CIO —
Productivity gains in the United States have become a favorite statistic for business leaders to cite when describing the health of the American economy. But what’s meant by productivity is often glossed over. Productivity is simply this: Output divided by input. When the dividend rises, productivity is increasing.
For close to a decade, business executives, academics and analysts have engaged in a vigorous debate over whether or not technology has driven the significant productivity gains recorded since the late 1990s. (In fact, since 2000, productivity in the United States has risen 4 percent annually.)
The question of what’s behind this is not merely a matter of academic interest; CIO budgets and technology dollars often depend on how organizations view IT’s contribution to productivity.
Most CIOs who have followed the IT-productivity debate naturally believe that investments in technology have been behind these gains, but a lack of data and research—hard numbers—has sabotaged their argument and often left them speechless, not to mention on the short end of the budgeting process.
MIT economist Erik Brynjolfsson, however, believes the terms of the debate must change. Technology has driven the productivity surge, and CIOs can prove it by measuring IT value across the whole organization, not just within the IT department. But there’s a new debate CIOs need to pay attention to: What distinguishes the most-successful companies from the least-successful. Brynjolfsson, the Schussel Professor of Management and the Director of eBusiness at MIT, has been at the center of the productivity debate for years. Speaking at IT conferences and publishing numerous papers on the subject, he has worked with some of the most high-powered firms in the world (including GE, Dell and Cisco, among others) to prove that technology drives productivity. In ongoing research that he shared with CIO, Brynjolfsson has devised metrics that will allow CIOs to demonstrate clearly how improvements in IT have fueled the productivity gains at their companies. (For Brynjolfsson’s metrics, go to www.cio.com/041506).
Numbers, however, will only get you so far. Brynjolfsson insists the companies that have been most successful in developing and demonstrating IT value share certain characteristics and practices that lend transparency to IT’s efforts. Some of these practices may seem elementary; some may seem impossible given the hurdles of age-encrusted company policies and culture. But they are necessary, Brynjolfsson believes, if you want to illustrate just how important IT is to the future of your organization.
Q: Why is the argument about IT productivity still a big deal today?
