beyond the productivity paradox
DESCRIPTION
In Class Presntation on Erik Brynjolfsson and Lorin M. Hitt paper 1998TRANSCRIPT
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HOW SHOULD AN ORGANISATION MOVE BEYOND A PRODUCTIVITY PARADOX?
A N D R E A , J A M E S , T I M , S E Á N , A N D R E W . 2 5 / 1 0 / 1 2
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WHAT IS A PRODUCTIVITY PARADOX?
“Discrepancy between IT investment and IT performance, between input and output.”
(MacDonald et al 2000)
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FOUR MAIN FACTORS
• Mismanagement
• Mismeasurement
• Lag
• Redistribution
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MISMANAGEMENT OF IT/IS AND THE MANAGERIAL PRACTICES TO MOVE BEYOND THE PRODUCTIVITY PARADOX
Investmentsin IT
Investmentsin IT
PerformancePerformance
This is a visualisation of the notion of It investments during the period of the Productivity Paradox.
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Investmentsin IT
Investmentsin IT
ConversioneffectivenessConversion
effectiveness
Firmperformance
Firmperformance
This a visualisation of companies installations of new IS/IT after moving beyond the Productivity paradox.
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A CHART FROM BRYNJOLFSSONS BEYOND THE PRODUCTIVITY PARADOX WHICH DEMONSTRATES MISMANAGEMENT OF IT/IS THROUGH THE TIME BEFORE IT IS PROFITABLE
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MANAGERIAL PRACTICES WHICH HELP MOVE BEYOND THE PRODUCTIVITY PARADOX.1.IT Alignment with Business Strategy.
2.Decentralised Organisations.
3.Decentralised IT Organisations
4.Benchmarking against Other Companies.
5.Employee Involvement and empowerment.
6.Internal Measurement
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• Brynjolfsson and Hitt identify a positive correlation between successful IT implementation and a decentralised organisational structure.
• Decentralised Decision making is spread across various outlets and lower level managers. Allows for greater empowerment
• Centralised Decision making power is kept at the top of the hierarchy. Decisions are not delegated to lower level managers.
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FIRM A – LOW IT SPEND , BELOW THE TREND LINE, BELOW AVERAGE RETURN ON ITS IT INVESTMENT.
FIRM B – INCREASED IT INVESTMENT WITHOUT CHANGES TO MANAGEMENT PRACTICES. MOVES PARALLEL TO THE TREND LINE WITH ONLY MODEST GAINS.
FIRM C – IT INVESTMENT COUPLED WITH CHANGES IN THE FIRMS STRUCTURE = GREATER GAINS AT A LOWER COST.
(DEDRICK AND KRAEMER, 2001)
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LAGGING BEHIND?
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4 PATHS OF I.T. INVESTMENT• I.T. investment – Investment over time.
• Strategic I.T. investment – Support Management Decisions
• Transactional I.T. investment-- day-to-day operations
• Threshold I.T. investment– Help with medial tasks
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A BALANCING ACT
• The intangible conundrum
• Hard data vs. soft data
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WHAT IS REDISTRIBUTION?
• It is beneficial for the firm
• However, not for the industry.
• No output is created.
• Firms with inadequate IT budgets will lose out.
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CONCLUSION
• Productivity paradox does exit.
• Canadian service sector spending increase by 64.2% during a 3 year period, with little gain.
• Organisations need to be patient.
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CONCLUSION• Decision making needs to change.• Move to a more decentralised
organisation• True cost of new systems• Need employees on your side.
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Thanks very much for listening.
Any Questions?