The Productivity Paradox - PowerPoint PPT Presentation

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The Productivity Paradox

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Title: The Productivity Paradox


1
The Productivity Paradox
2
Paul Attewell Information Technology and the
Productivity Challenge
  • Productivity output (goods and services) divided
    by inputs (labor, capital, materials) to produce
    that output
  • Increased productivity would mean that price of
    goods should go down, standard of living should
    go up.
  • This is what happened during the industrial
    revolution

3
Attewell (cont. 1)
  • Why has productivity not increased with the
    advent and popularization of the computer?
  • Researchers have come up with the following 4
    arguments
  • 1. takes a long time for business to become
    acquainted with new technology.
  • 2. Did not invest enough to really see the
    benefits.

4
Attewell (cont. 2)
  • 3. May be due to chosen metrics. Measurement
    problems!
  • 4. forces within the economy absorb the potential
    productivity gains (Attewells view)
  • Brynjolfsson and Hitt (1993) In the nineties,
    there began to be a serious payoff from IT
    investment but it began to taper off

5
Attewell( part 3)
  • Forces that absorb potential productivity gains
  • 1. Formalization of Communication
  • Indexicality tendency of people to not
    elaborate. Straight and to the point.
  • Email has a low tendency of indexicality when
    compared to face-to-face or phone communication
    (i.e. people tend to elaborate with emails)
  • IT investment has tended towards email

6
Attewell (cont. 4)
  • 2. Quality/Quantity trade off
  • Often, time saved by software (ex. MS Word) is
    used to enhance the appearance or aesthetic
    aspects.
  • Pentland (1989) IRS study showed that although
    auditors thought they were doing a better job
    with a computer, neither quality nor quantity
    were increased, the opposite actually occurred

7
Attewell (cont. 5)
  • 3. Volume of work Expands with Computerization
  • Because information is ready available and easy
    to manipulate, more information is expected.
  • CAD makes design and drafting easy, but because
    of this many more drafts are expected.

8
Attewell (cont. 6)
  • 4. Information and the managerial taste for
    control
  • Information available to managers number of
    units per hour per employee, break downs in cash
    flow, anomalies in sales patterns/earnings. This
    info is easy to obtain with modern DB and
    transaction processing
  • Weill (1988) Informational IT constitutes 56 of
    total IT investment within one manufacturing
    industry.

9
Attewell (part. 7)
  • W. Edwards Deming To manage one must lead. To
    lead one must understand the work that he and his
    people are responsible for management by
    numerical goal is an attempt to manage without
    knowledge of what to do, and in fact is usually
    management by fear
  • Where computerization has dominated, managers
    have increased, not clerical workers.

10
Attewell (cont. 8)
  • 5. Competition vs. Productivity
  • Company expands to increase profit, but does not
    improve productivity
  • Redistribute market share, not creating more
    wealth with less inputs
  • American Hospital Supply Inc. installed
    order-entry terminals in the hospitals. This
    created incredible customer loyalty, but did not
    improve productivity.

11
Attewell (cont. 9)
  • This causes other companies to follow suit or not
    survive (ex ATM machines)
  • 6. Interorganizational Processes
  • Jacques Ellul (1954) new technologies create
    needs which only more of that technology can
    fulfill sounds a lot like McDermot
  • We demand new technologies because of the
    technologies which exist.

12
Attewell (cont. 10)
  • Goal displacement We dont see increase in
    productivity because we try to increase other
    forces in the economy.
  • Should we use a different metric?
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