Understanding Productivity

Understanding Productivity

‘Productivity’ seems like a nebulous term. Can Industry 4.0 technologies, and indeed IT in general, increase productivity? Has there been any evidence for this in the past? Will newer technologies actually improve productivity?

A place to learn about productivity is the France-based Organisation for Economic Co-operation and Development (OECD). They have lots of data that shows more recent IT-led productivity gains have been small for most countries. Why hasn’t technology improved productivity significantly?

Organisations such as Focus Economics and the Bank of England have concluded that not many businesses have adopted earlier productivity improving tools such as cloud computing, customer relationship management (CRM) systems and enterprise resource planning (ERP). The UK’s ‘Be the Business’ organisation also has a useful paper (pdf) on How good is your business really? There are patterns of productivity improvement that classify ‘frontier’ and ‘laggard’ companies. There are a lot of ‘laggard’ companies that weights the numbers.

The numbers show that the first wave of IT systems brought improvements in productivity but only for the top 5% frontier companies. These companies have used technology to improve efficiency, planning and employee engagement.

The latest Industry 4.0 technologies such as sensing, IoT and machine learning are already providing proven benefits but, again, only for frontier companies. The difference this time is that the newer Industry 4.0 technologies will have more far reaching consequences. The frontier companies will further extend their reach over the laggards. This might have existential consequences for some of the laggards.

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