Home > IT Management, Management, Strategy > Does IT Matter (Part N)?: Tech Payoff for Companies Remains Elusive, Study Finds

Does IT Matter (Part N)?: Tech Payoff for Companies Remains Elusive, Study Finds

In today’s New York Times Bits Column, the article revisited this very question again: Tech Payoff for Companies Remains Elusive, Study Finds. It references THE SHIFT INDEX (from Deloitte’s Silicon Valley research unit).

The author writes:

But two numbers really jump out. The return on assets for United States companies has dropped by 75 percent over that span, while labor productivity has more than doubled.

Why haven’t companies benefited more from technology investment?

My reaction to this was “oh no, here we go again” — is IT relevant or not? My belief is that “productivity” (however that is measured) and “innovations” (in a broad sense from inventions, new products, business processes etc) are traceable to technological developments utilized in everyday personal and corporate “life”. On the face of it, try to imagine doing the things we do now without technology.

However I found one reply from reader Paul to be very intriguing. He finds the report conclusions believable and says it’s attributable to two causes:

The first is the Red Queen Effect where “it takes all the running you can do, to keep in the same place.” You’re not going to gain a competitive advantage when all your competitors are making the same changes.

The second cause is one I’ve observed repeatedly in corporate America; it’s the “customer effect”, by which I mean internal customers….The problem here is misapplication of the technological resource.

He goes on to suggest that technology, “if done right”, would eliminate whole departments and radically change corporations and not go by way of the dinosaur. Emotionally, I agree with this direction. IT should be both (1) steady and stable, but yet (2) innovative and ever-changing to permit structural changes. I believe though that in the past 35 years, technology (with help from venture capitalists, capital markets, strong business leadership and innovations) has done this very successfully.

Take a look at your daily “tools” you use the most and how you use it. Now imagine it goes all away….

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  1. June 21, 2009 at 9:58 PM

    Lui,

    isn’t this an example of a concern Warren Buffett identified many years ago? That being that productivity gains from investments are rarely retained in the company, but rather are passed on to the customer.

    Part of this is due to the fact that if a company is in a competitive field and they do the analysis that they should invest in some innovation; their competition, who is probably also intelligent, forward thinking and aware, is making a similar investment. Essentially the investment becomes a cost of doing business rather than a differentiator.

    Technology, for many firms, is a cost of doing business. Very few firms innovate, the lemming effect in business, where everyone does what everyone else is doing, is very strong. I’m thinking ERP systems, CRM systems or anything resembling Knowledge Management or as it’s been rebranded – social media.

    The brilliant thinking goes something along the lines of “everyone else is Twittering, so we should…” There is very little thinking about what a business actually does, how IT capabilities can differientiate our company and what do those capabilities need to be able to do?

    It’s much easier to say “everyone else is using Twitter, we should be Twits too” than it is to think independently. Especially when there are companies like Deloitte who specialize in taking half baked ideas and convincing companies to spend vast sums of money on projects they haven’t thought through.

    Just like a barber will always tell you you need a haircut, Deloitte and their ilk will always tell you you need some new new thing and many companies will invest together, driving up the costs and passing the benefits that may occur to their customers. The costs are retained and the benefits become the cost of doing business.

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