A recent post to the New York Times Bits blog has a very news-worthy byline. "A new economic index paints a disheartening picture for technophiles — at least the ones inside corporate America" it reads. The article continues to paint a bleak picture for firms that are investing hundred's of millions of dollars into technology and enterprise systems with the hope that there will be huge returns on their investments.
The Shift Index, developed by the Silicon Valley research unit of the consulting firm Deloitte, tracks a wide range of measures of economic performance, going back to 1965. 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.
Return on Investment
I don't necessarily agree with the assertions of this article. It is true that technology investment is one of the many investments firms can make that are extremely difficult to calculate returns for, but it is not impossible.
There are many reasons for these difficulties since these systems can increase revenue and decrease expenses in intangible ways... Some changes also take place over such large periods of time that they are difficult to track, and with poor data sets on previous systems it can make comparison difficult – or nearly impossible – between the two.
BUT–I would also add–that the main return that is (1) primarily realized, (2) not always calculated, and (3) present in the Shift Index is... the human element. Technology allows labor productivity to increase, allowing people to work smarter, faster, and more efficiently. It can be difficult to calculate a concrete figure on this efficiency bump, but it is clearly present.
Information is Key
The efficiency increase mainly involves the use of information and business intelligence, and this magnification effect allows employees of firms with large technological investments to make better decisions during their daily functions.
The good news, according to John Hagel, co-chairman of Deloitte’s Center for the Edge, is that companies typically have a solid technology foundation. But technology investment, he said, has been overly focused on an industrial-era model. “It’s been all about standardization and automation of business processes,” he said. “Until and unless companies learn how to harness knowledge flows, the impact of the technology will mainly be continuing competitive pressure.”
A part of the answer, Mr. Hagel added, is the smart use of social networks and other online collaboration tools. “There is a completely different set of values that information technology can drive, connecting and communicating with the outside world, both partners and customers, which can translate into competitive advantage,” he said.
Competitive advantage in today's marketplace will come from information. Social networks, information sharing, analysis, and hyper segmentation will mean the difference between Fortune 500 and top-performing Fortune 100 firms.
Speaking of online collaboration tools, check out the Jam sessions at IBM – a leading competitor of Deloitte.
Related posts:
Comments on this entry are closed.