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Tech Shortfall stalls Canadian productivity

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I noticed this article in Monday’s Globe and Mail (Tech Shortfall stalls Canadian productivity) and thought it worthwhile to share.  Productivity is really becoming of importance especially in Canada when companies look to compete globally.  The company example in article highlights the challenge.  Up until now it seems that it has been more of a leap of faith vs. a known outcome that technology dramatically effects productivity. 

The article is particularly relevant to IT managers including those holding senior positions: “…A recent study by two top economists, Melvyn Fuss from the University of Toronto and Leonard Waverman, chair of economics at the London Business School, concluded that ICT [investment in communication and information technology] can account for about 60 per cent of the huge and widening labour productivity gap between Canada and the United States.” Waverman goes on to note, “All studies show that ICT is the driver of U.S. productivity growth. Canada lags, and the lag is in increasing in ICT adoption…What these lags mean about production and organizational change are vitally important." Moreover, the article states, “All the researchers agree, however, simply spending more money on technology won't do anything for a company's productivity unless it is accompanied by thorough and effective training, plus strategic use of the technology itself.”  

I really liked this article as Heather not only presented the core topic well, she provided a balance view that while technology may not be the core root of the problem it may be part of the solution.  Have a look as I’d love to get your opinion.

John

Comments
  • I have this discussion all of the time, and what I find is that people who have contact with the U.S. notice the difference, but those who only have Canadian experience think we are doing great. A few weeks ago I was talking to a fellow that sells barcode and RFID gear and he made a couple of observations; When calling (large) U.S. companies, he rarely needs to ask if they are using barcoding as it is usually a given. And that the Canadian firms he talks to barely understand why they might even want to look at such technologies.

    I know that some folks love Canadian talent and believe that we have some of the best engineers around, but there isn't a local market for the products they are building.

  • John,

    A fine post! As a manager I found it engaging and it tied into recent discussions with high-level managers. I was recently asked to speak to an executive group dealing with issues [is IT important and should IT have a voice at the highest levels?] addressed by the article. Increasingly, justification is required for IT expenditures and a substantiated business case. Moreover, there is serious debate about the need for direct representation or communication from IT leaders into C-level executive and Board-level meetings; the reason, IT enhances or enables business strategy and so an IT voice must be heard at the highest levels. In fact, in recent conversations with senior level IT managers for large corporate groups, these exact issues were emphasized.

    The article is particularly significantly since it provides research indicating a direct link between IT investment and a substantial increase in productivity. And, an increase in productivity directly relates to competitive advantage / strategy, faster time-to-market, real-time business flexibility demanded in the current dynamic new world economy.

    This then ties into a recent interview in Computer World and a paper published in the Harvard Business Review, “Information Technology and the Board of Directors,” by celebrated professor emeritus, Warren McFarlan, at the Harvard Business School: “...The question is no longer whether the board should be involved in IT decisions; the question is, how? …We've found it helpful to define the board's involvement according to two strategic issues: The first is how much the company relies on cost-effective, uninterrupted, secure, smoothly operating technology systems (what we refer to as "defensive" IT). The second is how much the company relies on IT for its competitive edge through systems that provide new value-added services and products or high responsiveness to customers ("offensive" IT)…technology governance may be a routine matter best handled by the existing audit committee or a vital asset that requires intense board-level scrutiny and assistance.”

    So I ask you, where does IT fit into your organization: routine or vital?

    Stephen

  • You both bring up some good points and I see the same tendency among Canadian organizations as Jeff highlights in his above comments. I'm not sure that we all get it in a broad fashion or perhaps we believe that we are just fine in our comfortable world. That being said, Jeff’s comments brought to my attention that we really do need to bring awareness to this topic across Canada.

    It seems everywhere I travel, productivity is coming up in my conversations with IT Managers. Just a few weeks ago, I was at a Microsoft IT conference where I had the pleasure of attending a session on "The Digital Organization: How IT Delivers Performance" by Professor Erik Brynjolfsson of MIT. He is the Director of the MIT Center for eBusiness and I really enjoyed his approach. The session opened my eyes to the level of importance and context around the productivity conversation. You can get some of his insight from this article - http://ebusiness.mit.edu/erik/Optimize/pr_roi.html


    In his article he talks about the ongoing productivity debate and the importance to our quality of life “Why the ongoing debate over whether IT contributes to productivity growth? While productivity—the amount of output per unit input—isn't the only thing a business or an economy has to worry about, in the long run, it encompasses just about everything. Ultimately, productivity growth is what determines our living standards, the competitive advantage of companies, and the wealth of nations, It's arguably the single most-important economic statistic.”. His is not a lightweight approach as he has taken a broad look a many companies across the US. The research outlined in this article finds a statistically significant correlation between the intensity of IT used in a company and that company's overall productivity. He goes on to state that “There's an emerging consensus among economists that IT has been the biggest single factor driving the productivity resurgence, although debate continues about the exact magnitude of its contribution.” This comment is inline and supported from the original referenced article in my above post. Erik takes this perspective deeper and asks “The critical question facing IT managers today is not "Does IT pay off?" but rather, "How can we best use computers?". He also puts context around technology and the importance of understanding “why” technology before “what” technology. He identifies that even when different competing organizations have an identical IT intensity, they may only see a fraction of the productivity of their competitors. In the article he gives a great example of this by comparing Kmart to Wal-Mart. “Clearly, IT isn't like a certificate of deposit where you can invest your money and expect a guaranteed rate of return. Managers at Kmart won't catch up with Wal-Mart simply by installing new IT systems. While effective IT use is an important part of Wal-Mart's success, IT has been the catalyst for a broader host of changes in information flow from Wal-Mart's customers all the way to its suppliers. Only by understanding these IT-enabled changes and matching or even improving them can other retailers hope to close the productivity gap.” This also directly links into IT strategy and governance being a key component to corporate governance, strategy and planning.

    While, Erik’s final results weren’t surprising they were very revealing. Technology is important, yet he found that the greatest IT benefits are realized when an IT investment is coupled with a specific set of complementary business investments.

    John

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