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HOW SHOULD AN
ORGANISATION MOVE BEYOND
A PRODUCTIVITY PARADOX?




             ANDREA, JAMES, TIM, SEÁN, ANDREW.
             25/10/12
WHAT IS A PRODUCTIVITY
PARADOX?

“Discrepancy between IT investment and IT
performance, between input and output.”
                        (MacDonald et al 2000)
FOUR MAIN FACTORS
• Mismanagement
• Mismeasurement
• Lag
• Redistribution
MISMANAGEMENT OF IT/IS AND THE
MANAGERIAL PRACTICES TO MOVE BEYOND
THE PRODUCTIVITY PARADOX


        Investments
              in IT                                   Performance




 This is a visualisation of the notion of It investments during the
 period of the Productivity Paradox.
This a visualisation of companies installations of new IS/IT after
  moving beyond the Productivity paradox.




Investments                   Conversion                         Firm
      in IT                  effectiveness                   performance
A CHART FROM BRYNJOLFSSONS BEYOND THE
PRODUCTIVITY PARADOX WHICH
DEMONSTRATES MISMANAGEMENT OF IT/IS
THROUGH THE TIME BEFORE IT IS PROFITABLE
MANAGERIAL PRACTICES
WHICH HELP MOVE BEYOND
THE PRODUCTIVITY PARADOX.
1. IT Alignment with Business Strategy.
2. Decentralised Organisations.
3. Decentralised IT Organisations
4. Benchmarking against Other Companies.
5. Employee Involvement and empowerment.
6. Internal Measurement
• Brynjolfsson and Hitt identify a positive correlation
  between successful IT implementation and a
  decentralised organisational structure.
• Decentralised        Decision making is spread
  across various outlets and lower level managers.
  Allows for greater empowerment
• Centralised        Decision making power is kept at
  the top of the hierarchy. Decisions are not delegated
  to lower level managers.
FIRM A – LOW IT SPEND , BELOW THE TREND LINE, BELOW AVERAGE RETURN ON
ITS IT INVESTMENT.

FIRM B – INCREASED IT INVESTMENT WITHOUT CHANGES TO MANAGEMENT
PRACTICES. MOVES PARALLEL TO THE TREND LINE WITH ONLY MODEST GAINS.

FIRM C – IT INVESTMENT COUPLED WITH CHANGES IN THE FIRMS STRUCTURE =
GREATER GAINS AT A LOWER COST.

(DEDRICK AND KRAEMER, 2001)
LAGGING BEHIND?
4 PATHS OF I.T. INVESTMENT
• I.T. investment – Investment over time.
• Strategic I.T. investment – Support Management
  Decisions
• Transactional I.T. investment-- day-to-day
  operations
• Threshold I.T. investment– Help with medial
  tasks
A BALANCING ACT

• The intangible conundrum


• Hard data vs. soft data
WHAT IS REDISTRIBUTION?

• It is beneficial for the firm
• However, not for the industry.
• No output is created.
• Firms with inadequate IT budgets will lose out.
CONCLUSION

• Productivity paradox does exit.
• Canadian service sector spending increase by
  64.2% during a 3 year period, with little gain.
• Organisations need to be patient.
CONCLUSION
• Decision making needs to change.
• Move to a more decentralised
  organisation
• True cost of new systems
• Need employees on your side.
Thanks very much for listening.



Any Questions?

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Beyond The Productivity Paradox

  • 1. HOW SHOULD AN ORGANISATION MOVE BEYOND A PRODUCTIVITY PARADOX? ANDREA, JAMES, TIM, SEÁN, ANDREW. 25/10/12
  • 2. WHAT IS A PRODUCTIVITY PARADOX? “Discrepancy between IT investment and IT performance, between input and output.” (MacDonald et al 2000)
  • 3. FOUR MAIN FACTORS • Mismanagement • Mismeasurement • Lag • Redistribution
  • 4. MISMANAGEMENT OF IT/IS AND THE MANAGERIAL PRACTICES TO MOVE BEYOND THE PRODUCTIVITY PARADOX Investments in IT Performance This is a visualisation of the notion of It investments during the period of the Productivity Paradox.
  • 5. This a visualisation of companies installations of new IS/IT after moving beyond the Productivity paradox. Investments Conversion Firm in IT effectiveness performance
  • 6. A CHART FROM BRYNJOLFSSONS BEYOND THE PRODUCTIVITY PARADOX WHICH DEMONSTRATES MISMANAGEMENT OF IT/IS THROUGH THE TIME BEFORE IT IS PROFITABLE
  • 7. MANAGERIAL PRACTICES WHICH HELP MOVE BEYOND THE PRODUCTIVITY PARADOX. 1. IT Alignment with Business Strategy. 2. Decentralised Organisations. 3. Decentralised IT Organisations 4. Benchmarking against Other Companies. 5. Employee Involvement and empowerment. 6. Internal Measurement
  • 8. • Brynjolfsson and Hitt identify a positive correlation between successful IT implementation and a decentralised organisational structure. • Decentralised Decision making is spread across various outlets and lower level managers. Allows for greater empowerment • Centralised Decision making power is kept at the top of the hierarchy. Decisions are not delegated to lower level managers.
  • 9. FIRM A – LOW IT SPEND , BELOW THE TREND LINE, BELOW AVERAGE RETURN ON ITS IT INVESTMENT. FIRM B – INCREASED IT INVESTMENT WITHOUT CHANGES TO MANAGEMENT PRACTICES. MOVES PARALLEL TO THE TREND LINE WITH ONLY MODEST GAINS. FIRM C – IT INVESTMENT COUPLED WITH CHANGES IN THE FIRMS STRUCTURE = GREATER GAINS AT A LOWER COST. (DEDRICK AND KRAEMER, 2001)
  • 11. 4 PATHS OF I.T. INVESTMENT • I.T. investment – Investment over time. • Strategic I.T. investment – Support Management Decisions • Transactional I.T. investment-- day-to-day operations • Threshold I.T. investment– Help with medial tasks
  • 12. A BALANCING ACT • The intangible conundrum • Hard data vs. soft data
  • 13. WHAT IS REDISTRIBUTION? • It is beneficial for the firm • However, not for the industry. • No output is created. • Firms with inadequate IT budgets will lose out.
  • 14. CONCLUSION • Productivity paradox does exit. • Canadian service sector spending increase by 64.2% during a 3 year period, with little gain. • Organisations need to be patient.
  • 15. CONCLUSION • Decision making needs to change. • Move to a more decentralised organisation • True cost of new systems • Need employees on your side.
  • 16. Thanks very much for listening. Any Questions?