The big myth — computer use is increasing productivity

One of the Holy Grails in manufacturing is increasing productivity. By substantially raising productivity it is possible, in theory, to lower costs, improve profitability, decrease time to market and generally gain an edge in the market.

The importance today’s companies and their investors place on higher productivity can be seen on the cover of this issue. In the words of Magna’s Ted Wozniak, “We will be trying to take out significant amounts of time from manufacturing in order to improve productivity.” In an interview, Mr. Wozniak, Magna’s vice president of information technology, told me that Magna intends to accomplish this using information technology to share and exchange strategic business information among its customers and suppliers. Magna has already joined several automotive OEMs in a formative B2B initiative, called Covisint, which will try to transform the collaborative potential and power of the Internet into bottom line results. In describing the concept Mr. Wozniak used the analogy of a football coach on the sidelines who can only see a partial view of the action on the field. The B2B models now in development will place that coach in the press box, above the playing field, now able to clearly see the layout of the field and all the players on it.

What is most noticeable about Mr. Wozniak’s comments is the use of the future tense: will improve productivity. Indeed it is generally assumed by the public, media and financial know-it-alls that information technology has already vastly improved economic productivity. Some go so far as to say the productivity surge seen in the U.S. (2.5 percent over the last five years) has been fueled almost entirely by information technology.

This is often called the “new economy” view of the world. However, evidence shows that the new economy, as well as the productivity gains of the past few years, is largely being driven by the old economy.

A study by the U.S. Bureau of Labor Statistics has found that only 25 percent of the strong growth in productivity in the past five years came from the use of computers, software and other types of information processing equipment. The majority of this growth in productivity was a result of the manufacturing of computers and semi-conductors. In other words, it has largely been demand for and manufacture of faster, more powerful computers and other electronic devices that has driven up productivity.

In some ways this is easy to understand.

Productivity is the end result of a number of complex and inter-related activities. These include business structure, regulations, workforce skills, labor markets and R&D. Integrating computer use and information technology into any of these environments doesn’t automatically ensure a rise in productivity. For example, today it still takes about the same amount of time between the discovery of a new polymer or material and its introduction to the market as it did 50 years ago.

Up till now, the computer has been primarily used to store and manage information, promote and sell. Seriously tackling ways it could be used to de-bug organizations and improve work-flow and output has perhaps rightly been seen as a task beyond the resources of any one company.

Mr. Wozniak is on the right track when he says that using the computer in a collaborative way to improve productivity will require companies to change they way they have traditionally structured their business and operations.

Time will tell if the information age will allow us to work not just harder and longer, but quicker and smarter.

e-mail: mlegault@corporate.southam.ca