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Measuring the Wrong Things

By Edward H. Baker  |  Posted 01-07-2007 Print

Measuring the Wrong Things

Perhaps the reason that IT has been much-maligned when it comes to productivity is that its role has been widely misunderstood. Farrell's ultimate conclusion is that considering IT a primary productivity driver isn't really accurate. Yes, it's an enabler, and even, nowadays, a necessity. But as she says, it isn't sufficient. "The real driver of productivity, before, during and after the dot-com boom, is innovation. Only innovation can drive both increases in value-add, and decreases in cost," she says. In and of itself, Farrell maintains, IT can't make a real difference. Instead, it's simply part of the process by which managers innovate—and thus drive productivity gains.

In Farrell's view, innovation begets productivity in three ways: The first involves the development of the innovation itself, whether it's a new product, service or process. The second involves how innovations get disseminated within the innovating company, or among competitors in its sectors, and eventually in other sectors. And the third is how those innovations scale to their optimum use. That's where the growth and profits come from. IT plays an increasingly critical role in this process. "In this context," she says, "one of the reasons IT is such a powerful tool is that it can enable all three of these processes. IT enables many innovations directly—mobile telephony, online securities trading and retail innovation come to mind. And it enables the diffusion of innovation much more quickly because you can replicate IT services much more quickly than you can other innovations. And finally, because IT can scale so well, it can help take innovations to their maximum potential." Still, it's not IT but the innovation that creates the competitive advantage.

Parkinson puts the problem another way. Raw productivity gains, he says, aren't sufficient to compete successfully in the 21st century. "What you want is agile productivity," he maintains. "You want to be able to repurpose the assets of your business as efficiently as possible to stay current with the market. The early 20th-century model of capital efficiency, which is what built corporations and drove the process-focused productivity of the second half of the century, is being rethought around the ability to move all assets, capital, people and information as effectively as possible." Agility, of course, is but another way to describe a kind of perpetual state of innovation, of moving fast enough—through product and process development, and into and out of markets as opportunity dictates—to compete.

That's a consistent theme among the experts and CIOs alike. Atefeh Riazi, the worldwide CIO and a senior partner at Ogilvy & Mather Worldwide, the New York City-based advertising agency, points to growth as the metric that really matters in this environment. "Cutting costs and making your people more productive is critical, of course," she says. "We have a huge mobility program in place which is going to help our people become more productive. But it goes beyond all that. Now it's whether you can get to market faster. Your competitors are coming from places you did not expect. So you have to respond faster, smarter and cheaper. All of these are going to help grow your business. It's no longer just about cutting costs."


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