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Beyond The Productivity Paradox
 

Beyond The Productivity Paradox

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In Class Presntation on Erik Brynjolfsson

In Class Presntation on Erik Brynjolfsson
and Lorin M. Hitt paper 1998

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    Beyond The Productivity Paradox Beyond The Productivity Paradox Presentation Transcript

    • HOW SHOULD ANORGANISATION MOVE BEYONDA PRODUCTIVITY PARADOX? ANDREA, JAMES, TIM, SEÁN, ANDREW. 25/10/12
    • WHAT IS A PRODUCTIVITYPARADOX?“Discrepancy between IT investment and ITperformance, between input and output.” (MacDonald et al 2000)
    • FOUR MAIN FACTORS• Mismanagement• Mismeasurement• Lag• Redistribution
    • MISMANAGEMENT OF IT/IS AND THEMANAGERIAL PRACTICES TO MOVE BEYONDTHE 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 THEPRODUCTIVITY PARADOX WHICHDEMONSTRATES MISMANAGEMENT OF IT/ISTHROUGH THE TIME BEFORE IT IS PROFITABLE
    • MANAGERIAL PRACTICESWHICH HELP MOVE BEYONDTHE PRODUCTIVITY PARADOX.1. IT Alignment with Business Strategy.2. Decentralised Organisations.3. Decentralised IT Organisations4. 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 ONITS IT INVESTMENT.FIRM B – INCREASED IT INVESTMENT WITHOUT CHANGES TO MANAGEMENTPRACTICES. 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?