The Cost of Acquiring New Technology and the "Productivity Paradox"
Posted by Chris Tithof
In earlier eras, advances in technology led to greater productivity. But for the last half-century or so, despite heavy investment in computers and digital systems, overall productivity has been dropping. The Third Industrial Revolution - the digital age we now live in - has brought unprecedented technological advances but no corresponding jump in productivity. Now, as the Fourth Industrial Revolution promises even more profound changes in how humans work and live, solving the "Productivity Paradox" may lie in redefining what it means to be productive.
The First Industrial Revolution brought the first profound technological shift to human society between 1780 and 1840. The Second, in the late 1800s, added more sophistication to the partnership of humans and machines. Beginning in the early 1970s, the Third shifted that partnership from labor to information with the advent of computing technology and the recent evolution of "smart" devices capable of performing human-like functions of contextual decision-making and extrapolation.
Based on historical trends, the digital revolution should have been accompanied by a corresponding upswing in productivity across the board. But between 2000 and 2013, productivity in the US grew less than 1 percent annually, despite a commitment to digital innovation in sectors such as manufacturing and finance.
The inverse relationship obtained today between technology and productivity might have several causes. The proliferation of digital devices means that much can go wrong - and time spent dealing with computer issues is time lost from more productive work. New technologies are concentrated in only a few sectors such as manufacturing and finance, which could skew productivity statistics.
But in the digital age, the time frame for evaluating productivity gains may simply be different than in those previous "revolutions." Learning new technologies takes time, and many companies fail to invest the time needed for employees to become proficient enough to be productive. Canadian journalist and author Malcolm Gladwell famously established the "10,000 hour" rule as the minimum amount of practice needed to be considered an expert in any activity, but most companies offer far less training to their personnel.
The definition of productivity itself may also be undergoing a significant shift. In times past, productivity was easily gauged in terms of labor and capital. Today, though, productivity is defined less by measurable, physical outcomes than it is by talent and knowledge. The link between skill and productivity becomes more obvious in fields such as medicine and education, where "smart" technology allows doctors to treat patients more efficiently and allows educators to reach a student population that spans the globe.
These and other advances in smart technology are ushering in a Fourth Industrial Revolution, one characterized by the Internet of Things - a digital world in which everyday devices of all kinds are constantly connected to the Internet, sending streams of data that shape how people live, work and communicate. In that world, connectivity and digital sophistication, not capital, may become the factors by which productivity is defined.
In the future of the Fourth Industrial Revolution, transportation and communication costs will fall as more and more transactions take place online. That means manufacturing and supply networks will operate more efficiently, too. And services of all kinds can be delivered around the clock to large populations in locations around the world with a minimal investment of physical resources.
The new world of the Fourth Industrial Revolution is not without its tensions - and its impact on human life and relationships promises to be profound. But as advances in digital technology change the balance between humans, machines and the way productivity is defined, the productivity paradox may not be such a paradox after all.
Unit4 sits at the heart of a growing partner ecosystem. This ecosystem is tackling the productivity paradox by offering a people-centric alternative to the process-focused systems that have dominated the enterprise software market. Find out more here.