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

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)

10. LAGGING BEHIND?

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?