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Friday, November 06, 2009

Realizing Maximum Return from IT Investments

Productivity is in the news these days as people take note that it is rising impressively in the US even as unemployment remains high. What lies behind the ability of companies to maintain needed output levels with fewer employees?

One known source of productivity gains is investment in information technology. But some companies do markedly better in realizing productivity gains from IT than others. Why?

Erik Brynjolfsson, a professor at MIT's Sloan School of Management and Director of the MIT Center for Digital Business, and Adam Saunders, a lecturer at UPenn's Wharton School, have been investigating this question. The answer they offer in a recently published book is that
companies with the highest level of returns to their technology investment are doing more than just buying technology; they are inventing new forms of organizational capital to become digital organizations. These innovations include a cluster of organizational and business-process changes, including broader sharing of information, decentralized decision-making, linking pay and promotions to performance, pruning of non-core products and processes, and greater investments in training and education.
You can access the introduction and first chapter of Brynjolfsson and Saunders' book here.

[Earlier reference to the points Brynjolfsson and Saunders make in their book can be found in a post from July of last year. Brynjolfsson's views (along with those of co-auther Andrew McAfee) concerning measurement of economic activity that improves on the standard GDP measure are discussed in a post from last month.]


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