In 2017, The Conference Board projected that global labour productivity growth would improve to 1.9 percent, up from 1.3 percent in both 2016 and 2015. The figure came from its 2017 Productivity Brief, which draws on the Total Economy Database covering 123 countries. The question for chief information officers was whether the digital investment of the previous few years had contributed to that recovery.
The forecast itself pointed elsewhere. Bart van Ark, the organisation’s global chief economist, said in 2017 that 2016 had brought no visible turnaround from four dismal years. He attributed the expected uptick mainly to cyclical tailwinds from stronger demand, especially in emerging markets, rather than to technology.
A slump that technology had not fixed
The Conference Board projected improvement in both groups of economies. Mature economies were expected to rise from 0.5 percent in 2016 to 1.0 percent in 2017. Emerging markets were forecast to climb from 2.0 percent to 2.7 percent.
Even so, economists and business leaders were puzzled by the length of the slowdown. It had run for about a decade, through a period of fast technological change, and earlier technology shifts had historically lifted productivity. The 2008-2009 global financial crisis explained part of it. The rest raised doubts about how quickly new technology was turning into productivity and revenue.
Pressure on CIOs to do more with less
Raising productivity and cutting operating costs had long ranked high on CIO agendas. That pressure had pushed companies towards IT outsourcing and towards scalable, responsive technologies such as virtualisation, cloud computing and software-defined infrastructure.
Eileen Smith, a program director in IDC’s Customer Insights & Analysis group, argued in 2017 that changing competition and consumer expectations were forcing businesses to invest in digital transformation. In her view the payoffs were better customer experience, greater operational efficiency and a better-used workforce.
Reliability undercut that case whenever a critical service failed. In 2017 several airlines suffered system outages. A power outage at British Airways disrupted flights for tens of thousands of passengers, and was allegedly caused by staff error rather than an IT or software fault. That pointed to people and process as well as technology.
Vision lagged ambition
Customers in the digital economy had more power than before to demand personalised experiences, but many organisations had not defined their transformation vision, let alone delivered those experiences efficiently. A global executive study by Deloitte in 2016 found that 87 percent of respondents expected digital to disrupt their industry. Only 44 percent said their organisations were adequately prepared.
Leaders have to mean it
Elsbeth Johnson, an adjunct professor of organisational behaviour at London Business School, argued in 2017 that leaders must communicate clearly during change. She said they often describe what they want as tasks rather than outcomes, and rarely spell out how much change they are asking for.
She also said leaders must act on what they say. A company that wants to be customer-focused should put customer issues at the top of the agenda and give them real time. Resources matter as well, and she stressed that this is more than money. It means assigning people with the right seniority, experience and political connections, and signalling that the change will be funded and measured.
The human side of the argument
Brian Solis, a principal analyst at Altimeter, said in 2017 that digital transformation was not a label for spending more on technology. He described it as a renewed focus on the customer and the human side of business.
Altimeter’s research at the time defined it as realigning, or newly investing in, technology and business models in order to engage digital consumers at every stage of the customer life cycle. Solis said its significance lay in finally driving real change inside companies, including new models, team structures and customer-centred thinking.
The practical conclusion was that keeping pace with changing customer behaviour helps CIOs decide where to put technology, staff and money. That, the argument went, was the likeliest route to quick returns that show up in productivity and revenue.
What the later data showed
The Conference Board’s March 2018 summary tables put world growth in GDP per person employed at 2.0 percent for 2017. The same tables showed 1.4 percent for both 2016 and 2015, so the projected rebound arrived.
Its 2019 Productivity Brief added a caveat. Total factor productivity growth in mature economies improved significantly in 2017, then fell back below the 2010-2017 average in 2018. In the United States, output per hour grew 0.9 percent in 2018 against 1 percent in 2017. The data did not settle whether digital investment had been the cause of the 2017 improvement.