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We have computers. Why aren't we more productive? | page 1, 2, 3
Required projects are things Federal Express has to do to stay in business, such as payroll, billing and anything related to safety or government regulations. Return on investment projects must either bring in additional revenue, improve a product in a way that's measurable, or avoid a cost in a way that can be quantified; any project that doesn't produce a 30 percent return on investment won't be approved. Strategic projects, however, are ones that can't be justified by cost savings, but which are essential to Federal Express' business, marketing, or customer service. "We decided to track all our packages, and we had to put a significant investment into technology to do that," said Winn Stephenson, Federal Express' vice president of network computing. "It was strategic because there was no way we could figure out the direct return on investment of the project, but it was the way we wanted to market our services. It had to do with how we wanted to grow our business, how we were perceived in the marketplace, and giving our customers 100 percent satisfaction, all things that are the hallmark of our service." The kind of technological innovations that FedEx categorizes as "strategic" are the hallmark of competitiveness across industries today. They are new products and services that don't necessarily improve a company's bottom line, but often bring it more customers. "Senior management has bought off on the fact that they're dependent on computers," says Perl. "To run a business in the 1990s, they need it. They have no choice." The question remains: If computers don't cut costs, what caused the recent uptick in productivity numbers? MIT's Brynoffson believes the statistics are based on a narrow, outmoded definition of productivity by which, he concedes, productivity could have increased. Or the government might have tweaked its measurement methods. Or it could just be that the economy is going gangbusters, he offers. Northwestern University economist Robert Gordon attributes the change solely to improvements in computer manufacturing; he says in a recent study that productivity elsewhere has declined. It may be too early to say what caused the gain -- and 2 percent is not an overwhelming change, say the experts. But one thing is clear. In the vast majority of cases, information technology projects cost businesses more than they save. But they help companies do new things that human beings can't. Databases, networks and speedy computation make it possible for corporations to offer better customer service and new products -- be they custom insurance policies or ATMs. The computer revolution of the last three decades may not have led to a massive increase in productivity, but it has made life better for many, and certainly helped bring about wild increases in competitiveness. Once in a while, an innovative investment does allow a company to pull ahead of its competitors for a few years and realize a big payoff. This seems to have been the case with Federal Express' package-tracking system. Walmart is also frequently credited with having beat its competitors and made huge profits for a couple of years because of an innovative computerized stock-replenishment system. "Firms that succeed in implementing these new business processes earn unusually high profits because it's so difficult for other firms to copy them," says Brynoffson. "One of the iron laws of capitalism is that profits tend to get beaten down to zero as more firms learn to implement new technology. It seems paradoxical, but profits and returns are the highest for the newest innovations and the ones that are the least understood. In chaos lies opportunity." True, but these days, the main opportunity is for technology suppliers and customers, for anyone, that is, who can benefit from the increased appetite for technology or the new goods and services that technology enables. And there's nothing wrong with that. Just don't mistake it for old-fashioned, industrial-age productivity.
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