Productivity Improvement Spreading

In the 1990s, productivity (output per work hour) growth was concentrated in just a few industries.  We know that high tech companies substantially gained in productivity, including semiconductor manufacturers and computer assemblers.  Surprisingly, the rest of the economy made major investments in information technology but had little to show for it.

Now, however, productivity gains are spreading, according to a recent report by McKinsey.  This was to be expected, but it’s good news nonetheless.

Caveat: the data on productivity are not great, for a number of statistical reasons I’d be happy to share with you, but you probably don’t really care about.  Email me if you’re interested.

Business Strategy Implications:  Continue to look for ways to lower operating costs.  The information technology revolution is still in its infancy.  We’ve automated our old ways of doing business, but we have only begun to change the way we do business to take advantage of our new capabilities.  Remember, the first steel bridges looked just like wooden bridges.  Only after a while did engineers really take advantage of the unique capabilities of steel.  Similarly, most businesses have not adjusted to the new age.  A couple who have:  Amazon’s sales pitch: people who bought that book also bought this book.  Another example:  Google ads, using a person’s search terms to determine which ads to show him.