Why digital transformation won’t solve the productivity paradox
irregularideas.substack.com
The productivity paradox asks the question; why doesn’t productivity increase when we invest in new technologies? The electrification of steam-powered factories in the nineteen hundreds should have yielded huge productivity gains. Factories no longer had to be located near water or rely on shipments of coal to run a single massive steam engine, so they should have increased their outputs. But they didn’t. The factory managers of the time were familiar with how steam-powered factories operated, and so all they did was use electricity the same way they had used steam. A new technology but very little change. It was a generation later, when new managers took over and redesigned the architecture of the buildings, how the factory was laid-out, installed smaller machines, created new workflow processes, retrained workers, etc., etc., that factories realised the benefits of electricity. This wholesale change of everything that made up the factory required a new way of thinking, but still the factories failed to produce more goods more quickly. The productivity problem persisted.
Why digital transformation won’t solve the productivity paradox
Why digital transformation won’t solve the…
Why digital transformation won’t solve the productivity paradox
The productivity paradox asks the question; why doesn’t productivity increase when we invest in new technologies? The electrification of steam-powered factories in the nineteen hundreds should have yielded huge productivity gains. Factories no longer had to be located near water or rely on shipments of coal to run a single massive steam engine, so they should have increased their outputs. But they didn’t. The factory managers of the time were familiar with how steam-powered factories operated, and so all they did was use electricity the same way they had used steam. A new technology but very little change. It was a generation later, when new managers took over and redesigned the architecture of the buildings, how the factory was laid-out, installed smaller machines, created new workflow processes, retrained workers, etc., etc., that factories realised the benefits of electricity. This wholesale change of everything that made up the factory required a new way of thinking, but still the factories failed to produce more goods more quickly. The productivity problem persisted.