{"id":212,"date":"2025-07-08T11:39:54","date_gmt":"2025-07-08T15:39:54","guid":{"rendered":"https:\/\/institute-x.org\/blog\/?p=212"},"modified":"2025-07-08T11:39:58","modified_gmt":"2025-07-08T15:39:58","slug":"productivity-dig-transformation-gap","status":"publish","type":"post","link":"https:\/\/institute-x.org\/blog\/2025\/07\/productivity-dig-transformation-gap\/","title":{"rendered":"Productivity: the no. 1 digital transformation shortfall"},"content":{"rendered":"\n
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I have nothing against digital transformation imperatives or the millions of dollars and hours put toward it over the past decade. It was and remains an essential foundation of 21st<\/sup>-century value production. Picking up on a recent post<\/a>, I will say that if anything the job is not done.<\/p>\n\n\n\n

Productivity Recognition: Digital Transformation\u2019s final frontier<\/h1>\n\n\n\n

     As much as the rationale for digital transformation was as \u201cessential foundation,\u201d no organization should invest to lay down foundations without clear focus on the end. In other words, digital transformation\u2019s only value is sustained and improved value production. For businesses, that means profitability; for government: effectiveness and efficiency. Both resolve to productivity.<\/p>\n\n\n\n

\"Increase<\/figure>\n\n\n\n

     As the linked post suggested, especially in Canada, signs of digital transformation are everywhere except in productivity numbers. Why is that? Probably a lot of things, but high on the list has to be the organizations\u2019 (and let\u2019s be honest: executives\u2019) mental models of what and how technology affects their organizations. Also, an inevitable form of \u201cscope creep\u201d probably has a dampening effect.<\/p>\n\n\n\n

     Whether the technology represents a sales channel (eCommerce), operational integration (eBusiness), automation, or otherwise, in a transformation<\/em> there is necessarily a change to an existing, prevailing approach. That often got passed off as \u201canalog,\u201d as in replace analog methods with a digital alternative<\/em>. But that anodyne description hides that the transformation is really about changing how (much) labour is used. It\u2019s merely the labour:capital tension writ anew.<\/p>\n\n\n\n

\u00a0\u00a0\u00a0\u00a0 No doubt, McKinsey<\/a>, Accenture<\/a>, HBS\/HBR<\/a>, and others have labouriously constructed data-intense models, but I offer three relatively simple, broad-brush alternatives for how one might perceive technology impacting value production. (There are, of course, other perceptions but the focus is on value production, not conception or problem solving, etc.) The order is least to most troubling for labour and unions. That does not imply preference.<\/p>\n\n\n\n

Technology enables a person to do their thing better, faster<\/h2>\n\n\n\n

     Think about simple machines: levers, wheels, power tools\u2026 word processing and spreadsheets for office workers. In this case, technology always supports and requires<\/em> a human actor. The human actor does less and less as the technology gets more sophisticated, to the point of now merely asking for specific help (i.e., \u201cprompting\u201d AI).<\/p>\n\n\n\n

     This type of transformation can have a direct productivity impact and requires no change to the system of measuring productivity. For a financial analyst doing statistics on a lot of data, Excel\u2122 will do it much faster than with a calculator, which is in turn faster than the unaided option. The analyst ought to do more separate analyses in the same amount of time. That\u2019s productivity. If the tool enables deeper analysis to be performed, the time on a given problem analysis may not change\u2014though more is being done. That\u2019s not going to reveal productivity increase.<\/p>\n\n\n\n

     If the technology doesn\u2019t appear to affect the productivity numbers, gains may get lost in raised expectations and expanded workload. Looking for higher-level productivity while ignoring the deeper analysis cost will prove a fail for the organization in practical terms. Notably, it is not a failure of the technology to produce productivity gains.<\/p>\n\n\n\n

Technology changes what a person does<\/h2>\n\n\n\n

     The great fear propagated by labour unions about digital (and any other kind of technological) transformation is that the technology will eliminate work and jobs. (See next section.) Rather than leaning into this, organizational leaders recoiled to deny that anything like that would happen\u2014at least not in an uncontrolled way. But for this kind of technological transformation to be effective, it necessarily has to change what people do.<\/p>\n\n\n\n

     Consider eCommerce, which is not so different from drive-through service. eCommerce is the replacement of a physical sales and delivery channel by one that is Web based. (Similarly, the drive-through replaces standing in line for takeout service with sitting in your car.) Obviously, the nature of people\u2019s work is going to change somewhat despite the same basic business activity in play.<\/p>\n\n\n\n

     Whether in-store or online: a customer wants something; the customer shops and is shown the item; the customer can purchase the item; the item is given to the customer. Post-sales support is provided.<\/p>\n\n\n\n

     With eCommerce it\u2019s done without face-to-face interaction, much of the human activity happening in the background\u2014more like wholesale than traditional retail. The salesperson may (we eventually realized, often needs to<\/em>) personally engage the customer by phone or via online chat. The item is stocked and pick\/packed centrally at a warehouse not the stockroom or off the shelf. Entire ordering, inventory, distribution, and financing processes and dynamics change. This example is oversimplified, including structural labour inhibitors (e.g., a salesperson on the floor doesn\u2019t translate well to a web environment). More frequently, technology is added to the operation without material change to what the person engaged with it does fundamentally.<\/p>\n\n\n\n

     For example: in a digital transformation the organization digitizes the internal expense claim process. Employees no longer assemble receipts and remit them with a written expense claim. They enter the information (digitally) into SAP or some other ERP.<\/p>\n\n\n\n