Digital Technology May Give Productivity The Boost It Needs
In current occasions, there have been loads of questions concerning the state of our productiveness on this digital age. It’s up. It’s down. It’s sideways.
Will know-how give productiveness the upward raise we’ve lengthy been ready for? Erik Brynjolfsson and Georgios Petropoulos, who’ve been finding out the connection between know-how and productiveness for many years, say sure, however be affected person. “AI and different digital applied sciences have been surprisingly gradual to enhance financial development. However that may very well be about to vary,” they wrote in MIT Know-how Evaluate in 2021. “Know-how alone is never sufficient to create vital advantages. As a substitute, know-how investments should be mixed with even bigger investments in new enterprise processes, abilities, and different varieties of intangible capital earlier than breakthroughs as numerous because the steam engine or computer systems finally enhance productiveness.”
Such breakthroughs now being skilled embody AI and cloud computing, they state. This implies having the ability to produce nice enterprise worth from comparatively low cost assets, equivalent to cloud.
If such productiveness features had been to materialize, the outcomes can be astounding. “Regaining historic charges of productiveness development would add $10 trillion to US GDP—a lift wanted to confront workforce shortages, debt, inflation, and the power transition,” in accordance with a current report from McKinsey International Institute.
It’s simpler mentioned than performed, in fact. “Since 2005, US labor productiveness has grown at a lackluster 1.4 p.c,” the McKinsey authors, led by Charles Atkins, report. “On the similar time, actual wages have slowed and workforce participation has declined.” US labor productiveness is working properly under its long-term common of two.2 p.c, they state.
There’s a superb motive why productiveness wants a lift at this juncture, they proceed. “Looming challenges make productiveness development an crucial. Workforce shortages, debt, inflation, and the price of the power transition are highly effective headwinds. All might be simpler to confront with greater productiveness.”
Attaining such features would require “unlocking the ability of present know-how, investing in intangibles, bettering workforce reskilling and labor mobility, and implementing place-based approaches tuned to particular geographies,” the McKinsey crew urges.
Know-how gave productiveness a formidable enhance, however solely quickly, they observe. “Latest know-how advances, together with in AI and biotechnology in addition to productiveness spikes for the reason that international COVID-19 pandemic, raised hopes — albeit briefly — that maybe one other enhance might lie forward.”
Nonetheless, there’s a hyperlink between productiveness development and digital adoption, the McKinsey report states. “Sectors with the very best and fastest-growing productiveness have typically been powered by a mix of advances in digital know-how and an advantageous place in international industries.”
On the similar time, “regardless of — and maybe due to — their relative productiveness success, the sectors with the very best and fastest-growing productiveness provide a disproportionately small variety of jobs,” accounting for 2 p.c of recent labor hours. The 4 main sectors on this regard embody mining, data, finance and insurance coverage, and wholesale commerce. “Except for mining, which has benefited from pure gasoline innovation, all are among the many most digitized sectors within the US financial system. Data, which incorporates companies equivalent to software program, telecommunications, and web publishing, has been a productiveness famous person, averaging 5.5 p.c development since 2005, propelled by web companies and software program.”
The main companies in productiveness “are usually bigger, extra linked to international worth chains, and give attention to technology-intensive features of their sector. Analysis suggests these main companies make investments 2.6 occasions extra in know-how and different intangibles equivalent to analysis and mental property, and entice and put money into extra expert expertise.”
Whereas know-how has lifted productiveness for some companies, “its advantages haven’t been totally captured nor broadly shared,” the authors advise. “A colossal alternative awaits if the nation can accumulate the advantages of at this time’s applied sciences and make sure that its dividends are unfold economy-wide.”
“What’s to come back is much more tantalizing,” they proceed. “New so-called transversal applied sciences equivalent to synthetic intelligence and bioengineering are advancing by leaps and bounds. To unlock worth from really new know-how, companies should reconfigure how they work, typically over sustained durations, as they tinker with processes and staff adapt their abilities.”
The McKinsey crew additionally urge “complementary funding in intangibles equivalent to expertise, ecosystems, and organizational fashions. To be able to seize worth from digitization at this time and the brand new applied sciences of tomorrow, companies might want to construct their capabilities with the appropriate investments in expert expertise, working practices, and platforms.”
Main companies “decide to their digital technique and dedicate adequate assets to it as a core organizational precedence. They mobilize your entire group round their transformation, sharing duty and possession of the transformation. They’re versatile and agile, specializing in steady improvement and making daring bets to reinvent themselves. And so they put money into the appropriate technology-ready expertise to assist execute these bets at each the frontline and managerial degree.”