Productivity's Second Act

IT has helped power U.S. economic growth for a decade. As Fed Chairman Greenspan exits, his replacement may face a much different pace of tech change.
Forgotten Industries
You needn't look any further than the nearest doctor's office, hospital, or pharmacy to see the potential. "We're where the banking industry was 20 years ago," says Michelle Woodley, a registered nurse and assistant VP of clinical integration at St. Joseph Health System, which runs 13 hospitals. Among technologies it expects will enhance productivity: reporting and scheduling software tools that better forecast nursing requirements based on the number of patients and the nature of their illnesses. "We can avoid overstaffing and understaffing," Woodley says.

St. Joseph also implemented physician order-entry systems that reduce the number of phone calls nurses make to doctors to check treatment orders, letting nurses spend more time with patients. At just one hospital in just one year, the system slashed by 35,000 hours the time nurses spent on administrative work, letting each nurse, on average, spend 22 minutes more a day on bedside patient care. That's a real productivity gain.

Predicting the future of technology is difficult enough; forecasting tech's impact on the economy is a crapshoot. For one, part of the impact will come from how various technologies join together to enable collaboration. Forrester's Bartels sees current spending on technologies such as wireless networks, broadband, next-generation PDAs, and service-oriented architectures all laying groundwork for richer collaboration and information sharing. Better analytical software could wring more efficiencies from existing tech infrastructures by giving ever-growing data piles more meaning. "We'll most likely see one of our biggest boosts in productivity when we can start to do qualitative rather than quantitative analysis of data," says Knud Jacobs, founder of economic consulting firm Rational Perspectives and president of the Silicon Valley Round Table of high-tech economists. And digital design tools have only begun to change the product-development process, such as Lockheed Martin Corp. using product-life-cycle-management software to collaborate with suppliers for its F-35 fighter jet or General Motors Corp. creating digital factory layouts to shift production to hot-selling vehicles.

Implementation Counts
Economists recognize that how IT gets implemented, not merely whether the investment gets made, determines productivity gains. Conference Board economist Catherine Guillemineau notes that even as the U.S. productivity pace slowed last year, it outperformed the 15-nation European Union, which raised productivity a puny 0.5%. She credits greater "flexibility and adaptability" among U.S. companies and managers, particularly their ability to "adapt very quickly to far-reaching innovation."

Over his 18 years as Fed chairman, Greenspan continually found it relevant to highlight IT's role in shaping the U.S. economy. In September, he noted its role in providing the kind of economic flexibility that has allowed the economy to weather shocks ranging from Hurricane Katrina to the Sept. 11, 2001, terrorist attacks--and to keep growing. "Beyond deregulation, innovative technologies, especially information technologies, have contributed critically to enhanced flexibility," Greenspan said in that speech. "A quarter-century ago, for example, companies often required weeks to discover the emergence of inventory imbalances, allowing production to continue to exacerbate the excess."

Will Chairman Bernanke have as many reasons to tout IT's role in driving economic growth? If so, he'll likely be talking about how IT is being used to connect people around the world, letting them make decisions in ways we never considered way back in the 1990s.

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Sara Peters, Editor-in-Chief, InformationWeek / Network Computing
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John Edwards, Technology Journalist & Author