MIT Center for Digital Business Bruegel Lecture, Brussels, May 7, Productivity Growth is Accelerating

Transcription

1 ICT AND INNOVATION Erik Brynjolfsson MIT Center for Digital Business Bruegel Lecture, Brussels, May 7, 2012 Copyright Erik Brynjolfsson. Generous support for this research was provided by the National Science Foundation and the MIT Center for Digital Business. Productivity Growth is Accelerating Copyright 2011 Erik Brynjolfsson and Andrew McAfee 2 Copyright 2011 Erik Brynjolfsson 1

2 At least in the U.S. Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, January 2007, Labor productivity is defined as real GDP per hour worked. Trend estimates are based on a Hodrick-Prescott filter with a smoothing parameter of Copyright 2011 Erik Brynjolfsson 2

3 Real IT Stock Has Surged Real US Corporate IT Stock 160 IT Stock, normalized (year 2000 = 100) IT and Productivity: The Data Speak Productivity (relative to industry average) IT Stock (relative to industry average) (Source: Brynjolfsson and Hitt, 2000) 6 Copyright 2011 Erik Brynjolfsson 3

4 IT Pays off when it changes how companies work High IT and Digital Org. Market value Digital org. IT Capital Source: Brynjolfsson, Hitt, and Yang ICT Enables Four Drivers of Innovation Measure Experiment Share Replicate 8 Copyright 2011 Erik Brynjolfsson 4

5 Measure 9 New Tools Beget Revolutions Copyright 2011 Erik Brynjolfsson 5

6 The Nanodata Revolution Clickstream/Page views/web transactions Web links/blog references/facebook Google/Bing/Yahoo Searches messages Mobile phone/gps/location data ERP/CRM/SCM transactions RFID (Radio Frequency Identification), Bar Code Scanner Data Real-time machinery diagnostics/engines/equipment Stock market transactions Twitter feeds Wikipedia updates Etc. 11 Data vs. HiPPOs Truck Routing Wine Chemistry Housing Sales 12 Copyright 2011 Erik Brynjolfsson 6

7 Data Driven Decision-makers are Winning ü Data- Driven Decision- makers: 4% higher productivity ü Data- Driven Decision- makers: 6% greater profitability and 50% higher market value from IT Source: Brynjolfsson, Hitt and Kim, Experiment 14 Copyright 2011 Erik Brynjolfsson 7

8 15 Results Experimentation at Harrah s Gary Loveman Zero executive experience Zero background in Casinos But, an MIT PhD who knows how to make numbers talk Transformed Harrah s from second tier to number one gaming company in the world Completed a $30.7 Billion LBO Introduced a culture of pervasive field experimentation There are two ways to get fired from Harrah s We have come out on top in the casino wars by mining our customer data deeply, running marketing experiments and using the results to develop and implement finely tuned marketing and services strategies that keep our customers coming back. -- Gary Loveman, CEO, Harrah s 16 Copyright 2011 Erik Brynjolfsson 8

9 Share 17 Cisco s Mac Wiki - Over 10,000 Macintosh users at Cisco, but no central IS support - A few users established a wiki, where users could post tips, tricks, files, links and other content - Example: tip for using the Linux printers which were ubiquitous at Cisco - Many users all over world got up to speed entirely via Mac Wiki - Thousands of small ideas from hundreds of users 18 Copyright 2011 Erik Brynjolfsson 9

10 Scale 19 What Does IT Do? 1. Replicate Bits 20 Copyright 2011 Erik Brynjolfsson 10

11 21 What Does IT Do? 1. Replicate Bits 2. Replicate Processes 22 Copyright 2011 Erik Brynjolfsson 11

12 Case Study: CVS Basic script fulfillment process: 1 hour before pick-up 1 st step = drug utilization review (DUR) 2 nd step = insurance check Drop -off Data Entry Production Quality Assurance Pick -up Drop -off Dr. call I N V E N T O R Y Data entry or RPh Production RPh Consult area Shelves Quality Assurance Pick-up Standard script path 27% of scripts encountered a problem 16% of customers disappointed at pick-up INVENTORY 23 CVS: Scale without Mass New fulfillment process: Drop -off Data Entry Insurance check Production DUR QA Pick -up While customer is present Short- term results: customer satisfaction scores ú Wait time satisfaction: 76 à 86 ú Overall pharmacy satisfaction: 86 à 91 New process embedded in Enterprise IT (EIT) ú 100% compliance Rapid roll- out to over 4000 retail pharmacies 24 Copyright 2011 Erik Brynjolfsson 12

13 IT Reduces the Costs of Measurement, Experimentation, Sharing and Replication 25 Synergies Amplify The Benefits Replicate Measure Share Experiment A new kind of R&D 26 Copyright 2011 Erik Brynjolfsson 13

14 5/6/12 Lessons from the Research 1. Productivity surge since 1995 linked to ICT revolution IT is enabling business process changes and new ways to work This can significantly increase the level of productivity Ø Ø 2. ICT enables four drivers of innovation Ø Measurement Experimentation Sharing Replication This can significantly increase the rate of productivity growth 3. These techniques are more powerful when combined: Ø A new kind of R&D 27 Creating value while destroying incomes? Computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off. Read the Book: Read the Papers: digital.mit.edu/erik Copyright 2011 Erik Brynjolfsson 14