Is technology delivering on its productivity promise? James Champy, business technology and productivity expert and a founder of the reengineering movement, offers his unique perspectives about the reality of productivity improvement enabled by technology.

• Author: Champy, James A.

One of the most confounding phenomena of the recent business recession was that, even as business slackened, productivity improved. In the history of past recessions, this had never happened. The effects have been two-fold: job losses have been deeper and unemployment more extended. But this phenomenon also illustrates what economists have known for a long time: we are in a relentless march of productivity improvement, one that is both enabled and driven by information technology.

If history does repeat itself, as this economic slowdown ends, companies will reinvest the profits from their newfound efficiencies back into the economy. The result: business expands, companies are launched, jobs are created and everyone is at work once again.

But the next round of productivity improvement may not be easy to achieve. We are in an age of "continuing productivity," the mid-stage of the so-called "information age," and well beyond the point where simply installing a new computer application automatically means that the productivity of an enterprise will improve. In fact, there is some evidence that information technology misapplied or mismanaged can make a business harder to operate.

Item: A manufacturing company spends $85 million to install an enterprise resource planning (ERP) system. The system still isn't operating and probably never will. Item: A conglomerate engages over 300 development consultants to integrate the financial systems of its multiple acquisitions. The project has gone on for years and looks more like a full-employment effort for consultants than a project that will ever deliver real value for the company or its customers. Item: In many companies, communications technologies (also known as email and voicemail) rule our behaviors. We rush to do what appears to be urgent--such as answer the message now--rather than doing what's really important. Everyone seems to be working harder, but it's not clear that we are working better. Being electronically tethered doesn't necessarily mean that people are doing the right work. These examples are not just meant to point out the perils of technology misapplied. They also illustrate that, although technology will lead to broad improvements in productivity, the benefits will not automatically accrue to all companies. Information technology (IT), like all capabilities, must be intelligently managed.

When done right, there is no question that IT has the power to transform a business. Dell Inc., Cisco Systems Inc. and Wal-Mart Stores Inc. are examples of companies that have mastered technology. Not only do such companies intelligently manage technology, they each recognize that the process of "work" itself will also change.

"How should work be redesigned?" "Who does it?" "Where does it get performed?" These are among the questions that must be asked and answered as new technologies are applied. The next round of technology-driven productivity improvement will require not only the intelligent application of technology, but also massive work changes.

Just look at what happens when a bank goes "electronic." A process that costs $10 for a teller to manually perform costs $1 when handled telephonically and 10 cents when performed by a customer at an ATM machine. Also look at how work inside the bank changes, as more and more customers choose to do their business over the Internet. Real productivity improvement comes from a combination of technology and work change.

These changes will also place new demands on workers. Tellers displaced by technology will have to learn new skills--such as managing customer relationships, rather than processing transactions. Some workers will make the transition easily, while others will be challenged. Almost everyone will be touched in some way by how technology changes the nature of his or her work.

IT's Early Years

Information technology was first introduced into most companies in the 1950s in the form of accounting applications, and, for more than 40 years, remained principally the domain of finance. Eventually, other applications evolved. Research and development, manufacturing, distribution, marketing, sales and customer service all...