The digital productivity rules have changed
Every now and again the rules change, creating new winners and losers with the associated social disruption. This is one of those times as the boundaries of the digital economy have permanently blurred and the whole economy has changed forever. While the pandemic has caused devastation around the world, the rapid adoption of digital channels has dramatically reduced the impact.
If the COVID-19 pandemic had happened even ten years earlier, the economic and social upheaval could have been very different. However, the top line performance masks massive disruption to individual businesses and whole sectors of the workforce. Even if you are in the part of the economy that has done well, it is important to understand what is happening as there are likely to be major disruptions that will affect everyone in the months and years ahead. The current Evergrande crisis could well be a portent of many more financial issues emanating from the last couple of years.
Until the pandemic, we generally believed that if there was a major drop in consumption in any sector, the whole economy would take a nosedive. How is it that large swathes of business have not only weathered COVID-19 but have actually come out stronger? What do we learn for the economy going forward and will this reshape the digital economy? What happens from here will have reverberations for years and even decades ahead.
In 2016, Robert Gordon challenged all of us working in the technology industry to look in the mirror at our impact on productivity (see Where is the digital-fuelled growth?).
Without a clear impetus for change, IT investment has often focused on putting a digital façade on largely analogue businesses creating more options without changing the core or adding new productive activity. IT could be characterised as adding features without adding functions.
Without a clear focus on realising productivity gains as the main aim of technology, many benefits are pleasing but of little real benefit. For example, what do we really gain from being able to check-in to our aircraft in half a dozen different ways? What about buying soap with a QR reader?
The pandemic has clearly shown that some economically productive activities can be done more efficiently through digital channels than in person. For example, when finalising a business contract in the past I would have arranged a nice dinner with the client. The meeting would likely have involved travel and hospitality, providing income to both. However, in the new world, I do it all over a video call. The economically productive activity still happens (the contract gets agreed) but all the other spend is skipped. I hasten to add that there is a cost to this more efficient approach in terms of both relationships and work satisfaction for everyone involved.
Science fiction fans might recall that in The Hitchhiker’s Guide to the Galaxy the Earth was populated by the second of three “arks” which was designed to rid their home planet of those deemed to be unproductive (including telephone sanitisers and management consultants – ouch!). Perhaps those of us smug enough to have weathered the COVID crisis would do well to recall that the home planet discovered they needed those that they’d gotten rid of when they all died from a virulent disease originating in a dirty telephone handset!
While notoriously hard to accurately measure, the OECD has looked in detail at the impact of COVID-19 on productivity including the increased use of digital technologies and the associated benefits. The report highlights that the crisis “…induced reallocation of activity across sectors, with a positive effect on aggregate productivity in the short term.”
In this more efficient digital world, we can’t assume that human social activities, such as hospitality, team collaboration and casual in-person interactions are a given. We need to very deliberately design our new businesses to improve their efficiency, deliver greater value and make sure that we enable a satisfying human experience for everyone involved. What this looks like in the coming years could be very different for the better or worse depending on the decisions we make today.
The challenge for our sector is to keep the short-term economic benefits that the OECD has identified while improving the working, business, and relationship downsides that we have all experienced due to our pandemic health response. We need to keep using our newfound digital muscles and reinvent the core of our businesses to maintain the hard-won gains that have been achieved. At the same time, we need to challenge ourselves to stop leaving so many people behind.