Technology-Driven Productivity Improvements With a Focus on ICT-Enabled Automation

Technology-Driven Productivity Improvements With a Focus on ICT-Enabled Automation

DOI: 10.4018/978-1-5225-2179-2.ch001
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Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per employee at a rate that more than compensates for any reduction in employment.

Most of the disruption that is happening around us and that will happen over the short- to medium-term will be directly or indirectly related to digital technologies. Digital technologies are particularly interesting as they (Productivity Commission, 2016):

  • Allow replication at low cost once the initial high cost development and investment cost is expended.

  • Frequently exhibit network economic behaviour which shows itself through the initial benefit being low but increase along an increasing marginal return curve as the number of users increase to finally exhibit decreasing marginal curve due to the increasing influence of, normally exogenous, boundary conditions.

  • Normally add value by some combination of collecting, collating, processing, storing, and transmitting digital data.

  • Change the way individuals interact with data, other individuals, and organisations. This then lay the groundwork for behavioural change as relates to consumption, engagement, work, asset (physical, relational and organisational) utilisation and capital provision.

The importance of digitral technologies is evidenced in the findings of Hoberg et al. (2015) in their survey of executives in Europe:

  • 80% of respondents regard digital transformation as important for their company’s overall business strategy.

  • 42% of respondents have established a vision of the digital future of their company.

  • 35% of respondents claim to have a clearly defined digital transformation strategy.

  • 27% of respondents have a clearly defined execution plan for implementing their Digital Transformation strategy.

The impact of digital technologies will very across economies and be determined by: The level of access to the necessary physical infrastructure that exist across the economy; The level of access to the necessary hardware and software infrastructure (e.g. low latency 5G mobile phone infrastructure) that exist across the economy; The absorptive capacity, as relates to the relevant capabilities, of firms across the economy; The entrepreneurial and innovative propensity across the economy, enabling the development of productivity enhancing outcomes; The width and depth of the relevant industrial commons in the economy enabling the nascent entrepreneurial start-ups as well as the larger firms that are innovating to remain in the economy rather than having to move to another economy to achieve their growth targets; The affordability of the relevant services to the potential users; The reliability of the service provision across the economy; The regulatory environment (including cyber security) in the economy; The availability of prerequisite or supplementary offerings enabling the desired impact of the digital technology, across the economy; and The existence or development of global standards as relates to the digital technology domain

The economic environment is being changed in several ways by the adoption of digital technologies, e.g. as relates to:

  • Balance of Power Between Actors: An increase in the power of consumers vis-à-vis producers through the increased ability to exchange information between consumers as well as having better comparisons provided by intermediaries and aggregators.

  • Increased Competition: The emergence of aggregators is reducing the search cost of consumers and hence increasing the level of competition between suppliers.

  • Risk Reduction: The emergence of peer-to-peer review platforms reduce information asymmetry around infrequent transactions as well as reducing risks around new customers and suppliers.

  • Broadening the Value Basis for Competition from Instrumental to Also Increasingly Incorporating Extrinsic and Intrinsic: Through the provision of direct or indirect value, through services, that is not immediately expressible in monetary terms e.g. increased perceived offering quality, increased service levels etc.

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