Nine to One

I think the bolded bit below is a pretty intuitive point, but it’s worth noting that most of this investment happens either in individual functions (like IT, legal, etc. – shared services) or at the edges of the organization.

The first five years of the twenty-first century saw a renewed wave of innovation and investment, this time less focused on computer hardware and more focused on a diversified set of applications and process innovations. For instance…CVS found that their prescription drug ordering process was a source of customer frustration, so they redesigned and simplified it. By embedding the steps in an enterprise-wide software system, they were able to replicate the drug ordering process in over four thousand locations, dramatically boosting customer satisfaction and ultimately profits. CVS was not atypical. In a statistical analysis of over six hundred firms that Erik [Brynjolfsson] did with Lorin Hitt, he found it takes an average five to seven years before full productivity benefits of computers are visible in the productivity of the firms making the investments. This reflects the time and effort required to make the other complementary investments that bring a computerization effort success. In fact, for every dollar of investment in computer hardware, companies need to invest up to another nine dollars in software, training, and business process redesign.

The decision-making portions of legacy organizations – central management – have largely missed this boat. Yes, they’re using technology to do some of their work: their communications, document exchange, and analysis processes are computerized. Unfortunately, their decision-making processes, governance, and change management methods haven’t made any progress out of PPT slides.

From pp. 104-105 of The Second Machine Age.