NCAT Article

Superficial Thinking: The Productivity Paradox

By Carol A. Twigg
Educom Review, Vol. 30, No. 5, September/October 1995

Can investments in information technology improve productivity in higher education? Can we enhance student learning while reducing instructional costs? Some would say no, basing their conclusion on the current state of affairs.

Several years ago, MIT economist Robert Solow quipped, "We see computers everywhere but in the productivity statistics." His remark set off a controversy, now called the "productivity paradox." Simply stated, although U.S. businesses invested more than $1 trillion for computer systems in the last decade, they have almost no measurable productivity increase to show for it.

Writing in a recent Forbes ASAP, Michael Rothschild, author of Bionomics, concludes, "Like most puzzles, the productivity paradox is an artifact of superficial thinking," and offers the following insight into this issue.

Rothschild relates how Stanford economics professor Paul Davis, intrigued by the flap over the productivity paradox, decided to take a look at a remarkably similar historical puzzle. Although Thomas Edison invented the carbon filament incandescent lamp in 1879, it took nearly 20 years before electricity began having any significant impact on society. Between 1900 and 1920 the percentage of U.S. factories equipped with electric motors jumped from five percent to 55 percent. Yet, despite the obvious advantages of electric motors over steam engines, worker productivity showed almost no measurable increase.

Back then, a state-of-the-art facility was a three- or four-story brick building. A coal-fired steam engine sat in the factory's basement; its power was transmitted to the equipment on the floors above through an elaborate system of vertical and horizontal shafts and drive belts. Electric motor technology was indeed revolutionary, but to pay for itself it had to be grafted onto the existing industrial infrastructure. Since the entire infrastructure had evolved around the assumption of expensive steam power, factories were grossly inefficient in other dimensions. Once made, these fundamental economic trade-offs endured for decades in bricks and mortar.

It wasn't until cheap, small electric motors became available in the 1920's that factories began to abandon "group drive" power for the "unit drive" approach that is used today, to rip out their drive shafts and belts, to rearrange their machines and to redesign their flow of materials. Innovative firms were the first to go all the way and take the radical step of building single-story factories. Forty years after Edison's original inventions, productivity growth took off.

Rothschild goes on to apply this lesson to today's office environment. As new communications technologies link the previously isolated power of microprocessors, the cost of delivering the right information where it is needed collapses, allowing completely new work flows and organizational infrastructures to emerge. Even though in a paper-based world it made economic sense to minimize communication costs by co-locating workers in urban office towers, in the world of E-mail, faxes and teleconferencing the costs of that infrastructure have become a waste of money. As a result, all our sacred assumptions about the nature of organizations are being overturned. Like our predecessors in the early 1920s, we are being forced to rethink all the old trade-offs and invent new designs for our working lives.

What lessons for higher education can be drawn from these examples? Like our nineteenth-century industrial counterparts, we have created an educational infrastructure based on certain assumptions and economic trade-offs. As James W. Hall, president of SUNY Empire State College pointed out in a November 1994 issue of SUNY's Studies in Public Higher Education, "For nearly a millennium, the organizing concept of the university could best be described by the word convocation, the convocation of academic people, scholarly things, and convening places. . . . In fact, all of the university's traditions and practices assume that scarcity is the controlling condition of educational opportunity. . . . Consequently, convocation is not only a 'calling together' of academic wealth, but it implies, as well, conditions of scarcity." The vertically integrated, residential campus is a product of these assumptions, its state-of-the art exemplified by our leading research universities.

How have we introduced information technology on our campuses? Again, like our predecessors in the 1920s, we have grafted these powerful technologies onto the existing infrastructure. We have wired the campus, electrified the lecture hall, automated the card catalogue and the course registration process. And while we spend ever increasing portions of our ever declining budgets on information technology, we continue to operate more or less as we have done in the past, asking the same staff to do the same things in the same way. We have yet to rearrange our machines and re-design our work flows.

As a consequence, we have yet to realize productivity gains in higher education. Nor will we do so as long as we continue to "bolt on" technology to our existing processes. As Lewis J. Perelman pointed out in a 1991 Business Week article, "We know from the extensive experience of office and factory automation that roughly 80% of the productivity gains from technology innovation come not from new hardware or software but from fundamental changes in management, organization, and human resources."

In light of the capabilities of the new technologies, the task before us is to question our basic assumptions about how our institutions function and to re-design them accordingly. Do all professors have to spend the same amount of time in the classroom conveying information or can much of this be done via technology? Do all campuses have to offer the same courses or can we conceive of new import/export arrangements? Do all campuses have to replicate one another's administrative services or can we aggregate or outsource these functions?

To reap the full promise of information technology, we will have to devote an enormous amount of time and energy inventing new designs for our working lives. Like the innovators of the 1920s—the "high tech" firms who took the radical step of building single-story factories to create the first flattened corporations—those in higher education who successfully re-design their institutions will realize a productivity surge that will insure their future prosperity.

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