How IT enables productivity growth

By Diana Farrell, Lenny Mendonca, Mike Nevens, James Manyika, Shyam Lal, Roger Roberts, Martin Baily, Terra Terwilliger, Allen Webb, Anil Kale, Mukund Ramaratnam, Eva Rzepniewski, Nick Santhanam, Mike Cho

IT enabled impressive productivity gains in the US retail, retail banking, and semiconductor sectors during the 1990s. This report shows that IT was most effective when tailored to sector-specific business processes, deployed sequentially to build capabilities over time, and co-evolved with managerial and technical innovations incrementally.

Skepticism about the "new economy" following the collapse of the tech bubble called for a sober assessment of what the actual role of technology and IT was in productivity. MGI's report found that IT was only one of a number of factors that led to significant productivity growth.

Retail sector

The labor productivity growth rate in the retail sector was more than twice that of the rest of the US economy in the 1990s. But that productivity was unevenly distributed across different categories of retail.

Retail banking sector

Despite growth in IT spending in the banking sector from 1995–1999, labor productivity actually decreased over the same period of time. Retail banking did, however, see a high baseline of productivity growth when compared to the overall US economy.

Semiconductors sector

Labor productivity in the semiconductor industry saw labor productivity growth rates 35 times that of the US average in the 1990s. Changes in output quality were the main drivers of this growth.

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