People often claim that technology is the key to improved productivity.  Firms should, they say, be investing in digital services, robotics, AI, IoT and so on.  

Generally, there does seem to be a correlation between investment in technology and productivity improvement.

Case proved, then?

Well … not necessarily.

I learned many years ago that correlation is not necessarily causation.

From my experience, I would read things differently.

Firms often look at technology investments when:

  • they have analysed processes and identified ways of  streamlining systems, processes and procedures;
  • the labour market is very tight and they are having trouble finding employees with the right skills;
  • labour is expensive.

Only the first of these is really a direct win for technology – and perhaps that should be put down as a win for systematic process analysis and improvement.  The other two are direct results of a tight labour market. 

This is what really drives technology adoption.