Efficiency and Competition

So, I read this morning that new startups are starting up with fewer and fewer staff over time. Apart from the implications that this might have for job growth in our already shaky economy, it also suggests that, just perhaps, the much-vaunted efficiency of technology in business operations is finally being realized.

The advantages of technology were posited long ago, in the sixties and seventies as big business began to invest in information technology with the goal of making their operations more efficient. It didn't. Throughout the eighties and nineties, studies of the relationship between technology investment and productivity failed to show any significant improvements in efficiency associated with technology. Only in the late nineties and the early part of this century have researchers began to uncover subtle gains in efficiencies coming from IT investment.

With those early failures to improve efficiency came a sort of solace to those who had worried that new, hyper-efficient computers would result in massive unemployment, as us poor, pokey old human beings couldn't keep up and would necessarily be kicked out on the streets by our heartless corporate masters. Computers were everywhere, but job growth still boomed, fueled in no small part by the failures of the computers themselves... the support burden of keeping IT systems up and running was no small factor in its failure to introduce real productivity improvements.

But, as it does, technology has evolved, and IT systems today are faster, more stable, and easier to use than ever. As they start to fulfill their original promise, it looks like the original threat, that jobs would disappear, may also be starting to emerge.

This isn't great for the national economy or job-seekers, of course, but for the small business owner or IT manager, it has another set of threats. It means that your competitors are figuring out how to use IT to run a more lean operation, and if you want to stay in the game, you are going to have to do so as well. Years of cruising along with the blanket understanding that IT was difficult, expensive, and ultimately dysfunctional have led to a sort of complacency with the status quo that may now be fatal to small businesses. Technology that breaks, costs inordinate amounts, or does not actually improve your business processes in the ways that it should, can no longer be tolerated. The excuses are disappearing... it's time to make technology, make good.