An area of great change and my favorite topic is... technology and its’ role in productivity growth. Two landmark reports were released last month conducted by the Federal Reserve Bank, Harvard University, and the University College London that I truly believe presented groundbreaking data to prove that technology is driving productivity growth faster than labor hours can. What I liked about these studies is the fact that they recognized 2001 impacts: the technology boom and bust as well as the Sept. 11th event. A lot of what the New Economy has created may have gone poof. But the thing that started it all- was a revival in productivity growth - and it has stubbornly hung around.

A powerful factoid from the study: "In 1975, the productivity of average machines used on the factory floor lagged the best by just 15%. In 2000, the figure jumped to 40%. The gap widened most from 1995-2000 despite the capital-spending boom. The frontier is moving out so quickly that the average practice has continued to fall behind."

Let’s cut to the chase: It suggests that you have to do a ton of investment to keep pace with the frontier and that that investment will pay dividends. It means that organizations need to take a critical look at where they are on the productivity curve and more importantly how to get real, measurable, capital deployment from technology.

There was an old movie called "Other People’s Money" starring Danny deVito and he had some great lines. He played an investment banker absolutely dogmatic about the rules of free enterprise. He said "the game is to make as much money as you can for as long as you can and the way to do it best is to use money productively."

In today’s terms… that means getting full value out of every dollar spent on technology investments. What do we mean by technology? Is it the big systems such as ERP’s, CRM’s, and ASP’s? A new press with gadgets? Hardware and Software? Integration of human resources to modify workflows? The answer is: all of the above. It’s investments in microelectronics that are the key components in a large array of goods resulting in widespread improvements that were once unimaginable.

When we look at this compelling economic data we caution leaders not to underestimate the power of technology to drive competitive advantages. And more importantly, to spend time getting a line-of-sight as to how technology ultimately connects to cash flow. To date, we have not witnessed a large technology implementation where the total return on investment was actually covered solely by cost savings. The customer, in the end, pays for your technology. The sooner it’s connected to revenue generating solutions the faster companies can be part of the frontier.