Productive Capacity and Technology in Business

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Table of Contents

Article Summary
Evaluation of the Article Theme
Evaluation of the Consequences for Society
The validity of the Company’s Policy
References

Article Summary

The article by Mims (2018) published in the Wall Street Journal attempts to disclose some secrets of the biggest companies’ growth. Analysts and economists single out several probable suppositions such as the involvement of top managers by top companies, overall automation of processes, etc. Still, one of the recent explanations is that these companies invest in their technology thus contributing to productivity increase. The article focuses on the experience of Amazon, Google, and Microsoft. Among a diversity of IT spending alternatives, Mims (2018) mentions hiring developers and creating unique software owned and uses exclusively by a company. It is considered to be a significant competitive advantage. The measure of IT spending by a company is identified as “IT intensity” (Mims, 2018). The economists also claim that the bigger a company is, the higher is its IT intensity. Consequently, the productivity gap that develops as a result of these investments is increasing. This fact leads to a situation in which 5 percent of the most productive service firms and manufacturers demonstrate productivity up to five times higher than all other manufacturers and service firms (Mims, 2018). Another outcome of big companies investing in IT is the growth of employees involved in the departments of information technology. Also, the revenue increase per employee is observed.

Evaluation of the Article Theme

The article’s theme is related to the issue of increasing productive capacity due to technology use. The author provides a detailed analysis of IT use by the leading companies and the consequences of their investments in information technology. Moreover, the impact of IT investments on productivity is traced directly. The article also analyzes such aspects of bringing technology to big companies as IT intensity, the IT factor, the payoff, and the innovation problem.

Evaluation of the Consequences for Society

While technology implementation is beneficial for companies and their clients, the consequences or society can be diverse. One of the positive outcomes of active technology use to increase production capacity is setting high standards for the competitors. As a result, society gets a higher quality of services and products. Still, there is a negative outcome that is not frequently mentioned. The fact that active investment in technology creates a gap in productivity growth between highly productive companies and all others leads to a revenue gap and, finally, to the wage gap between employees of leading companies and those hired by smaller firms.

The validity of the Company’s Policy

The feature of the policies related to excessive investments in technology is that big companies such as Amazon or Google do not focus solely on IT for customer service. The peculiarity is that leading companies tend to hire developers for creating exclusive software, not for sale but used by the company for its further growth. Some of these technologies, still, can be used by both customers and the company itself. For example, the application of artificial intelligence (AI) technology by Amazon is beneficial for clients and the staff as well (Roepe, 2016). Still, one of the core AI functions is the increase in employees’ productivity, which positively influences the productivity of the company as a whole. Other aspects of technology use at Amazon are overall automation, standardization of processes, and empowerment of employees’ self-learning (Benzie, 2016). Therefore, it can be concluded that the policy of investing in technology is beneficial for productivity and growth.