1. Fusion 2007 The Future of IT-Induced Growth Dean Mike Knetter UW-Madison School of Business

2. School of Business: A Good Place for CEOs Wisconsin Ties Harvard for Educating Most CEOs –September Bloomberg Markets magazine –UW and Harvard have each graduated 15 chief executive officers of S&P 500 firms –Princeton and Stanford tied for third with 12

3. How important is IT for the economy as a whole? Lots of hype about the new economy in the late 1990s Lots of disappointment in technology companies since 2000 Do we see any evidence of a surge in growth in the real GDP data?

4. Gross Domestic Product Percent Change by Decade

5. Where is IT-induced growth in the data? Real GDP growth results from more labor, more capital, and greater productivity. IT could show up in capital spending or productivity Productivity is the best form of growth—it is working smarter, not harder

6. Productivity Percent Change by Decade

7. How does IT raise productivity? Do things faster Do things all the time (cell phones, PDAs) Do things differently –Automation of tasks –Easier communication of decisions, less need for physical meetings

8. Which sources are most important? Speed helps, but not much. 24/7 has a clear limit. This is a one-time gain. Doing things differently—organizational change—has continued big upside. –It has been confined mostly to big firms or startups in the US –Mid-size firms, public sector, other countries remain

9. Firm-level benefits of increased productivity Firms that boost productivity will reduce costs Lower costs mean higher profit margins and/or lower prices and greater market share Competition is driving adaptation of IT in most medium and large business—a “do or die” situation –Midwest manufacturing is a great example

10. Micro policies required to reap IT benefits Organizations must have the will to change. Key ingredients: –External competitive pressure –Bottom line incentives –Internal attitude Organizations must have the environmental flexibility to change –Flexible labor market policies –Access to investment capital

11. How can we expand the reach of IT-induced growth? US public sector –Little or no bottom line accountability –Little or no competition –Little or no flexibility in labor market US small firms –Attitude –Capital/knowledge access Other countries look somewhat like our public sector

12. How can the UW-System help? Executive Education –IT Business Alignment –Technical Leadership Certificate –Business Intelligence –And much more…ask Scott Converse Production of IT graduates Research on the frontier of the new economy

13. Conclusions IT-led growth is a driving force of US economic resurgence More potential for IT-led growth in some US sectors and other countries Tapping that potential will likely require changes in incentives and constraints facing decision makers