1 September 2022

How digital friction is eroding productivity

By Dave Page

Working at Cisco Systems in the late 90s we used technology to work remotely when we needed to. Most tech companies did. Now people call it ‘hybrid working’, but back then we simply called it work. But the way we worked was simply a useful by-product of a broader mindset that saw our business first of all as a technology business. We saw technology not as clever plumbing, but as a fundamental platform for innovation, reinvention and competitive advantage.

It is no surprise then that tech companies have in the last three decades become some of the most valuable companies on the planet. They have systematically adopted new technologies, reinvented how they do business, embraced new ways of working and innovatively changed industries, which has allowed them to attract the best people and continuously drive productivity.

We recognised in the 90s what the wider business world is now coming to appreciate. Sure, there are productivity gains to be had from hybrid working, but the enforced pandemic experiment in remote working has offered technology-reluctant organisations a glimpse of what technology can do for them. And it’s not just about the decision whether to work from home or in the office. It’s about reimagining how business is done.

Where it was once considered too risky, hospitals have latterly been releasing patients early to be monitored from home. Patients prefer this, and it frees beds for use by other who need more critical care. Mining companies have reconfigured their technology so that engineers and scientists can guide field operations remotely. This is cost-effective for the companies and they can retain and recruit better people because it is no longer a requirement to spend large amounts of time away from family and friends in inhospitable places.

From my own firm’s work with our customers, who are mostly large global businesses, it finally seems that organisations in general, not just tech companies, are embracing technology. They have seen for themselves the benefits for their people, their productivity, and now they are seeing the possibility of sustainable competitive advantage.

Of course, this places a company’s technology platform at the very heart of their business. Before the pandemic, our customers told us their employees spent 20-30% of their time working digitally – now they tell us it’s 60-90%. Savvy businesses are therefore concerned to make sure that the digital workplace works properly for everyone.

They are right to be concerned. For some people the digital workplace is much less efficient than it is for others. Video conferencing might involve regular requests for people to repeat themselves because the audio quality is poor. A 30-minute training course might take an hour or more because the video keeps on buffering. Downloading key documents can sometimes be interminable. From our data, some people need to work up to 20-30 days more each year to match their better off colleagues.

Across the workforce this digital friction saps productivity and business efficiency, and creates a fragile platform upon which to reinvert and rethink a business. If we extrapolate this to the digitally-enabled part of the UK economy, about £60bn of GDP is evaporating each year – more than we currently spend on defence and just shy of a third of the annual NHS budget.

The good news is that the interventions we need are neither costly nor complex, and that £60bn figure is a compelling return on investment. For individuals it may simply involve upgrading their router or hardware at home, or adding a business broadband connection to their house. For companies it may involve upgrading shared digital infrastructure and applications.

The UK is moving rapidly into an important new digital phase. People and businesses are embracing new ways of working, the time spent working digitally has leapt by 300% over the last two years, and, like tech companies before, organisations are finally embracing the opportunity for digital innovation and rejuvenation.

To harness these benefits, we need to make sure the digital world works properly for everyone, everywhere, all of the time. And that means thinking differently about incentives for people to invest in home offices and technology, and for businesses to double down on investments in their digital ecosystem. Do that and we will usher in an exciting new era of radical reinvention and sustainable competitive advantage.

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Dave Page is CEO of Actual Experience.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.