OVER THE PAST DECADE, senior managers in banking, insurance, health care, and other service industries have invested billions of dollars in computers and communication equipment—technology investments that promise to hone operations into an acute competitive weapon. But executives have been deluded; the payoffs have not been fully realized.
- Recent studies by the American Quality & Productivity Center show that in the service sector—finance, insurance, wholesale, retail, and business service companies—the effectiveness of labor and capital utilization is only slightly higher today than it was ten years ago.1 This despite nearly $180 billion invested in hardware and software to automate the spectrum of manual-intensive tasks.2
- Service quality, while difficult to measure, is generally perceived to be deteriorating. The news media frequently call this deterioration to our attention, as does our day-to-day experience as consumers of services. Bank teller lines seem longer. Flight delays are more frequent.
- Operating and administrative costs—driven in large part by technology expenses—continue to spiral upward. For its investment, management expected just the opposite.
- Pretax profitability is deteriorating in the service sector, declining from a high of 10 percent in 1965 to 5 percent in 1987.3 In addition, foreign competition is making inroads. The balance of trade has dropped to about $30 billion from $70 billion in 1981.4 The financial service, entertainment, and real... To read the complete article, login or sign-up using the form below.
Get a premium subscription today to read this and all MIT Sloan Managmeent Review articles.
More Info.Buy this article. Purchase one or more copies of this article as a PDF.
Subscribe today to read the most recent articles and the current issue of MIT Sloan Management Review.
Upgrade to premium
Current Subscribers: Do you subscribe to MIT Sloan Management Review? Register for online access.
- Register for free access to recent articles and the current issue of MIT Sloan Management Review.
- Subscribe and read articles from the past three years online.
- Premium subscription—access to the entire archive of articles.
