UK businesses lagging due to IT failures

A report from The Work Foundation highlights just how much poor IT use is hindering British business

UK businesses need to capitalise more on the competitive advantages offered by IT, according to a new report into the "performance code" of successful organisations.

The Work Foundation study of 3,000 UK firms, Cracking the Performance Code — How firms succeed,  found a huge gulf between the productivity of companies with the top third outperforming the bottom third by £1,600 per worker, per year.

Typical characteristics of these better-performing businesses are a higher degree of informality; open sharing of information between peers and networks of managers; a focus on the long term and outcomes; and a distrust of the status quo.

Low-performing firms focus on a narrower range of financially-driven output metrics and are dominated by bureaucratic process and internal structure rather than customer satisfaction or end product.

The use of IT was highlighted as a key factor in successful organisations but the report claims UK firms still lag way behind US firms, which invest three times more in technology.

The report said: "The UK needs to capitalise more on the opportunities that ICT offers. For example, there is growing agreement that the improvements in US whole economy productivity growth over the last 10 years when compared with Europe’s is due in large part to its greater exposure to, and application of, ICT."

Comparison of vertical sectors found that retail, hotels, catering and mining had a surprisingly high technology use despite being characterised as low-tech sectors.

Few regional differences between businesses were found in the study although the firms in London are more likely to be operating close to the technological benchmark for their sector whereas those in the North East are likely to be characterised by a low technology benchmark.

A lack of innovation and investment in R&D also characterises UK businesses across sectors, with most firms investing only 1 percent of revenue into R&D. The report calls on the government to review the operation of the R&D tax credit to evaluate whether it is having the anticipated effect on the level of innovation in the UK.

Future trends in business are towards the so-called "knowledge economy" and the increasing use of technology to support it, according to the report.

"ICT combined with globalisation is arguably creating a new tipping point where the network will become the new organising principle for economic and social life," the report said.

The Work Foundation research project was led by Astra Zeneca, EDF Energy, Hermes Pensions Management Limited, Manpower/Working Links, Microsoft, PricewaterhouseCoopers, Rolls-Royce, The Royal Bank of Scotland and Standard Chartered.