Digital Strategy and Markets · Week 1

The production function: along the curve, or lifting it

A service desk resolves tickets using workers, systems, and AI tools. With the workers and systems held fixed, the blue curve shows how resolved tickets rise with spending on AI tools. One slider changes the price of the tools, and the desk slides along its curve. The other raises A, the organization term from the lecture, and the whole curve lifts. Watch the desk's chosen spending, its output, and its profit respond.

Baseline = 1.00. Lower it to make the tools cheaper, the move Moore's law made for forty years.
Baseline = 5.00. Raise it to simulate better processes and management: the leftover A from the lecture.
Chosen spending on AI tools
6.25
 
Tickets resolved per day
12.50
 
Profit per day
6.25
 
The desk can produce more in two ways. When AI tools get cheaper, it moves along a fixed curve and simply buys more of them. When the organization improves, A rises and the whole curve lifts, so the same inputs resolve more tickets. In the data, this second channel shows up as the leftover after the measured inputs are counted.