Why Outcomes Always Lag Major Technology Investments

We might as well get used to the idea that artificial intelligence, machine learning, AR, VR, metaverse and Web3 are not going to produce the expected advantages as fast we invest in those technologies. 

The reason is simply that organizations cannot change as fast as does technology. So there will be an outcomes lag between investment and perceived outcomes.  

Martec's Law essentially argues that technology change happens faster than humans and organizations can change. That might explain why new technology sometimes takes decades to produce measurable change in organizational performance, or why a productivity gap exists.  

source: Chiefmartec 

Since there simply is no way organizations can change fast enough to keep up with technology, the practical task is simply to decide which specific technologies to embrace. In some instances, a major reset is possible, but typically only by a fairly-significant organizational change, such as spinning of parts of a business, selling or acquiring assets. 

source: Chiefmartec 

Some might argue that the Covid-19 epidemic caused an acceleration of technology adoption, though some also argue that demand was essentially “pulled forward” in time. In that sense, the pandemic was a “cataclysmic” event that caused a sudden burst of technology adoption. 

source: chiefmartec

The main point is that managerial discretion is involved. Since firms cannot deploy all the new technologies, choices have to be made about which to pursue. Even when the right choices are made, however, outcomes might take a while to surface. That likely is going to happen with AI investments, much as has happened in the past with other lags in measured productivity after major investment. 

We might reasonably expect similar disappointment with other major trends including metaverse, AR, VR or Web3. Organizations cannot change as fast as the technology does.

5G is Being Adopted Faster than 4G

It is easy enough to find stories expressing worry about the “slow” pace of 5G adoption or even the business model. To be sure, there have been business model concerns since 3G, based in large part on the cost of acquiring spectrum. 

Like it or not, data bandwidth--and lots of it--is the driver of the modern mobile business. And that means additional spectrum has to be acquired, like it or not. Fundamentally, it is the same business model issue as fiber to the home represents: service providers would rather not invest the huge amounts of new capex, but it is a necessity to stay in business. 

5G also is an example of the adoption curve for virtually all new innovations, which are adopted in a “S curve” fashion. As far as new use cases, those will take some time to develop, as well, in part because Martec's Law operates. Technology changes faster than organizations change.  

In many cases, the issue is less “where is the new incremental revenue” and more “we get to stay in business.” The investment is fundamentally strategic rather than driven by a simple analysis of the cost versus financial return. 

So slow early adoption should not come as a surprise. 

Ultimately, without the FTTH upgrade, a fixed network services provider will be driven out of business by competitors able to supply gigabit per second speeds and large usage allowances. 

In the early days of any next-generation mobile network coverage always will be uneven, and taht means customer uptake will be uneven.  It always takes time--especially in bigger countries--to deploy the network nationally. 

In the case of 5G, the use of low band, mid band and high band spectrum is a new wrinkle, as potential speed boosts vary dramatically depending on which bands are available. Low band bandwidth is not going to vary much from 4G. Mid band will be faster and high band will be comparable to fixed network performance in some cases. 

In the U.S. market, mid band spectrum has been limited for all but one of the leading providers, while high band deployments also have been limited. So speed increases have been correspondingly low, compared to 4G. 

Also, very next-generation mobile network requires new devices. So it is not surprising at all that consumers say they have not yet already “bought 5G.” They need to buy new phones. In fact, it would be surprising if only 35 percent of U.S. customers actually own phones that are only capable of 4G network access, at this point, as reported in a survey by Speedcheck.org. 

Other surveys might suggest more than 60 percent of U.S. consumers to 75 percent of customers do not yet own 5G-capable devices. But that will change over time, as people replace existing devices.  

Other obvious barriers to adoption are “no 5G service in my area.”

source: Speedcheck.org

None of those issues are terribly worrisome or even new. We are early in the deployment of full national 5G networks by all the leading service providers and the device replacement cycle takes about three years, on average (half earlier, half later). 

For many of us, battery life drives the replacement cycle, and that is closer to two years. At least one survey found that battery life is more important than 5G, for example.  

Every next-generation mobile network requires new devices. So it is not surprising at all that consumers say they have not yet already “bought 5G.” They need to buy new phones. In fact, it would be surprising if only 35 percent of U.S. customers actually own phones that are only capable of 4G network access, at this point, as reported in a survey by Speedcheck.org. 

Other surveys might suggest more than 60 percent of U.S. consumers to 75 percent of customers do not yet own 5G-capable devices. But that will change over time, as people replace existing devices.  

None of those issues are terribly worrisome or even new. We are early in the deployment of full national 5G networks by all the leading service providers and the device replacement cycle takes about three years, on average (half earlier, half later). 

For many of us, battery life drives the replacement cycle, and that is closer to two years. At least one survey found that battery life is more important than 5G, for example. 

Still, 5G is inevitable. Most consumers will switch.

source: YouGov

5G arguably is being adopted faster than was 4G. It just seems “slow” because the networks still are being built.

Did Covid-19 Change Martec's Law?

There is wide agreement that the Covid-19 pandemic has caused many technology adoption curves to get a temporary bump up in adoption, with growth then continuing on the curve already in place before the pandemic and its organizational response.  That is illustrated by the impact of the “cataclysmic event” on an underlying rate of organizational change. 

source: chiefmartec

In other words, firms and organizations are said to have experienced “a year’s worth of change in a month.” 

Martec’s Law was coined in 2013 by Scott Brinker, Hubspot VP. Martec’s Law states that technology changes linearly, while technological change is non-linear. That observation has parallels in the notion of the productivity paradox. 

The productivity paradox suggests that information technology or communications investments do not always immediately translate into effective productivity results. Many note that measured productivity has declined since 2000, despite all the technology investments firms have made. 

source: Goldman Sachs

This productivity paradox was apparent for much of the 1980s and 1990s, when one might have struggled to identify clear evidence of productivity gains from a rather massive investment in information technology.

Some would say the uncertainty covers a wider span of time, dating back to the 1970s and including even the “Internet” years from 2000 to the present.

The point is that it has in the past taken as long as 15 years for technology investments to produce measurable gains. 

Computing power in the U.S. economy increased by more than two orders of magnitude between 1970 and 1990, for example, yet productivity, especially in the service sector, stagnated).

And though it seems counter-intuitive, even the Internet has not clearly affected economy-wide productivity. Some might argue that is because we are not measuring properly. It is hard to assign a value to activities that have no incremental cost, such as listening to a streamed song instead of buying a compact disc. It might also be argued that benefits accrue, but only over longer periods of time. 

source: Customer Think

Few, if any, buyers of new technology actually believe the claims of benefit advanced by suppliers, for good reason. Virtually all observers of technology adoption note that organizations benefit from new technology at a rate that is vastly less than the rate of adoption. That’s the essence of Martec’s Law, which holds even if the Covid-19 pandemic caused an unusual step change in behavior.