Great Bosses are Relatively Rare

There is a reason people resonate with the TV show “The Office,” or in past decades have found the comic strip “Dilbert” so funny. Most of us who have worked a long time know it is somewhat rare to encounter “great bosses.” Most of the time, most employees realize their bosses are not especially talented in such roles, including both middle and top management. 

Very few people ever are ready to occupy the top rungs of any organization, research suggests. Nearly 70 percent of CEOs report they were not fully prepared or those new roles. 

In fact, companies fail to pick the right people for such spots as much as 82 percent of the time. 

In fact, according to Gallup research, only about 10 percent of people actually possess the skills necessary to provide leadership that makes a difference to organization results. Also, note that leadership and management are conceptually different matters. 

If you think about leadership as always involving change, stress or danger while management involves the conduct of processes on a day-to-day basis, without major external threats, you get some flavor of the difference.  

If leadership can be informal or formal,management is always organizationally determined. And the best of the best arguably are superior at both.

“It's important to note that another two in 10 people exhibit some characteristics of basic managerial talent and can function at a high level if their company invests in coaching and developmental plans for them,” says Gallup. 

All together, finding that 10 percent of top managers, and cultivating the additional 20 percent, can contribute about 48 percent higher profit by their companies, compared to firms that did not make those choices.

Companies that hire managers based on talent also tend to see a 22 percent increase in productivity, a 30 percent increase in employee engagement scores, a 17 percent increase in customer engagement scores and a 19 percent decrease in turnover, in addition to the 48 percent boost in profit. 

“Sure, every manager can learn to engage a team somewhat,” Gallup notes. But outperformance will not happen. “Being a successful programmer, salesperson, or engineer, for example, is no guarantee that someone will be adept at managing others.”

“Most companies promote workers into managerial positions because they seemingly deserve it, rather than have the talent for it,” Gallup notes. “This practice doesn't work.”

Gallup finds that great managers have the following talents:

• They motivate every single employee to take action and engage employees with a compelling mission and vision.

• They have the assertiveness to drive outcomes and the ability to overcome adversity and resistance.

• They create a culture of clear accountability.

• They build relationships that create trust, open dialogue, and full transparency.

• They make decisions based on productivity, not politics.

 

source: Gallup

As some other studies suggest, outcomes are more likely when organizations focus on strength, rather than attempting to overcome or compensate for weakness. “Companies repeatedly put people in manager roles because they were successful in previous roles or because they have been with the company for a long time,” Gallup notes. “This is a flawed strategy.”

 

source: Gallup

Hedonic Quality Adjustment and Broadband Prices

Hedonic qualIty adjustment is a method used by economists to adjust prices whenever the characteristics of the products included in the consumer price index change because of innovation. Hedonic quality adjustment also is used when older products are improved and become new products. 

That often has been the case for computing products, televisions, consumer electronics and--dare we note--broadband internet access services. 

Hedonically adjusted price indices for broadband internet access in the U.S. market then looks like this:

source: Bureau of Labor Statistics 

In other words, dial-up internet access and gigabit broadband are not the same product. 10 Mbps broadband is not the same product as 100 Mbps or 500 Mbps service. 

The same trend holds for mobile phone service, phones and other consumer electronics gear. The value and “quality” of a mobile phone subscription in 2000 is not the same as the 2020 value. Nor are the capabilities of a mobile phone the same in 2020 as was true in 2000. 

Without hedonic adjustment, it is hard to track value, capabilities or price over time. And that is before adjusting for inflation, or comparing prices to the overall cost of all goods bought in any single market. 

Telecom Is Not the Only Business With Tough Profit Margins

Slim profit margins also explain many other parts of the end user experience, automation imperatives and downsides, capital and operating cost concerns. Stranded or under-utilized assets are a business issue for both connectivity providers and airlines. 

Still, the next time the customer experience sucks, ask yourself whether you'd rather have a much-better experience for prices three times what they presently are. We might choose what we've got. 

Disaggregation Works Both Ways, Though Opportunities are Not Symmetrical

One observation about the way connectivity networks are becoming virtualized and disaggregated is that we most often see that the disaggregation brings new suppliers or partners into the business. Functions once conducted mostly internally become externalized.

source: STL Partners 

What we tend to see talked about relatively rarely are ways that disaggregation in other industries might similarly lead to opportunities for connectivity providers to enter value chains or assume new roles in other industries. 

Internet of things, private 5G or 4G networks and edge computing are among the areas where telcos or connectivity providers might have opportunities. But such opportunities tend to be anything but easy. 

In some cases that occurs because other contestants seemingly are better positioned to take on new roles in disaggregated operations. Existing system integrators, for example, might be better placed to act as 5G private network operators than would telcos. The same might be true for IoT system integration as well.  

In other cases the financial return from acting as app, platform or other value suppliers is challenging enough to discourage active pursuit. That is true for efforts to craft vertical market internet of things value propositions, for example. 

The other observation is that it almost always is easier to move down the stack and vertically integrate a lower-level function than it is to move up the stack and integrate a higher-order function. 

source: Vermont IT Group

In other words, the business process provider knows precisely what it requires from functions l;ower in the stack. 

But companies lower in the stack “have to guess” at what potential buyers higher in the stack will want, and have to be prepared to support all potential buyers (lowest common denominator) or optimize for a few verticals. 

There are other approaches, such as attempting to create horizontal platforms of some sort. Some argue that operating neutral host systems for in-building mobile network access are an example. Some might argue that operating as a wholesale-only access or transport platform is an example of horizontal specialization.

Most such examples use the computing industry notion of “platform” and not the business model sense of “platform.”

Operating edge computing real estate facilities might also qualify as a “platform” function, as the term is used within the computing industry (software or hardware that other software or hardware can run upon). 

But real estate functions for edge computing suppliers are not a “platform” in a business model sense, where an entity makes its revenue by facilitating exchanges and transactions between buyers and sellers. 

Disaggregation in other industries does offer opportunities for connectivity providers, albeit difficult opportunities in most cases.

How Valuable is Telco Data?

One often hears it said--in the communicatiions service provider business and elsewhere--that a firm’s data is valuable for reasons other than keeping track of sales or ensuring payment for sales made. Customer data is said to be valuable and monetizable in various ways. 

Of course, the reverse might also be true: a company’s customer data might be less valuable than that provided by third party sources, at least in some cases.

Consider the results of a survey of U.K. retailers and e-commerce firms by Oxylabs.

That study found that 57 percent of respondents make use of public third party data by means of web scraping, the culling of structured website data. Just 51 percent reported using their own internal data 

source: Oxylabs 

That might bear on the question of “how valuable is your data?” “Businesses in the retail and e-commerce sector clearly have a growing need for public web data, and the interest in old school sources of information is waning,” says Oxylabs.

In other words, there are at least suggestions that a retailer’s internal data is less important, in some ways, than external, third-party data obtained by web scraping. 

As you might expect, external data is viewed as most valuable for forecasting. Predicting market trends and consumer demand; benchmarking against other firms and setting pricing are among the key uses of external data. 

source: Oxylabs  

What your own customers buy, in what quantities and when, in what packages and at what price levels, is valuable information. What is less clear, in the connectivity business at least, is how valuable firm customer information might be to third party buyers or users, especially when only available at an aggregated anonymous level. 

All of that shapes reasonable expectations for monetizing connectivity provider analytics. Telco data might be less valuable to third parties than many believe.

What Has Changed for FTTH?

For more than two decades, U.S. cable operators have won the market share battle with telcos (net new additions) as well as the installed base battle (percentage of total customers). That appears poised to change, with telcos now believed to be possible installed base gainers. 

To accomplish that, telcos also would likely have to win the market share (net new additions) battle. We haven’t seen that in two decades (some might argue telcos never have won the market share battles) but it seems possible for the first time. 

So what has changed? Several things, probably. Some important tier-two telcos that had been capital constrained have now restricted to the point where they can afford to invest in new fiber-to-home facilities where they had not been able to, in the past. 

Tier-one suppliers also arguably have altered options. Verizon, which had largely halted FTTH deployments because of the business model, now sees different returns as a result of fiber deployment to support its 5G small cell deployments. One byproduct is a denser optical transport network that can change the incremental cost to provide FTTH. 

But market share or installed base can change in other ways directly related to that denser fiber transport footprint. In some cases, 5G fixed wireless can allow Verizon to gain share without full FTTH. If the issue is “bandwidth to the home” or “gigabit to the home,” then 5G fixed wireless might work, irrespective of the platform. 

AT&T has been deleveraging, and is the telco with the most room to upgrade its access networks to FTTH. 

source: Standard & Poors 

Lumen Technologies, on the other hand, recently divested itself of about half its total consumer access lines, to concentrate on its denser metro areas. 

It might seem paradoxical that perceptions of return from FTTH investment are higher than once was the case when three mass market services--each with high adoption--were possible with FTTH. With the decline of voice and linear video entertainment revenues, the fixed network business case for consumer services largely rests on internet access. 

Logically that should create a worse business case, as revenue mostly must come from a single lead application. But other parts of the revenue and cost model also are changing. Third party sources of funding sometimes are more lucrative (either from joint builds or bigger government subsidies). 

Divesting linear video reduces revenue, but also cost. Harvesting voice while concentrating on internet service provider operations might in some cases lead to lower operating costs. 

Also, though telcos failed to halt the slide in broadband market share over the last two decades, the growing need for more-symmetrical bandwidth now offers telcos a possible marketplace advantage over cable operators. 

Also, telcos increasingly are building models that rely on broadband for nearly all the financial return from a new FTTH build, based on steadily-improving efficiencies. Telcos with 5G backhaul networks now can leverage those other fiber transport investments to support consumer home broadband investments. 

Expectations about installed base share also help the new payback models. Where telcos once might have held only 30 percent share of the installed base, they now can reasonably expect to eventually take 50 percent share of the installed base, which changes the financial return. 

Up to this point the U.S. FTTH footprint has been rather modest. All together, telco FTTH probably today passes only about 29 percent of U.S. homes. That percentage will grow closer to half of all U.S. homes over the next five years or so. 

That still leaves telcos with a problem: they wil be able to sell FTTH-based gigabit services to only half of U.S. homes. What to do about the rest is the logic behind 5G fixed wireless. 

In 2021, for example, Comcast, the biggest U.S. cable operator, faced an FTTH competitor in less than 30 percent of its footprint. That obviously limits the amount of total share loss Comcast is exposed to, as cable trounces digital subscriber line platforms  in performance. DSL simply is not competitive with cable modem service. 

Then there are the strategic issues. Absent the upgrades to FTTH, can a fixed network service provider reasonably expect to remain in business? Increasingly, the answer is “no.” To the extent that internet access is the paramount driver of fixed network revenue, then FTTH either is installed or the telco faces bankruptcy. 

The argument then is not so much “we will make more money” as it is “we get to stay in business.” 

Are Happy Workers Really More Productive?

Are happy employees correlated with better financial returns? Are happy employees more productive? Most of us instinctively would agree with an article in the Harvard Business Review that “a decade of research proves that happiness raises nearly every business and educational outcome: raising sales by 37 percent, productivity by 31 percent, and accuracy on tasks by 19 percent, as well as a myriad of health and quality of life improvements.”

One new study--looking at firms deemed “best companies to work for” from 1984 to 2020, suggests it could be the case, at least for these firms. 

Other studies also suggest that happier workers are more productive, though the studies do not address the relationship between productivity and profit directly. 

The issue always is the “Hawthorne Effect.” The Hawthorne Effect refers to the tendency of some people to work harder and perform better when they are participants in an experiment. 

In other words, individuals may change their behavior due to the attention they are receiving from researchers rather than because of any manipulation of independent variables. They might report being more productive or happier simply because they are being studied. 

There are lots of other views, including the argument that happier people are more productive, irrespective of work conditions. In other words, they were happy independently of the work setting. 

Methodologically, one issue is that we cannot actually quantity “happiness” well enough to measure it. And some studies report just the opposite: unhappy workers also are productive. 

Also, the reverse might also be true: productive workers feel happy. It is productivity itself that drives feelings of happiness, not the other way around. 

According to Stephen P. Robbins, a careful review of the evidence finds the correlation between satisfaction and productivity in the range of +0.14 and +0.30. Essentially, no more than nine percent and maybe as low as two percent of the variance in output can be accounted for by job satisfaction self reports, which then is used as the proxy measure of happiness. 

So productive employees are more likely to be happy workers, rather than the reverse.    

There is evidence that more-profitable firms also have more happy employees, though it is hard to say whether the relationship is causal or only correlative. 

Highly-profitable firms are able to provide more benefits for their workers, more opportunities for promotion and nicer work environments, for example, so that alone might contribute to relative feelings of happiness. 

Most of us would instinctively believe that happier workers also are more productive. It might be the case. But it is difficult to prove the thesis. We need proxies for “happiness” that are relatively more objective than self reports. 

We need evidence that there is a causal--not merely correlational--relationship between work environment and “happiness.” We need to remove performance effects (Hawthorne). 

Also, there is little incentive for research about circumstances where “happiness” is unrelated or inversely related to productivity or firm profits, so that subject likely is under-researched. 

"You Get to Keep Your Business" is the Main Strategic Advantage of 5G

Lots of mobile industry executives have worried about 5G monetization. The real concern might not actually be so much whether there will lots of revenue, as there will certainly be.

The issue is more the cost side of the business model, especially capital investment to support dense backhaul networks and small cells. Even discounting new sources of revenue from network slicing, edge computing or internet of things, 5G revenue will mostly approximate 4G revenues.

Some will think that is an argument against deploying 5G. Strategically, 5G investment is necessary to keep the business a mobile service provider already has. In other words, lost market share, gross revenues and profits are at stake if the upgrade to 5G is not made.

That might seem like a paltry return, but that is the history of the mobility business. Every decade, a new next-generation network must be deployed, in large part simply to supply ever-increasing data demand and at the same time reduce the cost of supplying those bits.

Each mobile next-generation network is required as a primary means of accomplishing something else: generating new revenues to replace substantial lost revenues.

As a rule of thumb--as shocking as it might seem at first--service providers tend to replace about half of their existing revenue every decade. 5G provides one very concrete example, as did 2G, 3G and 4G. 

5G accounts will eventually replace half of all other accounts--primarily 4G but also 3G and 2G--over a decade. 

source: Statista 

The same process happened for analog mobile, 2G, 3G and 4G. By design, each successive mobile next-generation network displaces the older networks. A common pattern is for the latest generation to get about 50 percent share of accounts within five to six years. 

source: Strategy Analytics

The same process arguably also held for home broadband and fixed network internet access services. As typical speeds increase over time, customers upgrade. The product we called “dial-up internet access” was replaced by “broadband” access at single-digit or low double-digit rates. 

But speeds keep increasing. And customers gradually replace older services with newer services operating at higher speeds. 

source: Ofcom 

Access speeds  in the U.S. and other markets have grown by an order of magnitude (10x) every five years, since about 1990. 

source: iconnect007 

So, in a real sense, both mobile and fixed network internet service providers do replace at least half of all existing revenue every decade, looking only at a single product: consumer internet access. 

source: Openvault

For example, about a third of U.S. home broadband customers in early 2019 bought services operating at 100 Mbps to 150 Mbps. Two years later nearly half were buying services operating between 100 Mbps and 200 Mbps. 

source: Openvault  

In early 2019 some 54 percent of U.S. households purchased services operating at speeds less than 75 Mbps. By mid-2021, all customers buying services at less than 50 Mbps had fallen to 10.5 percent. 

Enterprise data services show the same trend. Where enterprises once bought X.25, they later switched to ISDN, also frame relay, then to T-carrier, followed by ATM, then witching to dedicated internet access and MPLS. Now many are moving to SD-WAN. 

The point is that the products enterprises purchased--and service providers sold--evolves over time. The same general pattern--replacement of half of current products--every decade also holds. 

So, to answer the question about where 5G revenue will come, it will mostly come from the same places it does now. There will be new revenue sources over the decade, including fixed wireless, sensor connections and edge computing revenues. But the mainstay will remain consumer and business mobile connections.

Sequential Hurdles Explain Low Rates of Transformation Success

A common rule of thumb is that about 70 percent of information technology projects fail to meet their objectives. Historically, most big information technology projects fail in some major way, failing to produce expected cost savings or revenue enhancements or even expected process improvements. 

Some would argue the digital transformation failure rate is the same. “74 percent of cloud-related transformations fail to capture expected savings or business value, ” say McKinsey consultants  Matthias Kässer, Wolf Richter, Gundbert Scherf, and Christoph Schrey. 

Of the $1.3 trillion that was spent on digital transformation--using digital technologies to create new or modify existing business processes--in 2018, it is estimated that $900 billion went to waste, say Ed Lam, Li & Fung CFO, Kirk Girard is former Director of Planning and Development in Santa Clara County and Vernon Irvin Lumen Technologies president of Government, Education, and Mid & Small Business. 

BCG research, for example, suggests that 70 percent of digital transformations fall short of their objectives. 

From 2003 to 2012, only 6.4 percent of federal IT projects with $10 million or more in labor costs were successful, according to a study by Standish, noted by Brookings.

Some industries arguably do better than others, especially consumer-facing businesses and industries. The success of e-commerce is one likely reason why that occurs. Compared to changing a whole business model, shifting sales partly to online mechanisms is relatively risk free.

Another common rule of thumb is that about the same percentage of digital transformation efforts also fail. Many reasons are cited. 

• Company Culture is not aligned

• CxOs do not really support it

• Silos

• Knowledge gaps about cause and effect

• Indecision or tepid initiatives

• Technology novelty not harnessed to business processes

• Expectations not in line with reality

• Not iterating fast enough

• Human capital mismatch

• Lack of continuity and consistency

• Unclear vision

• Business and IT execs do not agree on objectives

• Organizational inertia

• Lack of employee buy in

• Governance not aligned

Those concerns typically are found in every industry and firm that attempts DX, as this example from the banking industry suggests. 

 

source: Banking Circle 

There is a simple way of illustrating why innovation is so hard. If you have ever spent time and effort trying to create something new in the communications business, you know it rarely is easy, simple or uncomplicated to do so, and the larger the organization you work for, the harder it seems to be. That is because all organizational change involves power and politics, and changes will be resisted.  

There is a reason 70 percent of organizational change programs fail, in part or completely. Assume you propose some change that requires just two approvals to proceed, with the odds of approval at 50 percent for each step. The odds of getting “yes” decisions in a two-step process are about 25 percent (.5x.5=.25). 

source: John Troller 

The odds get longer for any change process that actually requires multiple approvals. Assume there are five sets of approvals. Assume your odds of success are high--about 66 percent--at each stage. In that case, your odds of success are about one in eight (.66x.66x.66x.66x.66=82/243). 

The more hurdles (approvals) required for a change to happen, the less likely the change will happen. Even when the odds of approval at any stage are 66 percent, the necessity of just five approvals will lead to seven of eight change efforts failing. 

source: BCG

Fermi is Necessary When Estimating Demand for a Product That Does Not Yet Exist

Every professional asked to estimate the size of a new market--especially for products that do not yet exist--has a Fermi problem. One has to estimate the size of something but with unknown or incomplete data.

It is not required when making forecasts about existing products with relatively well-established demand curves.

As a client once said, asking for an estmate of demand and a cost to create the network for a non-existing consumer product, “all I care about is that your projection is in the right order of magnitude. I don’t worry about precision less than that.”

source: Everyday Concepts