"Digital Transformation" Will be as Hard as Earlier Efforts at Change

New BCG research suggests that 70 percent of digital transformations fall short of their objectives. 

That would not surprise any of you familiar with the general success rate of major enterprise technology projects. 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.

source: BCG 

IT project success rates range between 28 percent and 30 percent, Standish also notes. The World Bank has estimated that large-scale information and communication projects (each worth over U.S. $6 million) fail or partially fail at a rate of 71 percent. 

McKinsey says that big IT projects also often run over budget. Roughly half of all large IT projects—defined as those with initial price tags exceeding $15 million—run over budget. On average, large IT projects run 45 percent over budget and seven percent over time, while delivering 56 percent less value than predicted, McKinsey says. 

Significantly, 17 percent of IT projects go so bad that they can threaten the very existence of the company, according to McKinsey. 

The same sort of challenge exists whenever telecom firms try to move into adjacent roles within the internet or computing ecosystems. As with any proposed change, the odds of success drop as the number of successful approvals or activities increases.

The rule of thumb is that 70 percent of organizational change programs fail, in part or completely. 

There is a reason for that experience. 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). In other words, if only two approvals are required to make any change, and the odds of success are 50-50 for each stage, the odds of success are one in four. 

source: John Troller 

The odds of success 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 for any change that requires five key approvals (.66x.66x.66x.66x.66=82/243). 

The same sorts of issues occur when any telecom firm tries to move out of its core function within the ecosystem and tries to compete in an adjacent area. 

Consultants at Bain and Company argue that the odds of success are perhaps 35 percent when moving to an immediate adjacency, but drop to about 15 percent when two steps from the present position are required and to perhaps eight percent when a move of three steps is required.

source: Bain and Company

The common thread here is that any big organizational change, whether an IT project or a move into new roles within the ecosystem, is quite risky, even if necessary. The odds of success are low, for any complex change, no matter how vital.

Why 4G Sometimes is Faster than 5G

As always, the amount of spectrum available to any mobile service provider correlates with potential data throughput. As AT&T, for example, has rolled out 5G service, it has relied on low-band assets initially.

And no amount of fancy signal processing is going to compensate for the amount of spectrum available to support 5G, compared to 4G, for example. If you look at the total amount of spectrum available to support AT&T’s 5G coverage, you can see that 4G spectrum is more capacious than 5G. 

source: PCmag 

That means AT&T’s 5G network--for the moment--offers less speed than the 4G network. That will change over time, and likely quite substantially. 

Over the last decade, average (or perhaps typical) mobile data speeds have grown logarithmically, according to data compiled by PCmag. I cannot tell you whether the graph shows median or mean speeds, but the point is that, assuming the same methodology is used for all data, the logarithmic trend would still hold. 

 

source: PCmag 

There is no reason to believe 5G will fail--over time--to continue the logarithmic trend, with the release of huge amounts of new spectrum, expanded use of spectrum sharing and spectrum re-use, plus small cell access.

Need for Global Scale Will Limit Telco IoT, Edge Computing Success

Among other reasons, lack of global scale is likely to prevent most telcos or mobile operators from becoming leading providers of internet of things or edge computing solutions or platforms. Generally, scale economics work against most telcos, no matter how large. 

That is not to say large telcos cannot significantly diversify revenue streams. AT&T has managed to shift its revenue sources enough that perhaps 43 percent of total revenue comes from something other than connectivity services. Softbank (at least until recently) had managed to generate perhaps 33 percent of total revenue from non-connectivity sources, while KT had reached about the same level. 

source: GSMA 

Many other tier-one telcos have managed to add between 10 percent and 25 percent of total revenue from sources other than connectivity. The need for scale seems to apply for those operations as much as it matters for the core connectivity business. But there are issues beyond scale. 

To be sure, new services such as the internet of things and edge computing will make some contribution to service provider revenues. Still, most of the value and revenue from IoT will be created elsewhere in the value chain (semiconductors, devices, platforms, integration, application software), not in connectivity. 

Perhaps edge computing will show the same dynamics, as edge computing still is about computing. That means the leading suppliers of computing--especially cloud computing--have a reasonable chance of emerging as the leading suppliers of workload as a service at the edge. 

Simply, if it is logical to purchase compute cycles from a major cloud or premises computing supplier, it will likely make just as much sense to purchase edge compute the same way. 

In other words, customers tend to have clear preferences about the logical suppliers of various products, beyond scale. The phrase “best of breed” captures the thinking. If an enterprise or other entity is looking at premises computing, it looks to certain brands. If a company is looking for cloud computing, it looks to other brands. 

Almost never is a telco among the logical five potential choices for buying compute cycles or computing platforms. 

That noted, tier-one telcos have made important strides diversifying beyond core connectivity. Among the issues are the extent to which that can happen in the edge computing or IoT realms.

BT to Build Private 5G Network for Belfast Harbor

BT says it is building and will operate a private 5G network on behalf of Belfast Harbor, covering large parts of the 2,000-acre site in 2021. BT says it aims to build “a state-of-the-art 5G ecosystem within the Port.”

Aside from supporting mobile phone service, the private network will enable remote controlled inspection technology (presumably use of drones), reducing the need for workers to climb towers. The network also will support air quality sensors. 

One can guess from those two examples--and BT’s talk of developing an ecosystem, that most of the expected smart harbor applications have not yet been deployed or developed, or perhaps have not yet been adapted to work on the 5G private network. 

Joe O’Neill, Belfast Harbor chief executive says the network is intended to support accurate tracking and integration of data gathered from multiple sources, and expects the new network to help it capture, process and interpret data in real time.

It's Hard to Win a Zero-Sum Game

Zero-sum games are hard to win, in part because every winner is balanced by a loser. Many mature mobile communications markets are largely zero-sum games these days. Market share, by definition, means one supplier gains exactly what another supplier loses. 

That is not the case for new, emerging or growing markets, where virtually all contestants can, in theory, gain while nobody loses. 

The substitution of machines for human labor is something of a zero-sum game as well.
The notion of tradeoffs is key for zero-sum markets. Consider minimum wage laws or unionization of employees. The issue is not whether those things are good or bad, but simply the tradeoffs that are made. 

Higher minimum wage laws. produce higher wages for a smaller number of employees, in part because higher wage minimums increase the attractiveness of substituting machines for human labor. 

Higher union membership and bargaining power tends to produce higher wages for union members, but often at the cost of the number of people who are employed at unionized businesses. 

The other trend we see is that when forced to make a choice, unions tend to prefer saving a smaller number of jobs in return for gaining higher wages. Workers with less seniority normally are sacrificed in such deals. 

We can disagree about whether Uber and Lyft drivers are independent contractors or employees. But it is not hard to argue that if employee classification leads to higher minimum wages, it also will lead to fewer Uber and Lyft drivers able to work. 

We can make any choices we want about which outcome we prefer: more work for more people or higher wages for fewer workers. But the choices will inevitably be made. It’s a zero-sum game.

As more and more telecom markets reach saturation, zero-sum outcomes will appear in market share statistics or the number of 4G phone account subscribers versus 5G subscribers.

Mobile operators can bend the curves a bit by changing value propositions, adding new features and bundling devices and features (up to a point) to encourage customers to switch to more-expensive plans, when they come up with compelling offers. But all of that occurs within a business that is largely a zero-sum game in many markets.

"When I Use a Word, it Means just What I Choose it to Mean"

Telecom terminology changes from time to time. These days, a “core network” for a private 4G or 5G network requires software we formerly associated with a mobile network core, such as base station control functions, routing, synchronization, timing and so forth.

These days “voice” often refers to the interface people use to interact with their phones, smart speakers or car communication systems, rather than the older notion of voice phone calls. 

Broadband used to be defined as any data rate of 1.544 Mbps or higher. These days it is some higher number that we adjust periodically. 

“Mobility” used to refer to use of mobile phones and cellular networks. These days it often refers to ride sharing. 

“Over the top” has been used in the past to describe video entertainment, messaging or voice applications provided by third parties and accessed by users and customers over any internet connection. Today it might more properly describe any service or application accessed over a communications network that is not owned by the supplier of access services.

“When I use a word, ‘it means just what I choose it to mean” the Lewis Carroll character Humpty Dumpty says. That’s an exaggeration as applied to use of terms in telecom, but the general drift is correct. 

2020 was Tough for Mobile Subscriptions, Better for Fixed Network Internet Access

With the caveat that usage is not identical to revenue earned from that usage, 2020 has generally not been a favorable year for mobile operator subscription growth, with a couple of exceptions, according to the Economist Information Unit. 

Fixed network internet access has held up better in most markets, with the strongest growth in the Middle East and Africa. 

source: Economist Information Unit 

Regions that saw the strongest fixed network subscription growth will see lower rates in 2021, while mobile subscription growth will improve in virtually every region in 2021.