What Causes Difficulty for Digital Transformation?

In a study of banking “digital transformation, two researchers illustrate why the way humans are involved in actual business processes shapes the effort. Even when using a single new tool--the SAP loan management system--the adaptation was easier for some parts of the organization than others. 

Complexity is a key issue. Also, it matters how much people need to understand the business logic of their firms. For example, one group of clerks used the new SAP-based loan management system to enter new contracts. For them, learning how to do their work with the new system was easy, the researchers say. 

In stark contrast, clerks who needed to make edits to loans in stock had a much harder time learning how to work with it, they note. 

Clerks in the former group achieved effective use within six to eight weeks, but those in the latter group needed over six months to do their work effectively again. The complexity of the task shapes the ease or difficulty of adapting. 

source: Harvard Business Review 

The researchers note the role of “system dependency,” which is a measure of how much of a user’s task is represented in the system. When more of the output or outcomes hinge on the innovation, adoption takes longer. 

That makes intuitive sense. An innovation that reshapes or affects 80 percent of a worker’s output or outcomes is going to be more complicated than when an innovation is actually peripheral to a worker’s job. 

Semantic dependency--the degree to which users need to understand how the business logic of their task is implemented in the system--seems just as important. 

Digitalized tasks that have a high degree of both dimensions are the most complex, they say. Of course.

Non-Profit Digital Transformation is REALLY Challenging

Digital transformation or digitalization in a non-profit setting might be more qualitative--and less quantifiable in terms of outcomes--than for private firms. Also, subjective assessment of “better outcomes” is one thing; objectively measurable outcomes are harder. 

One survey by Business and Decision found non-profit practitioners’ perceptions of value exceeded expectations across the board. Keep in mind these are perceptions, not measurements. 

Practitioners ranked transformation efforts high for “raising awareness,” for example. Perceptions of value for gaining new members or generating donations were generally expected to yield less improvement, as was fund raising or generating donations. That likely reflects a genuine understanding that these “tangible goals” were going to be more difficult than intangible outcomes. 

source: Business and Decision 

It is not easy. Many nonprofits struggle to get by, Microsoft notes. They are revenue-stretched, and paper-bound. Also, if digitalization normally presumes the ability to harvest insights from data, non-profits often have limited capability to generate meaningful data.

Also, non-profits often lack a firm understanding of how they are performing or what their costs really are, Microsoft notes. “They aren’t sure what programs are doing well and what could be done better.”

“Arcane and laborious administrative tasks, as well as the pressure of constant fundraising, can tie up skilled specialists and volunteers, keeping them from focusing on their real mission: helping others,” Microsoft says. 

Some basic requirements, such as understanding actual process flows, can be challenging as they are non-linear, non-standardized or porous, as they often rely heavily on volunteers or high rates of employee and volunteer  turnover. 

Also, “the nonprofit sector is not known for being particularly innovative or open to change,” notes Suzanne Laporte, Compass president. . 

So it might not be surprising that as much as 84 percent of non-profit digital transformation projects fail. 

DirecTV Now is a Standalone Company

Back in 2015 (though it seems much longer ago than that), a colleague working on U-Verse worried that the deal meant DirecTV would become the “go-to” platform for video entertainment. Some six years later, it is hard to disagree. 

AT&T’s deal to move DirecTV assets into a different company has closed. TPG Capital now will own and operate the DIRECTV, AT&T TV and U-verse video services previously owned and operated by AT&T. 

DIRECTV had approximately 15.4 million premium video subscribers at the end of the second quarter of 2021.

Many describe the transaction as “AT&T getting out of video entertainment.” That is far from correct. AT&T contributed its U.S. video business unit to the new entity in exchange for cash compensation, debt assumption but also retains a 70 percent interest in DirecTV. 

TPG contributed approximately $1.8 billion in cash to DIRECTV in exchange for preferred units and a 30% interest in common units of the new company.

At close, AT&T received $7.1 billion in cash and transferred approximately $195 million of video business debt to the new entity. 

Aside from the asset ownership dilution that frees up cash to pay down debt, AT&T managerial attention can shift back to the core mobility business. But AT&T still owns 70 percent of DirecTV. That is hardly “getting out of the subscription video business.”

Are Trade Shows Dead?

It is early to determine what permanent changes might happen in sales, marketing and customer support functions after firms have had a couple years worth of enforced use of virtual channels. 

But the behavior of sales and marketing teams since the start of the Covid-19 pandemic is fairly clear. Return on investment from virtual events or virtual conferences has been seen as sub-par. 

Generally,  trade show exhibitors and sponsors say virtual events have yet to match the networking and lead-generating potential of face-to-face experiences

Nick Borelli, Director of Marketing Growth at Allseated “worries that C-suite marketing teams may lose confidence in the value of face-to-face events as they gradually learn to live without them.”

Conversely, attendees at virtual events or exhibitions have overwhelmingly been concentrated among “learners” rather than buyers and sellers, according to surveys conducted by Bizzabo. 

“Learning is the primary motivation of virtual event attendees,” Bizzabo says. 

Virtual trade shows arguably have attendee pros and cons. They save money on physical travel costs, event exhibit costs and sometimes sponsorship or attendee fees. Virtual events arguably save time, as time out of the office is eliminated. 

Among the cons are lack of opportunities to network, ability to interact in the same way as in-person encounters, less engaging experience, possible technology or interface issues. Virtual is just more impersonal. 

Event managers who have had to pivot to “virtual” recognize the issue. 

source: Event Manager 

The big issue of importance is future behavior. Will firms have found work-arounds that make trade shows and exhibitions less important than in the past? 

One observation is obvious. Firms have had to learn how to drive sales, marketing and fulfillment operations even when physical channels are unavailable. In the process of doing so, there is some anecdotal evidence--and some hard financial results--that suggest the inability to conduct in-person sales and marketing has been detrimental to firm financial performance. 

Small business owners who generally rely on social media advertising, are generally unimpressed with the return on investment. Enterprises might be more satisfied, but also have the cost savings from not attending physical trade shows.

Conversely, if enterprises find they can sell, market and fulfill virtually, that is going to diminish the value of, and revenue for, suppliers of “live, in-person events.” Early in the Covid pandemic, event managers already were seeing the impact. 

source: Event Manager 

Virtual might still work for “learners.” It might not work so well for business-to-business sales purposes.

New Lumen Remains a Hybrid, but Barely

Asset reshuffling tends to be rather common in the connectivity business, with occasional bouts of merger unwinding. Consider the proposed sale of Lumen fixed network assets to Apollo Global Management.   

Basically, the deal unwinds the merger of CenturyLink and Qwest fixed network assets (more an acquisition by CenturyLink of Qwest) in 2011. What remains for Lumen are the original Qwest local exchange operations, plus networks in Florida and Nevada that were not part of Qwest.

Perhaps more important is the Lumen retention of the former Level 3 Communications assets. The proposed deal still leaves Lumen a bit of a hybrid: operator of large tracts of rural fixed networks, plus a handful of tier-two cities, as well as a global enterprise services network. 

source: Lumen

As was the case for the assets divided as part of the AT&T divestiture in 1982, observers will argue about which assets are most valuable. The new AT&T--focused on long distance and equipment manufacturing, was the “growth” play. The new Regional Bell Operating Companies were the “value” or “income generating” play, with little expected growth. 

Ironically, the eventual values were reversed. AT&T kept shrinking, while the RBOCs grew by acquiring each other. Eventually, new AT&T was acquired by SBC Communications, which had consolidated BellSouth, Ameritech and Pacific Telesis. 

Nynex was acquired by Bell Atlantic to form Verizon. 

The issue for Lumen is whether, shorn of roughly half of its local exchange assets, it can execute on a growth strategy driven by its enterprise and business customer operations, while shoring up losses in its consumer segments. 

Apollo may see upside from the rural ILEC operations in upgrading internet access while harvesting voice revenues. Still, it is a cash flow play, not a growth story. Lumen, on the other hand, will bank on a “growth” strategy. 

Lumen still remains a hybrid, deriving most of its revenue from its global network and enterprise connectivity services. Still, it remains one of the larger suppliers of fixed network access in the U.S. market. 

Before the sale, Lumen earned about 25 percent of total revenue from consumer services. After the asset dispositions, Lumen might earn about 12 percent of total revenue from consumer local exchange services.

source: Statista

So Lumen remains a hybrid--enterprise services and global networking--but with a 12-percent contribution from legacy consumer fixed network services.

DX, Digitization or Digitalization: Maybe There are Only 2 Categories

If “digital transformation” is a broader, organization-wide change, it probably cannot be quantitatively described. Some traditional attributes of “digitally transformed” companies include “agility” or “customer focus.” 

And efforts might still fail about 70 percent of the time. Each discrete process change might have a 70-percent chance of failure, defined as “no successful change” in process outcomes. In other words, investing to change a process, and then changing it, with no apparent improvement in outcomes, might still be deemed a failure. 

source: Digital Master Channel 

So perhaps nobody should worry too much about the difference between “digital” strategies; “digitalization” strategies and “digital transformation.” In principle and in practice, it often is hard to see the difference. 

Sometimes the difference is “objective.” According to analysts at Gartner, the difference might be the objectives of the application of any digital technology: optimization of any existing business process or transformation (changing) such processes. 

In fact, optimize or transform might be the key concept, even if Gartner itself defines “digitalization” as having “transformation” as an outcome, and perhaps “the” outcome. 

The problem is that, in some cases, changing an analog or manual process to a “digital” process (a “digital” objective such as replacing typewriters with personal computers for word processing; or electronic newspaper composition rather than manual typesetting) might also result in process change, which is supposed to be “digitalization.” 

Digitalization is “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities,” Gartner says. 

“One common misconception is that going digital is about implementing a set of technologies that get you to a digital outcome,” says Paul Chapman, Box CEO. “And that actually isn’t the case.” The problem is that it is not crystal clear whether that expectation of an outcome is an example of “digitalization” or “digital transformation.” It might be either; it might be both. 

SAP differentiates by saying digitalization is when “data from throughout the organization and its assets is processed through advanced digital technologies, which leads to fundamental changes in business processes that can result in new business models.” 

So an accumulation of digitalization efforts can eventually result in “transformation,” according to SAP, which tends to see transformation as a process that culminates or results from a series of more-discrete digitalization efforts. 

Others might argue that transformation primarily describes an entity’s ability to be customer-driven, end to end, across every internal operation. But just as many might disagree, arguing that transformation “means far more than a customer-focused technology transformation.”

In that sense, perhaps it is fair to see “transformation” as a concept, while “digitalization” is the set of practical changes in business processes, when digital technology is applied intentionally to change processes. 

According to Gartner, “digitization” is the simple substitution of a digital process for a former analog process, with no intent to change the business process. But as with “digitalization” and “transformation,”t often is hard to characterize the difference. 

Substituting automated teller machines for human bank tellers might be considered a “mere” digitalization move. But it might also enable a change of business model and processes. 

One might note the same for use of self-checkout kiosks in retail stores. That might be said to be a “mere”  digitization strategy, substituting a digital self checkout and payment process for a human clerk handling the same functions. 

But it also is a transformation of business model, to the extent that any business model includes both “how” an entity makes its revenue and all internal processes required to realize sales and revenue. 

Not only are operating costs affected, but human resources can be freed up to undertake other tasks, such as concierge services such as fulfilling shopper online orders for on-site pickup. To a real extent, that changes the model from traditional in-store retail to something else, including grocery delivery. 

Even our definitions require subtlety.

U.S. Office Workers REALLY Do Not Like Office Work

U.S. workers REALLY do not like working in the office, a survey of 3500 U.S. workers by Goodhire finds. 

 

Some 68 percent of respondents would choose remote working options over in-office work. 61 percent of respondents would be willing to take a pay cut to maintain remote working status. Some workers even suggested they would take a 50 percent pay cut to avoid returning to the office. 

Some 45 percent of respondents would either quit their job or immediately start a remote work job search if they were forced to return to their office full-time. Nearly 25 percent said they would quit if a return-to-office mandate was instituted.

Nearly three quarters of respondents said they need a continued remote working arrangement to stay at their current job. Fully 85 percent of respondents prefer to apply for jobs that offer remote flexibility, while just 15 percent would apply for a position that requires total full-time office work. 

Some 60 percent of respondents would move to a new city just for the opportunity to work remotely in any capacity; while 70 percent of respondents would forfeit benefits to maintain remote working status, most commonly: health insurance, paid time off, retirement accounts, and more.

About 74 percent of respondents believe that companies not offering remote working arrangements will lose major talent in the workforce. Also, 67 percent of respondents believe that companies that do not offer remote working arrangements will struggle mightily to attract quality applicants.

Additionally, 64 percent of respondents believe companies that do not offer remote working arrangements will have to increase salary offerings to entice job seekers to apply.