COVID-19 has shaken up companies around the world and turned them upside down. Revenues and stock prices plummeted. However, the pandemic has also created an environment of digital transformation. Deeply embedded structural processes that felt frozen all of a sudden were put to the test and adapted. Why did it require a pandemic to realize these slumbering optimization potentials? The example of the (non-)evolution of the keyboard suggests that crises are sometimes necessary for disruptive innovation.
Life today, for most, appears hardly imaginable without keyboards, whether they enable sending a text message as a digital onscreen-variant or even the writing of this text on a computer. Historically, keyboards evolved from typewriters, which were invented over 150 years ago. Typewriters revolutionized the way society communicated and wrote text. The influence of the typewriter is crucial to understanding the modern implications of technological change.
Nearly all keyboards used today with Latin alphabet letters printed on them start on the top left with the keys QWERTY (or QWERTZ in some countries). For technical reasons, the QWERTY arrangement was necessary to build typewriters. In 1985, when the modern keyboard was already around, Paul A. David wrote a vastly cited article about QWERTY in the renowned journal The American Economic Review. He laid the foundation for today’s broadly recognized concept of path dependence. David used the ever-persisting QWERTY keyboard phenomenon to conclude an effect he called “technological lock-in.” Indeed, technology has “locked in” in the case of the QWERTY keyboard. All of this would not have been worth noting had not more efficient keyboard arrangement forms emerged in the meantime. David presented studies that suggested keyboard systems with which users could type significantly faster. However, the QWERTY system was already widespread and had established itself. Users have become accustomed to it and are not willing to change. That is regarded as a technological path, that in that sense, appears irreversible. Over 35 years after publishing David’s essay, QWERTY is still the dominant form of key arrangement, whether on a touchscreen or a physical keyboard.
Path dependence is a concept that a variety of scientific disciplines use. It is embedded in economics and social sciences. As the economist Douglass North put it, path dependence describes the “powerful influence of the past on the present and future.” North and other scholars use the concept in the discipline of the New Institutional Economics to describe the degree of (in-)efficiency of economic systems. He describes the former Soviet Union as an example of an inflexible institutional framework that is path dependent and thus unable to adapt to new situations. In essence, the existence of an established way of doing things, no matter how flawed, lessens the likelihood of change.
Often, the only chances to deviate from path dependencies are crises or revolutionary moments. Indeed, the QWERTY keyboard alone does not offer much explanatory power on digital transformation processes. However, on the micro-level, it is an easy-to-grasp example of persisting technologies for which more efficient and innovative alternatives have emerged but cannot squeeze through the door because of the path dependent technological lock-in. This phenomenon is visible in macro-level processes as well.
Recently, the concepts of path dependence and technological lock-ins became relevant again. Companies all over the globe were confronted with the COVID-19 pandemic and subsequent lockdowns. The pandemic was the beginning of a challenging time for many sectors, including plummeting revenues and organizational changes. Regulations differed between countries. However, for many corporations, the lockdowns and public health measures included the obligation to offer forms of distance-based working. A survey of the management consulting firm McKinsey reported that measures undertaken by companies to adapt to the pandemic sped up technological transformations and the development of digital products by up to seven years. Indeed, the concept of the “home office,” or working remotely, was not invented due to the emergence of COVID-19. But the speed of its implementation increased vastly throughout the pandemic. The McKinsey study mirrors the discrepancy that companies’ executives reported between the pre-COVID estimated time to implement organizational changes and the actual time required for the implementation during the crisis. In the case of increased remote working and remote collaboration, the actual implementation within organizations moved a staggering 43 times faster than the executives expected before the pandemic. Implementing company-wide remote-working measures requires extensive organizational efforts and IT departments saw their workload increase exponentially when lockdown orders came into effect. Obviously, most workers also needed to be provided with technical equipment that allows working remotely, like laptops or webcams, resulting in vast procurement and set-up efforts for the organizations.
Moreover, companies must also provide data security and integrity. IT has to roll out VPN (Virtual Private Network) channels to ensure secure access to company data outside the organization’s network. The urgency of regulation concerning working from home forced companies to move fast and implement these measures in a short amount of time. Those and other significant means of digital transformations are here to stay. The storm of the COVID-19 crisis offered a chance to deviate from the path of several technological lock-ins.
The McKinsey report further highlights the adoption of digital customer communication channels. Pre-crisis, managers and sales representatives were locked in on visiting customers on-site at their offices. Speaking in terms of path dependency, had there not been a global COVID-19 pandemic, arguably there would not have been a reason to deviate from visiting customers all over the world. Yes, video conferences and other forms of digital consulting were around before the crisis as well. But the situation proved that customers appreciate creative digital alternatives of consulting and purchasing processes. The demand for digital purchasing services of customers increased 27 times faster than executives expected before COVID-19. These changes are now permanent. Do I still have to fly across the ocean to visit a customer’s site regarding a final purchasing decision?
In some cases, yes. However, deviations from the previous path are apparent and result in many variations of digital customer interactions. Those interactions must not include a human counterpart. The pandemic has introduced increased efforts in the implementation of automated digital interaction channels. The McKinsey report estimates that while the global average share of digital customer interactions accounted for 36% in late (pre-pandemic) 2019, it rose to an estimated share of 58% in mid-pandemic July of 2020.
The question which may arise when reading these figures in the report is, “Why didn’t they change these processes before the pandemic?” Firstly, specific customer demands for digital purchasing services were not as high before COVID-19. Second, and probably most importantly, many executives answered that these measures were not of high priority. Arguably, the observed organizational changes would still be on the low-priority list today, had the pandemic not happened. Why roll out holistic remote working systems when working from the office gets the job done? For the vast majority of employees, working on-site was an organizational lock-in. COVID-19 has shaken up the corporate world. Post-pandemic corporations certainly will include on-site working. However, employers and employees have realized the advantages of working and collaborating remotely in future hybrid working models.
As another report by the professional services network company Deloitte puts it, COVID-19 has “turned digitization from a nice to have to a must have” as we move towards the next normal in a post-pandemic world. Companies’ executives also realized the need to plan for future crises and disruptive situations, as many were not prepared for the situation that arose in early 2020.
This article does not seek to promote or praise the previously mentioned implementation of remote working and digital customers themselves, as they have apparent downsides. However, their discussion is beyond the scope of this article, which attempts to highlight the increased speed of the adoption of digital processes enabled through the pandemic.
Yet again, it is obvious that while some things evolve, others stay the same, as most of the work in modern corporate post-COVID environments will be conducted with the help of keyboards. QWERTY keyboards.