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(00:52): Hello and welcome to another episode of the Duct Tape Marketing Podcast. This is John Jantsch. My guest today is Mike Lenox. He is the Tayloe Murphy Professor of Business at the University of Virginia’s Darden School of Business. He has served on the faculty at Duke and NYU and as a visiting professor at Harvard, Stanford, and Oxford. He holds a PhD from MIT in Technology Management and Policy. And we're gonna talk about his new book Today Strategy in the Digital Age: Mastering Digital Transformation. So, Mike, that was a mouthful, but welcome to the show.

Mike Lenox (01:28): John. Thank you so much for having me.

John Jantsch (01:30): You spend a lot of time with textbooks. I think

Mike Lenox (01:32): , I do enjoy writing

John Jantsch (01:35): .

(01:36): So, uh, my first question is gonna sound like a silly question, but I think it's, I think it's legitimate based on all the conversations I have with people about strategy, um, and their, uh, confusion about what the term actually means. , uh, I thought I'd start there. Um, how do, how do you define strategy?

Mike Lenox (01:53): Oh, that's an excellent question. You know, in our MBA classes, we always start with what, uh, we refer to as the strategist challenge. And so to me, the strategist challenge is about finding valuable positions at the intersection of three things. Uh, your values and mission as an organization, absolutely critical. That's your north star, defining who you are and what you aspire to be, the opportunities that the market provides to you. So this is competition, it's demand, it's all those things that influence what is available to you. And then last but not least, your capabilities as an organization. And so the key for strategy is how do you identify and then achieve and protect those valuable competitive positions at the intersection of those three things.

John Jantsch (02:36): So it's not really just a list of tactics, is that what you're

Mike Lenox (02:39): Saying? Absolutely not, no. It's about trying to figure out where to point, you know, where to point the ship.

John Jantsch (02:44): It's kinda like how you're gonna, you're marketing the market, right? So again, in the title, uh, strategy in the digital age, how would you define the change or how somebody might look at digital strategy versus, I don't know, regular strategy or ? Or has it really just become a, you know, such a significant component? It's just part of the overall strategy.

Mike Lenox (03:10): I, I think that's right. I mean, I think in many ways digital strategy is just strategy in the same way, digital marketing is really just marketing in this day and age. And I think one of the points, uh, that I make in the book is that the digital agents having impacts not only in those sectors that we might call technology sectors or technology companies, but it's really pervasive. I am hard pressed to find an industry in a sector that is not being impacted by digital technologies. Now, one level strategy stays the same basis for kind of understanding markets and competition don't fundamentally change just because we're in this digital age. But there are certain ways in which the digital age is having maybe differential impacts than what we've seen in the past. And a lot of what the book is about is really trying to understand like, how fundamentally are these digital opportunities transforming those market opportunities?

John Jantsch (04:02): Yeah, and I, I, I have to admit, when I first saw the book and the title of the book, you know, in my mind, maybe it's my own bias, you know, kinda leap to, oh, you know, we was talking about websites and social media, and, you know, all the digital stuff. But really as you started to allude to there, it's really more about how digital technologies enable the creation of services and products and maybe an entire industries . So, so talk to me a little bit about, I mean, that's a much bigger conversation, isn't it?

Mike Lenox (04:30): Yeah. And the book, we, we talk about a number of kind of fundamental things that digitization is doing in a variety of industries. One, fundamentally changing the customer value proposition. Uh, now we find that you, you are constantly engaging your customers, collecting data, using that to refine the products and services that you're offering. It has ways that fundamentally changes the operations and the ways you deliver value and creating opportunities to both increase value and simultaneously lower costs through various kind of efficiency opportunities. And then perhaps even more fundamental, we're seeing things like what we call the de construction of the value chain. That what used to be more vertically integrated efforts by different companies are being picked apart by especially entrepreneurs coming in and taking various pieces of their value chain, again, leveraging digital. But really at the heart of it that, you know, we really kind of center most of the book on is this idea that data has really gained primacy. You know, people talk about data as the new oil in our economy here. And that the economics of data, especially the scalability of data and what that does for you, can really change again, the nature of competition within an industry.

John Jantsch (05:43): I'm gonna jump around a little bit here based since you opened that up. I mean, AI is essentially a technology that is massaging data . So, so what are some of the, let's go on both sides of that. What are some of the opportunities, but then what are some of the threats?

Mike Lenox (05:59): Yeah, absolutely. Well, obviously generative AI in particular with ChatGPT is on everybody's mind these days. But we should observe that AI is, it's been around for a while. It has many different forms and is affecting many different things, including autonomy. It's impacting, you know, the use of industrial processes, not just, you know, the fun, uh, language generators that we've been all playing with over the last few months here. I think it is quite disruptive and has a lot of potential in a lot of different directions. And again, I think it's, you know, goes to maybe even the fundamental construction of some of our, some of our industries there. But it's not just generative ai. You know, I point out blockchain is another one that gets a lot of excitement and buzz. If you listen to Mark Zuckerberg, the Metaverse is, you know, coming soon, the use of VR things like digital twins. There's a whole host of kind of interesting applications and technologies that we're seeing. And in many ways these are all kind of overlapping and intersecting in interesting ways that, again, forward thinking businesses are, are figuring out how to capitalize on.

John Jantsch (06:59): So, so the book does present a framework for somebody who is thinking, gosh, I need to get on board here. Talk to me a little bit about, you know, what would be a typical way, uh, that you would work with in an organization? Cuz I'm sure that, uh, I mean, there's still people that cryptocurrency is like an unknown word to them, , but then there certainly are people that are as, you know, as the buzz around, say, ChatGPT comes, you know, there's more and more people at least saying, I need to figure out what this is. How would you work with somebody to help them uncover where their opportunities might be or where they might actually be in real danger, Yeah. Of being disrupted.

Mike Lenox (07:35): Yeah. And I think, you know, uh, the one side, while I believe that we're seeing disruption in many different ways, we also have to be careful of kind of a hype cycle, right? Yeah. That some of these technologies get ahead of themselves, now the world is ending to certain pundits, and then, you know, it never really comes forward. One of the things we talk about, or I talk about in the book is industry life cycles. You know, we have a long history of kind of studying how industry has evolved over time, and there's patterns we can look at, uh, that help us understand when new technologies come about, how are they gonna play out. Um, so in the simplest case, you know, s curves, um, the simple idea that early in the stage of a technology, you might see a lot of investment, but not much improvement.

(08:16): But if it's gonna be disruptive, you go through these exponential growth periods in which the technology, you know, really begins to improve and, and change the marketplace. And then eventually you get a kind of lessening of that impact as we kind of figure things out over time, that has huge impacts for, you know, entrepreneurial entry, how incumbent firms respond, being, uh, responsive to these kind of timing and trends. I, I think in this day and age, trying to always be on the cutting edge, know exactly what's coming down the pipeline is a very hard task to do. And I think this is where the strategy piece comes in. I I always talk about, you know, strategy is never meant to be static. It's not meant to be kind of set in stone and off you go. It's a constant process of reflection where you have to be thinking about, all right, here's the latest new thing, ChatGPT is out there, what are the impacts here? And to think through kind of the underlying economics of what is that gonna do to our market structure?

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(11:02): Ironically, you mentioned oil. I was going to, you, you were using it as a metaphor for data. Let's take that industry on, you know, what's the strategy for replacing an an old entrenched industry? I, I mean it's, we've been talking about clean tech for a long time. Yeah. So, you know, what's the approach for, and I know that you are passionate about climate change and have written, uh, some other works, uh, directly related to that. So what's the strategy for, you know, that young startup to take on a really big entrenched industry that doesn't want to go away?

Mike Lenox (11:36): Yeah, as you mentioned, this is another passion of mine. Another area, I've written some books, uh, and they do overlap. Actually. There are some things in advances of digital technology that could help us advance clean technology as well. You know, I think there's a couple ways to answer your question. One, not to be too cute about it. What we often see when they see these massive disruptions and, and kind of major shifts in technology is often incumbent firms fail. They go out of business. And of course that's not great advice to those incumbent firms. So what do you do? I think the key is trying to understand what capabilities you currently exist that you can transform to the new market opportunities that are emerging. Recognizing it's really hard to just completely reinvent yourself. I run into a lot of companies who say, you know, they want to be the Google of X, you know, and they have this vision for who they're gonna be.

(12:25): And my quick response is often Google's gonna be the Google of X. They're better positioned than you are to, you know, occupy that position. So while we call it, you know, starting where I began with the strategist challenge, the reason it's a challenge is understanding that as the market shifts and those opportunities maybe moved from where they historically been, how do you evolve your capabilities? And I say evolve because again, you can't just reinvent wholesale typically to where the market goes. So using your example for oil, I'm doubtful that the oil companies and fossil fuel companies will transform into clean energy companies just simply because they're just radically different. They're not even different technology, they're different marketplaces in many cases here, but there are opportunities for them and maybe in some cases leveraging digital technology to improve their operations. Sure. Do better at exploration and extraction, you know, increase efficiencies, maybe reduce some of their direct environmental impact they have from, uh, from extracting fossil fuels. So again, there's a role for digital, there's a role for even clean with those companies, but I don't expect them to all become digitally, you know, AI companies tomorrow for any, you know, any reason.

John Jantsch (13:34): But at some point, you know, a lot of entrenched industries, you know, hang on because it's so expensive to change or because they have to, you know, gut the cash cow in order to change, but at some point, you know, they get, they get replaced. So, you know, how does a, and again, I'm not dreaming the oil companies are going away anytime soon, but you know, how does a company that might example I love to use is the classified for newspapers? You know, they, that was the cash cow for newspapers. Yeah. The classified ads. Right. And they closed their eyes to Craigslist and, you know, that business went away and where they could have owned it, you know, they could have, you know, they could have transformed at a moment, but it would've literally meant throwing money out the window. Yeah. Which, you know, nobody had the appetite to do. So how does a company who sees maybe sees this coming, you know, how do they, you know, brace for the impact that's not gonna be that positive.

Mike Lenox (14:28): Yeah. And I think this, you know, problems of incumbency, if you will, are very common, right? And I have so many examples that I share with companies that I work with of, of the failed attempts. And I'm always asked the question of where are the successes? And, and in fact, they're few and far between. They are harder to find those companies who can radically transform themselves in the face of some of these trends that we're seeing. Yeah. I go back to again, this notion that you have to build your strategy off of at least some elements of your current capabilities. Mm-hmm. , what can you bring to the marketplace that provides value in this digitally transforming world? The other thing the book spends a lot of time on, and I have different frameworks that help, uh, businesses think through, gets back to this, where is the position that you can best occupy and, and appropriate some value for your, you know, shareholders and for your stakeholders in this evolving, um, marketplace here?

(15:21): And it might be somewhat different than where you've occupied in the past. It might not be exactly how you envisioned yourself to start off with, just give you two examples of companies who used to play in the smartphone market. Blackberry and Qualcomm, , both of them made different decisions, right? One, Qualcomm moved upstream and became more of an innovator with patents and the like, that provide some of the core technology for, you know, your smartphones and the like. And then Blackberry recognizing that their old handset model wasn't going to work, moved into digital security, cybersecurity protection, and the like. So again, it was kind of a reflection that the marketplace was changing. They needed to shift their capabilities to a kind of a new position, a new part of the value chain where they could actually continue to, uh, survive and thrive.

John Jantsch (16:08): So I'm with you. I think the media, particularly new technologies, likes to, you know, kind of say, oh, here's the scariest scenario. But there really are, I mean, there are some social implications, some policy, some governing, you know, some regulations, antitrust, um, you know, when you start talking about the Googles and the Metas of the world, um, you know, where does that fit into, you know, the sort of enthusiastic rush to all things digital?

Mike Lenox (16:36): Yeah, I, we, I have a whole chapter basically on these kind of broader societal issues with tech. And I think from a company standpoint, my main point is you need to be thoughtful and proactive about this. You know, going back to data and the primacy of data mm-hmm. , you know, what do you feel comfortable and not comfortable doing with user data, critical question that every company needs to address, uh, when it comes to ai, what types of decisions are you willing to an essence seed to the ai? And where do you feel that's not appropriate? Um, one of the things I talk about in the book that I'm borrowing from colleagues of mine at the University of Toronto is this idea that what AI does for you at the end of the day is give you really good predictions, right? But predictions are only half of what you need. You also need judgment on top of that. And so to the extent that AI is lowering the cost of the prediction, a complimentary like judgment actually becomes even more valuable in that world. And so companies really need to be thoughtful about, again, what do they feel comfortable with and where are their opportunities for them to kind of layer on that higher order judgment to what these machines in essence can do for you.

John Jantsch (17:47): Yeah. I've actually, I've late been, I don't, at least the technology I'm working with, I don't feel like it's artificial intelligence. I kind of switch it around and say it's ia, it's informed automation, right? Is is kind of what I feel like it, at least for our uses in the marketing industry currently. Give me, I, and you already kind of alluded to the fact that this was a hard one to, to do, but I I was gonna ask you for some examples of companies that you think are at least doing, maybe they haven't, like hit some big home run, you know, here, but, or at least approaching the thoughtfulness of this in, in a way that you think is appropriate.

Mike Lenox (18:24): Well, I'll give you a historical example that has arguably transformed themselves two, maybe three times as someone like ibm, right? You know, who, who, who went from originally making business machines to making computers, to them being more of a software and services company who tried to embrace AI and the, like

John Jantsch (18:42): Early on with Watson really was kind of one of the original, uh, models, wasn't it? Yeah. Yeah,

Mike Lenox (18:48): Yeah. Exactly. And we can debate whether they're, you know, well positioned now moving forward, right? Uh, but again, they've done a fairly good job kind of repositioning themselves, uh, over the years. Yeah.

John Jantsch (18:58): Awesome. Well, Mike, I appreciate you showing up and spending a little time, uh, uh, with my listeners on the Duct Tape Marketing podcast. You wanna tell people where certainly they can get a copy of strategy in the digital age or connect with you in any way that you wanna invite them.

Mike Lenox (19:12): Yeah, absolutely. Of course, you can get it on Amazon and Barnes and Noble or any really online, uh, retailers. The book is coming out from Stanford University Press, uh, so you can of course look forward from them as well. Uh, and then on a personal note, I'm, I'm easy to reach at just simply michaellenox.com, uh, just one n in Lenox there. Uh, and, and that's another way you can engage and, and connect with me.

John Jantsch (19:33): Awesome. Well, again, thanks for taking a little time out of your day and, uh, hopefully we'll run it into you one of these days out there on the road.

Mike Lenox (19:39): Well, thank you so much for having me, John.

John Jantsch (19:41): Hey, and one final thing before you go. You know how I talk about marketing strategy, strategy before tactics? Well, sometimes it can be hard to understand where you stand in that, what needs to be done with regard to creating a marketing strategy. So we created a free tool for you. It's called the Marketing Strategy Assessment. You can find it @marketingassessment.co, not.com, dot co. Check out our free marketing assessment and learn where you are with your strategy today. That's just marketing assessment.co. I'd love to chat with you about the results that you get.