Strategy in the Digital Age: Mastering Digital Transformation by Michael Lenox – A Review
Technological progress is rapid and accelerating. Biologist Paul Ehrlich reassures us that as long as the human brain is setting the pace, we needn’t fear – basic human intelligence has remained the same for thousands of years. On the other hand, Singularity Theory (e.g., I. J. Good 1965) warns that Artificial Intelligence could beget machines that design progressively more intelligent machines, eventually leading to an “intelligence explosion” that leaves humans far behind. While pundits debate how to keep AI in check, Strategy in the Digital Age by Michael Lenox teaches business leaders how to navigate and manage the digital transformation. Organizations facing the shifting business strategies of this new paradigm will benefit from this well-organized deep dive into all things digital.
Kodak was the legendary leader in photographic film and, though they foresaw the rise of digital imaging and spent billions to keep up, they still landed in bankruptcy. Smartphone cameras, digital watches, and word processors are all transformational technologies that disrupted established businesses. As if things weren’t moving fast enough, the COVID pandemic pushed digital innovation ahead even more. The foundational digital technologies of processing power, storage capacity and bandwidth have grown exponentially over the past half-century - the technology of today could easily be obsolete in a year. The author closes his first chapter by laying out the structure and strategy with which the book will address the transformation.
Competition will be different in the digital age, and asset-light businesses will exploit existing technology with software to connect independent providers directly with customers. Examples include Uber, Lyft, Airbnb, and eBay. These two-sided market makers discourage competition primarily through rapid growth. The more people who adopt these platforms, the more value they have – Facebook has ~ 3 billion users, while LinkedIn has close to a billion. These platforms can also vanish quickly (e.g., Tinder, Match) if deemed “uncool” by users. Understanding just how digital transformation spreads is key to developing effective business strategies. The author helps by clarifiying the interconnectedness of various digital and non-digital technologies.
Once upon a time, a business produced a product, marketed it, and sold it to the customer in a one-way transaction. The new customer relationship is a longer lasting, two-way deal where the value proposition may continue to shift with changing customer needs. Lego has an online website where customers can build whatever they want with digital Lego blocks. Good designs that became popular have been made into real Lego kits. Another new method of capturing value is a switch from a one-time payment to a subscription, where defending customer engagement and loyalty becomes essential. Stitch Fix does this by analyzing customer data with AI to provide a regular offering of curated clothing. During Steve Job’s second stint at Apple, the company stopped trying to compete with Microsoft and moved into new innovative territory with the iPhone and iPad products. High switching costs kept customers engaged in the Apple universe.
Much like Kodak, General Electric saw digital change coming. GE invested heavily in the Internet of Things, but nonetheless failed to become a market leader. Perhaps GE’s old-school image kept customers from trusting them as the right company for this transformation. Valuable resources, like GE’s, aren’t enough if those resources are widely available. Corporate culture is one complementary intangible asset – examples include Amazon (data driven) or Apple (design expertise). The most important competitive asset may be the ability to innovate at every stage of the game.
Professor Lenox, a recognized expert in business strategies for the digital transformation, relates his own experience after being asked to lead the efforts at the University of Virginia’s Darden School of Business. This program accelerated with the onset of the COVID pandemic, which forced a change to 100% online course delivery and exams. His first-hand experience elucidates many of the book’s key points. Any organization must begin with a solid digital infrastructure, add data analytics (hence the emergence of the “data scientist” as an essential creative team member), and develop digital applications. Finally, none of this really matters unless there is a well-articulated digital strategy to tie it all together and feed back through the first three layers.
Many of the characteristics required of good leaders for the digital transformation will be familiar. One leadership strategy I especially liked was to encourage a culture where people are not paralyzed by a fear of failure. By assigning individuals to several project teams at once, one failure can be cast as an opportunity to devote more time to other tasks.
The media closely scrutinizes the products of digital transformation, and topics like data breaches and mental health concerns are popular click-bait. Social media is credited with enabling the Arab Spring and causing the resignation of Egyptian President Hosni Mubarak, but it has more recently been blamed for mentally unhealthy comparisons among young people During the 2016 US Presidential election, foreign actors were found to be provoking discord online and even inciting violent protests. As the term “surveillance capitalism” enters the lexicon, the very definition of privacy is changing. 96% of Apple iPhone users chose not to allow mobile device applications to track their data, causing Facebook to forecast a $10B decline in advertising revenue.
The author summarizes some of the concerns with Artificial Intelligence and introduces the importance of studying the ethics behind software algorithms. As he notes, some of our anti-trust laws may need to be revised to accommodate situations where monopoly may actually drive down prices and benefit consumers. The concept of “The Value of Values” is a fitting finish to the section on digital transformation – it is critical to check each new market opportunity for its alignment with your core values. Adjusting the values, on the other hand, sets a dangerous precedent.
Some of the most pressing problems of our time – optimized, sustainable farming, climate change and decarbonization, healthcare and telemedicine, the availability of education... – are promising fields for digital transformation. Author Michael Lenox lays out the challenges, providing a “Framework” at the end of each chapter to summarize the content and help readers organize their thoughts into actionable ideas. He concludes the book with a tour through all the frameworks in summary fashion to put the entire process in perspective. Individual terms are explained in such a way that the potential reader should not be put off by “business speak”, and there is a complete glossary of terms for further support. References to other useful business books in the body of the text guide the motivated reader to further detail on specific topics.
Populated with numerous relatable examples, Strategy in the Digital Age entertains, informs, and leaves with reader with a solid plan for doing business in the fast-moving digital world.
Author Profile - Paul W. Smith - leader, educator, technologist, writer - has a lifelong interest in the countless ways that technology changes the course of our journey through life. In addition to being a regular contributor to NetworkDataPedia, he maintains the website Technology for the Journey and occasionally writes for Blogcritics. Paul has over 40 years of experience in research and advanced development for companies ranging from small startups to industry leaders. His other passion is teaching - he is a former Adjunct Professor of Mechanical Engineering at the Colorado School of Mines. Paul holds a doctorate in Applied Mechanics from the California Institute of Technology, as well as Bachelor’s and Master’s Degrees in Mechanical Engineering from the University of California, Santa Barbara.