Strategy in the Digital Age
Mastering Digital Transformation
Michael Lenox



Rise of the Digital Age

On January 19, 2012, Kodak declared bankruptcy. On the surface, this was entirely unsurprising. Kodak was the global leader in the manufacturing and processing of chemical-based photographic film. One of the iconic companies of the twentieth century, Kodak was brought to its knees by the rise of digital imaging and the reconfiguration of the value chain for pictures. Seemingly overnight, we stopped taking pictures with film-based cameras, printing them out for sharing in photo albums and picture frames, and started using our smartphones from the likes of Apple and Samsung to create digital images shared through social media sites such as Facebook and Instagram.

Except the change did not occur overnight and Kodak was not asleep at the wheel. In fact, as early as the late 1970s, Kodak recognized the disruptive potential of digital imaging and began investing heavily in its own digital transformation. Kodak spent billions on R&D. It had some of the first patents for digital image sensors. It introduced one of the first digital cameras, in 1989.1p It created a new architecture for sharing photos, pioneering the PhotoCD and CD player in the early 1990s. It hired a tech-savvy CEO away from Motorola in 1993 and was a leader in point-and-shoot digital cameras for a time. This wasn’t enough.

Kodak is not alone. The pressure to digitally transform knows no bounds, having an impact on virtually every industry and organization. The list of digital casualties is long and growing every day. Blockbuster, Borders, Nokia, Sears, and Blackberry were all raging successes laid low by digital transformation, or as I like to call digital transformation’s “evil twin,” digital disruption. In their wake has risen a group of innovative companies with an entirely new wiring: Apple, Amazon, Google, Facebook, Uber, Airbnb, Netflix, Box, Zoom, and assuredly a whole host of upstart ventures that have not yet become household names. These are companies that have been built digitally from the ground up, that understand the primacy of data and how to leverage data to add value to their offerings.

While there is a temptation to view digital transformation as new, it is important to recognize that digital transformation has been occurring for well over a half century. In 1972, Hamilton introduced the first digital watch, the Pulsar.2p Powered by a battery-and-quartz technology, the digital watch was a major disruption to the centuries-old analog watch industry. Suddenly, generations’ worth of expertise in making small springs and gears was rendered moot. A decade earlier, the electronic typewriter pioneered by IBM disrupted the centuries-old mechanical typewriter business and established leaders like Remington—only to be disrupted a decade later with the rise of personal computing and word processing.

Yet there are reasons to believe that digital transformation is accelerating. The emerging digital infrastructure is giving rise to enormous datasets, what we used to call “big data,” that are helping fulfill the promise of artificial intelligence and machine learning. These are creating virtuous cycles in which data and learning beget more data and learning, accelerating innovation and creating the risk that those slow to digitally transform will be quickly left behind. I use the analogy of building an onramp to a highway. Once you successfully complete the ramp and enter the highway, you are speeding down the digital highway. Digital transformation is about building that onramp to the highway. If you are too slow, you may never catch up to those who came before you.

Over 50 percent of Fortune 500 companies have either been acquired, merged, or declared bankruptcy since 2000.3p In recent years, stalwart companies such as AT&T and ExxonMobil have been removed from the Dow Jones Industrial Index to be replaced by tech companies, Apple and Salesforce, respectively. The average lifespan of S&P 500 firms has been steadily declining, creating more turnover among the largest firms.4p Serial entrepreneur Tom Siebel, founder of artificial intelligence company C3 (ticker AI on the NYSE), points out that “it is estimated that 70 percent of the companies in existence today will shutter their operation in the next 10 years. . . . Mass extinction events don’t just happen for no reason—I believe the causal factor is digital transformation.”5p

This is not to say that digital transformation needs to be fatal. In the photographic film industry, Kodak rival Fuji doubled down on its core chemistry expertise and diversified into several adjacent industries such as health care, optics, and chemicals. Similarly, film-based camera manufacturer Nikon pivoted quickly to higher-end consumer digital cameras, leveraging its expertise in lenses to differentiate from smartphone alternatives. IBM has transformed itself at least twice: from the maker of mechanical business machines to the global leader in mainframe computers to its current manifestation as a digital solutions provider leveraging Watson, its AI technology platform.

This book is about how to understand the strategic ramifications of the digital age and to design and execute strategies to help your organization flourish. In my work with business leaders, I have yet to find a business or industry that is not feeling the pressure to digitally transform. All too often, companies and organizations relegate their digital transformation efforts to the IT team, as if wrangling your data and creating a few nice data visuals is all it takes. If only it was so simple! This book looks at how digitization is transforming the very ways organizations deliver and capture value, creating new business models, disrupting existing value chains, and providing opportunities for building new enduring sources of competitive advantage for those who have the foresight and tenacity to capture them in this digital age.


The growing technology reckoning wrought by digitization has had a long gestation. The rise of the digital age has been catalyzed by the exponential growth in three core digital technologies: processing power, storage capacity, and bandwidth (see Figure 1.1p). In 1965, Intel founder Gordon Moore advanced his now famous observation that the number of transistors per integrated circuit tends to double every year (later he revised it to roughly every two years). Referred to as Moore’s Law, his observation has proven remarkably prescient. Over the past fifty years, the increased density of transistors on integrated circuits has allowed microprocessors to exponentially increase in processing power while massively lowering their cost per gigahertz. Stated another way, we have seen a one-trillion-fold increase in floating point operations per second of computer processing power. An Apple Watch on your wrist today has nearly double the processing power of the Cray-2 supercomputer from 1985.

Similar dynamics have been observed in storage and bandwidth. Magnetic storage, in terms of bits per dollar, has progressed from roughly 1 bit per dollar in the early 1950s6p to 350 billion bits per dollar in 2020. From 5-1/4-inch floppy disks with 360 kilobyte capacity in the 1980s to USB flash drives with 8 megabyte capacity in the early 2000s to the petabytes of capacity available through cloud services today, we have seen an exponential increase in capacity per dollar for nearly seventy years. Similarly, Internet bandwidth has grown exponentially from 1,000 bits per second using dial-up modems in the early 1980s7p to 1 billion bits per second in 5G networks. We think nothing of streaming videos on our phones today when just twenty years ago downloading a simple picture using an AOL dial-up service could feel interminable.

Such exponential growth is hard for us to comprehend, let alone design strategies to accommodate. To help illustrate, let me evoke the apocryphal story of the creator of the classic game of chess. As the story goes, the inventor of chess was an Indian man who was summoned by the ruler of India to his court to celebrate his signature creation. The ruler, wishing to honor him, asked him to suggest a reward for his invention. The inventor, being a smart man, asked for one grain of wheat to be placed on the first square of the chess board and then to double it on the next square and then double it again and again until all 64 squares on the board were covered. The ruler scoffed at what seemed like a pittance. Assuredly, the inventor deserved more than a modest pile of wheat. What the ruler didn’t appreciate is that doubling 64 times, in other words 264, results in over 18 quintillion grains—about two thousand times the global production of wheat in 2020.

This is the power of exponential growth. While there is no consensus on how long Moore’s Law or the exponential growth in bandwidth and storage will continue, what is clear is that even a few more years of doubling could lead to a radically different world than the one in which we currently live. Technical challenges that may sound daunting today may be trivial in a decade. This, at its heart, is the challenge of the digital age. We live in a fast-moving world where the start-of-the-art technology of today could be obsolete by next year. The implications for competition are huge and highlight, yet again, the importance of clear thinking and well-devised strategies.

Figure 1.1. Exponential Growth of Technology. Source: Karl Rupp and Nielsen Norman Group,


Chapter 1

1p. James Estrin, “Kodak’s First Digital Moment,” blog, The New York Times, August 12, 2015,

2p. Xavier Markl, “Hamilton PSR, Reviving the First-Ever Digital Watch,” Hands-on,, March 18, 2020,

3p. Thomas Siebel, “Why Digital Transportation Is Now on the CEO’s Shoulders,” McKinsey Quarterly, December 14, 2017,

4p. S. Patrick Viguerie, Ned Calder, and Brian Hindo, “2021 Corporate Longevity Forecast,” Innosight

5p. Robert E. Siegel and Julie Makinen, “C3 IoT: Enabling Digital Industrial Transformation,” Case No. SM307, Stanford Graduate School of Business, 2018,

6p., “Magnetic Data Storage (Bits per Dollar) 1952—2004,” accessed September 20, 2021,

7p. Jakob Neilsen, “Neilsen’s Law of Internet Bandwidth,” Neilson Normal Group website, April 4, 1998 (updated September 27, 2019),