TLI Exit Interview: Professor Alfred "Alfie" Marcus

Dr. Alfred “Alfie” Marcus is one of TLI’s most popular instructors, wrapping up more than two decades of teaching at the institute this week. He's taught at the Carlson School even longer than that; he began his tenure at the storied business school back in 1984. 

He is a Professor and Edson Spencer Endowed Chair with the Technological Leadership Institute, and has been chair of the Strategic Management and Organization Department at  Carlson, and has won the outstanding teacher of the year award in the part-time MBA program. 

He authored Innovations in Sustainability: Fuel and Food, winner of the Academy of Management ONE 2016 Outstanding Book Award; The Future of Technology Management and the Business Environment: Lessons on Innovation, Disruption, and Strategy Execution; and is the author, co-author, or editor of 17 books. His latest book, Comeback: Can Great Companies Rise Again? Is slated to be published by the University of Toronto Press in the fall of 2025. He has taught in the MBA program of the Technion Israel Institute of Technology and at other universities throughout the world.  His Bachelor's and Master's Degrees are from the University of Chicago, and his Ph.D. is from Harvard University.

He was kind enough to sit down with us and answer a few of our questions.

Q: Thank you for taking the time from your busy schedule to talk with us. What courses do you currently teach with the institute?

A: Currently I teach the strategic management of technology course. In previous years, I taught a course on the environment of business, and one on business ethics as well as strategic management of technology. I also used to teach a course in risk communication in the security studies program. 

My main appointment is with Carlson. As of now, I'm still full-time at Carlson and I teach strategic management and business ethics at Carlson. I’m mostly teaching online nowadays.

Next year I will go into phased retirement at Carlson. I’m wrapping up my last class for TLI this week.

Q: When did you start at the Carlson School, and when did you start with TLI?

A: I started with Carlson in 1984, so this is my 40th year; we were not in the current building at that point in time. We were in one of the Social Science Towers on the West Bank.

[Former TLI Director] Massoud Amin invited me to start teaching classes at TLI. I started around the year 2000. I was teaching one course – business, government, and the macro environment initially. Then I started teaching strategy a couple of years later. 

The Edson Spencer Professorship is shared by the Technological Leadership Institute and Carlson School. I was given that title two or three years after I started teaching at TLI. 

Q: What are the big differences in the material you teach or the students that you teach between Carlson School and TLI? 

A: The material I teach is very similar. The number of students in a typical TLI class is generally smaller. Students I've taught at Carlson have been mainly in the part-time MBA. So most are working, which is also true of the typical TLI student, but the age range at TLI varies more. Overall, I've had some students right out of college and some in their sixties. Typically, TLI students are a little older, at Carlson about 30 and at TLI in their late 30s. 

TLI students tend to have more experience. They're more technically oriented. A lot of them came out of tech fields. A lot of them work for the university and a variety of companies, some from smaller firms not well known to me and some from UnitedHealth, 3M and other large Twin Cities companies.

Q: How would you say that the course material that you've been teaching changed over the last 20 plus years?

A: In strategy, I have taught cases of the same eight to nine companies over time. While the companies stay the same, their stories have changed a lot over the years.

I know these companies well – Intel, Amazon, Dell, Best Buy, Disney, Pepsi, Monsanto, which is now part of Bayer, and Tesla. I once taught a Walmart case. 

I teach a strategy framework I refer to as a formula, which says that sustained competitive advantage or SCA is a result of external analysis, internal analysis, and a variety of moves that companies make after they did that type of analysis. One move is business strategy; companies reorient the products and services that they currently sell based on product attributes and price. Another move is corporate strategy which includes mergers, acquisitions, and divestitures plus alliances. The point is to move out of businesses in which a company currently competes and to move into new ones.  

And then I do global strategy, mostly focusing on expansion abroad. I do innovation strategy, in the business model as opposed to R&D and patenting, finding the right opportunities and commercializing them. The final session is on what I call reinvention, which is a total strategic readjustment based on the moves, done after external and internal analysis. Companies should engage in this process of looking externally and internally to achieve sustained competitive advantage continuously and regularly update their strategy.  They should rethink the proportion of investment they make in the various strategies. My analogy is chess; before you would make a move in chess, you want to look externally at how the pieces of your opponent are arrayed and how your pieces are arrayed. 

If you’re looking at an external opportunity and your internal capabilities are not fit for that external opportunity, you should not pursue it unless you acquire such capabilities. The analogy I have used is, there's great opportunity in being an NBA basketball player, but if you are under six feet tall, and can’t jump very well, you have no hope of pursuing that opportunity.   

In the class we try to reach some kind of consensus about what the companies should do. I ask students to think about what the priorities of a company should be and how much it should invest in different moves that will assure its long-term viability and success. I ask them what the likely outcome is going to be given that there is uncertainty. A lot of strategy is dealing with uncertainty and hedging a company’s bets so that no matter what happens it survives and has a chance to thrive. 

Q: How well do these real-life companies deal with the kind of uncertainty you describe?

A: I started teaching a version of this course when I was on my last full year sabbatical at MIT in 1992. A lot of the companies I teach were very vital and very dominant at the time and they were leaders in their industry in various ways. Dell for example, or Best Buy, were very innovative companies. And what I've discovered, and that's what I write about in the book, is that almost all of them have experienced a serious crisis or two, which in some instances  threatened their existence. One example is Intel. It was dominant for so long and now it is falling apart. Best Buy went through a crisis like that, and it has recovered to an extent. It has stabilized the situation and now has the chance to think about how it might grow.  I think this is true of a lot of these companies. They restore stability and their financial health based on the moves that they make, but they don't fully recapture the greatness that they once had. And there's a kind of stagnancy that sets in, an acceptance of mediocrity and an unwillingness to take risks. 

Best Buy’s revenue today is little less than it was 10 years ago. And so the question is how do you revitalize the company so that it grows, as opposed to being stagnant?  Intel lost its shirt to Nvidia and Taiwan Semiconductor. It was competing with AMD and kind of ignored Nvidia until it was too late. Intel is still a force of course, in servers and laptops and in PCs, but the world has gone beyond that. It does not make super sophisticated microprocessors or the really simple ones that are in our smartphones. It was outsmarted not only by NVIDIA but by Arm in the smartphone market. The story is sad and has implications for national security. We need a company of Intel’s caliber to be strong and competitive globally. 

Disney’s big crisis has to do with streaming. The company just hoped streaming would go away and then Netflix ate its lunch. It’s been trying to catch up and it's had some success, in that it now has a lot of streaming subscribers and it is not losing billions of dollars on streaming. But for a time it was late and was losing spectacular amounts of money trying to catch up.

Tesla’s crisis came when it actually ramped up manufacturing so that it could mass produce at a big scale. It did not work because Musk wanted to automate everything and it turned out that it was impossible. It was only after he gave up on that dream that it was able to make the two models it makes now. As an automobile company today, Tesla is a distant second to BYD. BYD dominates it, because it has something like 10 or 11 models everywhere from $10,000 to $150,000, and Tesla basically has two models. So, it's in desperate need of protection by the US government, tariff protection and subsidies or else the Chinese EV makers like BYD will eat its shirt. 

Amazon emerged and reinvented itself as AWS and AWS is tremendously profitable. It’s something like 25% of its revenue, but 75% of its profits, it varies by quarter and so on. But that's roughly how Amazon works. AWS subsidizes the rest of Amazon. The packages to your home, the e-commerce business, never was very profitable.

About the year 2012, 2013 Dell fell from its heights and became a very troubled company.  Michael Dell took the company private and really thrashed around a bit before the big acquisition of EMC for the huge sum of $67 billion. Dell today actually is building or is involved in the building of the server farms where the Nvidia chips are being installed. It has made something of a comeback, but will it stick? It's a much bigger company because of the acquisition, while competitors like HP have slimmed down.

All of these companies are on trajectories I would not have predicted when I first started to teach about them. 

Q: Should these companies have been able to see the risks that were coming up?

A: A lot of what strategy is about is uncertainty and risk and you don't really know what the future's going to be, but it's extremely important to have options available when the world changes suddenly. So in the teaching of strategy, I really emphasize hedging your bets. 

An example that I give a lot is Intel. In the early days, it was not into microprocessors and when at the time the Japanese became dominant, it underwent a transition where it successfully became the leader in microprocessors and had dominance in microprocessors for up to 30 years until recently. But it flubbed the next advances in the industry. It missed the smartphone opportunity of ultra-simple microprocessors and the AI revolution of ultra-sophisticated microprocessors. 

The Pepsi case is about globalization. Pepsi does much better in the United States than it does globally, Coca-Cola dominates globally. So why does Pepsi even compete globally if Coke is so dominant? Well, you can’t let Coke totally take over globally because then they'll have the resources to undo your position domestically. So, we talk a lot about the degree to which it should globalize in the Pepsi case. In what countries should it get involved and why. And we talk about the pushback against junk food and how Pepsi might want to accommodate some people’s desire for healthier alternatives. 

Monsanto is another important case with respect to the role of strategy and technology. Its business model is to raise agricultural productivity to feed the world. So it makes these genetically modified seeds that resist the application of Monsanto infamous Roundup herbicide. It sells the system as a package – the business model is one of selling the seeds plus the herbicide. And in both areas, it got into trouble because in some parts of the world like Europe, people did not want to eat food that's genetically modified. In the United States, almost all the corn is now grown with genetically modified seeds. We don't typically eat it directly because it's mostly fed to cattle. It's in your hamburger, this industrial grade corn. Monsanto faces the problem of public acceptance of genetically modified seeds, which are less controversial than they once were. 

And then they also have faced the problem with Roundup and its alleged cancer-causing properties, and the suits that have gone against it with the awards to plaintiffs being in the millions of dollars. The whole industry has gone through huge structural change. It used to be DuPont, Syngenta and Monsanto, all US companies competing in making genetically modified seeds and chemicals used with them to protect them from pests and weeds. Now Bayer owns Monsanto and it is no longer a US company. Bayer bought it just before the outcome of the suits – great foresight. It now faces huge liabilities  

Most people don’t think of Monsanto as a tech company, and it really is. Its plant breeding technologies are vast and do not just involve genetically modified seeds. And it has branched out into precision agriculture in a rather successful way. 

The Disney and the Pepsi cases really are about established companies that we don’t really think of as tech companies either, but they have to deal with technology issues on a regular basis. All companies have to consider technology as a key element in their strategies. All companies will be mightily affected by the AI revolution which is just now gaining traction. AI has the potential to transform everything. 

Q: Disney is a really fascinating example of technology pushing a company out of its comfort zone. They were very slow to react to it.

A: The hard part is the internal battle to get people in a company to get out of their comfort zone so that their companies actually can make the changes. An example that I give the course is Xerox, which originated the PC revolution at its skunk works in Palo Alto where it was supposed to be creating the Office of the Future. But the people in the Rochester, New York headquarters said, we're just a copying company. What are these kooks doing on the west coast? 

And Steve Jobs was really just a kid into computers and they let him in. He took all their ideas and created Apple. 

Q: Apple is kind of the ultimate example, isn't it, of a company that was on the ropes for years and came back bigger than ever?

A: I talk about it in the introduction to this manuscript that I just wrote. It’s a really hard thing to do and few companies have done it. Jobs, when he came back to Apple after essentially being fired, was very focused, and he was ready to take big risks. But even if you're very focused and ready to take big risks, you can make the wrong moves and destroy a company. So the best route is to limit your major initiatives, but have more than one. You always must have some backups in place in case your major initiatives fail. 

Each of the companies illustrates a main idea in the framework – Intel sustained competitive advantage, Amazon external analysis, Dell internal analysis, Best Buy business strategy, Disney corporate strategy, Pepsi global strategy, Monsanto innovation strategy, and Tesla reinvention.   Dell, for instance, is an example of building up internal capacity. I always say when Michael Dell started the company, he was a kid in a dorm room and his main competitor was IBM, which at the time had a half million employees. So if you're an analyst, you say, who's going to win this contest?  You're not going to pick Dell. If you recall that period in history, there were hundreds of people building computers for you, not just Michael Dell, But he established a major business. I mean, today, Dell is more than a hundred billion revenue company that re-emerged after that period when it went private. Michael Dell did not want to face the pressures of being public anymore while he figured it out. And it took about five years for him to do that.

Q: There’s always some trepidation about new technologies, but there seems to be much more of it with AI – not only from the potential displacement of human workers, but also the possibility of the invasive things that AI is capable of. Do you see it as fundamentally different from earlier technologies? 

AI is definitely the next big disruptive factor. But what do we mean when we talk about AI? We have a lot of AI already. We just don't call it that when we consider picture recognition or even the ads that get sent to you, those algorithms are a form of artificial intelligence. 

AI requires a lot of human guidance. It needs a copilot. It is like GPS, but may be less accurate. If you just rely on GPS all the time, you're going to end up in the wrong place every once in a while or get lost. It loses its bearings. AI generally has this issue. It is helpful but requires human oversight. 

We've seen huge digitization of almost all companies and almost all functions. Everybody's digitized to some degree. And I think AI has that characteristic. It can change everything that a company does and will be ultimately integrated in everything a company does. 

Q: Are there cases where, in retrospect, the company should have followed the advice generated by students in your class?

A: Yes, but these ideas that the students come up with I don’t think aren’t things necessarily that weren’t thought about within the company. Sometimes students are much more outside of the box than someone inside the company would be, and in real life they might be told, we can't really do this, or we shouldn't do it because it's not feasible. What happens in a lot of companies is that they smother innovative ideas, as in the Xerox case, and it seems reasonable when they smother the ideas. I could have been in the room with Xerox executives saying, yeah, we're a copying company. What are these flaky guys doing to our firm? So, I think some of the student recommendations are things that companies probably thought about, but dismissed and some that would've been very helpful for these companies and done them a lot of good.

Q: So you could imagine an alternate history where Xerox made the right decision in rejecting the Office of the Future concept because it made more sense to focus on their core business.

A: Right. One of my colleagues has written about this regarding Kodak. Kodak developed digital technology, and it tried to sell it to Wall Street but Wall Street didn’t like that; Wall Street said, you're not a digital company. You are a photography/camera firm. We don't trust you're going in that direction. So Wall Street put a lid on Kodak going digital and killed the company. 

There are a lot of great companies in the United States, and even right now, I would say that there are a lot of really troubled companies in the United States right now – Starbucks, Nike, Southwest airlines, Target, CVS, and of course, Boeing. They need turnarounds and they may not be able to accomplish the turnarounds. They may become relics of the past. That is the nature of capitalism. Constant churn. 

It would be a huge tragedy for our country if we lost Boeing. And it's very close to being lost. Boeing is one of the most troubled companies that I've ever seen, and some of it has to do with the MBA mentality that was exhibited by its top management team when McDonnell Douglas ate up Boeing rather than the opposite after the two companies merged. McDonnell Douglass was more of a financially based MBA led company, and it destroyed the engineering culture. The conventional wisdom in strategy is that you should concentrate on what you do the best and contract out the rest, but that’s not always the best path to take. Vital engineering cultures like that once found in Boeing, 3M, and other companies have to eclipse the MBA tendency to reduce everything to monetization and financial calculation. Thorsten Veblen spoke about this more than 100 years ago in his book The Engineers and the Price System.  

Q: When is your book Comeback going to be out?

A: It is supposed to be out this fall. Maybe it will be useful to all these great companies that have to reinvent themselves.