Seeing Around Corners: The Signals CMOs Can’t Afford to Miss

Rita: You can't shrink your way to greatness. You know that's not going to happen. So a strategy, like when it's done right, is pulling you into the future.

Drew: What's fascinating right now is something that worked three months ago doesn't work right now.

Rita: These things feel, when they finally burst upon you, as though they came overnight. So it's how do you pick up the weak signals that something may be happening, the leading indicators, before the inflection point is actually upon you?

Drew: Hello, Renegade Marketers! If this is your first time listening, welcome. If you're a regular listener, welcome back. You're about to listen to an expert huddle where our flocking awesome community, CMO Huddles, gets exclusive access to experts, including the authors of some of the world's best-selling business books. In this episode, Columbia professor and author Rita McGrath, whose book Seeing Around Corners helps us get better at spotting change before it smacks us in the face, talks about reading the weak signals, looking beyond lagging indicators, and starting with strategy before throwing AI at the problem. And for CMOs trying to prepare for what comes next, she makes a strong case for looking a few moves ahead while everyone else is still reacting to the last one. If you like what you hear, please subscribe to the podcast and leave a review. You'll be supporting our quest to be the number one B2B marketing podcast. All right, let's dive in.

Narrator: Welcome to Renegade Marketers Unite, possibly the best weekly podcast for CMOs and everyone else looking for innovative ways to transform their brand, drive demand, and just plain cut through, proving that B2B does not mean boring to business. Here's your host and chief marketing renegade, Drew Neisser.

Drew: Rita McGrath has been helping leaders spot inflection points before they become obvious for years, and right now that feels like a skill that's less nice to have and more like we need this to survive. With AI accelerating everything from insight to imitation, the real question for CMOs isn't just what's changing, but how to see it early enough to matter and to act before everyone else does, or at least act at about the same time. So Rita is a best-selling author, longtime professor at Columbia Business School. We both just realized we met each other thirteen years ago at the Bright Conference, and she's one of the world's leading voices on strategy, innovation, and growth in uncertain times. She's a sought-after advisor to global organizations and a frequent contributor to Harvard Business Review, helping leaders rethink competitive advantage in a world that refuses to stand still. Oh my God, it is definitely not standing still. So, hello, Rita. How are you? And where are you this fine day?

Rita: It's a pleasure to be here. Thank you for inviting me. I am in New York City today.

Drew: All right. Well, we are definitely bringing New York City energy. And I should have asked before we even started if you prefer Rita versus Professor.

Rita: Oh, thank you. Right.

Drew: That seems like it. Yeah. So, your book, Seeing Around Corners, just in case—Seeing Around Corners—gives us a framework for spotting inflection points early. And I figured it would probably be a good thing for those folks who haven't read the book to just give them the basic concept, because it feels like everything's an inflection point right now.

Rita: Every time, CEO. So, the core theme of the book is really how you navigate strategic inflection points, which I define as something that creates, you know, an order of magnitude change in what's possible. And the book takes you through how do you begin to prepare yourself to see them, how do you recognize when they've arrived, when do you take action in time, and how to bring the organization with you. So it's sort of that whole arc. And the book really had its roots in Andy Grove's work, in a book—fabulous book—written in the '90s called Only the Paranoid Survive. And he and my mentor and friend Clay Christensen were very good friends, and it actually—their relationship prompted him to release a low-end computer chip, which was just, you know, anathema to Intel at the time because they were all about speed, speed, speed, high end, high end, high end performance. And he said, "Well, actually, no. We have to protect our low end." And he wrote about strategic inflection points back then. And I loved this concept, but I had no idea what to do with it because, as a strategist, if an inflection point sort of flies through the air and hits you in the head, and you didn't see it coming—what do you do with that? And then a wonderful surprise came when a friend sent me this terrific article called "What If You Changed the World and Nobody Noticed?" And the article was about the Wright brothers' historian—the first flight at Kitty Hawk—and it turns out that this was seen as so improbable, so impossible for so many people, that the next day in the newspaper there was nothing. The next year, nothing. Two years later—it took five full years before any news organization of repute decided to go and find out what the Wright brothers were actually working on. And that led me to the insight behind the book, which is these things feel, when they finally burst upon you, as though they came overnight. So, oh my God, it's November 2022, we have ChatGPT, and the world is going to change forever. But in reality, we've been working on artificial intelligence for at least seventy years. So it's been a long, long time coming. And that then opens up the opportunity to think about the book. So it's how do you pick up the weak signals that something may be happening, the leading indicators, before the inflection point is actually upon you.

Drew: Okay, so you must be getting this all the time. And I mean, yes, there was a lot of AI, but the transformative nature of Gen AI, which people didn't really see coming—I mean, I know there were people working on it, and maybe you did see it coming—but it took a while for folks to sort of say, "Oh, wow, we can do a lot of things." And then suddenly, there's, "Oh my God, this is going to change business as we know it."

Rita: I agree.

Drew: And so, looking at where we are right now, I mean, one of the big things, and I mentioned this when you and I were chatting, is that CMOs are honestly really struggling with this. You've got a team of a hundred, and everybody's saying your team's going to look completely different in six months. It's kind of the innovator's dilemma a little bit, because you've got a group of people that are doing something in a certain way that's working, yet you know you're gonna have a different way of working soon. So, I wonder if it's the same kind of skunkworksy thing. But how are you advising folks when it comes to this particular—they're no longer weak signals, these are like—

Rita: Alarm bells, right? Well, I think the first mistake that I see people making—and I see maybe three categories of mistakes. Mistake number one is, yes, AI automates tasks, but to really get the benefit from it, you need to approach it at a systems level. So the first problem is, "Oh yeah, this thing can write a press release, so I'm going to delegate all my press release functions to that." Sure, yeah, I mean, that's a way to use it. Maybe you replace the intern, but you're not fundamentally changing what's happening. You're just automating a few tasks. Second big mistake is people say, "I got to throw some AI into this," so they're starting with the technology. It's a big mistake. Start with the strategy. What's the outcome you're trying to achieve, and then work backward into what that implies your usage of AI must be. And I think the third big mistake is thinking that you can take human judgment out of a lot of systems and just leave it to the machines. And there's beginning to emerge a bunch of research on this, especially with agentic AI, that these things—they can be defensive, they can behave badly, they can mislead you, they can, you know, act in their own interests and not in yours. So we're at a very primitive stage of this. So an example of a company that I think is doing a great job is Shopify. As you know, Shopify puts up e-commerce websites for other businesses, and their CEO, who's a tech guy, has basically said, "Look, don't bring me requests for people or budget until you also bring me a demonstration that you can't get what you want to get done using AI." Now sometimes you can't, but as an example, one of the things that they've innovated using AI—I think this is brilliant—is: let's say you're a small business owner and you want to prep up your website for, you know, Valentine's Day. And the way this used to work, because you used to have to go to an agency and get a designer and get the thing, you know, it would take ages. Today, what it does is you tell the AI that's built into the Shopify platform, "I want my website to look this way for Valentine's Day." You tell it what you want, it throws up a bunch of different options, you say, "Oh, I like option four." You push the button, and boom, your website's changed. Then, if you want to change it for, you know, St. Patrick's Day, you do the same thing. So what this is doing is it's compressing the amount of time and effort that these small business people need to spend doing the basic updates. Now, what it's not doing is, you know, writing the copy, infusing it with your own personality, teaching it, you know, "For Valentine's Day, we're your go-to shop," or whatever it is—it's not doing the creative part, but it's certainly making the mechanics of it much faster.

Drew: Yeah, and honestly, it can do a pretty good job of the copy if you've built the brain, right? If you have enough of a style guide inside the thing, it can get you to eighty percent pretty darn fast. I love these three mistakes. I think part of the automating-the-task one was just sort of people getting a sense of what it could do, so there's some step involved in that for people to work through. The bigger one for me, the one that you mentioned, start with the tech—for a long time this has been a solution in search of a problem, you know. And so strategically, though, what companies are doing is saying, "Well, the strategy is cut costs."

Rita: I know.

Drew: Right? And we know that that's not a strategy. AI can create incredible efficiencies if you know what you're doing, so it's hard to argue with a CFO who says, "Hey, I think you could pull about thirty percent of your costs out of this process if you were deploying AI effectively." It's not a strategy, but it can kind of help a company. So I'm a little bit hard-pressed—what's your thought on the difference between efficiency and a real business strategy?

Rita: Well, you can't shrink your way to greatness. You know that's not going to happen. So a strategy, like when it's done right, is pulling you into the future. Now, I'm not saying efficiency is bad by any means, but let's say you cut your thirty percent out—well, what are you going to do with it? Are you going to just hand it back to shareholders? In which case, you're basically just extracting value. Are you going to invest in innovation with that freed-up resource? Are you going to develop young talent with it? You know, it's a question of—cut costs, sure, but to what end? What are you doing with it? And one of the things I'm seeing, and you're probably hearing a ton about—you know, Oracle just laid off thirty thousand people, and there's all this angst going on. And what I think is happening is sort of sensible, but it's happening at a pace that we're not used to, which is: they're getting rid of people who were doing things like, you know, monitoring data spikes and making sure capacity was up to date, because that can be automated. But at the same time, they're hiring people with these other kinds of skills, you know, that are capable of creating agents and then doing the rest. So what we're seeing—but it's happening so fast that it's really hard to absorb—is companies shifting their center of gravity from one way of operating to another. Now, I don't happen to think that's innately bad. What I do hold companies a bit more responsible for is how do you do it in a way that's human, that meets people with dignity. To be frank, I don't think sending an email at six a.m., you know, around the world to thirty thousand people saying, "Congratulations, this is your last day on the job," is a very humane way of doing this. And we know there are plenty of examples of more human ways of doing things. So, as an example, when the pandemic hit, you know, there was Airbnb, and nobody could travel, and Brian Chesky knew that he had to fire basically half of the company—people that he had gone to incredible effort to, you know, handpick, recruit, and raise. And so he had an all-hands in the parking lot, and he said, "Look, I'm really sorry, but I'm going to have to fire half of you, or all of you are going to be out of work. But here's what I'm going to do: I'm going to take my recruitment team, and they're going to become your outplacement team. So they're going to be your resource. You're going to keep your office and your laptop and your healthcare for as long as you need it. I will personally write recommendation letters for you. And when this is behind us, and we figured out what the future is going to hold, I really hope that you would consider rejoining us." That's a very humane way of doing it. I mean, that's just wonderful. This other stuff of just, you know, "fire the left-hand side of the building," is just—it's just not very human.

Drew: Well, you know, I have a tendency to rant against PE quite a bit, and I know it's not all bad, but if you're in the fourth year of a five-year sales cycle, the only thing they care about is EBITDA, and so that cut in efficiency is really all that matters. And they're not necessarily worried about the humanity or growing a business for the long term. They're worried about that moment of flipping. So there are decisions that are being made that affect a lot of companies that aren't necessarily human, because that's not the goal—they're not trying to build a great company, right? They're trying to flip a company, and that changes the conversation. All right, rant over. Back onto—let's talk about arena thinking, I think that's an interesting concept. How should a B2B CMO think about their arena today when AI keeps blurring these lines?

Rita: Well, I think what you need to start with is: where are the resources that keep your enterprise afloat coming from, and who else is contesting for those resources? Right? And I think that's a really important question to ask, even in B2B, because the most important competitor you may face may not even be in your quote-unquote industry. It may be some other industry making what you're doing or working on unnecessary. So let's just—I'll make this up—let's say you're in the inspection business, right? And some tech company comes along and says, "Hey, oil and gas provider, we can have sensor-controlled robots that do these very intensive, high-cost inspections for you." And now you're out of a job, and not because some other inspection company decided to take you on, but because capability is coming in from some other tech. So I think you really need to understand where the resources are coming from, and what are the other calls that could be made on those resources, and that then begins to shape your arena.

Drew: Interesting, yeah. Just to add, I was thinking of drone swarms, right? That would be the other way of doing that. Those things are going to be able to do some incredible things, whether it's wind turbines or oil rigs or something—they'll be able to do so much like that. So that's interesting. But you have to have a lot of imagination then, because that competitor may not be here yet. But you're almost imagining how could you be displaced, as part of thinking around the corner. And then, of course, that's a business development opportunity in theory.

Rita: Absolutely. I'm working with a company right now that I can't disclose, but they run a large assembly of assets. In parallel with that, they've got a digital twin of those assets. Somebody who's in that market already wants access to their data, and so they're having a very foresighted conversation about, "Well, whoa, you know, that's not where we are at in the ecosystem yet, we're not ready for that." And I think that's very imaginative on their part, because they're saying, "Let's not just think about this immediate thing. Sure, it would be easy to give them an API and they'd have access to our data, but let's think three, four, five, ten moves down the road. Where would that land us? Is that where we want to be?" And I think that's what people don't take the time to do.

Drew: Interesting. I want to go back to this notion of human, and so forth, because in your book you talk about—is it Satya Nadella?—and you kind of contrast him, not necessarily on purpose, but totally, with Steve Ballmer, and very different approaches. But the culture, and I will say customer centricity, really changed as a result of the leadership style and so forth. And while CMOs aren't CEOs, I think it's really instructive to talk about that, and maybe the lesson, and see if that even holds in an AI-driven world.

Rita: Oh, it absolutely does. And if I just take the contrast between those two men, Nadella and Ballmer—Ballmer ran the company on what I would call lagging indicators. So that's the first problem. If you look at Microsoft's performance under Ballmer, there was nothing wrong with its performance—where what you didn't see was its future. They were basically eking out, extracting revenue from the cash cow. Second thing that Ballmer did, which I thought was quite dysfunctional, was they employed this stack-ranking way of rewarding people. And so what that creates, right—basically, you're taking the bottom ten percent of whatever ranking you're using, and you're saying, "You guys are on warning, if you don't improve your performance, I'm going to get rid of you." So what does that do? First of all, it creates internal competition. Secondly, if you're a manager and you have a low performer on your team, you're going to keep that person around until stack-ranking time comes, and then, sigh of relief, you have somebody you can fire, "Oh, I'm losing one," right? So it just creates all this internal dysfunction. And then I think the third thing that Ballmer did, which Nadella fixed, was there was really no focus on leading indicators. And by the time Nadella took over—this was, I think, 2014—AWS was already up and running, Microsoft had its version, Google was working on its version. It was very clear that a lot of compute was going to be navigated through the cloud. It was absolutely clear by then it's not going to be the PC. And Ballmer was on record as saying it's all going to be mediated by the PC, and the answer was no. And by 2014, also, we've got these supercomputers that we hold in our hands—you know, those things, they were well out there. And so what Nadella did was he said, "Well, we're going to go from being this sort of Wintel, 1990s sort of product company—we're going to leave that behind." He sold the Nokia handset business he had inherited. He made a bunch of really gutsy moves. And then what he did was, both in his communication and in his reward system, he said, "We're going to reward people for leading indicators." And so, before we're going to be a, you know, as-a-service company—before we can debate that, we have to measure customer usage, and before customers use our stuff, they have to love our stuff. So I want to measure customer love." Can you imagine that coming from a—what CEO?

Drew: No, it's hilarious. No, when I read it, I always stood up and went, "Yep." I remember there was that transition. And yeah, but they were starting at a pretty low base.

Rita: Well, yes and no. I mean, from a purely financial point of view, they were remarkably powerful. 

Drew: Right, I mean, they had entrenched users, but not necessarily entrenched love. They just had a very sticky product or products. I want to cut into this leading and lagging indicator thing, because I think it's really relevant to the CMO job. Often, in CMO conversations, there's a CFO and a CEO and a board member in the room, and the board members are looking at lagging indicators. They're looking at revenue, they're looking at CAC, they're looking at lifetime—great metrics, but lagging. In an enterprise sale, it's twelve to eighteen months—you know, the actions that you take now will really, from a marketing standpoint, have their biggest impact in twelve months, and you're looking at a quarter, which is purely lagging. How, other than the CEO standing up one day and saying, "Renegade God, our entire organization is focused on lagging indicators"—how do these changes happen at organizations? Because a CMO will fight to say, "Look, reputation, retention, our close rates are not as good as they should be." There's all sorts of leading indicators that show we have some problems. They exist too, but they can't necessarily be taken seriously when they're just talking about leading indicators.

Rita: Well, it's a fascinating question, because, in fact, I think just earlier this week—I'm on the Blue Ribbon Commission for the National Association of Corporate Directors, and the topic that we're focused on is how involved should boards be in execution. And one thing that came up very vividly was that boards feel that the information flow between management and the board is often very clunky. They find out too late what's happening, and there's no easy way for them, without creating a burden of information sharing on management, to kind of grasp that. So I think the first challenge for a CMO is to very credibly build the case that leading indicators really matter. And I think there are a couple of ways of doing it. You can use a case from the past. So, as an example, for a long time in pharmaceuticals, the corporate portfolio was thought to all revolve around patent cliffs. And the theory was, if your patents went over a cliff and you were now back to selling generic medicine, you should have something stable in your mix of businesses that would keep you afloat. And when Vasant Narasimhan came in as the CEO of Novartis—which was what they had, they had an eye care business, they had a bunch of consumer businesses, they had nice, steady, stable businesses—but he actually went back and looked at the history, and he said, "When I look at the history, every time we had something go off patent, it wasn't those businesses that saved us, it was the science." And so what he decided to do, I call centering—what he decided to do was center the company on innovative medicine. And so now what we're looking at is, you know, what are the leading indicators that a drug is moving through our pipeline. Now we're looking at these things, and they got rid of Alcon, they got rid of Sandoz, they got rid of all these things that they thought were not really core. Now what's interesting is, if you look at the company today—the whole thing, when he first came in, was worth about, call it, one hundred ninety billion, in market cap, with all the businesses together. Today, even after stock splits and buybacks, if you look at the value those four—those remaining companies—contribute, it's almost double that. And the businesses have not fundamentally changed. And so this gets to the power of what I call strategic centering, where centering means you're picking this kind of fundamental organizing logic that's going to drive your company, and everything else is subservient to that. And you have to—I mean, it's gutsy, right? You have to, because you picked a center, and now that's going to drive other choices that you make.

Drew: I love the strategic centering. And often, a CMO—I mean, clearly, this is a job of the CEO, they have to be the one who sets the vision and the mission and does that. But CMOs can play, and when they do, it's funny—in B2C companies it's much more frequent than in B2B, but when they do, they have a seat at the table, and it's really secure, because they are helping to get to that. What's this, besides the Novartis example, of a center of being—you know, "we're going to be all about innovation and not just milking our cash cows"—do you have other examples of strategic centering that we might be able to help sort of know what it looks like, and then we can talk about how you get to that?

Rita: Oh, absolutely! In fact, I'm working — I've got an HBR article coming out on this sort of any day now, and I'm working on a book that looks at this. So the first kind of centering is mission, and that's what I would say Novartis is doing. They're saying our mission is to invest in innovative medicines, which allow us to help patients. Our mission is not to sell painkillers, right? It's — it's, you know, innovative medicines is the thing, and what that enables is for you to make really consequential strategic decisions. So, as an example, somebody comes to the board with two capital committee proposals. One is to build like a painkiller plant, right, for consumers, and the other is to invest in radioligands, which is this incredibly bleeding-edge technology. You attach a radioactive particle to a cell, and then it goes to the site of the cancer and kills the cancer specifically. Now, why that's such a big deal is if you have, say, prostate cancer, which they're using it for now, the existing treatments are horrible, right?

Drew: Right.

Rita: Number one is surgery, and it changes your life, and not for the better. The second kind is, you know, radioactive, sort of aiming at you, and that's not great because it kills healthy cells as well as bad ones, and then it's chemotherapy. That's your — those are your options. But with this radioligand therapy, you can actually selectively get to the cancer without the need for surgery or anything else. But very cutting edge — you have to get it from the factory into a patient in 24 hours because this is radioactive stuff, so you don't want it hanging out in the world too long. I mean, really. And Novartis had no basis in technology like that before, but one of the scientists told Narasimhan about this. He convened a committee of others. They persuaded him the science was really just at the beginning of this trajectory, and they bought three startup radioligand manufacturers, and now they have a huge position in an early stage, but it was mission fit. It wasn't other kinds of fit.

So the second kind of centering is around technologies or capabilities. The great example there would be Fujifilm. If you think about Fuji, they and Kodak faced exactly the same strategic dilemma, which was people weren't using film cameras anymore. They were not going to use images, and Fuji saw it coming, and Kodak saw it coming. What did Fuji do? They said, "We're going to dig deep. We're going to create a sort of committee, an ad hoc committee, and what that committee is going to do is go everywhere in the world and find out where our technologies have relevance." And so that got them into cosmetics, it got them into medical imaging, it got them into this whole array of different businesses, none of which look like each other until you realize the core is their technology center. And today, you know, Fuji employs 76,000 people. They're a thriving company. Kodak, I think, is down to like 4,000. They've been through bankruptcy a couple of times. You know, it's just that it could have gone the other way.

So technology is a third. Third is you could center on a particular kind of customer, and I think the most vivid example of that to me would be Southwest Air in its glory days. Southwest Air basically said the problem we're focusing on for our customers is we want to be the airline that allows them to fly, but that they would otherwise drive. So, you know, it's a four-to-five-hour drive, which is that kind of sweet spot where, gee, if I could fly, I really would.

Drew: Right.

Rita: So what that means — okay, so you make that decision, we're going to create flying for people who otherwise drive. Well, then the flights are short. So what does that mean? That means you don't care about an assigned seat because you're only going to be there for half an hour. What does that then mean? It means you're going to have a lot more flights than a traditional airline because they're really short. So that means that turnaround time at the airport has to be really short because that's — that is how you're going, and if you're going to shorten turnaround time, that has implications for what kind of planes you fly. And, and, and classic business school case, right? But they were centered on this fundamental challenge, and that drove everything else about the strategy. So, customer kind of issue centering.

Fourth center is an ecosystem or a region. So if you think about something like Taiwan Semiconductors, you know they're centered on building this capability in the Taiwanese economy, where they're basically the semiconductor fab for the world, right? But there was a strong, strong partnership between that company and the Taiwanese government. Temasek in Singapore, same thing, right? We're going to invest in businesses of the future that need patient capital that'll bring economic activity to Singapore. So it's a regional thing.

And then the fifth kind of centering that I think a lot of our big platform businesses are using right now is friction removal. You know, why does Facebook even exist? Because they made it super easy to find that guy you were in chess club with in sixth grade, you know. And then once you remove that friction, then you've got a whole economic model around advertising and eyeballs and attention and all that stuff. So those are the five basic ones that I'm writing about in the book.

Drew: Oh, interesting. Well, that'll be great. And I think CMOs listening can sort of get to, "Oh, this is kind of where we are, but we haven't defined it quite as well as we could." You know, they might say, "We're a customer-centric organization," which is great. But what's interesting and unique about the one in the Southwest case is customers replacing a long drive, and that's the insight, the problem that you're solving. And often customer centricity is not — it's not linked to a problem. It's just, hey, we're going to serve them faster. Well, what problem are we solving? And I think marketers are really good at getting to know the customer and what problems they are having. And you know that there's a lot of opportunities right now with things like Gong, where you can listen to customer calls all the time and synthesize this stuff. It's an amazing moment.

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Drew: As we're trying right now to see around corners and help CMOs do this — one of the corners that we're trying to see around as a community is org design. I'm wondering — and here's where I'll go into detail at the risk of being repetitive — if you go to a startup right now, their org structure in marketing is so different. It's almost mind-boggling that you don't see the division of labor that you do. You don't see demand gen teams versus brand teams versus creative teams versus go-to... you know, it's like two people running a bunch of agents. It's incredible to see it at certain startups that are very tech savvy. That's a, b — I've got 100 people reporting to me, I've got — and they're all doing this thing, and it's working. But the corner that we're trying to see around is an effective marketing organization in 2027. How would you tackle this for the folks in our community?

Rita: Sure. Well, I think where I would start is try to put this in context of where we are. And so, where we are — and this is work based on the work of economic historian Carlota Perez — where we are is in the middle of this, you know, once-in-a-generation transition from one technological regime to another. So what we're leaving behind — and I think this is super important for CMOs — we're leaving behind the world of mass production, where competitive advantage came from being able to make a million widgets that are exactly the same. And mass advertising was the thing, right? And so you were very creative about how you use TV and newspapers and reaching out to customers, where we had cars and we had suburbs and we had highways and, you know, the sort of Leave It to Beaver kind of world.

We're moving away from that world, and we're moving away from it now at an increasingly rapid pace, where services are replacing products, where digital goods are things people are selling to one another, where network effects become incredibly important, and your ecosystem and your complements become important. So here's the trouble: we're in the middle right now, and we still have a lot of vestiges of that old world left. But we're moving into this new world, and in the new world, I would argue you're not going to see functions the way that you have historically. What you're going to see are teams that have access to all of the expertise that they need, but they're going to be able to work with each other very quickly. So the way that some companies put it is, "I'm going to be very aligned on my mission and very loosely coupled within my organization." So this idea of an idea having to go from here to here to here to here to here to go through all these different departments — that's going to go away.

And I've worked at some firms that have started to move in that direction, so here's an exercise your CMOs can do: grab a group of people. You've got 100 people working for you — take 20 of them, let's say, and have them analyze how many things they are working on at any given time. So we did this with Fidelity Private Investments, and what we found was the typical person working there had between 12 and 15 projects they were working on, and they weren't all working on them with the same people, and they were built functionally, which makes sense being a mass-market paradigm. So I'm not being critical here, I'm just saying you need to fit it into what it belongs. And so what they realized was that a huge amount of their workday was spent simply either waiting for something from some other group that they were dependent on, or trying desperately to kind of feed other groups what they needed.

So we tried an experiment. What we did was we said, "Okay, let's take their web presence — what are all the skills that you need?" Well, we need engineering to do the design. We need marketing to figure out what the voice should be. We also need some people that know who the customer persona is that we're designing for. So, a small group, five to seven people, and then what they also need is access to support functions — legal, compliance, you know, all that kind of thing. That gets provided sort of almost through an API-like interface. And what we're going to do is have you all working on one thing, and you're going to do it in two-week cycles. This sounds probably a little bit like agile to some people, right? So this would be like just borrowing some of that theorizing.

Well, what they were able to do was reduce the time to introduce a feature on their website by 75% by rethinking how they were structuring. And then gradually other teams saw this flow, and they were like, "Hey, wait, we want to work that way too." And eventually, it got Fidelity to the point where they could actually change the norms in the industry. So I'll give you an example of that.

I was with a chief strategy officer group in 2018, and it's a day of programming, right — morning coffee break — and we had people in there from all the big investment banks, J.P. Morgan and BNY and companies like that. And so they all go out, and these financial guys come back from the morning coffee break, white as sheets. "Did you see what they did? Did you see what they did?" What Fidelity had worked out was that if they could make the cost of customer acquisition for young people really cheap, like free, that they could get these people in the door as young people, and then they would stay as they became more and more interesting from an investment bank perspective. Now, the reason that's so interesting is this was the bread and butter that all the other investment banks charged for — it was fees on these investments. And so Fidelity announced the very first no-fee index funds made available to people, and they were really targeting that young demographic that just didn't have a lot of money yet but who were likely to in the future, and it was that way of working that allowed them to have the courage to do that.

Drew: Fascinating. And the thing about your description of what we don't know yet — so what you described about the 75% speed improvement, we don't yet know if the quality was equal or not. We may have quality, and it may actually result in the same map, but 75% improvement in speed feels like that was a workflow challenge, and I would hope at least that CMOs listening have all gone with their teams and sat down and looked at all the workflows and mapped all those out and saw the repetitive steps and saw the opportunity. Call this — this is sort of like squeezing out some efficiencies just by looking at it. And I don't think five years ago anybody was looking at their workflows and saying, "Hey, can we make it more efficient?" They probably could have done it then, other than the agile people, but doing it now with AI, you can get that kind of yield.

I'm wondering, at that moment in time, that team was pretty much the same team — maybe the structure of the group was what you already had. I feel like the team, the notion of expertise, like we need critical thinkers, we need curiosity, we need judgment — but do we need, or will we need, deep subject matter expertise? Let's say in direct marketing, for example, when we can maybe train the machines to do some of that. And so I'm trying to think — I'm imagining a different team structure that is fundamentally different than the workflow problem-solving that we just described.

Rita: Well, I think that's possibly true. I don't think we know that yet. So what I don't think we know yet is where does human expertise and judgment stop, and the machines start. So, on my podcast, I had this fascinating computer science researcher named Vivienne Ming, and she did this actual study of how work was done, and she discovered three kinds of people interacting with AI. So, the first kind of people use AI and take its answers for granted, and they sort of substitute their own judgment for the AI's.

Drew: Whoops! Yeah.

Rita: Yeah, that's not great, not good. A group just about as large would use the input from AI, and then they mix it up with other things, and they kind of use it to supplement what they were doing. But she said the third group, which is very rare — there's only about 5% of people right now that she would put in that category — they actually use the AI as thinking partners and can't tell where the cyborg begins, you know, and the human ends, because they're actually going back and forth and questioning their judgment. And I'm assuming she would put herself in that category. She has a new book out, and she said, "I use the AI to critique my book to make it better." You know, "Where am I being unclear? Why isn't this working? Where might this not land? What have I left out?" You know, really working with those sort of counterparties as humans. So I think that's one thing about where we are, which is only about 5% of us are really good at this right now, so a lot of us are going to have to get better.

A second idea that I'll steal from Paul LeBlanc, who was the — just stepped down as the president of Southern New Hampshire University — and took this, you know, struggling, out-of-nowhere university and turned it into the largest online university in the country. Anyway, he's now retired — well, he stepped down from that role — and his vision is: if we could use AI to upskill people who are less expensive, we could afford a lot more of them. So imagine a medical situation, right? If I can use AI to make a nurse able to do things that right now it takes millions in training to build for a doctor, right — if I can do that, then I could afford a lot more of them.

And the way he likens this is when he was at SNHU, each student that comes into that system has what they call a counselor, or guide, and that guide stays with them throughout the whole time that they're there. And it's the guide that says, "Hey, you know, you've got an assignment due Tuesday — have you made sure that you've made time for that this weekend? Or, you know, I noticed you haven't logged on last week, is everything okay?" And it's that human interface that allows students to eventually succeed and to reach their goals, which for the online students is completion — you know, it's getting that degree so they can move forward in their lives. But if you imagine systems that are built with that idea, that we can bring higher levels of expertise to bear with less expensive people, then we could afford a lot more people.

Drew: Interesting and fascinating. I want to go back to the first one, because I think — so we don't know what these teams are going to look like, but we do know that at 5%, people using this as thought partners is not very good. So if I were a CMO right now, and we had a community of CMOs — wait, we do — and your goal in the next three to six months is to upskill everyone on your team to be in that top 5% using these tools as a thought partner, you will be prepared for whatever this — whatever this new — because the people on your team will be ready to do that. And we don't know what that org structure is going to look like, but we can prepare. And I can't imagine a world where having employees who are using these tools to their greatest advantage is a bad thing.

Rita: Exactly, right. I can highly recommend Vivienne's book, and she's got a website, and she's got analytics you can take, so you can test out like, how capable are your people. So it's Vivienne Ming, M-I-N-G, and her book is something like "When the Robots Have All the Answers, Build Better Humans," something like that.

Drew: Right, "Let's Build Better Humans," I love that. I mean, we're going to get Vivienne on the show so we can follow up with her and talk about her book, because "Build Better Humans" — and, you know, the human theme in this conversation, I think, is so important because a lot of the folks want to do the right thing by their employees, and there are laggards who — whether they're conscientious objectors — and what's interesting now is somehow AI has become politicized like everything else, and so merely saying you're using AI could put you on the wrong side of a dinner table conversation, which is unfortunate. However, again, this is where we're going.

Rita: Yeah, yeah. You know, if you think about any technological revolution, it's had this consequence. So, let me speak for a minute about disruption. My friend Clay Christensen wrote about disruptive technologies, and the way it's developed is now everything that's a big change is disruption, and I think that's not a very useful way of thinking about it. So to me, something has the potential to be disruptive when it makes something that was once difficult easy, and at the same time it makes something that was once expensive affordable or even free.

So if you think about just going back in history — if you wanted to have a likeness of yourself to preserve for the ages, you know, 200 years ago, what did you have to do? You had to hire a portrait painter who could spend decades working on their skill, right? And once the camera came along, and now you've got this Brownie camera, any doofus with enough money to buy that can produce absolutely perfect visual images. That's very disruptive. So what happens? Do we take fewer pictures? No, it grows the market exponentially, but at a completely different price point.

And I think that's something that CMOs really need to understand, which is disruption always creates explosive growth, because what it does is it allows people to become consumers — it allows companies to become consumers — where before it was either too difficult or priced out of their reach. So it always grows the market, but it grows the market in ways you may not be anticipating, because it requires different skills, different capabilities, often different technologies you're resting on.

So if you think there's a disruption coming, these are the two things I'd look for: where is something that was once really expensive becoming cheap or free, and where is something that was once difficult becoming easy? And if you look just at media in general — I mean, the big challenge in the newspaper days was distribution. How do I get a newspaper in front of everybody's door who wants to subscribe? Distribution today: dead easy and practically free. And so that's, of course, going to be very disruptive. So that's what I would encourage folks to look at as they're thinking about what kind of org they need to build for that world.

Drew: Yeah, and what a lot of folks are scared about at certain companies is whatever their product or service is — for example, if they were in SaaS, what used to be expensive or difficult to make, if you will, is now probably something you could build yourself. And it used to be really expensive, and now it's not free, but it's pretty damn close to free. And that's their entire business.

Rita: Yep, exactly. And what we've seen in history, right — this has been true, but there are red threads through it. So let's take the canonical buggy whip business, right. It used to be, when horses were the main mode of transportation, there was a whole little industry of buggy whip makers, and most of them went out of business. But there was one that didn't. And the leader of this company said, "Well, we're looking at cars now becoming popular, so we're going to go from making buggy whips" — and they made very high-end ones, so it involved very fine leather, and it involved making the whip so that it wasn't too abrasive, which involved fine fabrics and stuff — "why don't we make suitcases purpose-built to fit into cars?" Because remember, this was very early — this thing didn't exist yet — so that was their first sort of branch-out product. And then, as they began talking to the car makers and so forth, people were now traveling more, so they were going to need nice luggage. And from there we can build other kinds of leather goods — nice purses — and because we have this wonderful knowledge of fabric, we can get into fine scarves, things like that. The name of that company: Hermès.

Drew: Right?

Rita: So think about it — literally started as a buggy whip maker, and when that business went away, they were perfectly prepared to take their capabilities and extend them into the growing areas.

Drew: Such a great story, and a good one to remember, because there are a lot of buggy whips right now that need to find their suitcases. It's an interesting moment. One of the consistent themes of the last year — we kind of covered it, but I want to go back to it — is this phrase, "Do more with less." And whereas, and you said it earlier, well, what are you going to do with that efficiency? I'm wondering how we balance the need to explore new opportunities, new ways of doing it, new ways of just doing marketing, with this sort of mandate right now: I've got to deliver results right now. And I don't even know if those two are in contrast, but I feel like you could add some value here in helping us just frame this "do more with less" conversation, or reframe it. Pardon me.

Rita: Well, I think where I start looking at that is: what's your portfolio of opportunities? And the way I like to break it out is I say, in one dimension you've got uncertainty about markets, and on the other dimension you've got uncertainty about technology or capabilities. And if you imagine those two vectors, you've got three distinct kinds of activities.

So the first set of activities goes into keeping the core healthy — your core business — because uncertainty is low. You know who you're building it for, and you know how to do it, right? So it could be very innovative, by the way — we always think of the core business as boring, but it could be really innovative, it's just that you know how to do it and you know who to do it for.

Moving out a step in uncertainty, you have what I call new platforms, and these are candidates to be the future core. So this is like Adobe going into software-as-a-service offerings, going away from shrink-wrapped software that you sold in a box and shipped on a CD. And then the last category is the most uncertain of all, and these I call options — these are options for the future.

Now, one of the things that happens when people are under tremendous pressure to deliver results right now, to deliver efficiency, get rid of the low-hanging fruit — that stuff is they start cutting back on the platforms and the options. And in the short term, that's fine, you know, but it cuts off your seed corn for the future.

Now, here's what I think is interesting: human beings, we make decisions based on option value all the time. The fact that people are tuning in right now — it means they didn't get a slide rule and say, "Well, this is going to be 60 minutes of my time, it's worth this many network connections, I'll get three insights per minute." I mean, you don't do that, right? As a person, you say, "This could be really interesting for my future." We send our children to college, right? We take training courses, we do all kinds of things that invest in some time today that we think could buy us an attractive position in the future.

And yet, when it comes to business, it's all about ratios — you know, what's my EBITDA? And that's another big problem with companies, by the way: they look at ratios, they don't look at actual dollars. And I think you're much smarter looking at actual dollars than some percentage of something, because that just puts you in the wrong place. Clay [Christensen] years ago wrote a wonderful article called "Innovation Killers," and accounting practices was one of the innovation killers he called out.

Drew: Interesting. Oh my God, I have so many takeaways from this. I'm going to try to do this. I mean, ultimately, the transformation that we're describing is a strategic problem that the CMO can play a role in. You talked about some frameworks for strategy and thinking about this on the big picture — again, if our goal is to have a seat at the table and help drive the direction for the company and be an advisor, knowing how this technology is going to change the strategy and helping get there.

There's a second part of this thing that's an epiphany for me a little bit: most of us want to bring the humanity into this, and the most humane thing that you can do is prepare your employees for this new future, because there's really not much choice. This is the moment where you're going to help — that number of 5% who are using this as thought partners — get everyone on your team to understand how to do that, and you've suddenly created an army of individuals who can help transform the company. I love this notion of: we're going to take that efficiency, the "more with less," we're going to squeeze 30% out of our workflows, and that time is going to go to innovation.

That's connecting — if you can do that, if you can take that efficiency and suddenly use that for innovation, because that's real. I used to talk about, like, let's put 10% of our budget into innovation, because you always need to be testing. And what's fascinating right now is something that worked three months ago doesn't work right now.

Rita: Right.

Drew: So if you're testing these things all the time — CMOs struggle sometimes to have these other tests going because they don't have the budget. So maybe the efficiencies that you can drive, you can use to free up some dollars. I don't know, that would be a wonderful world. What are two key takeaways that you would love to have every CMO listening, either with us today or in the podcast later on?

Rita: I think the first is really: start with the end in mind. Don't start with the technology, don't start with, "Ah, what did OpenAI do this week?" Start with, "Here's what good looks like for us two, three years down the road" — however long your planning horizon is — and then work backward. I think that's where you should start. If you're going to be strategic, you need to start with the outcome and then work your way backwards.

I think the second thing is to realize that as a CMO, you are in an incredibly influential position in the company. To go back to this idea of centering, you're going to figure out how to communicate that both internally and externally, and that is a hugely important job that often CEOs are not themselves fully equipped to do. So I think there's a huge opportunity there to rightfully claim a seat at the table, because you've got to communicate this center to your shareholders, to your customers, to your investors, to your ecosystem partners. They have to know what you're all about, and increasingly, I think companies are going to be asking for that.

Drew: I love this. And if we think about it, CMOs in theory have already always been thinking 12 to 18 months. So we're taking this and saying, "Well, let's stretch that out to two to three years," so you can do some imagineering, as the folks at Disney talk about. And then helping to communicate that future is everything, both internally and externally, and how you do that — that is really part of the CMO secret sauce.

Rita McGrath, thank you so much for joining us today. It was an amazing conversation, what a treat! If a company wants to engage you, how can people find you, and when's your new book coming out?

Rita: Oh, I wish I knew the answer to that last question.

Drew: Okay.

Rita: I think probably either spring or fall of '27 will be — in between, hardcovers — but of course a lot to talk about before then. I work with companies, I give advice to senior leaders, I do some consulting, I obviously teach at Columbia Business School. I have a website very imaginatively called RitaMcGrath.com.

Drew: Perfect.

Rita: I run — I do a podcast myself, so there are hundreds of episodes out now with really interesting people, and I publish regularly in Fast Company and have a subscription-based Substack thing, which is called Thought Sparks.

Drew: I love it. All right, well, thank you again for joining us.

Rita: Thank you very much for having me. It's been a pleasure, and hope to hear from some of you.

 

Drew: If you're a B2B CMO and you want to hear more conversations like this one, find out if you qualify to join our community of sharing, caring, and daring CMOs at CMOHuddles.com.

Show Credits

Renegade Marketers Unite is written and directed by Drew Neisser. Hey, that's me! This show is produced by Melissa Caffrey, Laura Parkyn, and Ishar Cuevas. The music is by the amazing Burns Twins and the intro Voice Over is Linda Cornelius. To find the transcripts of all episodes, suggest future guests, or learn more about B2B branding, CMO Huddles, or my CMO coaching service, check out renegade.com. I'm your host, Drew Neisser. And until next time, keep those Renegade thinking caps on and strong!