Strategy Beyond Markets: The Intersection of Business, Public Policy and Ethics

“We live in a world in which two people with a video camera and an Internet connection can do irreparable damage to a brand overnight; it’s no longer just the Greenpeaces of the world that a company has to worry about — it’s much more complicated than that,” says Michael Lenox, the Tayloe Murphy Professor of Business Administration as well as senior associate dean and chief strategy officer at the Darden School of Business.

From government regulators and environmental activists to human rights watchdog organizations and other special interest groups — “nonmarket” forces have proliferated in recent years, creating a need for companies to develop a careful, more proactive approach to such external factors and pressures.

“Today, the average CEO spends as much if not more time on non-market issues as on the core business issues — supply, demand, competitors,” Lenox explains. “Managers in the 21st century have to cultivate strategic relationships beyond the usual stakeholders, public and private. The CEO who says, ‘These issues [environmental or otherwise] don’t matter to me,’ does so at his or her own peril.”

Evidence of that peril came during the Deepwater Horizon oil crisis of 2010, when, Lenox notes, the head of BP at the time was “grossly unprepared to deal with the non-market pressures and public outcry” in the wake of the spill. That CEO was quickly replaced by one “much more attuned to listening to his stakeholders.”

But it’s not just oil and gas companies; all firms are dealing with these kinds of non-market pressures, Lenox says, though some more than others. Recent surveys by the World Bank and The Conference Board, for example, show CEOs feel particularly constrained by the uncertainty of public policy — with many ranking government regulation as a greater concern above typical market threats (e.g., increased competition, supply-chain changes).

In other words, the business world has awakened to the need for what Lenox and a select few strategy scholars have long focused on — “strategy beyond markets,” also the title of a book he co-edited with John M. de Figueiredo, Felix Oberholzer-Gee and Richard Vanden Bergh. Their book is the 34th volume in the Advances in Strategic Management anthology.

“My interest has long been how businesses deal with issues beyond the narrow market definition, and I’m personally most interested in sustainability and the environment,” says Lenox, who earned his doctorate from the Massachusetts Institute of Technology’s Technology and Public Policy program in 1999 after obtaining bachelor’s and master’s degrees from the University of Virginia.

Recognized as a top strategy and business professor by various outlets, including the Strategic Management Society, Lenox’s focus on strategy beyond markets is somewhat of an anomaly in his field. As the forthcoming book’s introduction points out, managers have come to “view strategy beyond markets as fundamental, while the community of strategic management scholars views it largely as a niche.”

Lenox attributes the mismatch between scholarship and on-the-ground concerns, in part, to disciplinary boundaries. Beyond-market strategy, as opposed to market strategy, is “very interdisciplinary, involving the intersection of business with public policy, law, economics, sociology, psychology and ethics.”

Lenox and his cross-disciplinary co-editors want to see more scholars coming together to focus on these critical issues. As Lenox points out, whether it’s a fast food or soft drink company dealing with a national nutrition campaign or a technology company (think: Apple) facing sudden government intrusion, these issues “are not just asides; they’re central.”

“To adapt a phrase from Stanislaw Ulam, the term ‘non-market strategy’ is a bit like ‘non-elephant zoology,” Lenox adds. “You only need to look at the front page of The Wall Street Journal to see that these non-market issues actually have a much larger overall effect than the traditional market concerns.”

The challenge is the complexity of the issues. Strategy Beyond Markets tackles this complexity from many directions, in three categories:

• Private politics: firms’ interactions with NGOs and other special interest groups to preempt unfavorable policy choices, react to crises and develop socially responsible strategies
• Public politics: firms’ use of campaign funding, lobbying, committee participation and other instruments to influence local, national and international political environments
• Integrated political strategy: how firms organize internally to manage and monitor non-market concerns

The material, Lenox says, “addresses questions like, ‘When is a business likely to be targeted by an activist campaign?’ and ‘What are the viable strategies for addressing these issues when they arrive?’ Do you fight? Do you accommodate? Do you work around them some other way?”

“The world today is much different than it was in the ’80s and ’90s, because of technology and changes in how business is done,” Lenox adds. “Companies know they can’t just turn a blind-eye or take a position of mere legal compliance anymore — they need to be much more strategic. This book, and my research as a whole, is aimed at helping them know how.”

Michael Lenox, Tayloe Murphy Professor of Business Administration and senior associate dean and chief strategy officer, is co-editor with John M. de Figueiredo, Felix Oberholzer-Gee and Richard Vanden Bergh of Strategy Beyond Markets (Emerald Group Publishing, 2016).