IDEAS IN ACTION HBRAL.

COM

Strategy 2.0 - Orchestration Alejandro Ruelas-Gossi

EDICIÓN AMÉRICA LATINA is the Director of Adolfo Ibáñez

“Orchestrating
School of Management, and
Director of the Centre for Corporate
Governance & Strategy for Latin
America in Miami, USA. He has

commodities in the rapid-

written several articles for HBR
América Latina, and one of them,
“El paradigma de la T grande”
is one of the most influential

mobile industry”
and cited in the history of our
publication, and elected the best
article published in HBR América
Latina in its fifth anniversary.

U ncertain markets tend to generate innovation. Innovation is non-linear, it

large changes in external factors, cannot be planned, but emerges from the
which in turn create opportunities methodological interaction with the exter-
for firms – from both emerging and devel- nal factors, and precisely, for the endeavor
oped markets – to seize. In the fascinating of “reading” linearly the environment, I
to orchestrate nodes dynamically, pro-
vides a good example of how these sources
of change operate.
Technological Change. Technology
is the most common source of environ-
field of Strategy, we always deal with the have identified four particular sources of mental change. But while it is traditionally
dichotomy of strategic choice and determin- external volatility that create new oppor- perceived as either radical or incremental
ism. The first refers to the impact that strate- tunities for orchestration: Technological innovation on any variable of a product,
gic decisions make in the market, and affect change; Regulatory changes; Demographic in the context of strategy orchestration,
the environment. The second argues that trends; and Macroeconomic shifts. Some technological change doesn’t necessarily
little can be done to affect the market, and are more determinant than others in the involve a –sometimes futile– “complexifi-
that the sequence of external factors shape particular stories. In this article, I will cation” of any of those variables. Instead,
the markets. Although I deeply believe in address the story of an innovative finnish product innovation takes on a “minimalist”
strategic choice – strategy matters – it is also firm: Blyk, which has excelled in its ability approach, aimed to facilitate the integra-
true that the environment tion of new nodes to the
plays an important part in network.
generating opportunities
Blyk: Mobile Engagement Media Blyk did not invent a
for orchestrating. Text message new technology for the
Strategy can be ex- mobile communication
Picture
plained as the equilibrium message Scrolldown landscape, it just took
between order and chaos. advantage of the existent
The order – the linear technology. Indeed it po-
element – is the meth- sitioned at first as a MVNO
odology, the disciplined (Mobile Virtual Network
and careful identification Operator), using the tech-
of the chaotic environ- nology provided by actual
mental signals. The Key MVOs, telecomunication
concepts of orchestration, carriers, such as Orange
provide this “ordered” Brands engage their target audience of digital natives with visually and Vodafone.
atmosphere, and set the compelling messages. In the example, the ad of a Calvin Kein perfume In fact, I am using the
platform to incorporate ends with an offer to receive a sample. unique story of Blyk to
the non-linear elements: illustrate how can we in-

30 Harvard Business Review March 2010

IDEAS IN ACTION
MNO
Contribute with existing nets and
technologies
Wins with more minutes and
messages
Brands
Contribute with money
Get to a segment unattainable before
novate in a market of commodities. Yet it is
true that in recent times, product innova-
tion, like the smartphones(particularly the
iPhone) have introduced a new dominant
design in the category, switching from the
so-called dumbphones to “platforms of
business & entertainment”, it is also true
that the market share of smartphones is
still low (they are more expensive, and
more existent in the corporate world).
Orchestration is, intrinsecally, a
business-model innovation. (See my
article The Big T Paradigm, HBR feb 04 for
a deeper understanding for innovating in
the business model, beyond/around thep-
roduct). In that article, I proposed what I
call the “interaction between the small t
and the Big T”. Small t is product innova-
tion, Big T is business-model innovation.
In strategy we need both. And even in the
markets of fast-technology-cycle, there
are stages of “commoditizitation”, where
the business model innovation needs to
be more pervasive. And how do we know
that even in a fast-cycle industry, we are
dealing with a commodity industry? Easy.
Blyk did not orchestrate the brands of the
products, only the carriers. The brands are
factually, commodities. The strategic focus
switch from the product, to the network.
Demographic Trends. Blyk targeted
a very elusive market segment for classic
brands like Adidas, Coca-Cola, L’Oreal. :
32 Harvard Business Review March 2010
Contribute with its
sociodemographic
knowledge about the
segment
mobile users in an age range between16 and
24. Their demographics are very particular:
they are digital native, they had a very early
access to mobile technology, are flexible in
time and space, look for free services like,
Napster, mails, chat, videos, games, infor-
mation. They are part of virtual communi-
ties, like Facebook, MySpace, etc. they are
accustomed to change, to receive massive
information, but they like one-to-one com-
munication, They have limited budget.
They are not loyal to services. They switch
very easy. They like freedom.
Macroeconomic Shifts. The reces-
sion. Every current conversation at some
point, touches this issue. The limited bud-
get, along with the economic situation,
makes even more fragile the switching mode
of the target audience.
In my previous article (HBR Jan-Feb 10),
I described the process of strategizing of 4
phases: sensemaking, connecting, deploy-
ing and executing. It is evident that Blyk,
made sense of potential target audiences
for its unique business model, and then
connected the dots , through the orches-
tration of 4 nodes, where every node is
getting unique value. The only way to keep
the nodes in the network is by creating ac-
tual value for every one. Blyk just did that.
What did Blyk do?
Blyk started in October 2007, reinventing
HBRAL.COM
Audience
(digital natives between 16 and 24)
Accept to be exposed to the
brands ads
Get free minutes and messages
Media/Advertising
Agencies
Develope specific content for the
segment and the mobile medium
Get to important clients
the business model in mobiles. Founded
by 2 ex-Nokia top executives: Pekka Ala-
Pietila, former president & CEO, and Marko
Ahtisaari, VP of Marketing. Pekka led the
project inside Nokia, but left when Nokia
decided not to enter in. It was not part of
its core business.
Blyk, as a MVNO, offers free calls and
SMS (47´, and 217 SMS) provided by MNO
(Orange, Vodafone) to digital natives
(16-24 years old), in exchange of receiv-
ing advertisement from brands such as
Adidas, Coca-Cola, L’Oreal., artistically
designed by specialized advertisement
agencies that identify the sociodemo-
graphics (provided in the application to
get the service) of the target audience.
The visually rich messages engage the
audience in a conversation with a brand –
one-to-one – that offers value content for
them.
The model worked. 2/3 of users in the
range of 16-24 in UK (aprox 6 million). It
grows fast. The strategy is viral, word of
mouth – through the texting community –
among users.
By January 2008, it had attracted 60-70
advertisers en 14 industries delivering
messages to the audience.
The response is 29% , way above the
average of 2%:
It has built a sophisticated data base with
the sociodemographics of the segment.
IDEAS IN ACTION HBRAL.COM

Blyk has also created in this segment a
two-way value creation to the extent that
through its system, not just delivers value
to their clients, but also picks-up value
from them. The marketing campaigns
– visually attractive – get also a high
response.
Blyk is orchestration at its best.
Let us identify, as I do in every article,
the key concepts of orchestration:
Platform Business Design. (Allocentric
vs. Egocentric). See the graph. Value is
created for every node. Pure allocen-
trism. Conceptually, orchestration is
consistent with game theory, and more
particularly with the concept of “Nash-
Equilibrium” (nobel prize in economics
in 1994), where the goal is not searching
an “egocentric optimal” (that empiri-
cally, produces more inequalities) but
the art of suboptimals, where every node
wins. Orchestration is allocentric. Blyk
orchestrated an allocentric network that
delivers value to every node.
Unique and Enabler Processes. Blyk
uniqueness is a deep knowledge of their
target audience, a sophisticated inven-
tory of their sociodemographics. The
enablers are the nodes: brands, MNOs,
ads agencies.
Knowledge Legos: Plug & Play. The only
way to grow into other geographies is by
“packaging” and transferring the knowl-
edge gained in the initial market: UK. In its
website, it says: “Blyk will continue to oper-
ate in other markets, providing the unique
experience to members there in the same
way we have in the UK. Together, we have
created a future for free communication”.
The Paradox of Complexity. Blyk speaks
the language of every node. Orchestra-
tion does not have to be simple, just to the
direct customer, but to every node of the
audience. In fact, the transactional con-
cept of customer-supplier must evolve to
the whole audience, and having a 360º.
In the field of economics for strategy,
one of the key concepts is “switching
costs”, the cost of switching a supplier, a
customer, a partner. The paradox of com-
plexity makes this switch smoother to the
extent that the articulation in the network
is intentionally “very simple”. Blyk did it,
and this has been instrumental, it is not
easy to position a new business model in
such a competitive market.
The lessons of this story are plenty,
but the most important one is the same
that I intent to transmit in these articles:
think different. Strategy is not about being
better in the existent game, but inventing
a new game.
Reprint R1003P-EN

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