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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 HBRAL.COM

MNO Audience
Contribute with existing nets and (digital natives between 16 and 24)
technologies Accept to be exposed to the
Wins with more minutes and brands ads
messages Get free minutes and messages

Contribute with its Media/Advertising


Brands sociodemographic Agencies
Contribute with money Develope specific content for the
knowledge about the
Get to a segment unattainable before segment and the mobile medium
segment
Get to important clients

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

32 Harvard Business Review March 2010


IDEAS IN ACTION HBRAL.COM

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

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