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The price, the client, the competitor and the added value are
concepts
related to management that have become widespread during the
last
30 years and have encouraged a ‘sameness’ or the idea of
imitation.
Awareness of this reality is the first step towards overcoming it.
I
Alejandro Ruelas-Gossi
rofessor of trategy at the niversity of iami chool of usiness
Administration. esearch
rofessor at ew or niversity tern chool of usiness. e has
consulted for a number of
ortune 00 companies including ony, icrosoft, and hilips. rior to
entering academia,
he was a senior e ecutive at eme and eere ompany and the
founding director of r estra,
the as ue nstitute of ompetitiveness, in pain.
5. nception is one of hristopher olan s
masterpieces along with Memento, Insomnia,
Batman Begins, The Dark Knight and the Dark
Knight Rises.
he original name of the film was Dream Stealers.
n his movie, olan paints a world where technology
e ists for the purpose of penetrating the human mind
through dream invasion, gaining access to the
subconcious minds of e ecutives and thus opening
the door to committing corporate espionage. n fact,
om obb, the main character of Inception, is given
the opportunity to recover his past life as long as he
can pull off the impossible an inception, that is, to
implant an idea in the minds of businessmen.
n a similar sense, a current concept is implanted
in managers brains and it has spread like a virus.
he concept is sameness the idea of that which is
e ual, the idea of imitation .
n almost every business sector, the companies
are becoming more similar every day. hey imitate
each other and offer the same things. n their day, a
clear e ample could be seen ithin the American
automobile manufacturers. nstead of creating their
own history, they developed and grew by copying
one another. hen oyota and onda invaded the
nited tates market in the eighties, the American
automakers decided to imitate their Asian rivals. t
6. was surprising to hear ord s publicly declare a
few years back that his goal was to imitate oyota.
The four obsessions
of management
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By forgetting their own history and making
emulation an objective, the American automobile
companies lost their great creativity and their cutting
edge designs which had so distinguished them
during prior decades.
n the movie Men in Black III, the protagonist
travels back in time to the si ties. t was a time
when American made cars not only had fascinating
designs but, more importantly, they were original
designs. n other words they did not imitate. ust a
couple decades later, all the vehicles looked the
same. onse uently, it is not surprising that the
American auto industry faced a bailout crisis in
. his is only one e ample of how, in time, the
virus of imitation has infiltrated the minds of most
business executives and, as a result, affected their
decision making. ust like with any virus, this virus
has different components that make up its structure.
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54 Business ReviewHarvard Deusto
people from their reactions than their actions.
he latter are planned, considered and developed
consciously. contrast, reactions are manifested
unconsciously. ence, psychology refers to an
incompetent unconscious.
he onscious ompetence earning odel,
based on cognitive theory, describes four phases of
learning. he first phase is the incompetent
10. unconscious in which there is no awareness
conscience of what is being done. n other words,
behavior occurs on an unconscious level. he
second phase is the incompetent conscious.
Awareness e ists in this phase, but the behavior is
still erroneous. Being aware of a problem does not
e uate to eliminating it. o eliminate a problem, we
must enter a third phase, the competent conscious
in which we are aware of the problem and what we
need to do and we must decide to act to do things
differently. t is not possible to obtain different
results if we continue with the same behaviors. o
then, finally, we can enter into the competent
unconscious where our behaviors become reactions
rather than planned actions. hus the desired state is
reached. t is an interesting process that can
culminate in an important consideration as we deal
with the four obsessions of business management
that are detailed ne t.
1.THE OBSESSION FOR LOW PRICES
FROM REDUCING COSTS TO INCREASING INCOME
Efficiency can sometimes be an asymptotic trap.
It can destroy value and contaminate organizations.
Two examples of this are the low cost models and
the widely available private label brands that
generate poverty because they require that
executives focus on the denominator of the return on
capital employed to reduce investment and
expenditures
This perspective fre uently has negative impact
on organi ations and their employees. A case in
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55
In contrast, an increase in income (the numerator) has
no limits because executives must focus on increasing
the value equation of the business. This requires a
conscious and reflective learning process to produce
new and different behaviors.
Frequently, focusing on increasing the value equation
brin s ver ositive results orona, for exam le, the
13. orld s best sellin im orted beer, is illin to bear a
hi her costs structure in order to deliver its roduct ith
the same taste and identical ualit to ever corner of
the orld
This is why Corona brews and bottles every unit in
Mexico. Despite the higher costs, carrying out the entire
production process in its country of origin has been one
of the keys to its success. Of course, it is important to
maintain a control on costs, but companies that focus
exclusively on this objective without increasing the
numerator (revenue) are destined to oblivion. It is prec-
isely this vision which is obsessed with focusing busin-
ess on low cost models that has caused a veritable low
cost tsunami. This reality contaminates industries,
countries and even our daily lives. The generic pseudo
strategies, or the so called cost leadership strategies, that
reflect this trend and were formulated more than three
decades ago, caused a great deal of damage in their day.
The fact that these cost leadership strategies were
considered viable is one of the reasons for a biased
vision that today imposes itself disguised as efficiency.
It is the most frequently applied practice in times of
crisis, when layoffs happen immediately with the
objective of creating an ever leaner company structure
and downsizing employee numbers. These constant,
repetitive and unconscious actions which are focused
on one single objective leave no room for creativity or
analysis.
It must be clearly understood that the so called lo
cost strate is no strate at all Trying to attract
consumers by exclusively offering products that are as
cheap as possible, based on an obsession for reducing
costs, is like bribing clients so that they will buy
14. from us.
2. THE OBSESSION FOR THE C IENT
FROM LISTENING TO OBSERVING
I invite you to turn your attention to the myth of
listening to the client as it could ex lain h so
man companies are so similar n fact, recisel the
orst thin a com an can do is listen to the client
since the client tells ever one the same thin s a
result, suppliers deliver almost identical roducts
transforming markets into scenarios of commodities
and imposing rice t rannies This realit further
encourages the growth of the "imitation virus"
Yet that is not the onl roblem, e also need to
consider the fact that the client lies oes an one
actuall doubt this he television series ouse
illustrates this fact In fact, the series popularized the
phrase “everybody lies.” In the show, r ouse
knows how to observe the true reality without ever
listening to his atients To understand the source of
an illness, r ouse sends his team into the
atients homes or or laces to loo for clues
not to listen but to observe.
he four obsessions of management
he real challen e for businesses is to antici ate
the emer in needs and rovide solutions before the
clients can articulate hat it is the need t is not
about listenin to hat consumers sa but about
observin hat the do and determinin hat the
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Yet after observing those same clients for six
months, Land Rover discovered that no one actually
used that function. What really motivated clients to
purchase a Land Rover was the status it gave them.
In an effort to step up the learning ladder, Land Rover
became aware of its incompetence by discovering
its (unconscious) error in its marketingstrategy. To be
sure, an anthropological study would certainly be
more useful for anticipating client´s needs than the
array of sterile marketing techniques that abound.
Additionally, traditional marketing tools formulate
questions on what we know exists or what we know
doesn´t exist.
56 Business ReviewHarvard Deusto
17. In other words, we are talking about biased experiments
because the investigator intervenes in the experiment.
e cannot formulate uestions about things e don t
no e don t know, but that is exactl here authentic
discover lies In order to truly anticipate something, it
is necessary to observe thin s e don t no e don t
know, without outside intervention so as not to influence
the client's behavior Competent learning thrives in these
conditions, because individuals acquire skills that they
were not aware they lacked and can generate completely
new solutions that can help a company succeed in
today’s market.
Nevertheless, many people are obsessed ith the
client and so, once again, the conce t of imitation
a lies le, the most valuable com any in history,
hel s illustrate imitation n an intervie ublished in
the ril edition of ortune ma a ine onl a fe
months after launchin the i od in ctober of ,
teve obs ex lained the characteristics that ould ma e
the roduct a success on the mar et li e the desi n, the
miniaturi ation and the ease of use obs mentioned that
on also had a fantastic desi n and that the Japaneese
manufacturer had ioneered the developement of
miniaturi ation, but it did not understand the conce t of
ease of use decade later, we can see these statements
are true The characteristic ease of use that Apple
introduced has been widely imitated ut the company
has also developed other intrinsic elements that, ithout
a doubt, have reatl increased le's value such as the
orchestration of com anies of nodes around its
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The spider, the fly and the spider web
Consumer loyalty programs are another myth. They are useless
and a
clich . The client is not loyal. The metaphor of the spider, the
fly and the
spider web can illustrate this.
The client is the fly. The spider is a business. The strands of the
spider
web are the attributes of the value proposition that the company
offers
the fly, in other words, the reasons why the fly remains in the
web. The
fly is not loyal to the spider. The only way the fly will relate to
the
spider is if the company traps it in its web. f the only attribute
20. is price,
the fly will easily escape.
Strategy, then, consists in increasing the number of strands, of
both the
intrinsic and e trinsic attributes of the products orchestrated
around
the product . The spider assumes that the fly is not loyal and
that it will
not remain in the web unless the spider traps it with a unique
and dynamic
value network. ynamism means consistently increasing the
strands of the
network and inventing new games. The fly does not remain in
the spider
web out of loyalty the fly remains because it is trapped by
value. This is no
longer "customer satisfaction" but "customer trapping."
The metaphor of…
3. THE OBSESSION OVER THE COMPETITOR
FROM IMITATION TO UNIQUENESS
Concepts like benchmarking exacerbate the imitation
virus because they create an obsession and establish a
very wrong competitive dynamic between competitors
that makes the sameness more acute. As a conse-
quence they keep companies from delivering a unique
value proposition.
The saying, “When two dogs chase after a hare and
the dog in front can´t catch the hare, the dog behind
certainly won´t,” reflects the obsession with the com-
petitor. The two dogs are so obsessed with outrunning
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he concept of com etitive advanta e is not
ver hel ful either nder this concept, companies
follow a strate that starts b observin , and
sometimes imitatin , the com etitors and focuses
efforts on raduall bein better than com etitors
23. mar inall better f ainters subscribed to the
same mentalit that seems to revail amon
traditional executives, then e ould have
millions of ona isa ortraits ome aintin s
ould be chea er than others but the ould be
indistin uishable from each other save for a fe
radual im rovements
he roblem is that ever thin ha ens ithin a
ver defined and transcendental social and
economic context oda e are livin in an era
hich future historians mi ht call "The Era of the
Vacuum." he ill sa it as a time hen the
rules ere reinvented and coincided ith the
chan e of millennium he mi ht affirm that this
time as a ivotal time of chan e similar in
im ortance to the move from the iddle es to
the enaissance eriod
The main transformation that we are currently
experimenting is that, for more than two centuries,
we have talked about egocentrism in strategy. In
1776, Adam Smith stated that nations would
progress to the extent that they were capable of
maximizing their earnings at an individual level
and that the “invisible hand” of the economy would
eventually establish a fair distribution of wealth.
Yet this stance has failed. In the twentieth century
a group of economists proved that when someone
maximizes, someone else loses. Proof of this is that
today, we have reached the highest inequality in
history.
24. 58 Business ReviewHarvard Deusto
Selfishness is part of the human condition. In axiolo ical
terms we s ea of selfishness and altruism elfishness is
the natural human state and altruism corres onds to those
eo le ho are illin to ive ever thin for others these
actions are practically heroic because the are rarel seen
When we refer to economics, it is more precise to talk about
e ocentric and allocentric actions.
Strategy then is not from an egocentric perspective,
but from an allocentric one. he most successful
com anies toda , li e le, are those that are able to
attract other companies establishin nodes into their
net or of value creation and not ust focus on their
activities as an individual firm So to define strategy in
the briefest possible way, we only need three ords
"Chan e the ame " This a roach implies taking the
lead ith the ur ose of ainin both e ocentric and
allocentric benefits n other ords, it intends to ain
benefits for the entire net or and for itself he
definition of com etin and innin has evolved ou
don t in hen ou eliminate our com etition, ou
in hen ou compel our surroundin nodes to
commit to our ame
odels based on efficienc start ith the notion of
a value chain that refers to a set of activities that are
lin ed to a roduct and that flo linearl from the
urchase of ra materials and on throu h to
roduction, commerciali ation and sales while the
25. su ort services li e administration and human
resources o erate in arallel here are some very
important assumptions underlying this predominant
idea. or exam le, that there is a set number of
activities that add value, that these activities are
similar in all companies and that the remain stable
in time
om anies im rove their efficienc by refining
and o timi ing their value chain, but this conce t is
limited to a transactional perspective of the
relationship bet een the client and supplier and
cannot identif the creative relationshi s that mi ht
translate into innovative roducts and services he
value chain also impedes the detection of
o ortunities outside of the confines of standard
sales to established clients
Orchestration begins ith a different set of
assum tions Companies create value b generating
innovative combinations of resources hich include
tan ible assets li e real estate, distribution net or s
or machiner and intan ible assets li e ex ert
no led e, technolo or brands that satisf unmet
client needs he nodes are the individuals, the
business units or the com anies that control the
relevant resources and ma e them available to fill the
existin a in the mar et Ochestration consists in
coordinatin these nodes in order to rovide an
innovative combination that meets and exceeds
clients' expectations
he most successful companies today li e pple
now how to attract other companies by
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his orchestration re uires a ne lan ua e e
no lon er s ea in terms of clients, suppliers or
com etitors but rather in terms of nodes that are li e
e o ieces because the re resent the resources
that constitute the basic building bloc s that can be
combined amon st each other in man different
a s in order to satisf ne needs n orchestratin
node is the first amon e uals, the one that identifies
the o ortunit and then athers and coordinates the
others
4. THE OBSESSION FOR V E E
FROM THE V E CH IN TO ORCHESTR TION
past their own individual reality
he four obsessions of mana ement 59
ntel s value chain lo ic is centered around innovation of
ne roducts from the to the , from the to the
entium, al a s alon ith the latest icrosoft soft are
28. installed in the s n contrast, the lo ic of orchestration
lies in the innovation of the business model
nother interestin case in point is the emex
Company he traditional value chain lo ic ould
leave fe o tions o en for the com an backward
inte ration to acquire resources or ra materials,
for ard integration and com etition ith clients or
hori ontal expansion to do more of the same on a
larger scale ut emex challenged the value chain
lo ic and orchestrated onstrurama, changing the
lan ua e of client and com etitor to nodes. This
enabled it to ather and orchestrate the diverse types
of la ers nodes lo istics, distribution and
financin needed to rovide an inte rated solution
Cemex, for example, introduced the use of
sophisticated technology in its logistic nodes to
serve cement as quickly as pizzas are served. To
improve its distribution nodes, the company
worked closely with its base of 5.000
independent distributors in Mexico and helped to
transform nearly half of them into its retail
concept of Construrama. Under this plan,
distributors pay to be part of the network and
transform their building material warehouses into
Construrama shops. In exchange they receive
help with the design of their business and their
administration, as well as receiving financial
support, among others.
n so doin , emex created a ind of franchise, a
universal brand, in the construction sector that is
shared by all the nodes he com an is not the
o ner of onstrurama, rather it is a net or
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Apple ś iPod, iPhone and iPad are orchestrating nodes that
set the rhythm of a multiplicity of relevant nodes like a
myriad of applications and of products such as speakers,
cases, cameras, artists, radio stations, artists, automobiles,
and so on. Apple accessories generate value, as well as the
millions of applications (conceived by an authentic army of
developers) that orbit around them. Intel´s success lies in its
capacity to place a microprocessor inside a PC (know n as
Intel Inside). Apple´s success lies in that it has been the
orchestrating node (inside) of an extensive network.
31. 60 Business ReviewHarvard Deusto
its turn
kept on all the families to keep up with payments.
A related concept is Construmex, which Cemex
launched in the US to channel part of the $20.000
million dollars that Mexican immigrants send to
their families each year for construction work in
their homes in Mexico. Immigrants can walk into a
Construmex office in the US, design an extension
for their homes and pay for the construction
materials to be delivered to their relatives in Mexico.
hrou h these ro rams, emex has esca ed the
rice t rann and has achieved a much more com lex
value proposition emex s innovation does not lie in
the product –the cement is still cement–, but in that it
is an orchestrating node of a business model that is
constantly evolving. In this sense, Cemex clearly
illustrates the two central aspects of the logic of
orchestration.
rchestration s focus is first allocentric because it
incorporates the diverse nodes of the network. This
differs from the current strategic theory that is, to a
great extent, egocentric because its starting point is
the individual company that exists to create, capture
and maintain economic value and that is exclusively
centered on identifying business opportunities for its
individual benefit.
relationships and a change in the way executives learn.
Because the opportunities are so diverse, executives must
