DANIELA GUGLIELMETTI

D
A
N
IE
LA
G
U
G
LI
E
LM
E
T
T
I
or more than a century, the game was domi-
nated by the usual suspects: Europe, North
America, and Japan. But in recent decades the
competitive landscape has changed. Cham-
pions coming from emerging markets have risen to
leadership positions in a wide range of global indus-

tries, and they have done it not by defeating the es-
tablished giants in their own game, but by changing
the rules to create a new game altogether. In cement,
it is not longer Europe that heads the list, but an ag-
gressive multinational –Cemex– with headquarters
in Monterrey, Mexico. The fastest growing appliance
maker in the world –Haier– hails from neither Japan
nor Europe, but Qingdao in China. Another Chinese
F
by Alejandro Ruelas-Gossi and Donald N. Sull
november 2006 2
The Key to Agility on the
Global Stage
The new global champions coming from
emerging markets are not finding better
answers to old strategic questions. They
are changing the question itself –no longer
thinking in how to optimize traditional value
chains, but in how to create and coordinate
networks to seize opportunities that others
don’t see.
Orchestration
Strategy
Published in Harvard Business Review América Latina,
November 2006
upstart –Galanz– leads the world market in micro -
wave ovens. The world’s biggest brewer by volume

–InBev– is a joint-venture between a Belgian and a
Brazilian brewer. The world’s leading steel company
–Mittal Steel– began less than 30 years ago as a small
mini-mill in Indonesia.
At first, the explosive advance of these and other
emerging champions fall somewhere between un-
likely and miraculous. Most emerging market compa-
nies face a high cost of capital and limited availabili ty
of funding; their domestic customers often have low
disposable income but are still discerning consum-
ers; firms must fight a two-front war against domestic
competitors at the low-end and multinationals at the
high-end; and they lack resources such as technology
and brand at the scale afforded by established leaders
in developed economies.
What explains, then, that these upstarts from
emerging markets have managed to carve out global
leadership positions in such a short period of time?
Why have the incumbent players relinquished market
share to competitors coming from developing regions
such as China, India and Latin America? We believe
that the problem for many incumbent firms has been
that their managers have been asking the wrong ques-
tions. In North America, Japan and Europe, manag-
ers are still obsessing over the question of how they
can optimize their established business models. This
question assumes that there is only one best way to
compete –often embodied in the notion of a value
chain. It leads executives to ask what other competi-
tors are doing and then benchmark one another to
mindlessly ape the most successful. It leads them to
ask existing customers if they are satisfied with their
existing product offerings. It leads them to ask how
quality management programs –such as Six Sigma

or TQM– can wring incremental improvements out
of the established model. All of these questions lead
companies to imitate one another, to converge on a
homogenous business model, to offer customers more
of the same. Like long-married couples, competitors
look more and more like one another with each pass-
ing year. (See the sidebar “The Mindset that Leads to
Sameness”.)
Certainly there are benefits to this approach, in
terms of increased efficiency. But the emerging mar-
ket champions did not come up with new answers
to old questions. Instead they changed the question.
They did not ask, “How can we make the established
business model more efficient?”, but rather they asked,
“How can we become more agile?” By agility we do
not mean doing more of the same, only a little bit
faster or better. Strategic agility refers to a firm’s abil -
ity to consistently seize emerging opportunities faster
and more effectively than its rivals. Much has been
written about identifying new opportunities. But in
reality, spotting an opportunity is often the easy part.
The biggest hurdle to strategic agility is not seeing the
opportunity; it’s seizing the opportunity. It requires
firms to fill a new need in the market, by assembling
a new set of resources and coordinating them into a
novel combination. Think of the iPod, for instance:
Apple wove together a sophisticated network of dif-
ferent firms, including music companies providing the
content, subcontractors that manufacture the device,
and firms making accessories and complementary
products. Taken together, these companies constitute
an ecosystem that fills the market need. And it is the
network, rather than the product itself, that creates
a barrier to entry preventing imitators from copying

Apple’s offering.
In this article we will introduce the concept of or-
chestration to describe how a firm assembles and co-
ordinates a variety of nodes in a novel way to seize an
opportunity. Orchestration is not about building a net-
work and then allowing it to ossify with time. On the
contrary, orchestration requires keeping the network
dynamic, open to seize new opportunities as they
emerge and to avoid being trapped in tired business
models. In the following pages we will describe how
orchestration is helping companies in Latin America
and other emerging regions improve their strategic
agility, and we will present some basic principles that
can allow business leaders to successfully develop
their firms’ ability to orchestrate strategically.
From Value Chain to Orchestration
Efficiency-based models begin with the notion of a
value chain, which portrays a set of activities that add
value to a product. These activities follow a linear
f low, from purchasing raw materials to production,
marketing and sales. (Supporting services such as ad-
ministration and human resources run in parallel).
This inf luential notion embeds some very strong as-
sumptions: There are a set number of activities that
3 harvard business review
Alejandro Ruelas-Gossi ([email protected]) is a
professor of strategy and the director of the Adolfo Ibáñez
School of Management in Miami, Florida. He is the author of
“Innovating in Emerging Markets: The Big T Paradigm” (HBR
América Latina, February 2004). Donald N. Sull
([email protected]
don.edu) is an associate professor of Management Practice

at London Business School. This is his third article for HBR
América Latina, after “Prepare Your Company for Global
Competition” (September 2004) and “Lessons from Brazil:
How to Salvage a Business Threatened with Sudden Death”
(February 2004), both with Martín Escobari.
S t r a t e g y O r c h e s t r a t i o n : T h e K e y t o A g i l i
t y o n t h e G l o b a l S t a g e
add value, they are the same for all firms, and they
remain stable over time. Companies improve their ef-
ficiency by continuously refining and improving their
value chain. The value chain concept limits the vision
to the transactional relationship of customer-supplier,
rather than identifying the creative relationships that
could lead to innovative products or services. The
value chain also blinds managers to spotting oppor-
tunities outside the commodity sale to established
customers.
The orchestration approach begins with a different
set of assumptions. Firms create value by assembling
novel combinations of resources that fulfill an unmet
customer need. Resources include both tangible assets,
such as real estate, distribution networks or machin-
ery, as well as intangible ones, such as expertise, tech-
nology or brand. Nodes are the individuals, business
units or companies that control relevant resources and
make them available for use to fill a gap in the market.
Orchestration consists of coordinating those nodes to

provide the novel combination that meets a customer
demand.
Orchestration requires a new language. We no lon-
ger speak of customers, or suppliers, or competitors,
but rather of nodes. Nodes are like Legos: They are the
resources which constitute the basic building blocks
that can be combined to meet new needs. An orches-
trating node is the first among equals, the node that
identifies the opportunity and assembles and coordi-
nates the other nodes. In the case of Apple, the iPod
november 2006 4
In most industries, companies become more and more
similar to one another with each passing year: they mimic
each other to offer more of the same. Look at American
carmakers. Instead of writing their own story, they limit
themselves to copy one another. When Toyota and Honda
started winning in the market, American companies
started imitating their Asian rivals. Disregarding their own
history, they turned imitation into a goal.
Many established companies keep answering the same
questions and going back to the same set of notions,
which leads them to converge toward homogeneous
business models and perpetuate the wrong assumptions.
Let’s review some of them:
Cost Reduction. It is a trap that destroys value. It
focuses management on the denominator of return on
invested capital, that is, in how to reduce investment and
expense. By contrast, the numerator focuses executives on
creating –on how to add value to the equation of the firm.
Corona, the number one imported beer in the world, is
willing to bear a higher cost structure so it can deliver

its product with the same quality in every corner of the
world: every unit is bottled in Mexico. Producing entirely
in the country of origin has been a key to its success. Of
course, it is important to keep a tight control on costs, but
companies that do that exclusively, without growing the
numerator, are destined to shrink into oblivion. Instead,
the best companies consider a competitive cost structure
table stakes that let them play the game, while they rely
on innovation to win.
Listening to the Customer. A very common
assumption that might explain why so many firms
are so alike. The customer asks the same of everyone.
Accordingly, suppliers deliver the same, converting the
scenario in one of commodities and of the tyranny of
price. This breeds a culture of sameness. Innovatio n
requires that companies anticipate emerging needs and
provide solutions before customers can articulate what it
is they want.
Customer Satisfaction. Another concept that
preserves the sameness. It means that the customer
expects the same. But a customer doesn’t want to be
satisfied –he wants to be surprised. Indeed, the associated
notion of customer loyalty does not exist; there is not
such a thing as a faithful customer. Customers switch
naturally as soon as they perceive more value somewhere
else.
Benchmarking. It makes the problem of sameness
even more acute by creating an obsession with mimicry
and a fixation with competitors, not with delivering
a unique and complex value proposition. Let us use
a metaphor to exemplify this: Two dogs are chasing
a rabbit. If the first one cannot catch it, the second

does not have a chance. That’s benchmarking: Dogs so
preoccupied with chasing each other that they never
catch the rabbit.
Competitive Advantage. For these companies,
the concept of competitive advantage also revolves
around competitors, around being gradually better,
marginally better. If painters followed the same mindset
of traditional managers, we would have millions of
Mona Lisas –one cheaper than the other, with just a few
“gradual improvements”.
The Mindset that Leads to Sameness
is the orchestrating node of a multitude of relevant
nodes, all moving at the pace of iPod: speakers, bags,
computers, phones, cameras, singers, broadcasters,
and everything in between. All in white, just like iPod
–and all continuously evolving. Intel might have put
the microprocessor inside the product, but Apple is
the orchestrating node within a network.
The value chain logic focuses on new product in-
novations that pass through the chain –from 286 to
386 to Pentium, all bundled with the latest genera-
tion of Microsoft software and placed inside a PC. The
orchestration logic, by contrast, focuses on business
model innovation.
Consider Cemex. The traditional value-chain logic
would leave Cemex few options: integrate backwards
into raw materials, integrate forward (and compete
with its customers), or expand horizontally to do more

of the same at greater scale. But Cemex defied the
value-chain logic and instead orchestrated Constru-
rama, a network of almost 2,500 distributors in Mex-
ico. It switched from the language of customer and
competitor to the language of nodes, bringing together
various types of nodes –logistics, distribution and fi-
nancial nodes– required to provide an integrated so-
lution, and taking the lead in transferring knowledge
and best practices across them. In logistics nodes, for
instance, Cemex pioneered the use of sophisticated
technology to dispatch cement to work sites as quickly
as pizza delivery. To improve its distribution nodes,
the company worked closely with its base of about
5,000 independent distributors in Mexico, convert-
ing more than half of them to its Construrama retail
concept. Under this program, dealers pay to join the
network and turn their construction-supplies stores
into Construrama outlets. In exchange, they receive
help with store layout, administration, financing and
other matters.
Cemex thus created a sort of franchise, a universal
brand in the construction industry that is shared by all
the nodes in the network. Today, the highly-decentral-
ized Construrama is the largest network of construc-
tion materials in the world, and it is exporting the con-
cept to other continents. This program also combines
with other complex financing nodes, orchestrated to
facilitate the sale of a bulky commodity as if it were a
consumer product. Through its Patrimonio Hoy pro-
gram, for instance, Cemex offers Mexican families who
live in poverty credit to finance home expansions, fol-
lowing a traditional practice of lending circles known

as tandas: the company lends small groups of families
80% of the cost of building materials, which is later
repaid with contributions from the group driven by
the pressure of other families awaiting their turn to
receive the benefit. A related concept is Construmex,
which Cemex launched in the U.S. to channel into
home construction some of the $20 billion that Mexi-
can migrants send back to their families each year.
Workers in the U.S. can walk into a Construmex office,
design their home expansion and have the materials
delivered directly to their relatives in Mexico.
With these programs, Cemex has managed to es-
cape from the tyranny of price and achieve a much
more complex value proposition. One in which the
innovation has not been in the product –cement is
still cement–, but in being the orchestrating node of
a compelling and constantly evolving business model.
In this regard, the Cemex example illustrates the two
central aspects of the orchestration logic:
First, its approach is allocentric, which means that
it incorporates the various nodes in the network.
Most existing strategy theory is egocentric: Its start-
ing point is the individual firm that exists to create,
capture and sustain economic value. The firm focuses
solely on opportunities it can seize alone. The allocen-
tric orientation, by contrast, allows managers to seize
a whole range of opportunities that can only be pur-
sued by a network. This requires a shift in how man-
agers establish relationships. In the traditional view,
the egocentric firm maximizes its own value, often
at the expense of other players in the value chain.

Emerging market champions did not ask, “How can we make
the established business model more efficient?”,
but rather they changed the question to, “How can we become
more agile?”
The orchestration approach, by contrast, assumes that
there are unlimited opportunities to create new value,
as long as there is cooperation between the network
nodes and the pie is carved up in a manner that will
make it worthwhile for everyone to participate. As
Francisco Garza Zambrano, president of Cemex North
American Operations, says: “When the distributors sell
more, Cemex sells more… We want them to increase
their business”.
Second, successful orchestration requires managers
to overcome what we call the paradox of complexity.
To succeed in the marketplace, the network’s value
proposition (that is, the result of orchestration as seen
by customers) must be very simple. On the other hand,
the company needs its orchestration to be internally
complex, because is that very complexity what pre-
vents rivals from imitating the network. The paradox
of complexity, then, can be summarized as follows:
Executives must orchestrate the network so it seems
simple to customers but has enough complexity that
rivals cannot imitate it easily. Cemex has been able
to overcome this paradox through its Construcard
card, which customers receive when they join Con-
strurama. With it they can make transactions (buying
materials, scheduling construction, receiving money

for home improvements sent by their relatives living
in the U.S., and so on). It is essentially a multipurpose
card, very simple to the end consumer, but behind of
which there are lots of orchestrated nodes: financial
credit, money transfers, materials delivery, labor and
building methods. As a result, Cemex can add value to
the whole network almost on a daily basis, and at the
same time make it more difficult to imitate.
Cemex’s innovations illustrate how orchestration
enhances strategic agility. By orchestrating a f lexible
network that includes distribution, logistics and fi-
nancing nodes, the company was able to seize oppor-
tunities that other competitors might see, but could
not grasp. The network provides Cemex the agility
to adapt to new circumstances and incorporate new
opportunities, such as expanding to nearby markets
or tapping the large network of Mexicans working
in the United States. Instead of taking an established
value chain as an immutable law of nature, Cemex ex-
ecutives wove their own tapestry of relationships and
orchestrated an allocentric network that customers
experience as simple, but competitors find impossible
to replicate.
Four Conditions for Orchestration
Is it possible to apply the orchestration approach with
equal success across all markets and all companies?
The irruption of the emerging market champions
shows that the environment plays an important part
generating the opportunities for orchestration. How
to know when the benefits in strategic agility from
orchestration outweigh the traditional benefits in ef-
ficiency from a value-chain approach? You need to

look at the level of turbulence in the external envi-
ronment. Uncertain markets tend to generate large
changes in external factors, which in turn create op-
portunities for agile firms to seize. Thus, the value of
orchestration relative to efficiency tends to increase
as a function of market volatility. We have identified
four particular sources of external volatility that cre-
ate new opportunities for orchestration: Technologi-
cal change; Regulatory changes; Demographic trends;
and Macroeconomic shifts. The story of Chinese appli-
ance maker Guangdong Galanz, which has excelled in
its ability to orchestrate nodes dynamically, provides
a good example of how these four sources of change
operate.
Technological Change. Technology is the most
common source of environmental change. But while
it is traditionally perceived as either radical or in-
cremental innovation on any variable of a product,
in the context of strategy orchestration, technologi-
cal change doesn’t necessarily involve a –sometimes
futile– “complexification” of any of those variables.
Orchestration requires a new language. We no longer
speak of customers, or suppliers, or competitors, but of nodes.
Nodes
are like Legos: The basic building blocks that can be combined
to
meet new needs.
november 2006 6

the moment was Qingde Leung. Then a 42-year old ad-
ministrator in Guizhou township’s industrial bureau,
Leung proposed that the town’s party council set up a
collective enterprise to wash and process goose feath-
ers. The shift in regulation opened up the opportunity
to enter the down market.
Demographic Trends. Under Leung’s leadership,
the collective enterprise prospered for over a decade
in the down and feather business. However, in the
early 1990s, Leung anticipated that intense competi-
tion would depress profits in the textile business. And
on a business trip to Tokyo in 1991, he saw his first
microwave oven and “sensed” that domestic demand
for microwaves was poised to take off. Although mi-
crowaves had been produced in China for more than
a decade, most were exported, as they were considered
luxury goods in the country and sold for high prices.
Leung discovered that the household penetration rate
was much lower than the 40% to 80% typical in Japan,
Europe, and the United States. Moreover, no estab -
lished competitor dominated the f ledgling Chinese
market. Leung was convinced that Chinese consumers,
whose habits were changing rapidly, would respond
favorably to a more affordable offering. So in 1992,
the collective company officially changed its name to
Guangdong Galanz to mark its transformation into a
microwave oven manufacturer.
Thus began the endeavor of Galanz towards strat-
egy orchestration. To develop the expertise required
for microwave production, Leung visited Shanghai
and persuaded a group of engineers from the Shang-
hai Eighteenth Radio Factory to join his new venture,

initially as part-time consultants. The newly formed
team licensed technology from Toshiba to produce a
trial run of 10,000 microwave ovens in 1993 under the
Galanz brand. Lacking funds for a national launch,
Leung stroke an agreement with one of the largest de-
partment stores in Shanghai to stock the new Galanz
microwaves, under the condition to remove them if
none sold in the first three days. Although rivals dis-
paraged Galanz’s transformation into an appliance
Instead, product innovation takes on a “minimalist”
approach, aimed to facilitate the integration of new
nodes to the network. In fact, in industries with a
slower pace of technological change, innovation can
occur not in the product but around the product, as in
the case of Cemex’s Construrama network.
Guangdong Galanz illustrates very well this ap -
proach to product innovation. Although not as well
known as the also Chinese manufacturer Haier, Galanz
has carved out a commanding position in the micro-
wave oven niche. Today it is the global leader in micro-
wave oven production, with annual output exceeding
18 million units in 2004 –the vast majority of them
manufactured for sale under other companies’ brands.
The company has been introducing specific innova-
tions aimed at seizing the increasing opportunities in
its home market, but it has done so by simplifying the
product in accordance with the geoeconomic context:
Contrary to what could be expected, homes in China
–specially their kitchens– are very small; traditional
microwave ovens were of a size incompatible with the
space available to most Chinese consumers. Galanz
then introduced a smaller, minimalist oven with a
single button. The company incorporated just enough

technology to keep its value proposition very simple
to the customer.
Regulatory Changes. Although its name is now
directly associated with its leadership in microwaves,
Galanz today looks nothing like its original incarna-
tion as a collective enterprise founded in 1978 in Gui -
zhou, in the Guangdong province, to produce and sup-
ply goose down for branded clothing companies such
as Yves St. Laurent. In the mid-1970s, Guangdong was
an industrial backwater, distant from the manufactur-
ing and technology clusters farther north. But due to
a new government policy, all this changed in 1978: the
Communist Party announced its intention to create
Special Economic Zones (SEZs) and suddenly Guang-
dong, with its three SEZs of Shenzhen, Zhuhai, and
Shantou, was on the front line of China’s integration
into the global economy. One of those anxious to seize
Cemex executives wove their own tapestry of
relationships and orchestrated an allocentric
network that customers experience as simple, but competitors
find
impossible to imitate.
manufacturer, the company defied its critics and sold
80% of its trial run. By involving a variety of nodes
(engineers, retailers, technology) Galanz orchestrated
a robust value proposition.

Macroeconomic Shifts. Galanz has also been capa-
ble of seizing the opportunities created by macroeco-
nomic shifts, such as the Asian financial crisis. In the
summer of 1997, South Korean microwave oven manu-
facturers, including Samsung and LG, were accused
of dumping products in Europe, and local competi-
tors petitioned the European Union for an antidump-
ing investigation. While the inquiry dragged on, most
European microwave producers were unable to com-
pete with their Korean competitors on price and were
forced to explore options to salvage their business.
Galanz acted fast. “We visited European manufactur-
ers and asked how much it cost them to make a micro-
wave oven. When they said $100, we explained that we
could make them for half the cost at the same quality.
And we had a deal,” Yaochang Yu, Galanz’s deputy
general manager, later recalled. Galanz pioneered a
novel partnership scheme in which European white
goods companies moved their entire production lines
to China, where Galanz would make the microwaves
and then export them back to their home markets for
sale under the European companies’ brands.
Orchestration in Practice
Strategy orchestration requires managers to establish
and maintain connections between the nodes. This is a
crucial component when the goal is agility rather than
mere efficiency. Each network is unique –therein lies
much of their value relative to generic value chains.
Consequently, there is no simple cookie-cutter set of
prescriptions for orchestrating a network that manag-
ers can apply blindly to every situation. That said, we
have identified a few broad principles that appear
with remarkable regularity across the successful net-
works we have studied, including several Latin Ameri-

can companies that we will use as examples.
Identify sophisticated nodes and get them to
play ball. As we have seen, Galanz followed the logic
of identifying the sophisticated nodes early on and
securing their involvement in the network. The com-
pany certainly owes part of its success to Leung’s so-
phistication in structuring deals with technology pro-
viders, distributors, and OEM customers to get them
on board. More important, however, was Galanz man-
agers’ ability to manage the relationships with the
different nodes on an ongoing basis.
By bringing world-class partners into the network,
Galanz exposed its executives to best practices and
forced the company itself to adopt a high level of per-
formance. Sophisticated partners –such as Toshiba for
technology or European appliance makers for out-
sourced production– place “unreasonable” demands
on an organization, and are generally a pain in the
neck to deal with. They demand data and transpar-
ency, impose high standards, and push for constant
improvement. It is much easier to settle for work-
ing with less demanding –often local– collaborators.
What many executives fail to recognize, however, is
that these unreasonable demands are actually the so-
phisticated partners’ most valuable contribution to
the firm’s development. By actively seeking out and
locking their organizations into stretch relationships,
managers can pull their companies out of second-rate
practices and drag them –often kicking and scream-
ing– to world-class practices and performance levels.
The most successful firms will be those, like Galanz,
that enter into and successfully manage partnerships

with sophisticated investors, customers, and technol-
ogy suppliers. When Leung decided to pursue the
microwave oven opportunity, he did not select the
most approachable competitor for technology. In-
stead he selected Toshiba, because it offered cutting-
edge product and process technology. Subsequently,
Galanz has moved to the frontier of the microwave
oven technology globally through its stretch relation-
ships with high-end original equipment manufactur-
ers in the world’s most demanding markets. In fact,
those partnerships have not only allowed Galanz to
achieve economies of scale in manufacturing and pur-
chasing, but also to secure permission to use its Euro-
pean partners’ manufacturing equipment to produce
its own branded microwaves for the Chinese market,
thus avoiding expensive investments in production
capability.
Adopt an asset-light approach. Companies that
try to do everything in-house must make tremen-
dous investments in people and hard assets. Rely-
ing on partners can allow a company to minimize
its resource commitment. This lower commitment of
resources has three advantages. First, it minimizes
the company’s losses if the situation changes and the
business is no longer viable. Second, it enables the
company to pursue more initiatives and diversify its
portfolio of projects. Finally, by decreasing the equity
investment, it can increase the percentage return on
invested capital.
Consider how this approach worked at the Brazil-
ian company Promon. Founded in 1960 as a joint-ven-
ture between a U.S. company and a Brazilian firm to
provide engineering consulting, Promon followed the
established business model of billing hours to clients

on a cost-plus basis. In 1988, when a fiscal crisis in the
Federal government led to a sharp drop-off in gov-
november 2006 8
ernment-sponsored projects, Promon decided to out-
source its labor-intensive projects to move away from
being a service contractor and become an asset-light
systems integrator company –an orchestrating node.
Thus, in a typical project, the company would su-
pervise over 1,500 employees from some 500 separate
subcontractor companies, but maintain only 50-100
people on its own payroll. Since Promon acted as a
systems integrator, it could still claim a high margin
for its services because it took final responsibility for
delivering the project on time and on budget, and
managed all interactions with the final customer. Pro-
mon’s successful shift to an asset-light model allowed
the partnership to increase net revenues from $10 mil-
lion in 1987 to $197 million in 2003, while decreasing
total staff from 4,000 to approximately 600 profes-
sionals over the same period.
Don’t Stand Still –Keep Orchestrating. In stable
markets, relationships are often taken for granted,
and managers passively sustain them without giving
them much thought. In unpredictable markets, en-
trepreneurs and executives cannot afford to take a
relationship for granted, no matter how entrenched

and long-standing. They must consciously reevaluate
its benefits and costs and actively manage them in
light of shifting circumstances. Moreover, in an un-
predictable market the interests of the parties can
change substantially, often in a relatively short period
of time.
Consider the case of OXXO, the largest chain of con-
venience stores in Latin America with almost 5,000
stores, and one of the fastest-growing companies in
the world, at a rate of two new stores daily. OXXO
developed a very sophisticated systems dynamics
model that allows it to understand the interrelations
of an ever-increasing number of variables that impact
the success of a store. To orchestrate its exceptional
growth strategy, OXXO condensed its “success-factor”
from 18 months to six weeks. Traditionally, for a con-
venience store to prove successful it was necessary
to wait 18 months. But OXXO was able to narrow it
down to six weeks and thus accelerated the process
of attracting the most successful nodes around its con-
venience stores, such as gas stations, restaurants and
the like. By doing so, OXXO is becoming a sort of iPod,
around which every node wants to be to benefit from
its rapid growth.
Even in less dynamic industries is also possible to
use strategic agility to actively manage relationships
with external nodes. The Colombian electric power
distributor Codensa, a subsidiary of the multinational
Endesa, drastically increased its sales by orchestrat-
ing a series of new nodes to strengthen the weak link
between customer and supplier. Through a network
that combined electric appliances, retail stores, and fi -

nancial credit, Codensa shortened the access gap of its
low-income customers to electric appliances. Today,
a customer can go to a retail store, buy an electric
appliance, take it home, and pay for it through the
electric invoice, in predefined installments according
to household income. Instead of the traditional effort
of reducing the cost of energy, the network actively
increased the quality of life of final consumers.
Commit to Transparency. Forging and maintain-
ing stretch relationships with customers, technology
partners, investors and suppliers often requires an
increased level of transparency. To be orchestrated ef-
fectively, partners need clarity before joining the net-
work as a node. The importance of transparency may
surprise those who believe that success in emerging
markets depends on access to privileged information
and connections with powerful people, but managers
can take a series of innovative steps to commit to a
higher level transparency that benefits and strength-
ens their value networks.
For example, Promon was from its inception an em-
ployee-owned company. This choice of organizational
form meant that Promon was required to disclose all
transactions to its shareholders, more than 400 in
total. Many executives might see this requirement as a
In a globalized world, orchestrating networks in unpredictable
scenarios
will probably become the main managerial activity
for business leaders. It will be the agile companies that get to
transit successfully between the emerging and developed arenas.

burden, but Promon’s senior partners saw it as a clear
way of differentiating themselves: The firm’s reputa-
tion for professionalism and honesty consistently at-
tracted customers and partners, a crucial factor for the
success of its asset-light model.
Another Brazilian company, cosmetics leader Na-
tura, made transparency a core aspect of its strategy
and the central value of the entire organization in
the 1990s. Among other initiatives, the founders of
Natura bought out the shareholders who did not sup-
port the shift to new values; the compensation sys-
tems were homogenized and made transparent; and
the company anchored its entire marketing campaign
around the theme of transparency and “truth” in cos-
metics. This allowed Natura to orchestrate its network
around a commitment to honesty that extended to
relationships with all relevant nodes –shareholders,
employees (particularly its large direct-sales force
comprised of saleswomen or “consultants”), and con-
sumers– through a communication that conveyed the
benefits of the product without relying, for example,
on the use of models to drive sales.
The argument that “it pays to be transparent” is not
only a declaration of intent –it is a reality, as the need
to attract and orchestrate partner nodes imposes the
requirement of transparency on companies that seek
to achieve strategic agility.

• • •
We are reaching a turning point in the conception of strat-
egy. The successes of emerging firms that are conquering
the global markets prefigure the emergence of a new para-
digm: One that is no longer about being efficient in equi-
librium (accepting the conditions of the game), but about
creating disequilibrium (inventing a new game). Manage-
ment theory has been the stage for this battle. (See the
sidebar “The Battle between Sameness and Uniqueness”.)
The orchestration approach is not based on maximiz-
ing or eradicating links in a value chain, but on coordi -
nating a series of nodes creatively to assemble a more
complex value proposition and generate strategic agil -
ity. Managers should consider these guidelines when es-
tablishing and managing their companies’ relationships
with their competitive environment. In an increasingly
globalized world, orchestrating networks in unpredict-
able scenarios will probably become the main manage-
rial activity for business leaders, and it will be the agile
companies that get to transit successfully between the
emerging and developed arenas.
Reprint R0611B-E
november 2006 10
In the new paradigm, the best of the world of
equilibrium (the developed countries) and the new
business models from the world of disequilibrium (the
emerging countries) will combine. Their conceptual
platform stems from economic philosophies born in
the 1940s, such as creative destruction (1942) and game
theory (1944).
The first, developed by Joseph Schumpeter, explains

the growth of the firm in the destructive nature of
innovation. Intrinsically, innovation creates and
destroys simultaneously. The second, developed by John
Nash, provides the allocentric atmosphere: the Nash
Equilibrium. It consists in minimizing the losses of every
player, that is, in finding the suboptimal solutions. And
these suboptimal solutions are the appropriate platform
for strategy orchestration, where every node plays.
Orchestrating is not about maximizing every link
in a value chain, but about intelligently coordinating
each node in a network to create a more complex value
proposition. Strategy no longer means being efficient in
equilibrium, but creating disequilibrium. In other words,
inventing a new game.
The Battle between Sameness and Uniqueness
The old paradigms of strategy have had a tangible
impact in the managerial mindset, particularly in
the simplification of the decision making process
(Schwenk, 1984) to the extent that executives apply
the same framework of Porter’s Five Forces to every
strategic situation. The same dominant logic (Prahalad
and Bettis, 1986) is embedded in the mindset of most
managers, and reaches a fatalistic convergence through
institutional isomorphism (DiMaggio and Powell, 1983).
As a result, most organizations simply aim all their
managing toward subsistence, and base their strategy
on mimicry. This is not real strategy. Strategy is about
painting new stories, not just repainting. Strategy is not
even to play the game smartly –it’s to create a new game.
Paradoxically, what differentiates successful
firms (Carroll, 1993) sends the message of ignoring

competitors, of not pursuing sameness. Demsetz
(1991) argues that the firm represents a response to a
fundamental asymmetry in the knowledge economy,
which is opposed to the concept of competitive
advantage –an advantage that, in practice, produces
sameness.
32 THE JOURNAL OF COLLEGE ADMISSION
Moving the Needle
Dual Enrollment is Fast Becoming The Norm
SUMMER 2017 33
Moving the Needle
Dual Enrollment is Fast Becoming The Norm
By Elaina Loveland
Stephanie Mui completed her master’s degree in mathematics at
George
Mason University (VA) this May—before her high school
graduation from
Virginia’s Oakton High School in June.

She is the youngest-ever master’s degree graduate from the
university—
and it was made possible by a dual enrollment program.
It all began in fourth grade when Mui was told she could skip
math class.
In the summer of her fifth grade year, she enrolled in a dual
enrollment
program Northern Virginia Community College. Taking classes
online and
taking one or two classes a semester and two each summer, Mui
finished her
associate degree by age 13.
She then transferred to George Mason University and earned her
bachelor’s degree in mathematics in the summer of 2016—
before starting her
senior year in high school. Her age never became an issue. She
never told her
classmates she was younger than they were—and she blended in
just fine.
“I really felt like a normal college student with a normal college
experience,” said Mui, about having finished her college and
graduate
degrees so early. “And it feels pretty good.”
BENEFITS
While Mui’s story is aspirational, dual enrollment programs
offer a wide
range of students many advantages.
Many families would say cost savings is at the top of the li st.
“There
is a huge cost savings to students and families, and students

have the
opportunity to experience college in high school and it shortens
their path to
their degree,” said Yvette LeMore, director of the Lewis and
Clark Community
College High School Partnership/Dual Enrollment Program in
Illinois.
And for specific student populations, dual enrollment can help
with
college preparation.
“Students, particularly those who are preparing to be first-
generation
college students, gain a great deal of confidence by being
successful in these
courses, knowing that they can negotiate challenging texts and
ideas and
take more ownership over their own learning,” said Christina
Parish, director
of Syracuse University’s Project Advance.
But the perhaps the most remarkable benefit of dual enrollment
is that it
cultivates a college-centric perspective—one rooted in success.
“I think it’s important to recognize that as we increase the
numbers of
students going on to college, we also need to be focusing on
college success
and getting a few of these courses under your belt has a very
significant
impact on your academic momentum,” said Adam Lowe,
executive director
of the National Alliance of Concurrent Enrollment Partnerships,
the sole

accrediting body for concurrent enrollment partnerships.
Parish added that dual enrollment is “a great way to jumpstart
one’s
college career.”
AACRAO’s Dual Enrollment in the Context of Strategic
Enrollment
Management shows that 63 percent of colleges say completing
dual
enrollment courses improves the likelihood of being accepted to
college.
And after they are accepted, these students have a better idea of
what to
expect and are therefore more successful.
“Skills like syllabus navigation, advocating for yoursel f to your
professor,
understanding that in college there are typically fewer
assignments and
therefore the assignments that you do have a greater weight, and
you need
to put your 100 percent best effort into those assignments are
essential
understandings for any student going into college,” said
Michael Dunn,
director of college counseling at AIM Academy (PA).
MANAGING RISK
“Students participating in these programs do generate a college
transcript,
and so poor performance in a course can have some negative
impact in the
longer run,” said Lowe.

Lowe advises school counselors to work and make sure students
and
families are aware that there is some risk to having a poor
grade, but “at the
same time show them the value of stretching themselves
academically.”
Many dual enrollment programs closely monitor their student’s
academic
performance to mitigate the risk of a student not performing
well and earning
a poor grade.
To help make sure students on track academically, Dunn plays
the role of
a student support advocate in AIM Academy’s dual enrollment
program with
Cabrini College (PA). Twice a week, he hosts study hall
sessions at Cabrini in
the library for the students.
“We talk about how things are going in classes, how their notes
are going,
what method they use to take notes and whether it’s effective,
and how they
are studying for their next test,” explained Dunn.
If a student consistently performs poorly, Dunn pays close
attention to the
course withdrawal date so the student can withdraw from the
course before
the deadline.
Kent Scheffel, vice president of enrollment at Lewis and Clark
Community

College (IL), said that the state allows the Lewis and Clark’s
High School
Partnership/Dual Credit Program to withdraw dual credit
students from
courses on a later date than typical college students. Having a
later withdraw
date can allow students who are doing poorly to avoid a low
grade appearing
on their transcript.
“Parents and students need to realize early on that it really is a
college
course with the same rigor and standards and they need to take
it seriously or
it can have long-term implications,” said Scheffel.
The University of Connecticut’s UConn Early College
Experience program
goes a step further to help mitigate risk.
Students who earn a C or higher receive credit for their UConn
courses. If a
student earns a C- or below, the grade converts to an audit on
their transcript.
“This opens up the opportunity to take these courses with a
little bit of
a safety net,” explained Brian A. Boecherer, executive director
of University
DUAL ENROLLMENT ADVANTAGES
• Earn college credit in high school at no cost to the student
• Take challenging courses in subject areas that high school may
not offer
• Explore subject areas for possible future careers
• Learn new and enhanced skills needed for college courses

work
• Take classes in the summer
• Earn credit in transferable courses
Adapted from a list provided by Lisa Harper, director of
College Credit Plus at
the Ohio Department of Higher Education.
i
SUMMER 2017 35
of Connecticut’s Office of Early College Programs and UConn
Early College
Experience program. “This policy aligns with transfer credit
policies—where
classes with a C or higher would transfer to another university.
The same
principle is applied for our students for transferred courses.”
AN OPTION FOR ALL
Lowe said that dual enrollment programs aren’t just for high-
achieving
students, like they were several decades ago.
“We as an organization recently adopted a vision where we
made very
clear that we believe these courses and programs ought to be
available to all
high school students, rather than being available solely to the
high-achieving
students,” explained Lowe.
Lowe also emphasizes that there are several models of

postsecondary
education that dual enrollment programs fit into.
“‘College’ means any postsecondary education, and in this day
in age,
there are a lot of very high-value associate programs and high-
value
certificate programs that community and technical colleges
offer that are
often available through dual enrollment,” said Lowe.
AIM Academy sees dual enrollment as such an advantage to
students
that 100 percent of its seniors participate in a dual enrollment
program in
partnership with nearby Cabrini College.
The formal partnership between the school and Cabrini College
began six
years ago. The AIM Academy approached local universities
directly to form
a dual enrollment program because they wanted to prepare their
students
for the rigors of college coursework “without dropping them off
in the deep
end,” Lowe explained.
“Part of our philosophy is that we view dual enrollment as
experiential
learning for how to be a successful college student,” said Dunn.
“We want all
of our graduating students to walk away with the most solid
understanding
of what they’re going to need to do during their early years at
college to be
successful in the classroom.”

A growing number of high schools even host dual enrollment in
the building.
For example, Syracuse University’s Project Advance (SUPA)
trains
qualified high school teachers teach university courses during
their regular
high school day.
Parish, Project Advance’s director, outlines how teachers train
at a Summer
Institute. “SUPA teachers spend the week working very closely
with our SU
faculty to become familiar with the courses, which benefits
students’ college
readiness. There is a constant dialogue and close collaboration
between
faculty across secondary and postsecondary institutions.”
Lewis and Clark’s High School Partnership/Dual Credit
Program has
approximately 2,000 students participating each year. This
state-funded
program allows high school students to learn without leaving
their building.
Dual enrollment is also a great fit for homeschoolers.
Melinda Stewart, an independent counselor in Littleton,
Massachusetts,
has worked with community colleges to help homeschool
students achieve
associate degrees before they graduate from high school.
“It’s difficult to get an accredited [high school] diploma as a

homeschooled
student,” explained Stewart. Having the degree makes it much
easier for
these students to transfer.
Photo of Stephanie Mui, courtesy George Mason University
“Students… gain a great deal of confidence by
being successful in these courses, knowing that
they can negotiate challenging texts and ideas and
take more ownership over their own learning.”
Some students fulfill the requirements for an associate degree
but take
the courses as high school courses rather than for college credit,
so they can
apply to universities as freshman.
STATES TAKING THE LEAD
Minnesota launched the first statewide dual enrollment
initiative in the
1980s. Three other states—Arkansas, Virginia, and Utah—were
early to take
dual enrollment programs statewide, and many more states have
started
programs since.
Ohio launched a dual enrollment initiative College Credit Plus
as in the
2015–2016 academic year. Twenty-three community colleges,
13 universities,
and 35 private higher education institutions participated.

The cost savings in just one year of the statewide program is
considerable.
The Ohio Department of Higher Education reported that in the
2015–16
academic year—the very first year of the program—more than
52,000
Ohio high school students took college classes earning college
credit while
meeting their high school graduation requirements, collectively
saving more
than $110 million on college tuition.
Ohio knows this is worth the investment.
“Advantages for Ohio include having citizens who have
acquired
education beyond high school, industry-recognized credentials,
and
degrees,” said Lisa Harper, director of College Credit Plus at
the Ohio
Department of Higher Education.
“This program is one strategy to help Ohio move the needle on
the
attainment goal of having 65 percent of its citizens with a
degree, certificate,
or other postsecondary workforce credential of value in the
workplace by
2025,” she said.
COUNSELOR CONNECTION
School counselors are the link to both developing and
established dual
enrollment programs.

“School counselors play a huge role in terms of facilitating
getting students
in these classes,” said Lowe. “We see a number of places w here
school
counselors are really the glue for our program, and are
sometimes even called
a site director for a concurrent enrollment program.”
For school counselors who want to explore developing their
own dual
enrollment programs, Dunn said to look beyond the local
community college.
“There are lots of small liberal arts schools all around the
country that
would love to have high school students,” said Dunn. “We
found that
the liberal arts institutions in our area have been really
supportive of our
students, and offered much different opportunities for them than
community
colleges have offered.”
Dunn also encourages school counselors to have the
conversation about
college preparation versus transfer of credits. “If the goal is to
transfer
credits, maybe the community college is a fine option, but if the
goal is to
prepare kids for college, then I would say a liberal arts school
might be a
better option.”
No matter the formula, Mui, who will attend New York
University to
pursue a PhD in mathematics in the fall, said that balance is key

for students
who want to earn college credit in high school.
“With dual enrollment, you need to learn how to keep a balance
in your
life,” advised Mui. She said when students choose true
academic interests,
time management will fall into place.
Elaina Loveland is a freelance writer and the author of Creative
Colleges:
Finding the Best Programs for Aspiring Actors, Artists,
Designers, Dancers,
Musicians, Writers, and More.
“We see a number of places where school
counselors are really the glue for
our program, and are sometimes even
called a site director for a concurrent
enrollment program.”
• Providing professional development.
• Advancing ethical standards of conduct.
• Promoting equity and access to higher
education for all students.
H E C A
H E C A
H E C A
H E C A
CONFERENCE 2017

ARVO
H I G H E R E D U C AT I O N
CO N S U LTA N T S A S S O C I AT I O N
f o n t :
K E E P C A L M M E D I U M
s e c o n d a r y f o n t :
H I G H E R
E D U C AT I O N
CO N S U LTA N T S
A S S O C I AT I O N
M A I N U S E
S E CO N DA RY U S E
T E R T I A RY U S E
p a n t o n e 108 - 15 c
p a n t o n e 157 - 7c
p a n t o n e 3 0 - 7c
C O L L E G E S
DISCOVER WAYS TO
INTERACT WITH
OUR MEMBERS
B U S I N E S S E S
JOIN OUR

AFFILIATE PROGRAM
HECA SUPPORTS INDEPENDENT
EDUCATIONAL CONSULTANTS BY:
W W W . H E C A O N L I N E . O R G
Advertisement
https://hecaonline.org/
https://www.nacacnet.org/careercenter
Copyright of Journal of College Admission is the property of
National Association of College
Admission Counseling and its content may not be copied or
emailed to multiple sites or
posted to a listserv without the copyright holder's express
written permission. However, users
may print, download, or email articles for individual use.
See discussions, stats, and author profiles for this publication
at: https://www.researchgate.net/publication/262821340
STRATEGIC ORCHESTRATION
Article in Business Strategy Review · December 2010
DOI: 10.1111/j.1467-8616.2010.00707.x
CITATIONS
3

READS
1,412
2 authors:
Some of the authors of this publication are also working on
these related projects:
Flexible execution View project
Donald Sull
Massachusetts Institute of Technology
38 PUBLICATIONS 1,817 CITATIONS
SEE PROFILE
Alejandro Ruelas-Gossi
Universidad Adolfo Ibáñez
3 PUBLICATIONS 4 CITATIONS
SEE PROFILE
All content following this page was uploaded by Donald Sull on
19 September 2019.
The user has requested enhancement of the downloaded file.
https://www.researchgate.net/publication/262821340_STRATEG
IC_ORCHESTRATION?enrichId=rgreq-
27fb2ab7dc8e8f5c3a53dfe5162b6e48-
XXX&enrichSource=Y292ZXJQYWdlOzI2MjgyMTM0MDtBUz

o4MDQ5MDMzNjI1MTkwNDJAMTU2ODkxNTMyNDcwOQ%3
D%3D&el=1_x_2&_esc=publicationCoverPdf
https://www.researchgate.net/publication/262821340_STRATEG
IC_ORCHESTRATION?enrichId=rgreq-
https://www.researchgate.net/project/Flexible-
execution?enrichId=rgreq-27fb2ab7dc8e8f5c3a53dfe5162b6e48-
https://www.researchgate.net/?enrichId=rgreq-
https://www.researchgate.net/profile/Donald-
Sull?enrichId=rgreq-27fb2ab7dc8e8f5c3a53dfe5162b6e48-
https://www.researchgate.net/institution/Massachusetts-
Institute-of-Technology?enrichId=rgreq-

https://www.researchgate.net/profile/Alejandro-Ruelas-
Gossi?enrichId=rgreq-27fb2ab7dc8e8f5c3a53dfe5162b6e48-
https://www.researchgate.net/institution/Universidad-Adolfo-
Ibanez?enrichId=rgreq-27fb2ab7dc8e8f5c3a53dfe5162b6e48-
STRATEGY
58 BUSINESS STRATEGY REVIEW ISSUE 4 – 2010
STRATEGIC
ORCHESTRATION

Many companies seizing major
opportunities in emerging markets
are blazing a management path
also shared by companies such
as Apple, RyanAir and Nestlé.
Strategic orchestration allows
firms to get to market faster,
adapt to changing circumstances
and lower their invested capital,
thereby allowing them to pursue
less profitable opportunities such as
serving emerging market consumers.
Donald L Sull and Alejandro
Ruelas-Gossi tell how.
As the global economic crisis
recedes into the past, executives are
raising their heads from cost cutting
and looking for opportunities to
grow the top line. Unfortunately,
revenue growth is elusive. The
four horsemen of the new normal
— insecure employment, stagnant
wages, unsustainable credit and low
investment returns — cast a dark
shadow over consumers who cut
back on spending. At the same time,
governments are slashing investment
and public payrolls to reign in fiscal
deficits. Major savers, like China
and Germany, cannot shift from
exports to consumption fast enough
to offset declining demand elsewhere
in the world.

How, then, can executives grow
revenues despite tepid overall
demand? The standard answers
are corporate entrepreneurship and
innovation. To grow in stagnant
markets, managers need to spot novel
opportunities or envision breakthrough
products or services that will
differentiate them from competitors.
Unfortunately, established firms often
struggle to seize new opportunities,
losing out to more fleet-footed
start-ups. The failure of corporate
entrepreneurship is often blamed on
a lack of imagination. To stimulate
the necessary creativity, companies
send executives to workshops where
they use finger paints or pretend to be
jungle animals (real examples both) to
think more creatively.
These efforts to stimulate
creativity are misplaced. In most large
corporations, the primary impediment
to revenue growth is not a lack of
creativity, but an unhealthy addiction
to power. Pursuing new opportunities
often demands novel resources and
competencies not currently at a firm’s
disposal. In many cases, executives
reject out-of-hand any opportunity
that doesn’t leverage the firm’s
existing resources and competencies.
Like the proverbial boy with a
hammer, they reject any opportunity

that isn’t a nail. If internal champions
persist in pursuing the market gap,
they often draft detailed blueprints
to develop the necessary resources
in house. But senior executives
often turn down the proposal as too
expensive, time-consuming or risky.
There is an alternative, which we
call ‘strategic orchestration’, whereby
a firm pursues an opportunity —
not by controlling all the required
resources and competencies but by
assembling and managing a network
of partners. Strategic orchestration
allows firms to get to market faster,
adapt to changing circumstances and
lower their invested capital, thereby
allowing them to pursue less profitable
opportunities such as serving emerging
market consumers. We have found this
approach to be particularly powerful
in seizing opportunities in emerging
markets, but it also applies to Apple’s
iPod, RyanAir’s ancillary service and
Nestlé’s Nespresso.
Strategy is power,
but power corrupts
Managers typically discuss strategy
as a means to create economic value,
but strategic choices have as much
SEIZING
THE DAY

59ISSUE 4 – 2010 BUSINESS STRATEGY REVIEW
to do with power as value. Indeed,
the two dominant streams of strategic
thinking — industry structure and the
resource-based view of the firm —
both connect strategic choices to value
creation by way of power. According
to the industrial structure framework,
firms erect barriers to entry that keep
rivals out and confer the market
power to set prices. A firm that
successfully erects barriers to entry
can prevent rivals from entering and
leverage its monopoly power to pay
suppliers less, charge customers more
and squash would-be rivals.
Seen through the resource-based
view, firms create and sustain value
to the extent they control resources
or competencies that share three
characteristics: first, a resource or
competency must create value by
cutting costs — think Wal-Mart’s
logistics — or increase willingness
to pay — Coca-Cola charging twice
what a store-brand cola costs. Second,
a resource or competency must be
rare — if every car included BMW’s
technology, the German automaker
could command no premium. Finally,
it must be difficult to substitute an
alternative resource or competency

— Saudi Aramco’s oil stockpiles will
remain valuable until mass-market
automobiles can run on alternative
fuels. Power, in this view, arises from
dependence. Coca-Cola exercises
power over its bottlers, to the extent
these distributors depend on Coca-
Cola. Owning a resource, in this case
one of the most valuable brands
in the world, is the source of both
the bottlers’ dependence and
Coke’s power.
The conventional strategic wisdom,
therefore, views power as a good
thing for the firm that wields it.
Powerful firms — think Coca-Cola,
Royal Dutch Shell, Microsoft, Roche
or Wal-Mart — can capture more
economic value by squeezing their
suppliers and distributors or charging
customers a premium. Strategic
power helps firms sustain profits into
the future by fending off established
rivals or new entrants that might
compete away profits. No wonder
powerful firms are so attractive to
investors, such as Warren Buffett,
who described his ideal company as
an economic castle protected by an
unbreachable moat.
Executives crave strategic power
as much or more than investors do,
because it makes their life much easier.

First, managers can get things done
by the raw exercise of power over
employees, distributors, suppliers and
even customers who are dependent
on the firm. Second, strategic power
provides greater certainty about future
revenues and profits. Finally, strategic
power allows firms to weather changes
in the marketplace without having
to respond immediately. General
Motors’ market power in the 1950s
allowed the automaker to survive
decades of changes in technology,
regulations, competition and consumer
preferences before finally succumbing
to bankruptcy.
The GM example hints that
strategic power is not an absolute
good. The obvious risk of over
reliance on strategic power is that
no positional or resource advantage
lasts forever. The personal computer
disrupted IBM’s stranglehold on
mainframes, just as the tablet
threatens Microsoft’s dominance
in PC operating systems. But we
all know that. The more insidious
risk is that the very market power
that companies use to protect their
established business hinders them
from seizing new opportunities.
Over time, strategic power tends
to pervade a company’s culture and

not in a good way. When speaking to
customers with high switching costs,
LEADING THOUGHTS STRATEGIC ORCHESTRATION
STRATEGY
company representatives often lecture
customers on what they should want
rather than listening to what they do
want. Sony lost to the iPod, in part,
because it forced users of its digital
music players to use its proprietary
ATRAC software rather than the
MP3 standard that customers wanted.
In selecting partners to work with,
power-drunk executives prefer vassal
organisations whose dependency
renders them easy to control. Leaders
who can exert hierarchal control to get
things done within their own company
often apply the same heavy-handed
tactics to corporate partners.
To grow revenues, companies must
often enter new market segments in
which they lack power, as Microsoft
discovered in the game box, mobile
phone and Internet search segments.
To seize an emerging opportunity,
these companies must also assemble a
new set of resources or competencies

that they do not already control.
The iPod’s success depended not on
hardware and software alone, but on
the cooperation of record labels and
producers of complementary products
such as speakers and carrying cases.
Owning its own record label hampered
Sony from striking a deal with other
music companies.
There is another way. Strategic
orchestration describes a time when
a firm pursues an opportunity not
by leveraging strategic power, but by
assembling and managing a network
of partners. This is not about pursuing
partnerships for their own sake — the
corporate equivalent of having 1,000
connections on LinkedIn. These
networks are strategic in the sense
that they serve to create, capture and
sustain economic value. Strategic
orchestration flips traditional strategy
on its head. Rather than start with
what you control and look for ways
to leverage it, managers begin with
the opportunity and then assemble
the required resources in its wake.
(See box for problems that strategic
orchestration can help solve).
Strategic orchestration requires a
shift in orientation. Existing strategy
theory is egocentric — its starting
point is the individual firm that
exists to create, capture and sustain

economic value. The firm focuses
on opportunities that it can seize by
leveraging its strategic power. The
allocentric orientation, by contrast, takes
a broader perspective and incorporates
the various partners in the network as
the unit of analysis. Apple’s renaissance
began when the newly returned
Steve Jobs reframed the company as
the hub of a digital lifestyle, rather
than a computer maker that had to
do everything important itself. An
allocentric view allows executives to
recognise and, more importantly, seize
a whole range of opportunities that
could only be pursued by a network
rather than an individual firm, no
matter how powerful. An allocentric
orientation does not imply that
unmet needs or collaborating with
partners to provide an integrated
solution. How else can one explain the
mindless proliferation of features that
no one understands (let alone uses)
that clutter consumer electronics,
other than employees’ desire to
rely exclusively on actions under
their control?
To break out of the arrogance of
power, it helps to start with a different
set of questions. What really matters
to our customers? What emotional need,
beyond the purely functional, is unmet?

What do our customers hope for? What
do they fear? You may think these are
absurd questions for an insurance or
coffee company to ask. You would be
wrong. By asking just these questions,
Swiss insurance firm Baloise learned
that customers bought insurance
but craved safety; while CEMEX
discovered that low-income customers
bought cement to build a legacy that
they could pass on to their children.
Armed with these insights, these
companies could begin to assemble
a network of resources to address
customers’ deep desires and fears.
Customer empathy is the first
step in discovering how a product
could resonate with a deep emotional
need. Empathy is not the same thing
as niceness, which is often used as
an excuse to avoid hard discussions.
Rather it is the ability to put yourself
in someone else’s shoes. Strategic
power erodes the empathy required
to understand customers’ deepest
hopes and fears. When working with
a large European bank, for example,
one of the authors sat with the top
management team as they discussed
how to grow revenues. As they spoke,
he jotted down the verbs they used
to describe what they would do to
(never for or with) the customer. The
list included ‘cross-sell’, ‘leverage’,
‘squeeze’, ‘exploit’ and ‘penetrate’,

at which point, he interrupted the
proceedings to note that he was
not one of their customers and
never would be since no one in that
room was going to exploit, let alone
penetrate, him. A leading technology
firm, to give another example, refers to
customers as ‘sockets’, presumably just
waiting to be screwed.
How can managers, whose
empathy has been blunted by
strategic power, see the world
from the customers’ point of view?
Most companies collect reams
There is an alternative,
which we call ‘strategic
orchestration’, whereby
a firm pursues an
opportunity — not
by controlling all the
required resources
and competencies
but by assembling
and managing a
network of partners.
managers ignore the interests of their
own company. Rather, they recognise
that the value lies in the network,
which they cannot own.
Put yourself in your customers’
(and partners’) shoes
When executives in powerful

companies want to grow revenues,
they often start with the same basic
question: how can we sell more
software, pizza, cement, insurance,
coffee? Asking the same question
leads to the same tired answers —
use better raw materials and hope
the customer will notice, cut prices
to steal share, boost advertising,
add features or simply give up and
focus on cost reduction. These stale
answers are often attributed to a lack
of imagination, and they indeed share
a tiresome lack of creativity. But that
is not all they share. These responses
are all actions that are under the
company’s exclusive control. In taking
these actions, companies avoid the
difficulties of probing customers’
of monthly sales data and survey
current customers’ satisfaction. These
quantitative data reveal only those
times when a customer is satisfied with
a current product but mute on what
would delight or surprise a customer
or meet his or her deeper needs.
Some companies attempt to discover
this with focus groups, but this is the
equivalent of scientists going to the zoo
to study animal behaviour.

To empathise with customers’
unmet needs, managers must observe
them in the wild, not the zoo. To
better understand the needs of
Mexico’s less affluent customers,
CEMEX assembled a cross-
functional team of high-potential
managers who spent 10 hours each
day for a year in an extremely poor
neighbourhood in Guadalajara.
This intense observation provided
many surprising insights. They noticed,
for example, that poorer consumers
generally bought less expensive
powdered cement in bags, rather than
pricier ready-mixed concrete delivered
by trucks. In these neighbourhoods,
cement is a consumer product. Their
observation led CEMEX to market
powdered cement like powdered soap,
through consumer advertising and
sponsoring local football clubs.
More importantly, the team
gleaned insight into the subtle
emotional benefits of home extension
that supplemented the functional
benefits of more room. Home
improvements not only added space,
they learned, but also conferred an
important psychological satisfaction
by creating ‘patrimonio’ — something
of enduring value that customers
could pass on to their children and
grandchildren. The insight that

buildings represented more than
utility inspired CEMEX to create
a programme called ‘Patrimonio
Hoy’ (legacy today) that appeals to
consumers’ aspirations to create an
enduring legacy that their children
and grandchildren could enjoy.
To help customers realise their
legacy, the CEMEX team had to
understand obstacles that prevented
consumers from building a legacy.
Funding was one. They discovered
that poor Mexicans raised capital
for building by organising ‘tandas’, a
lottery in which a collection of families
contribute a set sum to a pool each
week and one family wins the entire
pot at the end of the week (no family
can win more than once). Although
these funds were intended for
building, winnings were often diverted
to alternate uses such as celebrating a
wedding or birthday. Lack of building
equipment and expertise also hindered
construction. Although bagged cement
represented a significant expenditure,
the CEMEX team discovered that
40 per cent of all cement went
bad, because customers lacked the
tools or blueprints to complete their
construction project.
dealing with customers at the bottom
of the pyramid, there is not enough

profit to go around. Second, by
linking cooperation exclusively to cash
payment, companies risk the winner’s
curse, paying above the odds to woo
partners over their next best offer.
Finally, exclusive reliance on financial
incentives, rebates and commissions
to attract and retain partners fosters a
transactional attitude in which more
cooperation requires more cash. Of
course, a partnership must work
for everyone financially; but cash
need not be the only, or even most
important, way to attract partners.
Empathy is as important for
partners as it is for customers in order
to understand what matters to them
beyond money and to structure deals
that appeal to their values. CEMEX
attracted local hardware stores into
a network of Construrama solutions
providers, in large part by providing
them with access to best practices
from CEMEX, the opportunity to
learn from other leading retailers and
the use of the Construrama brand
that signalled quality to customers.
Apple’s commitment to elegant design
attracts accessory producers, apps
providers and product reviewers
at sites such as iLounge that value
aesthetically pleasing products.
High-end equipment makers, leading
hotel chains, premium airlines
and sommeliers at Michelin Star

restaurants are attracted to Nestlé’s
Nespresso coffee system for its luxury
and elegance. Nespresso’s elegance
likewise attracts customers who sign
up to the company’s Nespresso Club,
which might sound like a marketing
gimmick until you realise that half of
new customers learn about the system
through demonstrations by current
club members. These evangelists
have helped make Nespresso Nestlé’s
fastest growing brand with revenues
approaching $3 billion dollars.
In some cases, a dominant value
such as design or luxury will attract
partners. In other cases, however,
strategic orchestration requires
different deals to induce different
partners to play ball. Consider the
case of JLT, a British insurance and
risk management firm, which was
attempting to grow its business in
emerging markets. JLT’s Peruvian
management team knew that the
government was concerned about its
aging taxi fleet that caused pollution
Managers aspire to
strategic power, but
power corrupts. The
same power that helps
capture and sustain
profits in the short
term and midterm
can limit a firm’s

ability to thrive in
the long term.
Get partners to play ball
Identifying an unmet customer need
is one thing, but meeting that need
is quite another, particularly when
providing an integrated solution would
require resources and competencies
that your company doesn’t control.
CEMEX executives had no desire
to run hardware stores or provide
financing for construction. To provide
their customers with an integrated
experience, CEMEX needed to work
with partners, including mom and
pop retailers and banks, over which
the company could exercise more
power. The team was also charged
with observing local hardware stores
first-hand to understand what would
induce them to work with CEMEX.
When faced with the need to
find partners, managers accustomed
to exercising power often look for
companies they can easily boss
around. When that doesn’t work, they
look to pay the partners to play, but
this is not the only or best approach.
In many cases, particularly when

STRATEGY
and traffic accidents and also knew
that the country had ample supplies
of low-cost natural gas. The JLT team
saw an opportunity to convince taxi
drivers to buy new vehicles that ran
on natural gas and to make money
selling auto insurance.
It was a great idea in theory, but
it faced myriad obstacles in practice.
The banks wouldn’t lend to taxi
drivers with no credit rating; lacking
bank accounts, drivers could not
pay their bills; without customers
gas stations refused to stock natural
gas; and car dealers refused to order
natural-gas powered cars. Rather than
give up, the JLT Peru team figured
out a way to get everyone to play ball.
JLT added mortgage insurance to the
bundle of insurance it sold drivers,
agreeing to pay off the loan on the car
if the driver defaulted, which induced
the banks to make loans.
To stimulate the use of natural gas,
the Peruvian government provided
low-cost natural gas to filling stations
that agreed to invest to distribute
the new fuel and also install a billing
system that allowed taxi drivers to
pay their bank loan and insurance

premium when paying for gas.
Facing new demand, auto dealers
started stocking vehicles that could
run on natural gas. JLT Peru also
worked with the national taxi drivers’
association to identify drivers who
would drive the 200 kilometres per
day required to cover the financing
charges and with two local companies
who installed GPS systems to monitor
miles driven and locate the cars if they
were stolen.
The Peruvian taxi case illustrates
that one company has to take the lead
in identifying the pieces needed to
seize the opportunity, understanding
what matters to each player and
structuring deals that make it work
for everyone. This may seem like a
lot of work — and it is. But it offers
several advantages. First, the network
is simple for the customer to use,
thereby stimulating adoption. Demand
for the new taxis grew five-fold in
its second year as did the number of
filling stations carrying natural gas.
Second, while the network is
simple to use, it is very difficult to
copy because key partners are already
locked in. Finally, the company that
orchestrates the network is well-
positioned to make money. As a trusted
partner within the network, JLT has

offered a comprehensive insurance
package including damage, theft,
liability, mortgage and policies to
ensure the bank is paid if the driver is
ill or the car is in the shop. The network
also provides a platform for offering
additional coverage, such as health or
life insurance, to existing customers, or
expanding the programme to shipping
companies or private bus firms.
Guide the network with a light
touch, not a heavy hand
Strategic orchestration requires a shift
in how executives deal with partners.
Executives often brandish their
company’s strategic power as a stick
to threaten partners into compliance
with their wishes. But when value
creation depends on partners’
voluntary participation, firms like
Nespresso, CEMEX or JLT can guide
a network, but they cannot dictate
what partners do. Guiding without
power requires executives to exercise
diplomacy rather than raw power in
dealing with their partners.
Part of guiding a network is dealing
effectively with communities rather
than engaging in bilateral agreements
in which you can leverage your power.
JLT’s success in Peru, for example,
hinged on the insurance firm’s ability
to work with the local association
of taxi drivers. In selecting growers,

Nespresso identifies regions with
the potential to deliver exceptional
coffee and then works with local
farmer cooperatives to secure the
high-quality beans the company needs
for its espresso. To spark continued
innovation in coffee machines and the
overall drinking experience, Nespresso
taps into the global design community
by sponsoring design competitions.
This diplomatic orientation to partners
permeates the coffee makers’ language,
which refers to customer-facing
employees as ‘ambassadors’.
It is not enough to talk the talk
of communities, but companies also
have to actively treat community
members as equals, not vassals. With
a global brand and billions of dollars
in sales, Nespresso could easily use
its strategic power to get things done,
but it consistently relies on diplomacy
in working with its partners. After
identifying attractive growing areas,
Nespresso offers local farmers the
opportunity to ‘opt in’ by joining
neighbouring farms to participate in
the cooperative to supply Nespresso.
What really matters to
our customers? What
emotional need, beyond
the purely functional,
is unmet? What do our
customers hope for?

What do they fear?
AUTHORS
DONALD L SULL
[email protected]
Sull is a Professor of
Management Practice in
Strategic and International
Management and Faculty
Director of Executive Education
at London Business School.
ALEJANDRO RUELAS-GOSSI
ALEJANDRO.RUELAS-
[email protected])
Ruelas-Gossi is Professor of
Strategy at the Adolfo Ibañez
School of Management in Miami,
Florida and Academic Director
of the Global EMBA UCLA-UAI.
IF STRATEGIC
ORCHESTRATION IS
THE ANSWER, WHAT
IS THE QUESTION?
How can we profitably serve emerging market
customers at the bottom of the pyramid?
Mexican cement company CEMEX assembled a
network of hardware stores, banks and community
leaders to help poor customers build extensions
to their homes. By relying on partners rather than
building the full infrastructure itself, CEMEX
earned a healthy return on invested capital

despite a relatively low price point.
How can we break out of the commodity trap?
Swiss insurance firm Baloise has partnered with
business service providers to move beyond selling
commodity insurance policies to making clients
safer through prevention. Baloise has partnered
with flood prevention, data security and fire
safety firms to provide clients with an integrated
approach to risk prevention.
How can we grow outside our core market?
Nestlé is the global market leader in instant
coffee, but it had no experience selling systems
for in-home coffee consumption when it formed
Nespresso in 1986. Nespresso has orchestrated a
network of coffee growers, machine manufacturers,
distributors, service firms and high-end partners
(including Ritz-Carlton hotels and first class on
Cathay Pacific Airlines) to provide a luxurious
experience to coffee drinkers.
How can we provide an integrated
customer experience?
From its inception, Apple has aimed to deliver
a seamless experience to users, but in the
Macintosh era the company tried to do everything
itself. With the iPod (and later the iPhone and
iPad), Apple has continued to value ease of use
but achieved it by stitching together an ecosystem
of content providers and accessory makers that
provide customers with simplicity.
How do we grow revenues on a low-cost product?
RyanAir offers the lowest prices of any major
European airline with an average fare in 2010 of

35, but the company books an average of 10 per
passenger from ancillary services. RyanAir partners
with Hertz, Booking.com, Costa Cruises and Banco
Santander to offer passengers car rental, hotel
rooms, cruises and branded credit cards.
How can we solve the world’s big problems?
Although everyone recognises the value of an
effective vaccine against HIV, pharmaceutical
companies lack incentives to develop one because
the people who need the vaccine most are too
poor to pay for it. The International AIDS Vaccine
Initiative works with a host of biotech start-ups,
pharmaceutical companies, governments,
universities and not-for-profits to secure
government funding, stimulate experimentation
on vaccine design and development, and run
clinical trials in developing countries.
The lead partner must also be willing
to delegate key decisions to partners.
It was not the company but Nespresso
Club members, the network of millions
of customer advocates, who selected
George Clooney as the brand’s
representative.
Networks rely on trust, and
the lead partner in an orchestrated
network must go out of its way
to build and maintain trust
among members. Transparent
communication is one powerful way
to build trust. Transparency does not
mean that all information has to be

shared with all partners all the time.
Apple, for example, maintains a high
level of secrecy about forthcoming
designs to maintain suspense
and ensure product launches are
media events. But a bias towards
transparency, rather than bilateral
deals brokered in smoke-filled rooms,
builds trust within a network.
Companies can invite credible
third parties to verify that everyone is
playing by the same rules. Nespresso
works with the Rainforest Alliance,
a non-profit dedicated to preserving
tropical forests, to verify that coffee-
growing partners are farming in an
environmentally sustainable way and
provide their workers with a fair
wage and access to health care and
education. Sometimes a company
must orchestrate multiple partners
to provide adequate verification and
sufficient scope. De Beers launched
the Kimberley Process to stem the
flow of conflict diamonds — rough
diamonds used by rebel movements
to finance wars against legitimate
governments in countries including
Angola, Cote d’Ivoire and Sierra
Leone. The process requires member
countries to certify shipments of
rough diamonds as conflict-free, with
each individual diamond having its
own passport.

Managers aspire to strategic
power, but power corrupts. The same
power that helps capture and sustain
profits in the short term and midterm
can limit a firm’s ability to thrive
in the long term. Power corrupts a
firm’s ability to work with partners,
substituting arrogance for empathy
and high-handedness for diplomacy.
Strategic orchestration, however,
allows firms to assemble and guide
the networks necessary to seize many
opportunities that lie outside the grasp
of any one firm.
Innovation and
entrepreneurship
Special Report.
featuring John
Mullins, Rajesh
Chandy and more.
NEXT
ISSUE
View publication statsView publication stats
https://www.researchgate.net/publication/262821340

DANIELA GUGLIELMETTI

Recommended

Recommended

More Related Content

Similar to DANIELA GUGLIELMETTI

Similar to DANIELA GUGLIELMETTI (16)

More from OllieShoresna

More from OllieShoresna (20)

Recently uploaded

Recently uploaded (20)

DANIELA GUGLIELMETTI