STRATEGY ORCHESTRATION BALAS Santiago de Chile Alejandro Ruelas-Gossi, PhD

Denominator (recession mindset) vs Numerator (growth mindset)

The failure of Corporate Entrepreneurship is blamed on a lack of imagination Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

The primary impediment to Revenue growth is not a lack of creativity but an unhealthy addiction to Power…….. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Managers and researchers typically discuss strategy as means to create economic value, but strategic choices have as much to do with power as value. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

The 2 dominant streams of strategy thinking: Industry Structure Resource-based view of the firm Both connect strategic choices to value creation by way of Power Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

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. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Executives crave strategic power as much or more than investors do…..it makes their lives much easier….. 1. Managers can get things done by the raw exercise of power over employees, suppliers, distributors, and even customers. 2. Strategic power provides greater certainty about future revenues and profits. 3. Strategic power allows firms to weather changes in the marketplace without having to respond immediately. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

General Motors’ market power in the 1950s allowed the automaker to survive decades of change in technology, regulations, competition and consumer preferences before finally succumbing to bankruptcy. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Strategy is Power……..but Power corrupts…. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

But the more insidious risk is that the very market power that companies use to protect their established business hinders them from seizing new opportunities. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Strategy Orchestration flips traditional strategy on its head. Rather than starts with what you control, and looks for ways to leverage it, managers begin with the opportunity and then assemble the required resources in its wake. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Strategy Orchestration happens when a firm pursues an opportunity, NOT by leveraging strategic power, and NOT by controlling all the required resources BUT by assembling and managing a network of partners (nodes). Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Classic StrategyOrchestration Vantage point The Individual Firm Individual Opportunity/Network Source of funds(investment) Firm´s own resources Mobilizing other´s resources Methodology Upstream/Downstream Integration Identify the needed resources (assemble the network) Window of opportunity Value chain – 180º No-boundaries. Peripherical-360º Locus of control Egocentric central control Allocentric distributed control Scope of value Firm (Adam Smith) Network (Nash) Skills PowerDiplomacy “How orchestration differs from classic strategy” Ruelas-Gossi, Orchestration, EGOS Colloquium, Gothenburg, July 2011.

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. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Strategy Orchestration: Allows firms to get to market faster Adapt to changing circumstances Lower their invested capital Allowing them to pursue less profitable opportunities such as serving emerging market consumers…… Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

But it also applies to Apple iphone/ipod, RyanAir’s ancillary Services and Nestle’s Nespresso. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

I. Put yourself in your customers’ (and partners’) shoes. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

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. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Feeling Being Doing Knowing

What really matters to our customers and partners? What emotional need, beyond the purely functional, is unmet? What do they hope for? What do they fear? Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

II. Get partners to play ball. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

When faced with the need to find partners, managers accustomed to exercising power often look for companies they can easily boss around, and when that does not work…… Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

They look to pay the partners to play….and that has at least 3 problems: At BOP, not enough profit to do that Risk the winners curse (there is always a best offer) Unilateral/transactional attitude Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

III. Guide the network with a light-touch, not a heavy hand. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Managers aspire to strategic power, but power corrupts. The same power that helps capture and sustain profits in the short and mid term can limit a firm’s ability to thrive in the long term. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.

Strategy Orchestration, however, allows firms to assemble and guide the networks necessary to seize many opportunities that lie outside the grasp of any one firm. Sull and Ruelas-Gossi, Strategic Orchestration, Business Strategy Review, Winter 2010.