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DANIELA GUGLIELMETTI

Published in Harvard Business Review América Latina, November 2006

Strategy

The Key to Agility on the Global Stage

Orchestration
by Alejandro Ruelas-Gossi and Donald N. Sull

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 tooptimize traditional value chains, but in how to create and coordinate networks to seize opportunities that others don’t see.

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or more than a century, the game was dominated by the usual suspects: Europe, North America, and Japan. But in recent decades the competitive landscape has changed. Champions coming from emerging markets have risen to leadership positions in a wide range of globalindustries, and they have done it not by defeating the established 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 aggressive 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
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Strat egy Orc hestration : The Key to Agility on the Glob al Stage

upstart –Galanz– leads the world market in microwave 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, theexplosive advance of these and other emerging champions fall somewhere between unlikely and miraculous. Most emerging market companies face a high cost of capital and limited availability of funding; their domestic customers often have low disposable income but are still discerning consumers; firms must fight a two-front war against domestic competitors at the low-end and multinationals at thehigh-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, Indiaand Latin America? We believe that the problem for many incumbent firms has been that their managers have been asking the wrong questions. In North America, Japan and Europe, managers 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. Itleads executives to ask what other competitors 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 leadcompanies 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 passAlejandro Ruelas-Gossi (alejandro.ruelas-gossi@uai.cl) is a professor of strategy and the director of the Adolfo Ibáñez School of Management in Miami, Florida. He is the author of “Innovating inEmerging Markets: The Big T Paradigm” (HBR América Latina, February 2004). Donald N. Sull (dsull@london.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...