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Tuesday 20th March 2018

Orchestrating the Right-Game

Business

Alejandro Ruelas-Gossi

Tue, 25 Sep 2018 16:53 GMT

I am a frequent contributor to CNN International in the areas of Strategy & Innovation, Globalisation, Disruptive Business Models and Digital Business. Almost every week or so, CNN sends me business news to discuss in an interview. This past week was about how the batteries in smart phones owned by Apple Inc., Volkswagen AG and about 20 other global manufacturers keep miners digging by hand in the Congo, and was related to the efforts of the Trump administration to ease companies’ liabilities for contractor franchise violations.   

This attempt to ease liabilities made me think that we appear to be going backwards.

The appropriate strategic framework for this case is what emerged back in the 90s, that strategy must encompass the stakeholders, which means that successful strategy for firms, mostly global firms like Apple, goes beyond shareholders alone. Traditionally, strategy focused on financial results. Today, the relevant currency is "reputation", and every stakeholder is involved here. Reputation deals primarily with the "triple bottom line (TBL)": financial, environmental and social responsibilities. Miners digging by hand in Congo are very relevant stakeholders. What Apple should do is what Nespresso did after Rainforest Alliance (RA), a Greenpeace associate, exposed Nestle-KitKat for endangering the habitat of orangutans. Nespresso joined forces with RA as a credible partner that could assess Nespresso’s supply chain activities for coffee grains. Apple should join forces with an NGO such as RA that assures clean and sustainable supply.

No doubt European firms are far ahead of American firms in considering every stakeholder.

I have written extensively about the three strategic traits that I consider essential for a successful firm – targeting high-value audiences, orchestrating the value of other firms in its platform, and telling emotional stories (rather than just selling products). Nespresso masters all three strategies.

Nespresso coffee system brought luxury and style to a game that it operated in a race-to-the-bottom/low-cost path. Nespresso’s stylishness succeeded in persuading customers to sign up to the company’s Nespresso Club, which might sound like a marketing gimmick until you realise that half of its new customers learn about the system through demonstrations by current club members. These story-tellers have helped make Nespresso Nestlé’s fastest growing brand with revenues approaching $5 billion dollars.

Nespresso orchestrates a network of coffee growers, design firms, machine manufacturers, distributors, as well as high-end partners (such as Ritz-Carlton hotels and Cathay Pacific Airlines, among many other luxury firms) to provide a high-value experience to coffee drinkers. It also orchestrates credible nodes to provide adequate verification and sufficient scope in playing the right-game.

Nespresso has an on-going practice of identifying regions with the potential to deliver exceptional coffee, and then engages 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’s emotional reach involves tapping into the global design community by sponsoring design contests. Rather than trying to exercise the power of a large global umbrella like Nestle, Nespresso creates a diplomatic relationship with partners by referring to customer-facing employees as "ambassadors".

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.

Companies can orchestrate credible third parties to verify that everyone is complying with the same rules. Nespresso did this with Rainforest Alliance, a non-profit organisation dedicated to preserving tropical forests, asking it to verify that its coffee- growing partners are farming in an environmentally sustainable way and providing 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, for instance, 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, Ivory Coast 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.

Orchestrating the right-game involves a responsible strategy for every stakeholder, and this does not have to stop at geopolitical borders. To bridge the gap between developed and emerging countries, we must globalise standards accordingly.

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect the views of 7Dnews. 

Alejandro Ruelas-Gossi, PhD

Clinical Professor of Strategy & Innovation

Universidad de Navarra

School of Economics & Business

International Professor of Strategy & Innovation

IPADE Business School