2023 FUTURE OBSERVATORY
2023 FUTURE OBSERVATORY
The traditional western (capitalist market) model of 'business' strategy - or, more widely, of interactions in general between individuals and especially between organisations - has come to be that of 'competition'. This may originally have been derived from the need to fight for scarce resources - a need which no longer exists in developed countries. It has frequently been developed, in the theory at least, to apply to situations which are reasonably described as 'zero-sum' games; in which the two parties interact on the basis that if one 'wins' the other must 'lose' - so the most frequent outcome, paradoxically perhaps, is that they both choose to lose! In the management field, the theory of competitive advantage, making your own organisation (or even country) more competitive, has most popularly been developed by Michael Porter. His were, indeed, the ideas behind many of the developments in corporate strategy during the 1980s. It is also, in many respects, the key (but often hidden) concept underpinning the 'market', so frequently called upon by politicians as the ultimate arbiter of our fate. Thus, two products, or ideas, face each other - in a parody of a Western gunfight - and fight for the consumer's purchase decision - and the winner takes all, even if the loser does not die immediately!
Research shows, however, that this has never, in recent years at least, been what normally happens in practice. It is yet another myth - though a very powerful one! Almost all organisations conduct co-operative relationships with their customers - they would be foolish to do otherwise - and increasingly invest in these all-important relationships. What is more surprising, perhaps, is that the majority of the (western) even indulge in co-operative relations with their competitors!
It should have been obvious, from research results and (we would hope) from logic, that the emphasis in almost all spheres of human activity across the globe will move even further from the confrontational in favour of the co-operative. This was specifically recognised by a quarter of our respondents (though interestingly, in view of their roles, not by the experts - the professional planners). Those mentioning it expected it to have a significant impact. This will just happen rather faster in the case of organisational relations.
Despite the all pervasive hype, most organisational relations are already co-operative rather than competitive. This trend will accelerate over the next decade - so that co-operation will become the accepted model for almost all transactions.
However, the desire of the US - at the start of the century - to use its position (as it at least thinks) the sole superpower, to gain an imperial hegemony has meant that competition (now between nations) has moved once more to centre stage. Equally, though, this has strengthened the resolve of the EU (and in particular the EC) to develop its own socially cooperative approach.
The Chatham House Forum still believes competition is a major driving force, "The chief agency of change has proved to be the self-amplifying nature of competition." They see this as leading to ‘commoditization’ "Commerce requires a fine balance to be maintained between open, adaptive competition and the conditions which support profit-sustaining differentiation...the coupling together of economies and markets tends to increase the trend towards commoditization and thus, ultimately, declining profitability."
Lester Thurrow adds a useful reminder that this is not a God-given requirement "In the Middle Ages avarice was the worst of all sins and the merchant could never be pleasing to God. Capitalism needed a culture where avarice was a virtue..."
From the opposite direction, describing the remarkably successful relationships between Japanese corporations and their suppliers, Charles Hampden-Turner - from the Judge Institute of Management Studies at the University of Cambridge - says "The aim is not to make the company profitable at the supplier's expense, but to make that supply chain more profitable than other chains for all members - what is called 'shared destiny'. These ever-more inclusive boundaries form what Michael Porter calls clusters..." What he does not explain is that even he believes that such co-operative clusters are the basis of competitive advantage achieved by many nations - very much in contrast with the competitive policies he otherwise advocates to firms within these nations!
Will Hutton, reporting the work of Russell Cooper and Andrew John, says "The proof that market economies suffer from widespread coordination failures is one of the battering rams of the New Keynesian economics, using new developments in game theory to drive the point home...In most economic situations the pay-off of any one players action is likely to impact on another, so that, for example, if all firms raise their investment, then returns rise rather than fall because overall demand rises." He gives the examples of South Korea and Taiwan which were suffering from co-ordination failures until "It was an array of government interventions that broke the logjam."
4 April 2003
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