Strategy: Competition VS Cooperation
Strategy has been a most fascinating topic for thought, discourse and action. From the dinner table and chess-board to a team-sport and corporate suite and for those at the echelons of power, politics and warfare - Strategy is considered Bread and Butter. Throughout the known history, Strategy has been quintessential to the survival and success of key players pursuing - political, entrepreneurial, corporate or military endeavors. Despite its origin in the military parlance, 'strategy as a school of thought and practice' has permeated the planning meetings and budget sessions across all layers of the society.
Originally known as the 'Art and Science' of orchestrating the military ploys to gain advantage or as 'unique collection' of idiosyncratic styles of army leaders in the conduct of warfare, now, the 'strategy' has become almost second nature to the business executives, political consultants, business CEOs, and corporate board members... to formulate business decisions for securing advantage over competitors or ensure investment-returns.
From a business and economic perspective, 'strategy' has been defined in many ways: 'unique and consistent pattern(s) in a stream of decisions to achieve the intended mission', 'competitive moves and tactics to outsmart the rivals', 'securing and sustaining competitive advantage in terms of profits or market share', 'accomplishing quality and technological supremacy', 'shaping the rules of the game or industry by establishing first-mover advantages or creating alliance-based or network-driven industry dominance', and quite importantly 'revolutionary or disruptive tactics to break the barriers of advantage established by the rivals.'..and so on..Oftentimes, Winning the Competition happens to be a core theme in strategy.
Yet, the success of a modern business these days demands an effective global presence which naturally calls for cooperation between businesses and Nation-States. Achieving results in the global market very much depends on the foreign policies and international relations of respective host-nations within which firms operations are embedded. The foreign policy and international relations in reality - another complex strategic dimension - is beyond the scope and capability of many business corporations.
Strategy within Nation-State Contexts: Evolution of Competition and Cooperation
All along the history of economic or political institutions or business organizations, 'tangible resources', have always been the critical factor in the forethought and hindsight of the strategic planners. For instance, 'land' has been both the primary means and ends of both the conflicts and stratagems all along the past 3 millenniums of recorded history: Grabbing more land, border disputes or venturing into unknown frontiers in search of habitable resourceful land was the predominant foreground for strategy thought and action.
Military invasions, wars of catastrophic proportion, horrid and grisly genocides, despicable enslavement of tribal people and anarchic political turmoils have all been the final outcomes of land-based competition ever since man came out of forest dwelling. And the quest for land grabbing is still continuing through the modern times often disrupting the human progress, global peace, and harmony among nations. Technologically stronger nations have already started staking their claims in Arctic, Antarctic, and are even trying to raise their flags in Mars.
Subsequently as the world entered the medieval and colonial-trading phases of the history, a new type of competition emerged. This time it was in search for gold, mines, oil & mineral resources, and all forms of tangible resources like cattle, horses and even people for achieving the cost advantage or wealth which resulted in long mortal battles among tribes and nations that are continuing even today in some pockets of the world.
In the pre-industrial era, amassing land-based resources required large army, lethal power, massive equipment, high speed and stealth which were engendered by the canons, horses and elephants; whereas now those advantages are sought through naval, nuclear, and aviation technologies. In addition to military strength, political games and civil disruptions, destabilizing the peace, strength and governance formed the core of strategies. From the iron age to medieval religious crusades, colonial trade wars through ideological conflicts and cold war times of the recent century - land based resources seem to have occupied the central place in competition. This tendency has no end in sight - as it appears. Jiddu Krishnamurthi, a modern philosopher, proclaimed such a state of affairs - a glorified tribalism.
Along the search and conquest for material wealth, another form of competition was shaping up across continents. This competition was not for material resources, rather competition for "who got the 'right truth' or 'who got the truth right'. With the arrival of ideas for emancipation, enlightenment, progress unlimited or reaching the abodes of god or the gates of heaven for salvation from birth and sin, now men began to "compete for the minds" of other men. Religious or spiritual doctrines, and political ideologies like democracy, capitalism or socialism were the ideas that prophets, philosophers, preachers and professors carried on their shoulders as "truth" for solving personal or social crises and sold them as "solutions" to the economic problems of poverty, famines, and scarcity. A deeper analysis of the history would reveal to us that more people have been killed in the guise of search for right god or competition for political truth than by natural disasters or disease or famines. While the ideological conflict or theocratic rivalry has not yet come to an end, they have however created a perennial existential threat for the entire humanity with all sides brandishing the most destructive weapons one can imagine.
Whether we prefer competition or not, it has become quite evident now that none of the ideologies, doctrines of truth or god, nor economic and political institutions, nor the weaponry could solve the most common challenges ever faced by human kind. Although modern science has enormously contributed to reducing the human sufferings from the poverty, disease, aging and injuries, humanity is still facing the worst dangers resulting from competition. We have not even solved the problem of premature death among children, let alone winning over the sword of death hanging over all life or accomplishing our quest for conquering the nature. No philosophy yet has answered the very basic question of the purpose of life or planetary existence beyond narrating a biological/reproductive sense for the origin of life or painting an evolutionary tale for the emergence of intelligent, conscious, and conscientious human being. Neither philosophy nor science can unequivocally clarify our question on the purpose of life in general or more specifically answer the reasons for birth, existence and death cycle.
As nature had preordained both the 'competitive' and 'cooperative' designs as evolutionary processes right from a single-cell organism to the most complex human kind, life in the modern world is yet being shaped by a range of choices between a mortal combat to the highly sophisticated form of cooperative endeavors among clans, peoples and civilizations. While nature's evolutionary or strategic designs mostly operate on the basis of "chance factor" or "optimal search" for the sustainability of an organism, yet human designs and strategies are quite often shaped by cognitive and psychological desires rather than optimality or sustainability. Sheer ego, greed, illusion of control, myopic rationalization of an idea or a system, false pretense, cognitive bias or even sheer stupidity of those at the helm of affairs often determine the decisions. The studies on human cognition and information processing have shed a great deal of knowledge on the fallacies of rationality and debacles due to emotions in human decision making.
Many a time, our political and competitive actions are guided by 'charade and pretense' of "what we think and do is right, and that we are the custodians of ultimate truth" - Such a line of thought cannot be attributed to the "chance factor", nor can be substantiated as the "optimal choice". Based on past historical evidence, one can assert that most of the competitive actions, sooner or later, have resulted in a "lose - lose" negative outcome for all the parties in a conflict without generating any permanent advantage for any side. In most situations, over the long-term, the borders that separate the conflicting parties disappear with new problems appearing in the horizon that can affect all the parties.
The colonial trade, competition for wealth and resources, and the supremacy of nationalism that resulted in two world wars cost the humanity 50 million young lives with no advantage to any one nation in terms of worthy land or precious resource. Astonishingly, the same nations within the next few decades after the wars had come together to solve the major economic and human crises experienced by all of them. Without allowing for mutual exchange of products, access to markets and resources, nations could not sustain their growth or economic stability in recent times. Inter-dependence and coopetition (simultaneous competition and cooperation) have become a new order promising progress and growth for all nation-states. (At this juncture, we are not sure what would be the outcomes of BREXIT to EU, and the World-at-large).
Teleologically speaking, the organizational boundaries (scope of decision frames) within which human choices are made - like tribe, ethnic group, nationality, religion, ideology or political system have turned into unrealistic, unsustainable Utopian ideals; They are rather limiting our options. The decision to retain independence or compete is subject to limitations depending on the context, common threats, resource scarcity, the order of arbitration and the common challenges such as the natural catastrophes. If there is an order and efficiency arising out of competition, it could have helped the humanity to limit the most pressing problems. History suggests that Competition however does not seem to lead us to a systemic optimality or efficient equilibrium of the economic factors.
Rivalry and Strategy in the Business Context
From the early times, businesses have been shaped with an amoral (value-neutral) imperative that the only purpose of business organization is to increase owners wealth by competing vigorously and outsmarting the rivals. With self-interest as the centripetal force to take all potential sales and profits away from the markets, the sheer monetary and profit goals have eclipsed the lofty social and humane ideals of organizations. Because of a historically reinforced notion of the 'self-interest seeking guile' as the basis for success in a free market, most businesses suffer from a social perception of ‘caveat emptor or buyer beware’ . In the global context, this notion is highly pronounced resulting in more frictions which further stunt the business growth.
Competition is quite an obvious force produced by the laws of nature. All of us recognize the importance of outsmarting the rivals to secure more customers and profits. However, reducing business strategies to mere short-term quarterly profits or competitive advantage in terms of better than competitors' ROE (Return on Equity) has robbed the human spirit and social significance of businesses. Mere profit outlook of strategy had sucked the spiritual and creative vitality out of organizations, and turned several large companies into mere metallic and concrete cans of robots, computers, and machine tools. Given the extant challenges, yet, the firms are under even more pressure to bring high returns to shareholders, because now the savings of the most of the society are channeled into public firms in the form of stocks, bonds, and loans and there is intense competition to attract this money.
From a profit maximizing perspective, however, a firm's ability to outsmart the competition still matters in most industries, and it enables a firm to secure more economic advantages than rivals or other industries in the market place. Here, of course, we have to remind ourselves that within any national economy, no company can continue its success and profit growth for ever. Because intense rivalry, resource scarcity, market saturation, declining industry life cycle, disruptive technologies, and antitrust regulations - the challenges arising out of systemic, confounding and interdependent nature of industries across an economy will naturally constrain a firm's independent, isolated growth. Often, mergers are recommended as a way out to escape the problems of competition. In reality, large integrated firms soon turn into unattractive and risky behemoths suffering from organizational inertia and size related dysfunctions. General Electric and GM are classic examples of size-crisis.
As industries mature, the emergent unfavorable conditions will not only affect individual firm efficiency, but also the overall systemic optimality of the entire society. The way modern stock market operates is a great illustration of how systemic economic-inefficiency and resource drainage can occur due to unhealthy competition among firms for financial resources. Of course, it does not imply that firms need to collude or form cartels to gain bargaining power over customers or merge to create hierarchies to achieve efficiency. Firms can simultaneously compete and collaborate by functioning as a formation or school of fish enhancing the efficiency of individual entity as well as the economic optimality of the whole collection. The collaboration can be exercised within a value chain, across industries, or among competitors. If firms learn to cooperate, the profits or subsidies can be rationed among them to avoid the unhealthy competition.
However, we can be optimistic about the growth-horizon of many businesses across industries because now they are operating beyond their national borders and their growth is not constrained by the rivalry. Both consumption, production, and ownership of businesses are now transcending the national borders allowing for growth and expansion; Yet, the global expansion depends on the cooperation among nations and firms. If nations and firms operate under the principles of give and take - trustworthiness, reciprocity, safety-net, social responsibility, and exercise due-respect for the political sovereignty and stakeholders rights, there is no limit for growth.
The point what I am trying to drive home through this article is that the "material-based economic competition has natural limits in strategy" for securing lasting advantage in any business. In the guise of free-market competition, when the financial markets and a few firms drive a system with a promise to deliver 40%+ profitability in a year (like hedge-funds), a majority of firms and industries (for example traditional agriculture, manufacturing even automobiles...) within the same system will go bankrupt because they can never be able to match such a high-profit goal nor can retain their investors base. (Please read my LinkedIn article "To Turn the Porter's Nail on its Head" on the skewed long-term profitability of American Industries).
Mere profits cannot be the whole means and ends of a business organization; Along the same line of thought, mere economic gains cannot be the core strategy of a national government. Competition is certainly not the only best choice to achieve economic gains. Businesses have much larger role to play in the greater scheme of life, society, economics and our planetary existence. Given the necessity of global growth and interdependence for national markets to sustain business, organizations need to think beyond competition and profits, and ought to shape their strategies in terms of social exchanges - trustworthy relationships, reciprocity, power sharing, quality of life, safety-net, equitable distribution of critical resources, and shared governance.
Winning the love and trust must be the core of a long-term strategy. Organizations working for securing a lasting legacy will give the whole emphasis on winning the mind, enthralling the heart, and building a safe-quality-world for all. Businesses making cognitive, emotional, and visceral connections to life in general are essential strategies for sustaining the humane character of the corporations. Given the 'perceived injustice' about the global trade among many developing nations, to be successful in a global business environment, firms need to build more trust-equity - which is more valuable than the market equity or brand-equity in dealing with diverse stakeholders in global markets. A Business firm can build high trust-equity - if it can effectively demonstrate that its actions are non-opportunistic and trustworthy, and that it has the competence to deliver what it has promised without failing, and work toward benefiting the humanity in general. A trustworthy firm will rather demonstrate the motto "Veritas-Uirtus-Sinceritas" that is, truth, excellence, and honesty.
Concisely speaking, "Strength of a Strategy is its Moral Intent"
(Please refer to my other LinkedIn articles on Trust-Equity, profitability, market inefficiency).