“In essence, the job of the strategist is to understand and cope with competition”.
It is with this sentence that Michael Porter started his 1979 seminal article ‘How competitive forces shape strategy’, which ended up defining strategy for a whole generation of business leaders. While the popularity of Porter’s ‘competitive forces’ amongst strategists remains unrivaled, business leaders commonly complain that strategies aren’t properly executed and that the vast majority of innovations fail. What is persistently wrong with innovation strategy?
In this article, I aim to explore how looking at strategy through the lens of competition may actually undermine the innovation potential of your company and that an alternative approach based on mutualism opens the door to greater possibilities.
The Nash equilibrium
Four girls enter a bar – one is a stunning blonde and three are ordinary-looking brunettes. From inside the bar, three young bachelors contemplate their chances of seducing them. What are the probabilities for each of them to succeed?
If they follow a competitive strategy founded on Adam Smith’s principles of capitalism, the probabilities are 0%. If, however, their strategy were to be based on the principle of mutualism, as depicted in the award-winning movie, A Beautiful mind (2001), the probability for each bachelor would be 100%. You may remember the movie, in which Russell Crowe plays the late game-theorist John Nash. Here’s how the two different approaches would work in this apocryphal anecdote:
If you’re Adam Smith, you’ll act in your own self-interest, and so will your friends (“every man for himself!”). Therefore, the three of you will rush to seduce the stunning blonde. So much attention will freak the blonde out and she’ll soon flee the bar, leaving you and your friends with no alternative but to try to seduce the three ordinary-looking brunettes, as plan B. But no one likes to be second choice, so they too will show their backs. You and the other bachelors will go home alone.
If, however, you’re Russell Crowe and believe in the Nash equilibrium, your strategy will be to maximize both your own outcome and the outcomes of the group. Provided your two friends choose the same strategy, the three of you will ignore the stunning blonde and approach the three ordinary brunettes first. The brunettes will feel so flattered by your choice that they’ll offer you all the chances to seduce them. Each one of you will return home with a conquest at your arm.
The reason for the failure of the initial attempt resided solely in the decision to adopt a competitive strategy, while a collaborative strategy led to a complete success. Similarly, in your business, your successes will most likely depend on choosing a strategy that maximizes the benefits of your partners as much as your own. That’s what is called mutualism and it is revolutionizing Capitalism, after having revolutionized Social studies.
Mutual Capitalism may read like an oxymoron, but the fact is that, decades before John Nash even coined the concept of the Nash equilibrium, Capitalism had already clumsily stumbled upon mutualism.
In the late 19th century, at the peak of the industrial revolution, industry barons collaborated to establish trusts and cartels, aimed at coordinating strategies that would maximize the individual and collective outcomes of their members. This innovative approach may have been originally inspired by the same noble motivations that pushed Victorian gentlemen to belong to clubs. But in this case the invitations to benefit, unfortunately, hadn’t been extended to all corners of the value chain; mutual benefits were mostly generated to the detriment of an essential group of stakeholders – the customers.
Consequently, following the passing of antitrust laws designed to impose competition and protect customers, Capitalism started to be identified with strategies that promote turf wars and market shares. This contrived evolution of Capitalism made it easy then to establish the current dominant ideology – one that establishes business strategy as a necessary struggle against competing forces (Michael Porter) and that claims that the role of strategists is to defend the sole interests of their company’s shareholders (Milton Friedman). For more than a century now, the dominant model of Capitalism has thus been one that sees its founding principle being best expressed in the motto “Every man for himself!”
Come what may, our biological nature remains impossible to repress. Man – like most of the other species that survived natural selection – is a social animal whose genes make reciprocal altruism the currency of growth and flourishing.
In 1964, social biologist W.D. Hamilton described four social strategies at play amongst interacting agents of the natural world:
1. ‘Spite’ as the strategy that decreases the fitness of both actor A and recipient B
2. ‘Selfishness’ as the strategy that increases the fitness of actor A but decreases the fitness of recipient B
3. ‘Altruism’ as the strategy that increases the fitness of recipient B but decreases the fitness of actor A
4. ‘Mutualism’ as the strategy that increases the fitness of both actor A and recipient B
The most common example of Mutualism in animals is the grooming of apes, but everywhere in the natural world it’s leaving a vibrant footprint: even wolves hunt in packs.
Selfishness on the other hand rarely benefits the species, as exposed in the famous example of the Tragedy of the Commons, described first in 1833 by the British economist William Foster Lloyd and completed by Garrett Hardin in 1968: individuals acting independently and rationally according to each’s self-interest behave contrary to the best interests of the whole group by depleting common resources. When farmers allow their cattle to overgraze on the commons, the animals eventually perish of starvation. If mutualism leads to ‘win-win’ situations, in the long run selfishness always ends up leading to ‘lose-lose’ situations.
How can today’s business strategists harness the natural power of Mutualism to drive innovation and growth?
In the Four lenses of Innovation (Wiley, 2015), Rowan Gibson describes the historical impact of innovation practices that ‘Challenge Orthodoxies’ and ‘Leverage Resources’ (N.B. the other two lenses in Gibson’s model being the more traditional practices of ‘Harnessing trends’ and ‘Understanding needs’).
‘Challenging Orthodoxies’ refers to the practice of questioning deeply-held dogmas and common assumptions within your company and industry. ‘Leveraging Resources’ is the practice of thinking of the firm as a portfolio of embedded skills and assets, not just as a provider of specific products or services. It is about seeking ways to repurpose, recombine or redeploy these resources in order to stretch into new growth opportunities.
As an innovation strategist seeking to shape the future, your role will be to find creative ways to leverage available resources in an effort to disrupt some aspects of the present. What the breakthrough techniques described by Rowan Gibson allow you to do is to 1) rethink how much of the present can actually be disrupted and 2) recognize which resources are at your disposal for this purpose. Studying innovators like Richard Branson, Walt Disney and Elon Musk, Gibson provides key recommendations on how to push the boundaries of what’s possible. These include (amongst others):
- Develop an elastic view of your company – define your company in terms of what it knows and what it owns, not what it does.
- Leverage resources (competencies and assets) not just from your own organization but also from others – especially across your value chain
Indeed, when applying Gibson’s ‘Four lenses of innovation’, it pays greatly to take your entire eco-system of stakeholders into consideration, rather than stick to the narrow perspective of your company’s sole interests.
Four different kinds of Capital
In a scenario that may sound familiar to you, imagine a decision to be made between the following alternative innovation strategies:
- Strategy A potentially delivers very high returns but is predicted to have very low feasibility
- Strategy B potentially delivers medium returns and is predicted to have a high level of feasibility
Which strategy will you adopt?
If you live in the world of Adam Smith, Michael Porter and Milton Friedman, you’ll certainly choose Strategy B – ‘a safe bet’, ‘a low-hanging fruit’, ‘a no-brainer’.
Now, suppose you’ve evolved and you now live in the capitalistic world of John Nash, W.D. Hamilton and Rowan Gibson. Then you won’t hesitate to choose the high-return Strategy A. Indeed, once elevated to the whole eco-system – suppliers, customers, employees, governments, etc. – the seemingly impossible is suddenly revealed to you with a much greater sense of confidence; you are now contemplating possibilities offered by resources from the whole group (just as a lone wolf joining a pack increases its chances to find food).
Having made your choice, the question you should address next is not ‘how can I help improve the feasibility of Strategy A?’ but rather ‘who in my eco-system can help improve the feasibility of Strategy A?’ Just like serial innovators, business strategists who favor mutualism don’t limit their world of possibilities to their own assets, but seek to partner with those in their value chain who have assets to exchange (tangible and intangible) that can benefit their highly desirable ends.
This can only be made possible, though, if you assign value to Capital that is not purely financial. Otherwise, you’ll find yourself in a situation where improving feasibility only results in reducing returns – hence making Strategy A much less desirable. However, if you equally value human, social, natural and financial Capitals, then you’re equipped with very rich sources of exchange that can bring to you and your business partners a wealth of possible win-win solutions.
For instance, when a leading diaper manufacturer offers its diapers at a below-cost price to a maternity hospital, it’s benefiting from the association with trusted healthcare professionals (social capital), while the hospital gains access to affordable quality products (financial capital). Patients benefit as well, as they enjoy the peace of mind to know that their precious newborn needs will be met (human capital).
Mutual Capitalism and chocolate
The cocoa supply chain is built on the heritage of the colonial era with many levels of ‘middle men’ consolidating the labor of millions of small independent farmers, mostly in the developing countries of West Africa. Because of poor revenues, farmers are abandoning cocoa for other crops or moving to different professions. So with growing demand from China and other emerging economies, the world is in danger of chocolate shortage and price increases. The solution is to pull the cocoa farmers out of poverty by increasing their yields.
According to Mars Chief Agricultural Officer Howard Yana-Shapiro, the secret to cocoa’s greater yields is to be found in its genes. By identifying the genes responsible for the crop’s resistance to drought and diseases, the industry and farmers will be able to select the variants that maximize productivity and increase farmers’ revenues.
In the world of Selfish Capitalism, Mars should have either ignored the problem or invested millions to set up its own internal skunk works to develop a proprietary solution and make money out of it. But Mars lives in the world of Mutual Capitalism – inspired by the Mars family’s principle of Mutuality, first coined in a 1947 letter by the company’s founder Forrest E. Mars, Sr.
So, instead of going at it alone, Mars enrolled the help of IBM and the US Department of Agriculture to leverage their unique expertise and help decode the cocoa genome. What happened next is remarkable and would probably have never been possible should Mars have not been 100% privately owned by the Mars family: Mars offered the cocoa genome to the public domain. Not in an act of philanthropic altruism but in order to allow thousands of scientists from around the world to access it, study it and offer their own improvements to the value chain.
So far 200,000 scientists have accessed the cocoa genome database with the ambition to improve the business and the lives of 6 million farmers. In turn, Mars knows that the farmers will grow more of the high-quality cocoa they need, at an affordable price. A meaningful example of ‘Pay forward’ applied to human, social, natural and financial Capitals.
Mutual Capitalism in Paris
Another example of Mutual Capitalism innovation comes from the City of lights, Paris. JCDecaux is an advertising company that offers urban services to municipalities in exchange for advertising access to public spaces – e.g. bus stops, flag posts, etc.
In 2007, JCDecaux offered the Paris municipality to invest 50 million euros in creating a network of self-service bicycles in exchange for a 10-year exclusive access to advertising rights in all public spaces of the French capital. As part of the scheme, the municipality of Paris receives the revenues originating from the rental and subscription fees of the bike users (amounting to 18 million euros a year). The scheme also delivers obvious environmental and public health benefits to 12 million Parisians (WHO estimate that every kilometer of bike saves Euro 1.21 in healthcare spends). Eight hundred kilometers of protected bike lanes have also been created by the Paris municipality to ensure the scheme is a success. Bicycle shops have also seen their sales increase, as more Parisians get into the habit of using bikes as their preferred means of transportation. JCDecaux have now replicated the scheme in a total of thirty international cities.
In the world of selfish Capitalism, one can argue that no competitive strategy would have allowed JCDecaux to secure a 10-year exclusive contract with the municipality of Paris, with the exception of an obvious price war against competitor Clear Channel.
Mutual Capitalism not only unlocks amazing opportunities for business growth and innovation, it also seems to make our world better.
“Now it’s your turn. Let’s discover how Mutual Capitalism can unlock your company’s innovation potential. First, pick one of your business’ most ambitious high-return strategies – one that you never dared to consider due to poor perceived feasibility. Next, create a map of the stakeholders in your eco-system (see Figure 1 for an example).”
Then, make a list of all your eco-system’s resources (competencies and assets) – starting with your company’s own resources – expressed in terms of human, social, natural and financial Capitals. Identify the resources that will remove the obstacles getting in the way of your strategy. Who owns these resources and what would they value in exchange?
Maybe you doubt your creative capacity to run this exercise successfully. But be reassured. As explained in Rowan Gibson’s book, all of us have natural pattern-recognition capacities that allow us to connect the dots in seemingly complex systems. In my experience, enrolling the help of colleagues and partners in your eco-system will also increase your chances of success.
Now that you’ve opened your mind to the possibility of discovering new patterns that may present innovative solutions, the road to insights should be cleared. Once you’ve compiled some of these new insights, try “crashing” them together in different combinations until powerful ideas emerge.
If you’re still uncertain, The Four lenses of Innovation is full of practical tips and tools on how to release the creative genius inherent in your teams.
The Future of Competition
Finally, I’d like to leave you with this reflection. As innovation leaders, we need to free ourselves from the toxic habits of Selfish Capitalism. However, I’m sure that like me you’ve noticed in your professional life that years and years in business seem to have created an addiction for competition.
So, to make Mutual Capitalism the new habit of business leaders, we’ll need to promote its benefits, but equally we’ll have to deal with this common addiction to competition. I am not arguing that we should try to make our addiction to competition disappear. Instead, I’d like to propose that we can channel it to a new field, where it would be free to express itself without compromising the flourishing of Mutual Capitalism.
Ernest Hemingway wrote: “There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self.”
Hence my final word on the subject will be this: we owe it to ourselves, our organizations and to society to channel our insane energy for competition into the only field that really matters: that of our personal growth. For my part, from tomorrow onward, I’ll aim to become better than before at being a mutual capitalist.
image credits: Cocoa farmer David Kebu Jnr holding the finished product, dried cocoa beans ready for export.: Flickr / Author: Irene Scott/AusAID; Paris street scene June 7, 2008: Flickr / Author: Quinn Dombrowski; Figure 1 by Mars, Incorporated.
Author note: The opinions expressed in this article are personal to Cedric Bachellerie and are not a reflection of Mars Incorporated’s opinions.
Wait! Before you go.
Choose how you want the latest innovation content delivered to you:
- Daily — RSS Feed — Email — Twitter — Facebook — Linkedin Today
- Weekly — Email Newsletter — Free Magazine — Linkedin Group
Cedric Bachellerie is a regional director of Mars University at Mars Incorporated. After a career in marketing that spans some of the world’s most famous brands – Always, Kleenex, Huggies, M&M’S, Snickers – Cedric’s passion for Innovation now expresses itself in the areas of Leadership development and Organizational development, within the corporate university of Mars, Incorporated. Here’s where to find Cedric on LinkedIn.