In the current economic climate, collaboration, not competition, is the name of the game

In his landmark work, Competitive Strategy (The Free Press, 1980), Harvard Business School management guru Michael Porter famously preached the virtues of competitive strategies and expounded on his “Five Forces” model of the firm—both of which, to this day, remain standard fare in the typical MBA course on strategic management. But that was over four decades ago. The business environment has drastically changed since then.

In recent years, revolutionary changes have taken place in the world of business that have forever altered the way corporate managers pursue their strategic objectives. In their increasing order of recentness, these are:

The Digital Revolution (a.k.a. the Third Industrial Revolution), the shift from analog to digital computing, which started in the early 1950s and saw the emergence and the eventual widespread use of mainframe computers, the ubiquity of the personal computer and the internet;

The Fourth Industrial Revolution, technological innovations that exemplify the practical application in business and industry of ongoing scientific breakthroughs and technological developments; and the deadly coronavirus pandemic, the worst in recent memory.

These changes have ushered in an era where collaboration has become key to survival.

There are two underlying reasons for this radical shift in strategic thinking.

Lessons learned from the COVID-19 Pandemic

The COVID-19 pandemic has sent the powerful message to corporate managers the world over that their economic fortunes and those of their other stakeholders are intimately and inextricably intertwined, and that what benefits or adversely affects one will also be felt by all others. The realization that “we’re all in this together” has tended to foster closer ties and greater collaboration between business firms and their stakeholders.

The immediate impact of the pandemic was to disrupt existing supply chains, mainly as a result of small input—and service providers running out of business and consumers losing their sources of livelihood.

In the face of the ongoing crisis, many business establishments have gone out of their way to continue serving their customers, retaining and catering to the special needs of their workers, and maintaining their relationships with their suppliers and distributors, all of whom they depend for their continued survival.

The decision of many corporate entities, such as San Miguel Corp. and the Ayala Group, to retain and provide assistance to their customers, workers, suppliers, distributors and tenants are, at bottom, strategic moves to preserve as much as possible their supply chains and to be ready to resume operations as soon as the pandemic starts to abate. These initiatives will enable firms to adapt effortlessly to the emerging “new normal,” and at the same time provide a ray of hope in the midst of crisis to their customers, employees and business partners.

Multiplicative effect on value creation of knowledge sharing

In today’s economy, knowledge and information have become the most valuable economic resources.

Compared with the traditional economic resources of land, labor and capital, knowledge and information have several unique characteristics, foremost among which is their being subject to increasing, rather than diminishing returns. Larger accumulations of these resources make them more productive, especially considering that these resources are heterogeneous in nature (meaning, no two pieces of knowledge or information are identical) and as a rule are complementary. For this reason, the more these resources are shared, the greater their potential to produce economic value, thus providing a strategic motivation for firms to collaborate with one another by sharing their complementary knowledge, information and databases.

Nowhere is this shift to collaborative strategies more dramatically demonstrated than in the way the pharmaceutical industry reacted to the COVID-19 crisis.The partnership between Pfizer and BioNTech in developing the COVID-19 vaccine using the mRNA platform, and the sharing of production and distribution facilities between Johnson and Johnson and Merck, and between AstraZeneca and the Serum Institute of India to facilitate global access to vaccines all serve to illustrate how collaboration among firms can serve the long-run strategic interests of the participants, but also help avert a looming humanitarian disaster.

These examples serve to show that the case for collaboration is stronger than ever.

Both sets of forces have underscored the obvious fact to business leaders the world over that under current conditions, no business can succeed alone. INQThe article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP. The author is a retired professor of Economics and Management, and currently professorial lecturer at the University of the Philippines-Diliman