The Contributive Business, Part 1.

Part One: Competition is not the only possible business focus

It is taken as a given, when we talk about business, that all business is defined in part by its need to be competitive: that is to compete against other businesses offering similar or the same products or services to the same potential customers. We even talk of businesses having to compete for share of attention and for share of wallet with other businesses which are in completely different sectors.

We talk about the need to compete on price, and to compete on service, and we talk about standing out from the competition.

Because making a profit (that is earning more money in sales than it costs to run the business) is so core to our concept of what business itself means, we always go further, by making the assumption that there is at least one other business, and probably many more, that have amongst their objectives the desire and need to deprive us of our custom, and thus of our profit. Like us, those 'other' businesses are competing, and competing has the objective of taking something away from the competitor (the opponent).

The popular working hypothesis of business owner and managers is that we must always be competitive, for to be otherwise we believe will certainly result in failure, either imminently or some way down the road. Somewhere up ahead, we are certain, perhaps just out of sight, lies a competitor with the intent and the means (better product or service, lower price, dazzling innovation, or more effective marketing effort) to put us out of business. We might be in business now, but if we don't compete effectively and always, we will ultimately be out of business.

However, perhaps the hypothesis that competition is an absolute given is incorrect. Perhaps there is more than one kind of business. Just as there are businesses for which competitiveness is a necessary focus, perhaps it is possible for a business to put its focus elsewhere. Perhaps it is possible for a business to focus not on competition but on something else.

I'm going to refer to this other kind of business as Contributive. So, for the sake of this discussion, we have two kinds or types of business.

The first is the Competitive business. The kind we are all familiar with, whether huge global corporations or tiny so-called micro-businesses. This is the dominant form of business and ever has been. The second is the Contributive business: a different approach to business, requiring a different attitude from the entrepreneur and the investor.

Competitive and Contributive businesses have much in common. Both types of business do something which is of value to a potential customer. They manufacture, or they process, they serve, they problem-solve, they invent, they labour: and then they market and sell. It might be something tangible or intangible: made of concrete and steel, or of circuitry or physical effort and skill, or of ideas.

What they make or do is not the thing which sets the two business types apart. The difference lies in why and how they do it.

Both types of business need to generate a surplus of funds: to make a profit. But the making of profit itself is not the point of difference between a Competitive business and a Contributive business: rather two aspects of profit. These are: the rules by which profit is created, and the use to which profit is put. The Competitive business has one attitude to the rules and use of profit: the Contributive business has a different one.

It is important, before going any further, to note that Contributive businesses might include non-profits and social enterprises. But it is possible for businesses to be Contributivewithout necessarily being non-profits or social enterprises. So Competitive businesses and Contributive businesses both have owners and both aim to make profits.

Since the industrial revolution and the rise of capital the focus of all business has been on competition, because it has been perceived that only by vigorously competing can any business survive and thrive. In fact competition as a business strategy goes back much further in history. People in trade/business have always competed with one another in a huge variety of ways: through price, through visibility, availability, quality, speed of delivery, continuity of supply, product innovation, tariff barriers, advertising, brand-building, bribery, and piracy. They have competed too through attempts at market domination, resulting in cartels (which then collaborate but ultimately compete with each other), and through creation of monopolies. They have competed through military action, via tribal wars, with corporate 'private armies', territorial acquisition, the building of empires, the defence of exclusive trade routes, and of course the enslaving of particular classes of people (captured in war, plundered from other countries and continents, raised through generations). Every conceivable strategy and tactic has been used by humankind to achieve greater competitiveness and thus greater profitability.

If it has always been thus, then many would say it will always, of necessity, be so. But does the longevity of the competitive approach to business and trade really mean that competition is inevitable? Is competitive-focus the only possible focus for business? Is it even the most effective focus? The past is not always the best guide to the future.

In his slim but dense book Finite and Infinite Games (Free Press, 1986) history professor James Carse describes two kinds of game, in these words:

"There are at least two kinds of games. One could be called finite, the other infinite. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play"

Carse applies his analysis to society, to culture, to all of human behaviour. It is a useful lens through which to look at the two kinds of business that I'm describing.

Competitive businesses play a finite game: because they are focused on winning. The driving impetus of the Competitive business can be said to be the drive to win, not because of the need to achieve and maintain profitability (a need shared by Contributive businesses) but because of the focus on doing so through competing.

The need to compete in turn drives all sorts of particular behaviours, including the following. A focus on minimising costs (which of course means limiting wages as much as possible). A focus on minimising taxes to be paid. A focus on the maximum exploitation of the cheapest viable resources. A focus on increasing the dividends payable to shareholders and owners. A focus on the payment of disproportionately high salaries and bonuses to the most senior executives (as part of the 'war for talent').

Contributive businesses, by contrast, play an infinite game: because they are focused, not on winning, and therefore not on competing, but on continuing to play: continuing to contribute. How such businesses can contribute, and why the distinction between competitive and contributive businesses could be profoundly important in our current era, will be explored in my next article.