The Contributive business, Part 2.
Part Two: Comparing the Competitive and Contributive business models
In the previous article I introduced the idea that there might be a role for a business model that is not focused on competition.
I called conventional businesses (those focused on competition) Competitive businesses, and I called the alternative type (those focused on something other than competition) Contributive businesses.
I also emphasised that Contributive businesses can still be interested in making a profit (which is to say they are not necessarily non-profits or social enterprises). The distinctive nature of Contributive businesses lies in the rules they create for themselves to follow in the creation of profit, and what they choose to do with their profit.
In this article I will elaborate on the nature of the Contributive business, and compare its characteristics to the Competitive business. In the next article I will explain why the time is right for a Contributive approach to business, indeed why the circumstances of our world make it imperative that the Contributive model grows.
The defining characteristic of the conventional, Competitive business is the need to focus on competing in order to win the game of business: in order to make the maximum achievable profit.
Competition against other businesses is seen as vital because it is considered that there is a finite amount of 'spend' available from potential customers and a virtually infinite number of businesses ready and eager to fulfil those customers' needs and wants.
Competitive businesses can therefore be considered a finite game (in the terms of James Carse, Finite and Infinite Games, Free Press, 1986) because it is about winning. Every sale must be won by a particular business, and thus lost by its competitors. I discuss finite and infinite games in the first chapter.
Competitive businesses that fail to win sufficient sales and to generate sufficient profit eventually lose the game of business and are forced to leave the field of play (they go into administration).
Some Competitive businesses approaching a position of failure are 'rescued' by other companies or individuals who, for a variety of reasons, see the acquisition of all or part of the failing business as an opportunity (if it's a part then it's always the profitable part). Perhaps the failing business can then come back into the game, and may even begin to winunder new management strategies. But this does not mean that somehow the business has moved from finite play to infinite play. Rather it has started another finite game: because its destiny still rests on the need to keep competing against other businesses.
When such businesses are revived, it is not in order for them to play for the sake of play (to serve customers, to support their employees, to enhance the world - i.e. the infinite game). Instead they have been revived in an attempt to squeeze maximum profit out of the remaining potential in the (usually stripped down) business.
So Competitive businesses are focused primarily on competing. But the focus of Contributive businesses lies somewhere very different.
Contributive businesses are focused, above all other considerations, on making a positive contribution to the world in which they operate. To put it another way: they want to make the world a better place.
The contributions they want to make cover a range of aspects:
contribution to the lives of their customers
contribution to the lives of their employees
contribution to their suppliers
contribution to the community in which they operate
contribution to the wider community, beyond their immediate location
contribution to the environment and the world as a whole
In all these areas it is the intent of the Contributive business to make a positive contribution, thus...
the Contributive business wants its product or service to be in and of itself a positive thing: a product or a service that in some way can be said to enhance the life of the purchaser (and not to damage it, for example through an impact on health)
the Contributive business wants to pay its employees the highest affordable wage and to maximise its employee support in others ways, not in order to win the so-called war for talent, but because to value employees is in the very nature of such a business
the Contributive business will want to treat its suppliers and partners with fairness, and in fact to help them to thrive, because it knows that suppliers and partners are part of its own ecosystem
the Contributive business wants to make the maximum positive impact on the community in which it operates, because it knows it is inextricably entwined with that community
the Contributive business wants to give the most it can for the benefit of the wider community
the Contributive business always aims to make a positive impact on the environment
This might seem a simple list of 'nice things for a business to do': but it is actually much more than that. This approach changes virtually every decision a business makes: and every outcome. So for a Contributive business...
Taxes are embraced: not avoided
Time and energy is focused on excellence: not wasted on looking over one's shoulder at the competition
Marketing messages are truthful and clear: not spun
Attention is earned by behaviour: not won (i.e. stolen) by interruption tactics
Customer loyalty is genuine and lasting: not transient and 'paid for'
The environment's health and integrity is an essential part of the prize: not ignored or paid lip-service to
The lives of future generations are considered at every decision point: not ignored for the sake of short-term success
Employees, suppliers, partners, and the community are treasured, respected, empowered and supported: not bought, persuaded, exploited, bullied, or ignored
Growth is approached cautiously as a possible benefit that needs careful management: not fetishised as an objective in its own right
Owners and shareholders are agreed that the business exists to do positive work in the world: not simply to make the maximum return for individual or institutional investors
Senior people are rewarded appropriately: not with disproportionately inflated salaries or bonuses
In the next article I will try to explain why the time has come for Contributive business: and why it is the only sustainable approach for entrepreneurs going forward.
Simon Middleton, February 12th 2019