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The Case for Economic Co-operation, as Well as Competition

If competition ends up as being a fight to the finish, then we need a new way of thinking about economic success.

If competition ends up as being a fight to the finish, then we need a new way of thinking about economic success.

Economic co-operation has always been part of the story, but not one told so often in the conventional narratives of heroic entrepreneurs and far-seeing investors. In 1917, for example, US Congress forced the formation of the Manufacturers Aircraft Association. The Wright brothers and Glenn Curtis were willing to see the airplane industry grounded than to see the other win out in terms of setting standards for airplanes to succeed.

But something is changing. This year in Davos, Kai Engel, Partner and Global Coordinator of A. T. Kearney's Innovation and Research and Development Practice, reported to the World Economic Forum that 62% of businesses across Europe say that a quarter of business revenue is now due to collaboration around product and service innovation. 71% predict that, by 2030, co-operative innovation will account for over a quarter of their total revenues.

I work for a co-operative, but the formation of a legal co-op is not the only way to co-operate. There are many pathways that economic co-operation can take.

There are five significant forces for economic co-operation today:

1. Competitor partnerships

In commercial projects, whether based in contract or a formal entity as a joint venture, economic co-operation is commonplace. Peugeot Citroën and Toyota shared components for a new city care, sold at the same time as the Peugeot 107, the Toyota Aygo, and the Citroën C1. Samsung and Sony, too, worked together to develop flat screen LCD TVs. This is a model of competitor partnerships sometimes dubbed 'co-opetition'.

2. Industry standards

Standards, from communications protocols and standards for the interoperability of technology through to fuel efficiency and the treatment of the workforce, are all examples of economic co-operation with extraordinary importance in economic success at national level and, increasingly, across borders. Standards, which coordinate economic activity in an open and collaborative way, account for between one eighth and one quarter of overall productivity growth in modern economies.

3. Knowledge pools

To support and institutionalise standards and spread knowledge more widely, a significant role is played by a wide range of professional associations, trade unions, business schools and partnerships across the economy - with some indeed, in areas such as healthcare and law, being the direct contemporary descendants of mediaeval craft guilds.

4. Innovation chains

Innovations such as 3D cinema or Android software spread faster when there is co-operation across the value chain of different groups needed to make a success of it, able to overcome blockages if it is not in the interest of any one group to see it succeed. Innovation and diffusion is increasingly recognised as a multi-player, co-operative process. As Ron Adner argues "the need for collaborative innovation has defined progress since the Industrial Revolution - the lightbulb on its own was a miraculous invention but needed the development of the electric power network to turn it into a profitable innovation."

5. Peer production

Peer production, from video journalism to Wikipedia, has emerged as one of the most influential models of organisation and information generation of the Internet age. This is a model of co-operation, suggests Yochai Benkler, that succeeds because it is a more effective way of harnessing a diverse range of people and motivations than hierarchical models, characterised by formal contract and management. He has charted the 'wealth of networks' that can emerge from peer-to-peer production and the rich and growing forms of co-operation that are liberated with the dramatic rise in connectivity online.

If you add these together, along with the mutual business model, you have what I call the co-operative advantage - co-operating in order to compete.

Co-operative Advantage is a book new out that I have edited that explores this. It is based on research I led over three years with co-operative business experts, advised by Professor Michael Best, University of Massachusetts Lowell, an internationally recognised authority on sector development.

The research analyses growth sectors around which the co-operative model has an edge and a fit that offers a competitive advantage - identifying fifty potential innovations that dovetail with emerging trends in technology and markets. The total economic value of the sectors that we look at add up to 61% of overall GDP and account for 64% of total employment in the UK.

In an economy that is not just digitally enabled but powered increasingly by networks and platforms, it is time to rethink our formulae for success. In the 20th century, competitive advantage stemmed from restricted access to knowledge and resources. As the field of open innovation suggests, new value is not necessarily now locked up in companies, in capital-intensive stock and closed research and development. New value emerges from knowledge, relationships ...and co-operation.

Co-operative Advantage: innovation, co-operation and why sharing business ownership is good for Britain is edited by Ed Mayo and published by New Internationalist.

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