University of London Professor David Faulkner has written extensively about the need for cooperative, rather than purely competitive, strategic business relationships and alliances. Since the early 1990s Faulkner has studied the “essence” of competitive strategy, and the challenges involved in integrating cooperation as part of the competitive mindset. One of his books is International Strategic Alliances: Cooperating to Compete (1995). The strategies of cooperation has been his most common theme.
In one of his papers on strategic alliances and the factors that influence success and failure, Faulkner notes that the advent of globalisation and the integration of markets has meant that organisations – “for survival” – enter into strategic alliances.
He concludes that successful alliance relationships are “characterised by higher levels of commitment, collaboration, communication, and trust than are less successful alliances.” Further, success is enhanced by ensuring that the “alliance partners have a fit with respect to alliance objectives, its mechanics of operation and the performance evaluation criteria.”
So simply put, increasing globalisation and competition has meant that companies can’t really go it alone very effectively in the marketplace anymore. Which brings us to Faulkner’s idea of “cooperative strategy.”
Cooperative strategy, he writes, is the attempt by organisations “to realise their objectives through cooperation with other organisations rather than in competition with them.”
The focus turns to the benefits gained through cooperation, and “how to manage the cooperation” in order to make the benefits real.
Faulkner says a cooperative strategy “can offer significant advantages for companies that are lacking in particular competencies or resources to secure these through links with others possessing complementary skills or assets.” In addition a cooperative strategy can provide “easier access” to new markets, and “opportunities for mutual synergy and learning.”
Well, if all this sounds very similar to what I preach in connection with the Vested business model every day – about the need for collaborative partnerships and relational contracting designed to enhance value for everyone – well, I stand guilty as charged!
And Faulkner continues even further into Vested thinking by placing special emphasis on trust, because it reduces the perception of risk, and collaboration as the “key dimension” of a strategic alliance relationship.
“Partners that trust each other generate greater profits, serve customers better, and are more adaptable,” Faulkner says. When exchanges are governed by trust, he continues, transaction costs, such as bargaining and monitoring costs, can be reduced. “Studies suggest that one critical factor determining alliance performance is the degree of trust between alliance partners. Indeed, it has been argued that trust is so important to alliances that it is considered the cornerstone of the strategic partnership success.”
Faulkner is direct about the value of collaboration: “Alliance partners must collaborate to achieve their strategic objectives.” And this is equally true for outsourcing relationships or joint ventures. Collaborative associations are interactive and adaptive in nature, he continues, and understanding the nature and scope of collaboration is “essential in analysing the operation and success of an alliance. A highly collaborative relationship provides the flexibility and adaptability necessary to overcome uncertainties, resolve conflicts and achieve mutually beneficial outcomes.”
Cooperation should be high on the agenda of an organisation’s corporate strategy because it is, as Faulkner rightly writes, an enabler of innovation and a means to share resources.
While cooperative strategy is not a new idea, it is also not an alternative to either competitive or corporate strategy. “It amounts to a further domain of policy options whose purpose is to enable firms to compete more effectively,” Faulkner writes.
That’s another way of saying that cooperative strategy is ignored at a firm’s peril – I say it’s the most important part of a company’s strategic toolkit.