New Zealand businesses are being urged to put competition aside and look to collaboration to help "weather the storm" of global economic disruption.
A University of Auckland researcher, Associate Professor Suvi Nenonen, says while competitiveness among companies is a key to success, it may also be a hindrance in some circumstances.
Many companies fall into the trap of not being able to see beyond the possibility of a rival doing slightly better. But New Zealand is a small country and if companies don't collaborate they risk relinquishing control and allowing other players globally to take the lead as factors like climate change and automation bring about massive change.
"New Zealand produces wonderful products and services," she says. "But what is needed is the magic ingredient – to become more courageous, to start shaping markets and to do it collaboratively.
"Collaboration will give New Zealand companies more muscle and enable them to share risk," she says. "It will help us weather the storm of disruption and allow all parties to be better off."
But she says once collaboration has created market gains "innovating firms should revert to traditional competitive strategy to share the spoils."
Nenonen, Director of the Graduate School of Management at the university's Business School, says the pace of change, characterised in part by digital disruption, means companies can no longer rely on predicting what the market is going to do; rather they need to be able to innovate or shape it for the benefit of themselves and their customers.
She calls it "market-shaping" or "market innovation", a process she says will nearly always involve collaborating with other firms and players – sometimes even with competitors.
She says a good example is the electric car market. "You just don't need the electric car you also need the charging infrastructure and companies who are developing batteries.
Innovations generally need certain conditions to make them viable – conditions which often involve a whole lot of different players.
"It is now not enough to create a viable product; firms need to identify the viable system their products need."
Nenonen, along with a colleague Professor Kaj Storbacka, have completed a three-year research study into market innovation. The pair have published a book, SMASH - Using Market Shaping to Design New Strategies for Innovation, Value Creation, and Growth, which she describes as a "toolkit" to help business understand markets and how to shape them.
She says their research shows that while some New Zealand firms are successfully shaping their markets, it is not occurring as much as in other countries of a similar size. "It is a bit of a conundrum and I can't really explain why," she says. "But it is likely resulting in many lost opportunities and failed product launches."
She says one of the best examples of market innovation is the smartphone industry. In the early 2000s Nokia was the biggest mobile phone manufacturer and the first to introduce a smartphone.
"But, unfortunately, Nokia didn't really understand what makes the smartphone smart," she says. "It is not just the device, it is the apps and the content and Nokia didn't actively foster the creation of an app developer or content provision network."
That fell to Apple when it created the App Store. It outsourced this role to app developers and focused on developing iphone hardware and operating systems.
Nenonen says while some entrepreneurs intuitively practice market shaping they would "benefit from a more systematic framework to guide their efforts."
She says market-shaping turns traditional strategic thinking on its head, effectively creating a mind-set shift from fighting for a bigger market share to baking a bigger pie for everyone: "Market shapers don't take the environment as a given, but they try to shape it so it creates more value for the company and their customers.
Nenonen points to three key reasons for companies to collaborate:
• It is seldom any single firm will wield enough influence to shape, or make, an entire system but it can close this power deficit by partnering with a competitor who shares a similar vision.
• To prevent painting oneself into a niche corner. If no competitors embrace a would-be innovation, the firm risks creating a new niche sub-segment and becoming a sole provider.
• No politician or government official will even consider changing legislation because a single company asks them to, thus collaboration is usually needed to induce change.
Nenonen says it is possible New Zealand managers are not aware of market shaping as an option because secondary school and tertiary education has created a bias for a traditional view of markets.
"New Zealand business undergraduates, postgraduates and executives leave tertiary education with limited sense of markets as complex adaptive systems. Instead they are taught that markets are givens and black boxes; such a view makes market innovation literally unthinkable."