The Pitfalls of Competition in Business: Embracing Collaboration for Growth

In a story someone told me some time ago, a friend of his who was driving a Daewoo Tico car set off at the same time as a BMW car. So, he decided to test the power of his car by competing with the BMW. He managed to race at par with the BMW at a speed of 140km/h. By the time they had made about 12 miles, his engine locked. Then he realized how foolish he had been! That is just what a competitive spirit can do to a person and a business.

The Webster’s Dictionary defines competition as “The act of seeking, or endeavoring to gain, what another is endeavoring to gain at the same time; common strife for the same objects; strife for superiority; emulous contest; rivalry, as for approbation, for a prize, or as where two or more persons are engaged in the same business and each seeking patronage; — followed by for before the object sought, and with before the person or thing competed with”.

For centuries now, competition has been part of humans; in education, sports, the arts, religion, business, the work-place and many other facets of life. It has been touted as beneficial for every progressive society and economy. “It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly-valued uses”, culled from Wikipedia.

However, as with other philosophies that have been handed-down to us, is it not time for us to examine this phenomenon to see whether it is still relevant in our day?

Analysis

Per the definition of competition above, there are certain characteristics that go with it: strife, superiority, contest, and rivalry. If these are desirable traits that should be pursued, then imagine a home with these between spouses and between siblings and you would appreciate why there is so much lack of trust, honesty, altruism, satisfaction, joy and many other beautiful traits in business, the workplace, society at large and even sadly within the family!

Collaboration, on the other hand, is defined as “Act of working jointly; together; united labor” –Webster’s.

In this definition, we can isolate certain desirable elements; working jointly, unity which embodies other fine qualities. Well, do we not say that “unity is strength”? So, between competition and collaboration which one should we be espousing?

In this article, our focus will be on competition as is expressed in business, although some social dimensions will also slip in.

One underlying reason why people compete is the scarcity of things that are believed to be desirable, even prestigious: Wealth, fame and power.

Yet another debilitating reason that I can identify is Herbert Spencer’s ‘Survival of the fittest” philosophy which he coined after reading Charles Darwin’s On the Origin of Species. “This survival of the fittest, which I have here sought to express in mechanical terms, is that which Mr. Darwin has called ‘natural selection’, or the preservation of favoured races in the struggle for life.” Principles of Biology (1864, vol. 1, p. 444)

Thus even though Adam Smith had written on competition before Darwin’s On the Origin of the Species, belief in evolution and its subtle influence which is rife in many capitalist systems has fuelled the spirit of competition by making many people believe that in order to survive, one has to compete with the other. And in the process, the favoured species succeeds in getting what is desired at the expense of the weak one. And we see this playing out daily in almost every aspect of life, as earlier mentioned, even though some of those with the competitive spirit denounce evolution. But how does competition affect business?

Competition’s insidious effect on business

While some argue that competition prevents monopoly and its attendant potential of exploiting the consumer we shall see that that stance is simplistic. Competition even in its perfect state (which is utopic, by the way) is unhealthy to modern business for the following reasons that I can identify:

First, competition is wasteful. It inhibits the full utilization of scarce resources effectively, contrary to what Adam Smith and some economists believe. These resources are either human or material. Let us see how they are misapplied in competition.

In our modern dispensation, creativity and innovation are very vital for the success of any business entity that aims at a profit and at growth. To achieve this, the human resources of a company must have a broader view in order to come up with new ways of looking at problems/challenges and devising innovative solutions.

However, when the aim is to outwit a competitor, too much time and effort are invested in trying to figure out what a competitor intends to do and how to counteract that move, instead of focusing on how best to satisfy the sophisticated needs and demands of today’s customer ingeniously. This is the result of an emulous contest which is inclined to imitate or copy what the other is doing. Such unhealthy duplication is a total waste of the critical human resource factor of creativity. Worse yet, it renders the strategic mission and vision statements of the organization ineffective and bogus.

We see this playing out especially in what I perceive to be the three leading sectors of the services industry in Africa; namely, telecom, banking and insurance. Invariably, we see players in these sectors offering the same kind of services with little or no variations. And each one is playing it safe by waiting for one to make a move in order to know what course to take next. In effect, it has become like a game of chess. This amounts to a gross under-utilisation of the capacity of creative human resource. The result then is, not the creation of wealth, but the enhancement of poverty and impairment of better standards of living.

Regarding wastage in material resources, we see this especially in the area of advertising. Once again, you may agree with me that those above-mentioned service sector players are those that largely afford the high advertising bills of the ad media. It is not uncommon to hear the same competitive ad from a particular service provider run back-to-back on the same network. When this is multiplied by the number of media platforms on which those ads run, you can image the cost involved. But who pays for all that at the end of the day? It is you and I the final consumer! That is one reason why you see certain costs on your itemized bill, and you marvel how they came about.

If you share an idea with others, you either refine it or create new ones out of either what the one you are speaking with contributes to the conversation or out of yourself. For that matter, creative people do not fear to share their business ideas. The competitor does not benefit from this.

Certainly, I am not against what I call ‘sensible’ advertising since it is strategically vital to make a business and its offerings known. My concern though is with unbridled rivalry that adds no value to the economy at large. My suggestion is that, instead of wasting these resources, why not find more creative ways of providing value-adding services that will enhance the activities of both individuals and businesses? Further, the sad thing is that these industry players have several potential customers who have not yet employed their services. Would it not be better to shun competitive ads in order to reduce operating costs and subsequently lower service charges to rope these in?

There is yet another dimension to it–Competition stunts ideas. I always use the water closet to illustrate our use of valuable resources: Untill you flash the WC no more water comes into the cistern.

And for the next countless number of days/years it will continue to be so. However, immediately you flash it more water comes in. In like manner, anyone who continues to store resources; be they ideas, money or otherwise, without spending (of course judiciously) will continue to lack. But when spent wisely, more comes in. Just as nothing goes for nothing in business, so also nothing comes for nothing.

This is true, not only in terms of money, but ideas as well. If you share an idea with others, you either refine it or create new ones out of either what the one you are speaking with contributes to the conversation or out of yourself. For that matter, creative people do not fear to share their business ideas. The competitor does not benefit from this.

Third, competition wastes time. Time is one of the most critical resources we have. It is, therefore, a very terrible thing to waste, especially in business. But how does competition waste it? Well, the competitor may have some brilliant moves to make. But as I mentioned earlier, he deliberately waits for his rival to move first. Thus so long as his opponent has not taken a step he continues to wait, wasting all of that time.

Further, by focusing on his rival, the competitor wastes time on analyzing what his opponent has been doing so far and the trend of his activities in order to be able to predict his next course of action. How that time could be better spent on a more productive activity such as how to effectively and efficiently meet customer satisfaction!

Fourth, competition stifles creativity. While I have briefly touched on this earlier, we like to look at it from the perspective of a new business. Certainly, it is not wise for an entrepreneur to go into a kind of business

that would require educating its target market, which can be very expensive. However, the decision of a new business to compete with already established ones is equally unwise and expensive. Hence with the competition ‘spectacles’ off, the budding businessperson can identify a niche that is oblivious to others and capitalize on that.

That would help in meeting the needs of customers in a holistic way and improve standards of living, instead of the whole economy being skewed towards the provision of just a few types of products and services.

Fifth, competition is unhealthy. Unhealthy, not just in the sense of sanity but it causes physical health risks. And that I believe is one of the main causes of certain ailments in the so-called developed western world. And now they are developing in our part of the world as well. Naturally, we all need some amount of stress to function well in society.

However, when stress becomes chronic, it leads to very bad consequences. Stress can suppress your immune system. And when that happens you become susceptible to infectious diseases. “Stress doesn’t make you sick,” says one virologist Ronald Glaser. “But it does increase your risk of being sick because of what it does to your immune system.”

Stress is strongly linked to an increased susceptibility to colds, flu, and herpes. While we are constantly exposed to these viruses, our immune system typically defends against them. However, emotional distress can weaken these defenses, allowing the viruses to take hold.

The specific biological mechanisms are not yet clear, but some experts believe that stress hormones can suppress immune function when they flood the bloodstream. Typically, this is not a concern, as these hormones are temporary. However, chronic and intense stress can lead to sustained suppression, making one more susceptible to illness. This may explain why Canadian doctors estimate that 50-70% of office visits are stress-related, manifesting as headaches, insomnia, fatigue, and gastrointestinal issues. The US estimates are even higher, at 75-90%. While seemingly calm individuals may also be at risk, especially if their calmness is a facade, individuals with type-A personalities (characterized by impatience, aggression, and competitiveness) are most vulnerable to stress-related catastrophes that can lead to fatal consequences. Thus, competition in all forms is detrimental and deadly.

Sixth, competition kills business. If we turn to the global economic down-turn of 2009, this cannot be overemphasized. The Fourth Estate, a novel by the renowned British storyteller Jeffrey Archer, amply illustrates the pathological nature of competition.

It involves two ambitious competitive media tycoons, Keith Townsend and Richard Armstrong. Both of them made very terrible business deals that could collapse their respective empires as they competed with each other. Both went bankrupt as a result. Keith was wise to listen to good financial advice and survive. Richard on the other hand committed suicide.

While the story is purely fictional, it is no doubt true to life. And it helps every discerning reader to realize how sinister competition is. Sure, it can be exciting! But just as we say “The speed that thrills is the speed that kills” so also is the statement true that “The competition that thrills is the competition that kills”. And that, in part, was the cause of the financial crunch. For me, every competitor is a villain because he is only focused on one thing that should belong to his opponent when there is still so much out there for him to enjoy but oblivious to, thanks to competition blindness!

We can discern this in the services sectors aforementioned as demonstrated in Ghana. Regarding the Telecom sector for example, we have been praising competition for the relatively lower call rates that we enjoy. But the fact is that competition has rather made those costs higher since until recently, they were individually building their own cell sites which apart from being expensive to build are equally expensive to maintain. And currently, there are other infrastructure that they could share if they collaborated. But competition does not allow that. Couple this with the cost of their competitive ads and you would see that we are rather being ripped-off! And competition is the culprit.

We can also look at the flip-side. What would happen if operating costs for the telecom companies continued to rise while they reduced call rates in order to be competitive and you and I were happy to stay on the phone for as long as we wanted, chatting about non-value-adding things. If some of them were no longer profitable and had to fold-up, what would become of us? We would be falling into the hands of a monopolist and you know what type of service we would be receiving at ridiculous rates. Would you in that case applaud competition?

Many of us complain about high bank charges, high interest rates on loans and low interest rates on savings. The bankers in turn explain it off with their technical jargons. However, all said and done the fact is this: Due to competition, they have invested heavily in technology, opening new branches and hiring staff which in turn raise their operating costs. And who should pay for all that? You and I, of course! Otherwise, they would die. Yet what they should have been doing is running branchless banking through the deployment of modern ATM technology that interfaces for all of the banks. With that common infrastructure, operating costs would be reduced, and the burden would be taken off the customer.

Seventh, competition disrespects and insults the intelligence of the consumer. It is manipulative. Take for instance a promotion that requires you to text to a certain code for, say, 50p and stand the chance of winning, maybe a car.

And mind you, most of them say you stand a better chance of winning the more you text. If that company receives just 2,000,000 texts that would translate to GHC1,000,000! More than enough to pay for the car and the ads. The rest is huge working capital that ‘texters’ have contributed for free without any hope of dividends! It is 100% lottery.

Some call it smart business. I call it mediocrity, manipulation and an insult to the intelligence of the consumer.

The case for collaboration

Collaboration then becomes a better course to take. When businesses that are supposed to be competitive become collaborative, they reap more. The following quote from a Virtual Photography Web site demonstrates it: “Just today I spoke with what some may consider to be my competitor. However, he is focusing his efforts in a completely different direction. But he offers some side products that would combine with mine, and offer incredible tools to our clients. Instead of looking at him as competition, I’m now piecing part of his products with mine, and providing us both with increased sales potential. Win/win for both businesses”.

In international trade, we have what we call comparative advantage. This concept holds that if Ghana for instance has the capacity to produce maize more effectively and efficiently than rice, Ghana should in that case concentrate her efforts on producing maize and import rice from, say Thailand who has the comparative advantage over rice production. Thailand would in turn import maize from Ghana since she does not have a comparative advantage there. This is collaboration. And if world trade were truly like that, you can imagine how different life would be. Unfortunately, this is only in the textbooks. In practice, selfish competition holds sway. This is a major cause of poverty in the world.

Therefore, if the private sector as engine of growth of the economy would apply the principle of comparative advantage and collaborate, poverty on this continent would be drastically reduced! But currently, every bank is providing the same services that all the other banks provide and are vehemently competing with one another. The same goes for the telecom and other parts of the services sector; and spreads further to the other industries.

I apologize if I seem to be biased towards the services sector. That is only for illustrative reasons. Yet given the current economic indicators that the services sector in Sub-Saharan Africa contributes more to GDP than the others, there is a great potential there. And I believe that sector can contribute immensely to poverty reduction if properly managed. For example, Nigeria’s relatively stronger banking sector which is present in other countries puts her on a pedestal to spearhead economic growth in West Africa. Matter of fact, their banks’ entry into Ghana, for instance, transformed the banking landscape in that country with more innovative solutions. That is why collaborations in this sector can have a multiplier effect on economic growth in Africa. Yet, not the services sector alone, but all the others as well should embrace collaboration as opposed to competition.

Competition is wasteful, expensive, retrogressive and thus unproductive. Collaboration on the other hand is efficient, effective, progressive, and many, many more. So, which one should you be promoting—competition or collaboration? It is your decision to make. But I prefer COLABORATION.

I would be most grateful for your thoughts; whether you agree or disagree with any of my views or you have some contribution.

The author Jules Nartey-Tokoli is Founder and Group CEO at Groupe Soleil Vision, comprising Soleil Consults (US), LLC, NubianBiz.Com, ShopNubian.Com and Soleil Publications. He has lived and worked in both Ghana and the United States, having extensive experience in Strategy, Management, Entrepreneurship, Premium Audit Advisory and Web consulting. He has also published several articles on Strategy, Management, Corporate Governance, Leadership, Entrepreneurship, Economics, e-Commerce, Information Technology (IT), Customer Service/Care, Sales, Marketing, Communication, Branding, Education, among others. 

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