The Business Model of the Future

The dominant myth in business is that competition drives excellence. If everyone's competing, they will work harder and produce more. But there's a problem with this argument: it is wrong.
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The dominant myth in business is that competition drives excellence. If everyone's competing, they will work harder and produce more. But there's a problem with this argument: it is wrong. Working against others -- either individually or corporately -- doesn't produce anything except noise, friction and waste. It's working together that proves productive and creative.

A classic example of this is one of America's iconic companies: Ocean Spray. The company was founded in the 1890s after a Massachusetts cranberry farmer, Marcus Urann, invented cranberry sauce as a way to use up fruit that couldn't be stored. When his neighbors copied his invention, he could have fought them or lowered his prices in a classic race to the bottom. Instead, he reached out to them and formed what is today a cooperative of 750 cranberry farmers.

Joining together has, over the years, produced some startling results. Because the company is motivated to find the most profitable uses for their fruit, instead of beating each other down in the marketplace, they've found increasingly creative uses for the bitter little red fruit: juices, jellies, craisins, salsa. Together the farmers can pay for research and product development on a scale and at a level no one of them could afford independently. Only working together has allowed them to turn a local, indigenous American product into a global brand.

For the managers, marketers and food technologists employed by the farmers to run the company, the ownership structure is demanding; 750 activist shareholders represent a lot of knowledge and demand a great deal of attention. Ocean Spray's CEO Randy Papadellis told me, laughing, that he thinks of himself as the Chief Alignment Officer, keeping everyone's interests moving forward together.

But here's the big win: having to be great collaborators within the business has given the company the skills, nuance and social awareness required to be great collaborators outside the company. Ocean Spray can, and does, work well with its competitors -- Gerber, Nestle, Heinz -- purchasing plastics together, sharing distribution and manufacturing in some parts of the world.

The structure of Ocean Spray is one in which, as Papadellis put it to me, no one wins unless everyone wins. Farmers with huge cranberry bogs are just as important as those with small ones. Everyone's ideas about how to improve output get shared. Any new product idea -- when it works -- benefits the entire business. Everyone is motivated to succeed because what helps one helps all.

Cooperatives aren't unusual in agriculture. What's remarkable about Ocean Spray is how profoundly the company's structure has enabled it to grow to be a $2 billion business by investing in its own future. The company may be old and feel traditional -- wooden cranberry scoops litter the Massachusetts headquarters -- but its ability to work for the success of all its constituents profoundly fits it for the future.

"I think we may be where other firms need to get to," Papadellis told me. "We have a longer horizon, not focused on quarterly returns but on passing on to the next generation. We take a more holistic view where we are committed to making sure that everyone we work with -- everyone -- benefits. No one gets left out. We all win or no one wins. And that's not just us, our generations, but the generations of the future."

Margaret Heffernan's new book on collaboration and competition, A BIGGER PRIZE, is out now.

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