In July last year, the Washington Post ran an article, “The end of small business: Giant corporations may be the only survivors in a post-pandemic economy.” What a bleak outlook for the rest of us. In the 1980s, small businesses represented one-half of all shopping visits, today it is less than one quarter. Our best strategy for success is to adopt the principle of ‘collab-etition’ in which collaboration and competition work synergistically together. We must combine our efforts and expand our share of voice, research and development, and access to capital to grow small businesses’ market share. As individual businesses, we must learn to collaborate and compete more effectively against the corporate giants.
Two dominant forces are pushing us towards greater collaboration; The first is the economic havoc resulting from pandemic business closures, job loss, a locked-down consumer base, and the impact of government interventions on labour. The second is the growing gap between small and large corporations. Close to 70% of shopping transactions took place in small businesses in the 1980s, and today it is closer to 50%. Not only is the small businesses share of market declining, but its profitability is as well. A new study published in the Harvard Business Review notes that return on capital for big businesses is now more than double the return for small businesses. This gap will continue if nothing is done about it.
Collaborative marketing is nothing new; it’s prevalent throughout the tourism industry with pooled funding and partnerships between Destination Marketing Organizations, transportation partners, attractions, and hospitality providers. They all work together to attract more visitors and increase the share of wallet from those they attract to the region. We also see Business Improvement Associations promoting businesses within a geographic area and the Island Good brand which encourages consumption of Vancouver Island products. We’ve created the South Island Prosperity Partnership here on Vancouver Island, a public/private enterprise including most of our thirteen municipalities and private businesses.
Collaboration is the best way to grow a business category or the business of like-minded organizations that share a similar target audience. It’s why car dealers gather in the same area and advertise on the same days. While their shared voice draws attention to the category, their individual offers help consumers choose which vehicle fits their needs and budget. Similarly, we as a community win only if the consumer remains in the market and purchases from a locally-owned company.
So how can we get to a more collaborative approach to business here on the Island? Start with shared values. We need to come from a place of empathy and understanding, or the partnership won’t last. If you look deeper, you will find most of us have shared values; they may not be visible at first glance. The hardship and growing inequalities exacerbated by the pandemic have made us all look more closely at our values. It seems that these values may be the critical success factor in our recovery.
A collaborative approach is consumer-centric, focusing on more client needs. We become of greater value if we can create a more fulsome and seamless purchasing experience. Automobile dealers don’t sell auto insurance, but they bring an agent into care for you when you buy a new car. We need to start thinking the same way. How can my client become our shared client?
As the big get bigger, it is harder for us to compete on costs, inventory, and innovation. Collaboration extends to the sharing of cooperative inputs to manufacturing and service delivery. Suppose we can’t afford the capital investment to create a parity product. In that case, we must pool our resources with compatible and cooperative competitors: shared food processing equipment, distribution and even labour.
The aphorism “A rising tide lifts all boats,” used frequently by John F. Kennedy in many speeches, illustrates how collaboration has evolved in the economic development realm. The rising tide idea is similar to the fair share of market theory, which dictates that all things being equal, your share will grow proportionally to the category. However, the truth a rising tide does not float all boats equally. The big will keep getting bigger unequally unless we steal share back from these Goliaths. And we can’t do that on our own; we need each other.
Now is the time to put differences aside and focus on our similarities, shared community, values, schools, parks, and social services – the things that make Vancouver Island a great place to work and live.
Now’s the time for some healthy ‘collab-etition.’ A great place to start is to attend the upcoming Vancouver Island Economic Forum October 27-28 — in person or online to find out how we can all work together.