The Reciprocity Advantage: A New Way to Partner for Innovation and Growth
Bob Johansen & Karl Ronn
240 pages, Berrett-Koehler Publishers, 2014
The Reciprocity Advantage came out of a relationship that Bob Johansen and I have had for more than 20 years working on innovation from two very different perspectives. The Institute for the Future, where Bob is a Fellow, creates 10-year forecasts, distilling signals of disruption into the most important insights that companies can use to shape their business. We met at Procter & Gamble where I was an R&D vice-president working to develop new billion-dollar brands like Swiffer and Febreze. My job was to turn insights like Bob’s into action.
Whether working with large companies or startups, we see two consistent dilemmas. First, when companies do their strategic analysis, they fail to plan for and anticipate the big future disruptions, instead addressing opportunities and threats in terms of existing competitors and current trends. They’re also blind to the macro events shaping the current decade. Second, even when they become aware of these future forces, they don’t know how to take action. Our research shows that in the next decade cloud supercomputing, the rise of digital natives, socialstructing, and gameful engagement will disrupt and reshape business as we know it. The companies that thrive in this new environment will be those that design for and capitalize on those disruptions through reciprocity–giving now to get profitable growth later. Winning will require sharing undervalued assets and partnering with unlikely groups of individuals to accomplish more than what you could alone. We call this new competitive advantage a reciprocity advantage. Some big companies like IBM, Google, and Apple are learning how to do this. Other startups like Airbnb and Uber are built on this premise.
Here’s an excerpt from the book showing how competitive advantage is changing.
Partnering to Reduce Food Safety Risk
The Global Food Safety Initiative (GFSI) is an example of global partnering with an extremely wide reach to do something that no single company and no government could do alone. Food companies have always been concerned about food safety, and having a good reputation around food safety used to be a competitive advantage. As the food web has become increasingly connected and increasingly global, however, food safety can no longer be a competitive advantage for a single company. A food safety crisis creates consumer concern that disrupts all food providers—even if they have nothing to do with the source of the food scare. Food safety is being reimagined as a foundational standard upon which competition can build. GFSI began as an effort to leverage the resources of corporations, governments, and universities.
Here is the way that the GFSI describes the environment that created this need:
Back in 2000, food safety was a top of mind issue for companies due to several high-profile recalls, quarantines and negative publicity about the food industry. There was also extensive audit fatigue through the industry, as retailers performed inspections or audits themselves or asked a third party to do this on their behalf. These were often carried out against food safety schemes that lacked international certification and accreditation, resulting in incomparable auditing results.
Up to that point, players up and down the food chain had their own approach to food safety. Some players were better at food safety than others, but the food supply chain is interlinking, so food safety mistakes can multiply rapidly. Also, the consumers of food often blame food safety mistakes on companies that had nothing to do with the problem. A bird flu scare in China can cause a consumer in Illinois to eat something other than chicken—even if there is no rational argument for doing that.
McDonald’s, one of GFSI’s early board members, has found that partnering was a way to engage positively with the growing numbers of people who are concerned about food safety. In the minds of many people, McDonald’s has a right-of-way with regard to food safety and health. McDonald’s restaurants are very clean and known for high food safety standards. In emerging markets where food safety is more of a concern, the McDonald’s brand is perceived as a safe place to eat. Yet, food safety is a problem that McDonald’s cannot deal with alone. If a food scare happens around chicken, for example, many people will stop eating McDonald’s Chicken McNuggets—even if McDonald’s is not at fault and even if the scare has nothing to do with them.
In February of 2008, Walmart announced that all of its private (store) brand suppliers and some of their national brand suppliers would be required to become certified based on one of the GFSI standards. An independent study published in the Journal of Food Protection in 2012 found that adoption of GFSI standards resulted in fewer safety audits—on the average one less per year, at considerable cost savings. Another positive outcome from GFSI was an increase in employee food safety training.1
GFSI is a nonprofit business that allows all competitors in the food industry to compete at a higher level. More important, GFSI reduces the risks of food safety scares for consumers and for suppliers up and down the food chain.
GFSI’s Reciprocity Advantage in Summary
What right-of-way has the GFSI created to share with others? Each company shares its science, standards, and practices in food safety.
Who are GFSI’s partners? Anyone involved at any stage in the food supply cycle.
How did GFSI experiment to learn? It tried many different approaches in its early days and has now evolved to be a global brand—expanding up and down the food chain. They began with benchmarking on a global scale to look for opportunities that would add new value by working together to improve food safety as well as opportunities to create new business value.
What assets do member companies and GFSI give away? Food safety standards, science, and techniques, plus their time to create the standards.
How did GFSI scale? GFSI now sponsors a wide range of events for food safety professionals internationally in programs and standards—as well as ways of responding quickly to food safety crises.
What is GFSI’s reciprocity advantage? As the founders say, “Food safety is not a competitive advantage.” GFSI allows its members to achieve their own competitive advantage in areas other than food safety. A strong, consistent approach to food safety assurance creates a low-cost solution that allows everyone to focus on higher order benefits.
GFSI recently commissioned the first study by an independent research group to help assess the initiative to date. The researchers concluded that GFSI has contributed significantly with the following benefits:
A more effective food safety system and enhanced ability to produce safe food.
Enhanced compliance with regulators, with a reduction in the number of notifications and product recalls.
- Improvements in the culture of food safety and the human behaviors that are required.2
- GFSI is a better way to deliver food safety. GFSI lowers the cost of food safety while also allowing members to focus on delighting their customers and competing at a higher level.
- GFSI encourages companies of all sizes anywhere in the world to partner for overall food safety. GFSI is a nonprofit reciprocity-advantage business that increases the profit for each member company by lowering the risk of costly safety and health mistakes. Lowering this risk allows companies to focus on creating better products and more successful businesses.
GFSI is massive reciprocity on a global scale. Companies are giving away their expertise in food safety in order to compete at a higher level on the assumption that all the food will be safe. Today’s Internet and tomorrow’s cloud will make it possible for ever-larger numbers of partners to participate in GFSI. When a food safety crisis breaks out, as it certainly will, this global connectivity brings together the resources to respond much more quickly and effectively. The GFSI partners assert, “Food safety is not a competitive advantage.” GFSI offers a reciprocity advantage to its member companies. By sharing its food safety expertise, it lowers its overall risks in the face of food safety scares.
Individual companies—like McDonald’s, Cargill, Tesco, and many others—were able to team with other food companies to strengthen the Global Food Safety Initiative—an excellent example of reciprocity advantage that leverages right-of-way through partnering. By combining with other companies, a shared network of trust and right-of-way around global food safety was created. GFSI, however, can help individual members widen their right-of-way and lower their risks.
Karl Ronn and Bob Johansen are the coauthors of The Reciprocity Advantage: A New Way to Partner for Innovation and Growth.