Business Strategy in an Age of Polarization
For three decades, companies in the United States and Europe operated in a remarkably stable environment. Free trade flourished, markets opened, and corporations thrived on global reach and distributed value chains. Ideological divides seemed to narrow, and centrist governments dominated much of the West. It was, as former U.S. National Security Adviser H.R. McMaster called it, a “holiday from history.”
That era is over.
Today, strategy must extend beyond the market. Firms are no longer just market actors—they’ve become instruments of policy. Governments lean on corporate capabilities to advance national priorities. Consumers judge companies as much by their values as by their products. And policy volatility reshapes competitive dynamics faster than product innovation.
While most companies struggle to earn their cost of capital, the top performers are pulling away. Their success comes not just from market excellence, but from mastering forces beyond the market:
Creating value requires more than a compelling product. The strongest brands combine functional benefits with a clear values proposition—alignment with customer identity and beliefs. In polarized markets, this emotional bond drives loyalty and differentiation.
Capturing value depends on more than market power. Firms that mobilize collective action—from regulators to consumers to activists—can reshape industry structure, secure favorable policy outcomes, and protect margins that product innovation alone cannot sustain.
Protecting value requires more than capital allocation. Relational capital—trust-based relationships with stakeholders, governance capabilities, and reputational resilience—enables firms to anticipate regulatory shifts, adapt quickly, and turn crises into opportunities.
Evidence shows this advantage is measurable: companies with active policy engagement adjust costs 15-20% faster than peers, face lower costs of capital, and achieve higher returns than those focused solely on market competition. Since 2000, regulation and political engagement have explained a growing share of corporate profits and valuations—often more than R&D or capital investment.
The boundary between market and nonmarket strategy is disappearing. Firms that integrate both dimensions systematically outperform those that treat politics and policy as peripheral risks to be managed.
This Substack explores how successful companies create, capture, and protect value in an age of polarization—and how leaders can turn nonmarket forces from constraints into competitive advantage.
