Business strategy in an age of polarization
For thirty years, businesses in Europe and the United States could count upon a stable business environment. Free trade and open markets were the norm. Corporations benefited from access to global markets and the efficiency of distributed value chains. The world was becoming flatter, ideological fault lines were becoming less pronounced, technological progress was universally cheered on, and in many countries centrist “third-way” governments took hold. This “holiday from history”, as former US national security adviser HR McMaster put it, is over.
In an age of polarization, strategy requires firms to think beyond the market. While some leaders might dread this new reality and see it riddled with risk, others seize the opportunity. In fact, the age of polarization extends to corporate success: while the majority of companies earn little to no economic profits, the top quintile of the market achieves higher returns than ever before.
In almost all instances, their success builds upon forces beyond the market.
The strongest brands do not just create a strong value proposition, but also a compelling values proposition: there is no greater customer loyalty than one built upon an emotional bond of shared values and beliefs. And few moats are as strong as regulation cementing an industry structure and shielding one from a constant flow of new competitors. Likewise, breaking into new markets often requires regulators to change their perspective, when new technologies make old rules obsolete. Finally, when the inevitable crisis moment arrives, credibility and strong stakeholder relationships become mission-critical assets.
Companies that build influence and manage their beyond-market environment well have proven to grow faster, realize higher margins, and outperform the stock market. With billions at stake, strategy beyond markets is the new frontier in corporate value creation.
This substack is the place to learn how to win in an age of polarization.
