Let's do some future gazing to 2020 or thereabouts and look at what Australian Business Limited's Sydney North Regional Council is up to.

One scenario

Well, we might see the Sydney North region as a high performance global hub, a centre of excellence in bioinformatics grown from the convergence of world-class start-up IT and telecommunications enterprises with the latest bioscience advances from Macquarie University and its spin-offs.

The region's enterprises are sought-after for leading edge solutions in everything from environmental remediation to remote sensing to telemedicine.

It is a mecca for knowledge workers and is largely responsible for reversing much of Australia's brain drain. Not just in the sciences, but in the arts, film, entertainment, multimedia and cultural industries.

Sydney North is recognised worldwide as a hotbed of creative industries that started with Australian Academy Award-winning animation, special effects and cinematography skills around the lower North Shore in the late 1990's.

Innovation and technological pioneering is not restricted just to high tech or creative elites. Mainstream local businesses, even those just serving domestic markets, know that continuous innovation is a survival strategy. They turn ideas from customers and suppliers into new business offerings that command a premium. They work more intelligently. They harness the skills and know-how of their people, resulting in increasing sales and fresh capabilities in their firms.

And of course, they can do all this because of their decades-long membership of Australian Business Limited, with the unrivalled access it gives them to panels of skilled advisers anywhere in the world, tailoring vital services specifically to their enterprises 24/7.

And another scenario

Or maybe not. In 2020, maybe ABL's Sydney North Regional Council meeting would be a very small affair. A few business stalwarts remembering the good old days of the dot.com boom and the promise of biotech breakthroughs which sadly few in Australia could realise, unable to access the huge amounts of patient venture capital needed to cover the long lead times and high risks inherent in life sciences businesses.

A world of chauvinistic nationalism and revived trade barriers makes doing business from Australia a lonely and ill-fated pursuit. It is an age of borders, fragmentation, protectionism and isolation.

This puts a swift brake on Australia's energetic film, multimedia and cultural industries, unwelcome as decadent imperialist imports in Asia and the Middle East and a victim of more blatant protection in Europe and in North America.

Exports are in decline, which has a knock-on effect to local businesses serving the domestic market. Even how we describe wine and food and whether we can call an Italian restaurant 'an Italian restaurant' is subject to rules set by the EU in Brussels!

The only companies doing well are those in the defence industries to support the geopolitical crises, skirmishes and wars that we are either involved in or protecting against.

Or those lucky enough to be able to exploit personal business relationships, cultural heritage ties to Asia and hard-won political bilateral trade deals.

ABL survives by the careful husbanding of its resources and by the valiant efforts it makes one-on-one for its member companies in hard to reach markets. It succeeds only because of the depth of its business relationships and its alliances with bodies like Austrade, carefully nurtured over decades to weather both the good times and bad.

These alternative pictures of the future fortunes of ABL's Sydney North Region and its member companies extrapolates from a scenario-building study by the Australian Business Foundation, with GBN Australia, called Alternative Business Futures and published in 2000.

Collaboration & competition

They are used to set the scene for my presentation tonight on The Paradox of Competition and Collaboration.

From the body of research undertaken by the Australian Business Foundation comes a critical piece of intelligence for business: innovation and knowledge are increasingly at the heart of competitive success; and their active ingredient is collaboration. Paradoxically, it seems that the more you collaborate, the stronger your competitive success.

When the Harvard Business School's Michael Porter wrote The Competitive Advantage of Nations in 1990, he gave hard-headed respectability to strategies that had previously been seen as the cosy, soft side of business – networking, alliances, partnerships, collaboration and clustering.

This is where the idea took shape that collaboration and competition can co-exist.

Porter recognised that this blend of competition and collaboration drove remarkable business productivity and performance because of the concentration (the eco-system) of specialised capabilities and skills, institutions and rivals, related businesses and sophisticated customers.

More than that, collaboration was seen by Porter and others as the new driver of competitive success in markets transformed by globalisation, online technologies and the increasing significance of intangible assets such as knowledge, relationships and motivation.

Today, these concepts of alliances, clustering and collaboration help us bridge two apparently contradictory ideas of modern business – on one hand the need to be nimble, alert and intimately connected to the customer and changing market demands, and at the same time, to have the scale and critical mass to compete globally.

The Australian Wine Industry

A home spun example of this is Australia's wine industry, which was the subject of a study for the Australian Business Foundation by Professor Ian Marsh and Brendan Shaw, then of the Australian Graduate School of Management.

Marsh & Shaw show how the Australian wine industry has transformed itself over a decade and a half from being a domestic commodity industry to a knowledge-driven cluster producing premium global brands.

Marsh and Shaw identify strategic collaboration as the cornerstone of the transformation of the Australian wine industry.

The study found that while not orchestrated and centralised, industry-wide collaboration and linkages have facilitated three significant changes in the wine industry:

• First, wine producers have adopted a global business orientation – they started to think of their industry and its prospects and their individual strategies in an international context.
• Second, within this strategic frame, marketing is king; the industry has become market and consumer led, not producer driven.
• Third, the industry is committed to innovation; there is clear evidence that Australia's competitive advantages have been driven significantly by technical developments. The industry has invested in research – and perhaps more importantly, findings have been widely disseminated and adopted.

This collaboration, say our authors, took hold through the existence of:

• Industry champions, like Brian Croser and Len Evans, who had a vision and led from the front.
• A potent strategic planning mechanism, resulting in a 12 page document in 1996 called Strategy 2025, which documented the vision of what the wine industry could become, set the necessary objectives and targets to achieve this and detailed what the industry needed to do to translate this aspiration into a reality. Strategy 2025 created a kind of strategic envelope, within which risks could be managed, new opportunities could be recognised, and with it, the willingness to adopt previously unthinkable practices like varietal labelling.
• Strong research and development advances and their diffusion throughout the industry.
• Excellent mechanisms for education and skills development in the industry and an array of information exchange media.
• A robust set of interlinked, but specialist, industry associations working in concert to implement the opportunities identified in Strategy 2025, eg Winemakers Federation, Wine Industry Research Institute, Wine & Brandy Corporation and the like.

It is important to note that the strategic collaboration in the wine industry was somewhat chaotic and serendipitous, rather than an organised cluster. But, its reality and its performance-enhancing effects are detailed in Marsh & Shaw's study.

They conclude that collaboration was the means through which knowledge enhanced competitive performance, especially in terms of reducing transaction and marketing costs, and disseminating and realising opportunities for export and for innovation.

Lessons for collaboration

If we return for a moment to the alternative visions of 2020 outlined earlier, high performance is lock-stepped with collaboration.

High tech businesses link to Universities to commercialise latest research advances. Knowledge that is shared grows new capabilities in the creative industries, which in turn, attracts more investment in a virtuous circle. Even low-tech businesses create new business offerings or work more effectively by listening and responding to their customers and suppliers.

Moreover, in our isolationist scenario of 2020, the businesses that succeed are those with robust personal, business and cultural relationships that allow them to fly in the face of trade barriers, investment controls and nationalist and protectionist policies of all sorts.

Industry clustering and collaboration has potential to foster strong regional economic development. But, it is not enough just to recognise the natural connections in a geographic area between economic actors. These interactions must be harnessed to create distinctive capabilities that come to characterise the region and drive its economic prosperity.

Deliberate and disciplined efforts are required to encourage the collaboration that puts a region's enterprises in touch with the know-how, resources, technologies, skills and motivation that pushes them along an outward-looking, high growth path. The performance and productivity of such firms then serves to attract other investors, suppliers and competitor firms into a critical mass of business capability and community connections that becomes self-reinforcing. The end result is a viable industry cluster (or more likely, multiple clusters), a regional hub with proven capacity for stronger participation in global supply chains.

Let me conclude with some thoughts from the latest book of Harvard Business School Professor Rosabeth Moss Kanter, called Evolve! Succeeding in the Digital Culture of Tomorrow. A key message is that collaboration is becoming the competitive weapon of choice for those wanting to master the revolutionary transformations being brought about by digital technology and e-business.

Rosabeth Moss Kanter and other management writers believe that the only means of competing will be through messy economic webs of partners and stakeholders that form and disband as needed to capitalise on emerging business opportunities.

Competitors, suppliers and customers become blurred. Companies are more dependent on others to achieve their strategies. Control is sacrificed to the ability to influence. Beware, if you believe that outsourcing relieves you of responsibilities; it just changes them to different forms of relationship and customer management. The challenge becomes to nurture your economic web where all the parties can thrive interdependently.

Rosabeth Moss Kanter introduces a space-faring analogy and the concept of "collabronauts", a new corporate player charged with searching for collaborative advantage and alliances.

"(They) are good at making connections, both human and intellectual. They are constantly on the look-out for new ways to benefit from combining forces with partners. They venture into unfamiliar territory, make deals, and return with knowledge that transforms their home world. They bring organisations closer together, introduce people and build relationships among groups that can initially seem like aliens to one another […] They manage rumours, mount peace-keeping missions and solve problems [….] They convince their colleagues to forget old rules and try something new, something that a comes with having partners." (Kanter: 137)

Kanter draws out five lessons from the most effective ''collabronauts'' she has studied in enterprises like Amazon.com, Sun Microsystems, CISCO and Hewlett Packard. They are:

1. Focus on the future and be open to discovery of new and unimagined opportunities from collaboration.
2. Devote resources and pay attention, as nurturing networks is no idle task or after-thought.
3. Get embedded in the partner's business, both as a supplier and as a customer.
4. Exercise diplomacy, work at seamless connections between partners so that customers get what they want, however the relationships are configured. Collaboration is an adult relationship, as your partners may also be in partnership with your competitors. The rules of engagement must be clear – neither isolation nor outright war.
5. Master internal change, so partnerships are real and vital at all levels in the organisation and internal barriers to collaboration are dismantled.
   
   Just as we have witnessed the paradox of collaboration and competition co-existing, it may be that excellent business performance in today's volatile, online, connected world will be driven by proficiency in community and relationship-building skills.
   
   Rosabeth Moss Kanter, in fact, sums this up in the intriguing idea that tomorrow's successful corporations will not be hierarchical ordered bureaucracies, but will resemble open, inclusive, slightly chaotic communities of purpose, with permeable boundaries, shared knowledge, good grapevines and bonds based on mutual contributions and responsibilities.

Now, there is a stretch target for Australian Business Limited's Sydney North Regional Council as it creates its own future for 2020.