Creating diverse and inclusive business ecosystems: a cooperative advantage perspective
Leon Prieto and Simone Phipps
A lot has been written about business ecosystems since James F. Moore provided a definition of the concept in his seminal Harvard Business Review article Predators and Prey: A New Ecology of Competition. Moore argued that business ecosystems are an economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world.
Even though this concept was defined in the 1990s, this phenomenon was around long before and was even evident during the days of segregation in Durham, North Carolina’s Black Wall Street. Unlike Tulsa, Oklahoma’s Black Wall Street destroyed by an angry white mob in 1921, Durham’s Black Wall Street was more successful and long-lasting due to the cooperative advantage gained by the African American and white business communities. There was a level of cooperation that existed between the Black and white business ecosystems that was mutually beneficial. Some leading African American entrepreneurs – Charles Clinton Spaulding (Thinkers50 Hall of Fame recipient), John Merrick, Dr. Aaron McDuffie Moore, and other African American business leaders -- launched ventures with assistance and financial investment from white businesspeople who they had a good working relationship with. Washington Duke (benefactor and namesake of Duke University), the patriarch of white Durham’s largest business, American Tobacco, was a regular visitor to Durham’s Black Wall Street and invested in African American businesses and institutions there, and both Black and white ecosystems interacted with each other in a robust way that resulted in economic and community development. There are lessons to be learned from that historic example that can be useful in contemporary times as it relates to creating diverse and inclusive business ecosystems, and we believe that there are tremendous benefits to be gained if today’s business ecosystems strive to gain a cooperative advantage.
Gaining a cooperative advantage
Unbridled capitalism is being challenged due to various inequities in wealth, employment, education, and other factors that the pandemic has exposed. COVID-19 has ravaged the well-being of communities and has brought much needed attention to the structural and systemic injustices experienced by people from racialized groups. We believe that this can be alleviated if there is a robust and authentic effort to create diverse and inclusive business ecosystems. These can play a role in building the sustainable cities and communities that we desperately need to facilitate economic and social development in communities. Increased development and sustainability can be enabled by a cooperative advantage approach, which describes the benefits that an organization possesses and accrues due to its people-centered approach. This encompasses engendering a spirit of care, meaningful dialogue, and consensus among employees, customers, and community. This approach can be utilized within the context of creating diverse and inclusive business ecosystems; ones that have the potential to create decent jobs, engender social innovation, revitalize marginalized communities, and facilitate sustainable development and community wellbeing.
We propose that business ecosystems should strive not only to be profitable but also inclusive, diverse, and sustainable; ones that ensure the well-being of all its stakeholders and members of its extended professional family. Humans are generally social and communal beings, and we argue that the successful relationships that existed between Black and white business ecosystems in Durham, North Carolina during the days of segregation, won the support of the local government, large firms, small businesses, customers, and community because of the cooperative advantage that they all strived for, in order to benefit all stakeholders. Today, all business ecosystems can benefit from learning how to obtain a cooperative advantage; an approach rooted in ubuntu, a word whose meaning translates to ‘I am because we are’.
Diversity matters
Creating diverse and inclusive business ecosystems can be practiced in various contexts. For example, in the United States, Minority Business Enterprises (MBEs) are classified as businesses that are owned and controlled by individuals identified as minorities. Currently, there is urgent need to support MBEs. For example, many Black-owned businesses had precarious finances before the COVID-19 pandemic struck, and an estimated 41 percent of them closed down between February and April 2020 (the Economic State of Black America, 2021). Through organizations such as the National Minority Supply Development Council Network (NMSDC), MBEs are connected to corporate members including America’s top publicly owned, privately-owned and foreign-owned companies, as well as universities, hospitals, and other buying institutions (NMSDC, 2011). Greater efforts are needed currently to facilitate a cooperative advantage between the interacting business entities which include corporations, government entities, small businesses, consumers, and minority business enterprises. Work by Antonella La Rocca and Ivan Snehota suggests that increased interaction between entities in business ecosystems has the potential to create multiplier effects that result in mutually beneficial relationships. More collaboration means that we can reimagine more Black Wall Streets in contemporary times; ones that are embedded within a wider business ecosystem. For example, some African American executives who oversee capital, including top executives at M&F Bank, one of Durham’s Black Wall Street’s most prominent firm, have seen its assets rise to nearly $310 million in 2021, a 16.4 percent increase from 2020, and recently received more than $18 million in equity capital from four of America’s largest white banks. As a result of these significant increases in capital, attributed to the current social justice movement, M&F is now attempting to strategically deploy significant capital into the local African American business ecosystem to stimulate further stability, growth and sustainability.
A 2021 report by McKinsey found that improving access to capital, mentorship, networks, and professional opportunities could help more Black enterprises launch and grow—and achieving parity would create 615,000 new Black-led workplaces. We must remember that MBEs’ activities impact not only the owner of the business but go further to create job opportunities for the community. The pandemic has exacerbated the financial situation of MBEs at a time we desperately need these businesses to grow, flourish, and hire more employees, and in turn, provide a greater benefit to society during the ‘new normal’. To foster the promotion and growth of diverse business ecosystems, the relationships between corporations, government agencies, small businesses, consumers, communities, and MBEs require further cultivation because these relationships are critical for all stakeholders.
Three foundational elements to create diverse and inclusive business ecosystems
To gain a cooperative advantage, business leaders must first be authentic in their cooperative approach to creating diverse and inclusive business ecosystems. We encourage business leaders to utilize the three core tenets of ubuntu: spirit of care and community, dialogue, and consensus building as an approach to facilitate development and sustainability of diverse business ecosystems.
- Spirit of care and community:
Spirit of care and community is a core element of gaining a cooperative advantage, and practiced in a business context, it addresses the kinds of values that embrace people’s well-being, such as meaningful work, a sense of community, and caring. As it relates to creating diverse and inclusive business ecosystems, a spirit of care and community includes supporting MBEs, especially those that were struggling prior to and during the Covid-19 pandemic. This includes the consideration of the needs and preferences of all MBEs and the clients they serve, as well as the nurturing of a sense of community within the business ecosystem that is built on inclusion, trust, and teamwork. Support from corporations, government agencies, small businesses, consumers, and the community are needed to ensure the survival of MBEs within those business ecosystems. This can be in the form of initiatives and/or incentives from government agencies to increase participation from MBEs. It can also take the form of joint ventures between large corporations and MBEs that can result in greater innovation, access to new markets and distribution networks for all parties involved.
- Dialogue:
Open communication is essential for cooperation. People need to feel that they have a voice within the business ecosystem, and that their voices are heard — otherwise, it will be difficult to get their support. Discussion promotes participation. If there is no discourse, the signal sent is that stakeholders’ input is not valued, so cooperation may be slow and reluctant. During the 1970s, Maynard Jackson, who served as mayor of Atlanta at the time, was interested in turning Atlanta’s airport into an international hub, and he mandated that 25 percent of all contracts would be set aside for MBEs. This upset many in the business community, who felt that they were not consulted before that decision was made, and it led to a standoff. It took intense dialogue to arrive at a consensus where all parties decided on 20 to 25 percent of contracts to be awarded to MBEs. Despite the good intentions of Mayor Jackson to help increase participation of MBEs and make them part of Atlanta’s business ecosystem he faced tremendous pushback. Dialogue was needed in the early stages to achieve buy-in sooner. The same is true today.
- Consensus-building:
A diverse and inclusive business ecosystem requires dialogue, which is the foundation for consensus building, in which stakeholders reach an agreement to address a common concern. When there is dialogue, entities within diverse business ecosystems can learn from one another, understand different viewpoints, and find a way to reach an agreement that is mutually beneficial. Agreement helps to unify people and promote the cooperation that is needed to foster greater innovation, dynamic capabilities, market share and social good. Consensus building has the potential to incorporate many interests, to break logjams, and to find solutions. Stakeholders within diverse business ecosystems must listen to each other. For multinational corporations that are used to driving decisions within sectors that they control this may be frustrating. However, when the community, government agencies, MBEs and other stakeholders converge it may result in transformational business opportunities and social benefits. It is essential that stakeholders within business ecosystems feel confident that their voices will be heard — otherwise, they may feel ignored and may be more likely to ignore others’ voices, too, which hinders consensus.
In conclusion, there is a need to foster the creation of diverse and inclusive business ecosystems to facilitate economic and community development. Corporations, government entities, small businesses, consumers, and minority business enterprises have the potential to obtain a cooperative advantage, and there are important lessons to be learned from the relationship between Black and white business ecosystems in Durham, North Carolina’s Black Wall Street during that turbulent time in United States
history. In contemporary times, stakeholders can benefit from thinking about others and not just themselves. Through care, dialogue, and consensus building, diverse business ecosystems can interact and flourish.
Cooperative advantage means more than just increasing efficiency or maximizing profits; it is about building, maintaining, and harnessing meaningful relationships with people, including those within different business ecosystems, to achieve an even greater, diverse and inclusive business ecosystem for the benefit of all stakeholders.
Leon C. Prieto is an Associate Professor of Management at Clayton State University, and Associate Research Fellow at the University of Cambridge Judge Business School’s Centre for Social Innovation.
Simone T. A. Phipps is an Associate Professor of Management in the School of Business at Middle Georgia State University, and Associate Research Fellow at the University of Cambridge Judge Business School’s Centre for Social Innovation.
They are the authors of African American Management History: Insights on Gaining a Cooperative Advantage.
Resources:
Derek T. Dingle, ‘Maynard Jackson: The Ultimate Champion for Black Business’, Black Enterprise Magazine, 10 February 2009. Antonella La Rocca and Ivan Snehota, ‘Knowledge in use when actors interact in business relationships’, IMP Journal, 5(2), 2011.
Derek Major, ‘M&F Bank to Receive Investments from 4 Large U.S. Banks to Close the Racial Wealth Gap’, Black Enterprise Magazine. 15 March 2021.
James F. Moore, ‘Predators and Prey: A New Ecology of Competition’, Harvard Business Review, May-June 1993. National Minority Supplier Diversity Council, Annual Report, 2011.
Erastus Ndinguri, Leon Prieto, Simone Phipps and Vicky Katsioloudes, ‘The synergy between minority business enterprises and corporations: A proposed supplier diversity relationship framework’, International Journal of Supply Chain Management, 2(3), 2013.
Leon Prieto and Simone Phipps, ‘Cooperative Advantage: Rethinking the Company’s Purpose’, MIT Sloan Management Review, 15 September 2020.
‘The Economic State of Black America’, McKinsey Global Institute, 17 June 2021.
