Explaining what cooperative is has become second nature to me during the past 12 months. Surprisingly, it seems many New Zealanders, particularly in the business world, have an antiquated view of just what these enterprises are.
A simple definition is ‘an organisation owned by, and democratically operated for, the benefit of those using its services’. The earliest cooperatives appeared in Europe during the Industrial Revolution to protect the interests of less powerful members of society – workers, consumers, farmers and producers.
And whilst these simple cooperatives are still growing in their thousands in the developing world, in more sophisticated economies like ours, cooperatives have evolved to encompass financial entities like credit unions and building societies, as well as purchasing and shared services cooperatives. This collaboration allows independent business owners to collectively enhance their purchasing power, lower costs and improve competitiveness.
Historically, businesses have focused on finding competitive edge by developing the latest product or service enhancement. But, technology now allows us to transfer information around the globe at light speed, meaning your time as market leader is often much shorter.
So, the competitive edge may just have to be gained through other means. It sounds an oxymoron to say that collaboration can enhance your competitiveness, but I really believe it’s time that SMEs, in particular, collaborated more to grow their business on greater scale. The proliferation of SMEs in New Zealand is the perfect breeding ground for collaborative arrangements, and it doesn’t necessarily require radical transformation of your business model to officially form cooperative.
Cooperative arrangements can be informal or formal. On an informal level, mutually beneficial collaborations really can work. It could be as simple as combining to achieve greater purchasing power, sharing resources like HR and training or market intelligence. By adopting cooperative mentality, smaller businesses can drive their cost base down, become more cost effective and, as result, grow their business.
To thrive, we still need to be competitive and there’s obviously fine line between cooperation and competition, but I think we can be competitive in way that ensures we also benefit from collaboration. After all, cooperative arrangement works on the fundamental basis of creating win-win solution for everyone involved, which should be the driving philosophy behind all good business, especially those that are customer focused.
More formal arrangements, such as trade associations, can provide significant collaborative advantage to many industry groups. The New Zealand Association of Credit Unions (NZACU), for example, was established 50 years ago and serves our 21 member credit unions throughout New Zealand with worldwide links.
Individually, credit unions operate as small to medium size businesses in their local communities, each with their own identity. Yet, collectively, under the NZACU umbrella, they enjoy the synergies and scale that come from being part of large member-owned cooperative. This approach has resulted in credit unions ranking amongst the country’s largest financial service providers (by financial transactions), with one of the largest ATM networks in New Zealand, outside the major banks. For us, the cooperative model really does work – each credit union remains independent, but at the same time, is able to reap the benefits of larger business entity.
Worldwide, cooperatives provide more than 100 million jobs. Here in New Zealand, together with mutuals, cooperatives are responsible for an estimated15 percent of our total GDP, meaning they play significant role in our economy.
The United Nations has designated 2012 as ‘International Year of Cooperatives’, recognising the economic and social contributions made by cooperatives in New Zealand and globally. The GFC and continuing economic uncertainty has reminded us all that there can be price to pay for the unending quest for profits over customer and market wellbeing.
True cooperatives are based on the values of self-help, self-responsibility, democracy and equity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness and social responsibility. I’d challenge anyone to argue against basing business model on such fair and positive philosophy.
I believe that understanding the worldwide impact of cooperatives and their context in our modern world is now more important than ever, as we recognise as nation we are all going to have to work together for better future – and cooperative economy. M
Henry Lynch is chief executive of the New Zealand Association of Credit Unions (NZACU). For further information on cooperatives see http://nz.coop/ or http://www.nzacu.org.nz/
