How to Build a Company That Acts Beyond Profit — Part 2
Whether Jeff Bezos or Elon Musk — the “Space Billionaires” started a competition into space on the back of the success generated by their employees.
But why do CEOs behave like kids in a candy store? With Dr Nari Kahle, Head of Strategic Programs at CARIAD, the automotive software subsidiary in the Volkswagen Group, and author of “Mobility on the Move: How Social Innovations are Revolutionizing Our Mobile Future,” my co-host Frank Thun and I explored this question.
In five principles, we trace why companies mostly do not consider social issues in their corporate strategies, if they do not ignore them altogether. Principle one and two can be read here:
How to Build A Company That Acts Beyond Profit
To become a software-driven organization it does not only need technological know-how but also a new mindset.
Step 3: Let’s change the context so that feeling isn’t so damn difficult
If organizations can only do head and the heart stays outside the office door for eight hours, we need to change something fundamental: the structure.
Holism Level 3: Structures for the union of heart, head and hand
Only then can sensible companies emerge. There are two categories of these: The first includes companies that actually strive to create a discourse within themselves that sees every person as valuable. In which psychological security, voice and participation in decision-making prevail. Frederick Laloux has written of such in Reinventing Organizations, citing the examples of Buurtzorg, Favi, Morning Star, and Gore.
Such companies are holistic, self-organized, and pursue a dynamic mission beyond profit.
These types of organizations are more likely to feel things and trust their intuition, but they are also compassionate. Unfortunately, such companies have been rare and rather small. Buurtzorg, a provider of patient care, is the largest of them, with 14,000 employees — but I think that’s because it has adopted structures from the second category of feeling companies.
The second category of sensible enterprises relies on evolution. The organizations in this category are dynamic networks organized around central platforms. They decentralize command and control across multiple layers of their organization. Examples include platform organizations, such as Wikipedia, the Apache Foundation (the world’s dominant system for web servers), GitHub (a platform for programmers), and Haier, the Chinese company mentioned earlier with over 70,000 employees.
These companies are no longer trying to reconcile analysis and synthesis in their internal operations. Instead they operate in many small units — from individual developers to units of usually up to 150 employees. In bio-evolutionary fashion, these companies work and feel their way into their niche via what they do, creating both value and insight. Proximity ensures that people bring their whole selves to the job: Head, heart and hand, in unison. Proximity ensures that people are there, at the moment, in the room, in the problem, and the relationship with colleagues, suppliers, and customers. And closeness only works in small units. Never in large ones. In large ones, the dynamics of bureaucracy and hierarchy tends to take over: The Hand is crowding out out Heart and Hand.
Some of these small units manage to succeed, to grow and to multiply. Some don’t. But the platform learns from this, too, if it is structured to learn. Each unit — called a microenterprise at Haier — is a small experiment. The Microenterprises are the hand that produces the experiences that nourish the heart and head. All this improves decision-making by making it more wholesome.
The first three principles describe how holistic thinking works. We believe that such thinking — institutionalized into sentient ways of working with one another — is critical in helping us pursue more meaningful missions, beyond profit.
All well and good, you may think, but the market demands maximum returns now. Circumspection is certainly nice and at times useful, but sometimes you just got to cash in. Well, we see two reasons why Holism should pay off.
Step 4: Realize, that to dumb down companies for the sake of easy money is bad business in the digital age
So lets talk profits. What drives financial success in the digital age? My rough guess is innovation and speed. Look back at principles 1 through 3 — holism pays off in every iteration of a startup or transformation. Holism is what makes companies see innovation in the first place. Chances that companies who only sees with their head, rationality, will fail to recognize more disruptive innovations. Just like someone who only feels the world with their heart. Or like someone who only does and acts in a frenzy without ever processing the impressions analytically and emotionally.
Holism produces innovation and speed. It is an essential element of any agile project and team methodology. The trick is to bring holism to the enterprise level. It’s about scaling holism — so that when you’re an adult company, you’re not running around dumbed down in the head the way many tech companies are today.
Did I just say scaling? That brings me to principle five.
Step 5: Don’t rely on people to hold up spaces for holism: Rely on the law.
Holism is a sensitive plant. Like trust, it thrives slowly and can be destroyed quickly. No one contributes as a whole person — with head, hand and heart — and thus makes himself vulnerable when a company is characterized by political power games and contrary world views of the powerful. Then it is best to retreat to the lowest denominator of common activity in the company: The goal of making a profit.
Holism is fragile. It must be protected. Some founders and owners, through the power of their personal beliefs and skills, manage to keep open the space in which trusting exchanges take place. IDEO’S Tim Brown, Netflix’s Reed Hastings, Einhorn’s Philip Siefer and Waldemar Zeiler are probably such people.
A goal orientation beyond profit becomes truly sustainable when a company’s mission is legally secured — notarized in the articles of incorporation. When companies become so courageous as to not only print their “mission statements,” which are so in vogue today, on glossy paper but also give them legal bite.
Today, only a few have this bite: Bosch, Zeiss, ZF Friedrichshafen and Alnatura, for example, are legally bound to pursue goals beyond profit. They tend to have secured those goals legally for the long term through foundations. In 35 of the 52 U.S. states, the concept of “responsible ownership” is even secured via a recognized legal form of “benefit corporation”.
Securing the will to act beyond profit by legal means is not just something for philanthropists. It’s a clever way to enhance the chances that holism will take root in organizations. And it may, in the face of the overdue green transformation of the economy, become more than a nicety. The European commission, for example, is considering supplementing the conventional market-driven economic model with a mission driven model. In this model, companies will strive for targets that go beyond profits, and towards maintaining and building a more hospitable ecological and social environment. More about this can be read in a 2019 report prepared by the British Economist Marianna Mazzucato for the European Commission. Chances are, this will be a major part of Ursula von der Leyen’s upcoming Green New Deal.
No matter how the legal entrenchment of a pursuit beyond profit takes place: The climate catastrophe and factless disorientation of society make this time more than ripe for giving the entire economy, and by extension society, a mission and direction. There is no lack of urgency.
Act Beyond Profit
“Act beyond Profit” is the motto Nari Kahle has chosen for her website. In her book “Mobility on the Move — How Social Innovations are Revolutionizing Our Future,” which is well worth reading, she lists many examples of companies that think technology and social issues together. She shows what potential and opportunities still lie in mobility, especially when it is not reduced to technology and finance.
The discussion with Nari added a huge perspective to the organizational one we take in “How to Build a Tech Company”: that of making sense of the operational drive. Our conclusion is in one sentence: to act beyond profit, structure beyond profit.
This is the only lasting way to reduce the blind spots. Then the design of technology in business will also become a social endeavour. Then there will be fewer Space Billionaires and more sense in this world.
Nari Kahle, 2021 “Mobility in motion — wie soziale Innovationen unsere mobile Zukunft revolutionieren” — On the intersection of mobility, technology and social issues.
Frederick Laloux, 2015 “Reinventing Organizations — a guide to creating organizations inspired by the next stage of human consciousness” — about “compassionate” progressive companies
Frank Thun, 2019 “Liberated Companies — how to create vibrant organizations in the digital age” — on organizing progressive organizations at scale
Mariana Mazzucato, 2021 “Mission Economy — a moonshot guide to changing capitalism “ — on mission-driven governance and economics
How To Build A Tech Company
An industry in transition: I would like to discuss with you, but also with international experts, what kind of organisation and processes are needed to create modern, innovative products that combine high-quality hardware with agile, smart software solutions. I would like to find out how we can jointly transfer German engineering skills into the digital or even autonomous age — which is why, in the coming months, I will be asking myself more than ever before: “How to build a tech company? Follow our Medium blog for this.