How social innovation can lead to technological breakthroughs

The proudest moment of my professional career happened almost a year ago. A female member of our production team came to me and said that they had found a way of improving the industry standard for cleaning processes by the factor of 9 in terms of efficiency and sustainability. I have been in my position for long enough to know, that my colleagues can be very serious at times and – funny – the first question that came to my mind was „why?“. A rather stupid question, I know, but I really wanted to know why she did it before I even knew any details. And her answer was as terse an one can imagine: „it’s better!“.

Half a year later we became the only second B Corporation worldwide from the paint industry. We are today – to our knowledge – the only CO2-neutral paint manufacturer in the world when measuring scope 1, 2 and part-3. Hopefully there are others, but we are definitely just a few. I think we are the only ones in the world that provide industrial-use-type of wood coatings with a content of regrowing raw materials of over 95%, striving to make them net-negative.

That made me think how we, a team of 42 employees and a mildly gifted boss, actually got there: we and not the multinationals that dominate our industry would be invited for environment research, implement new technologies before the multinationals do and drive climate-friendly manufacturing to a new level. To a point where an employee out of her feeling that the process is bad would work for 6 months with her colleagues to find an environment-friendly alternative, spend hours of her spare time for research and then come back after she had made sure that the thing she invented works just fine. I think, the former might be closely related to the latter.

Having thought about it for a while now I now know that this did not happen by mastermin-design nor by a well thought through strategy or excellent managerial decisions. For us it happened because of four factors:

  1. The area we are located in
  2. The people we hire (and fire)
  3. Having a purpose but not a religion
  4. The dynamics of all three together

The area we are located in

I know it sounds odd, but there is something to the countryside that I have found very hard to replicate in metropolitan areas. The people that were born and raised here (or moved to Kipfenberg a long time ago) have an attitude around them that makes it totally natural not to waste food, eat small for dinner and always pick up your waste from the street. I have owned a few companies in metropolitan areas like Munich and that type of deeply engrained behavior: stuff you don’t have to educate because everybody knows from home. We have always been a company that cared about environment-friendly products and manufacturing, but that goal has to see fit in the people that want to attain it. And the combination of sustainable products and people from a natural reserve park are a perfect match.

The people we hire (and fire)

Oh terrible all those books… the seven (nine, twelve) habits of industry leaders, how to make your company great (again) and so on. We never believed in this type of counseling books. But one thing was totally true for us. It is 100% about the people that are grouped together in a tight spot, every day. It makes a complete difference if you love to go for work or you have to. Over the years we have developed our „criteria to hire“ in written (happy to share if anyone is interested) and followed the basic principle that every employee has a veto for hiring anybody in any position – a power that has not been used by a colleague at least for the last five years.

Equally important: the people we fire. We don’t fire very often (because we have actually gotten much better in hiring) but we fire for one reason and one reason alone: if somebody cannot stand the idea that we are peers and have to trust each other. I don’t mean arguments or discussions, not even the occasional fights over who’s job it is to get coffee from the supermarket. I mean situations where someone is led to believe that he is in some way intellectually or morally superior to his or her colleagues. We once found a leading manager treat employees not with respect, badmouthing a refugee from Syria that we had hired, and it took us 5 minutes to part ways. As a close friend of mine used to say: hire slow, fire fast. But hire much more often than you fire.

Having a purpose but not a religion

There is a lot of literature about companies that find their WHY being more successful than the technocratic, product driven competitors. Simon Sinek has made a living from educating people that purpose really matters. Just I find that there are two things wrong with that.

For once, it seems that this type of what one could call purpose-driven marketing thing has spun out of control for too many companies. It has become a marketing-wash instead of a meaningful thing. Not a company that does not claim, it is particularly sustainable and encourages customers to consume more with an even better conscience. I think the environmental problems man is facing on earth are not going away by maintaining our lifestyle of consumption – just reducing sugar and plastics and all will be fine. It doesn’t work this way.

The second thing that strikes me as wrong with the propose-inflation is that many companies treat their values as a religion. I know more than one company that would not allow their employees to openly use products from competitors. Quick self check for executives: what do you say when an employee brings a competitor’s product to work?

The dynamics of all three together

In my opinion, the dynamics of people and their motives makes all the difference. It is common wisdom that the „vertical“ relationship between the company and the employees is governed directly or indirectly by the top management; and the horizontal relationships in a company (i.e. between employees) is governed by the individual skills of the people. I actually think now, that it is quite the other way round.

The vertical relationship, that is where purpose comes into play. Do we all believe in the things to be our goal? Do we have common principles that we as a company want to follow? My opinion is that top management should (apart from being organizers of the discussion of such things) stay out of the way. We found our formal purpose and story in a series of workshops with employees from all departments and levels. Some were more capable of formulating their views and visions than others, but one thing was blindingly obvious: all workshops that went without top management participation were the most fruitful and successful of all. We, for example, have defined a clear WHY a couple of years ago (We’d like to make the world more beautiful and better), have a couple of HOW’s that we do (regrowing raw materials, a continuous product development, regional sourcing, etc.) and that’s how we make our products and conduct research. You could call this our „purpose“ but it is far from a religious understanding of the world, it’s actually quite pragmatic. This type of purpose is carried by all of our employees and it is carried with much less problems then a huge „we are the best in XY“ purpose, because it needs no explanation. Guidelines that are totally clear and self-explaining are much easier to follow. This is the vertical part that determines the relationship of employees with the company.

The horizontal relationship of people within the company is where in my opinion top management has the greatest impact of all. I for sure am not the brightest kid in town, I have reasonable financial skills but that is about it. The only thing I was clear about from the beginning of my career was that there are two things that I want from life:

  1. people I like around me
  2. it should not feel like I’m wasting my time

Assuming that most other people feel the same, we devised some very clear rules for ourselves in the management team:

  1. We will never hire people that we don’t like because they are so good in whatever… culture eats skills for breakfast.
  2. There is no such thing as a „direct report“ in our organization. Actually nobody is supposed to report anything to anybody. We are not slaves, we have a task and it totally makes sense to propagate information through an organization. Not as report, but as a question, a comment, an idea or a seeking of opinion. Seriously, it’s much easier than you might think and it works perfectly.
  3. Feed-back is (quite) instantaneous or never. We as managers collect strengths and weaknesses over the year and then – one day in late December – we spit it all out and spoil every meaningful discussion about it by having to talk about a pay raise moments later? Doomed to fail. And me personally on the other hand, I actually don’t like being criticized months after something happened I can only faintly remember. How to discuss that in a meaningful way. Impossible! So it’s fairly quickly or never. Both ways.
  4. No gain – no blame. The hardest part, especially for top managers: nobody claims a victory for himself. When we brag about ourselves, we say how invaluable the help of the colleague was in achieving this and that goal. NEVER EVER would you hear somebody in our company say „I have accomplished…“. This is quite an exciting experiment that you should consider doing as an executive: the moment you stop to take credit for yourself, you will stop putting blame on others. And eventually all the others will do it as you do. The result is a super relaxed working environment. Available without expensive consultants and incentives. I don’t know the psychological mechanism behind it, but I can assure you that it works.

We have been doing this kind of „responsible collaboration“ for five years now: we haven’t fired more people than normal, our profits are strong. Had it been a strategic masterplan, I’d say it was a success.

I’m not saying that our organization model is universally good; it just happens to work for us. But I’d be tempted to say that it is worth a try. And the subversive part is: even if you are not the CEO of the company, you can do it still secretly in your own department or group. It works without talking about it.

So we accidentally became environmental innovators by being social innovators. And that in a broader sense could actually work for others as well.

About the author:

Dr. Marcel Pietsch is a studied economist and philosopher. He runs a family business that deals with sustainability and that was certified as B Corporation in 2019.

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