Social Innovation implications of the Mondragon cooperative experience

The Young Foundation has published a new report on the Mondragon Cooperative experience. These are some additional thoughts about the implications for the social innovation field.

• Competitiveness can be the best ally for implementing large scale social innovation ecosystems
• Value-based decisions are rooted in Mondragon’s business model
• A distributed system for wealth generation combined with fair taxation systems presents a pre-distribution alternative to fighting inequalities
• MONDRAGON needs to be looked at as a social movement

1.- Competitiveness.

MONDRAGON shows us that competitiveness can be the best ally for implementing large scale social innovation ecosystems. In fact, MONDRAGON believe that they are more competitive because their social principles and practices.

Since the very first day Mondragon had to learn to compete head to head with large industrial companies in order to fulfil its social mission effectively. This is the reason why competitiveness has been naturally incorporated to its social innovation narrative and action. In fact, and despite its clear social impact, members of Mondragon prefer to be defined as a competitive company in the global market, rather than as a social, traditional company.

The social dimension of its functioning is not perceived as a peripheral element. To the contrary, it is rooted in Mondragon’s business model. This particular behaviour is consistent with various research demonstrating the greater impact of long term value-based-decisions, in opposition to exclusively instrumental decisions. In the case of Mondragon, its value system determines the company’s strategic decisions.

Mondragon´s social dimension is therefore inherently connected to competitiveness and differs with the traditional approaches to corporate social responsibility. Mondragon is not only a good company that distributes its benefits fairly. It is a more competitive company due to its social practices.

2. – Mondragon as a social movement.

Mondragon has operated as a genuine social movement for the transformation of the valley with a great impact in the whole Basque territory. The logic and mechanisms connecting Mondragon under the corporation’s big umbrella – people, enterprises and institutions – cannot be exclusively understood from a traditional business approach.  The cooperative members feel part of something bigger than just a company. Some of then describe it as an experience, others as a family or a network, but its origin clearly responds to the necessity of creating a movement in favor of the social and economic transformation of the territory.

In practical terms, this movement approach has allowed them to channel internal competition in a positive way, as well as to maximize existing resources, align different strategies and constructing a transformation narrative that connects all the agents within the ecosystem in a deeper way, as compared to traditional corporate practices.

When seeking to understand Mondragon and other high-impact social innovation ecosystems, it is essential to look into the perspectives and the repertoire of actions associated to social movements. This allows different organizations and institutions to network collaboratively without the need of establishing rigid structures or complex legal agreements around a more sophisticated leadership (soft power), as well as performing radical democracy practices, based on values, common goals and narratives.

3. – Replication.

 Mondragon cannot be dissociated from its territory. These cooperatives were born as a social and economic response to the necessities of a community that was struggling with an extremely difficult situation. For this reason, Mondragon’s cooperatives and companies are deeply tied to the valley’s little towns and neighbourhoods. This close connection leads them to a value based decision-making process that differs from traditional companies, especially with regard to long-term investments, creating a very resilient model.

For all these reasons, Mondragon cannot be replicated. In fact, many attempts to create similar experiences have systematically failed. However, this experience can help us better understand how social innovation ecosystems work and can also be an exceptional ally to other organizations and institutions who wish to foster territorial transformation processes incorporating large-scale and globally competitive business models.

For this purpose, it is absolutely necessary that systems change thinking and social innovation incorporate new methodologies to address the cultural dimension of territorial transformation processes. Ethnographic research aiming at capturing the value system and narratives operating in a particular territory can be a useful way to capture the “innovation software”. This knowledge will allow us to connect specific and interconnected initiatives (hardware) with the real demands of the community; but to that end, new methodologies that exponentially grow the number of people taking part in co-creation will need to be designed.

4. – A new model of community innovation.

Mondragon cooperatives question and challenge the myth of the individual entrepreneur which is being uncritically adopted by many social innovation initiatives[1]. Instead of looking for the “talented” individual, implying that this is an exceptional gift, Mondragon proves that everyone can be innovative if the proper conditions are created. As a matter of fact, the company’s Founder used to talk about a “positive attitude” as the only required talent for innovation.

This way of understanding innovation at a community level is consistent with extensive research on community transformation processes[2].  Systemic changes can only take place when the community as a whole feels invited and empowered to act differently.

5. – Distribution of wealth.

While the taxation system is similar to the European average, the Mondragon Valley and the Basque Country have enjoyed high equality rates for decades. The situation has changed since 2008 due to the financial crisis but this data allows us to think that it is possible to complement the necessary distribution of wealth through taxes with the generation of wealth in a distributed manner. Their salary policy, networking and cooperation mechanisms help to provide real and large scale “pre-distribution[2]” of wealth.

This is an example of how successful business can fairly generate and distribute wealth among companies and members to tackle the current rampant inequality.  The generation of distributed wealth combined with fair taxation systems becomes a vehicle for socioeconomic regional transformation. It also broadens our concept of how social innovation ecosystems can integrate wealth generation as a key mechanism for systemic change.

For the future, distributed manufacturing and other technological phenomena associated to cyber-industry will enable alternative models to foster competitive and socially balanced territories. Mondragon created 1000 new jobs last year, evidencing that industrial automation can also generate employment and equity.

6. – Links with the local territory.

Mondragon cannot be understood dissociated from its territory. Cooperatives were born as a social and economic response to the necessities of a community that was struggling with an extremely difficult situation. For this reason, Mondragon’s cooperatives and companies are deeply tied to the valley’s little towns and neighborhoods. This close connection leads them to an alternative decision-making process that differs from traditional companies, especially with regard to long-term investments, and creates a very resilient model.

The companies of Mondragon are used to deliver positive responses to great crisis, such as the Fagor Electrodomésticos downturn or their very own birth. However, they present more difficulties to innovate in times of stability. It is easier for them to generate solidarity mechanisms when facing a specific difficulty or a common enemy than being open to new innovation systems when things are going well. The big challenge for social innovation ecosystems that have achieved good results in particular moments is to constantly reinvent themselves.

7. – Equality.

The innovation ecosystem generated by Mondragon consists in a complex agent-network and several processes that operate on the basis of transparency, radical democracy and equality. These concepts are commonly used in the social innovation field, but unfortunately, there are few examples of successful, large scale business projects that incorporate principles such as: “one person, one vote”; sovereignty of the general assembly in strategic decisions; internal solidarity mechanisms; re-employment policies; commitment to low salary gaps, etc.

These strict transparency and democracy procedures could not exist without the commitment to equality between people and companies conforming Mondragon. It is impossible to understand the way public-private cooperation develops so naturally if we don’t take this core principle into account. By contrast, public-private collaborations which does not incorporate equality mechanisms and procedures can be easily manipulated in favor of the most powerful.

Mondragon’s experience presents deep implications to the way in which social innovation projects incorporate the fight against inequality to their narrative and actions. The best ally for the growing inequality is accepting the lack of alternatives. This experience shows us that competitive, large-scale models of fight against inequality are possible.

[1] The Entrepreneurial State. Mazzucato, M.

[2] “Bowling alone” Putnam, R.

[3] “The institutional foundations of middle-class democracy” Hacker, J.