Combat Financial Downturns with Corporate Democracy
Sustainable innovation is a process. And sometimes, this involves collecting – and implementing – feedback from thousands of stakeholders.
Collect input from 12,000 employees and 350,000 customers. Seem laborious?
Absolutely. Is it worth it?
For Spanish retailer Eroski
, the answer is a resounding yes.
Employee and customer engagement were key to navigating Eroski's way through the financial crisis. Pre-crisis research indicated that alliances, joint ventures, and corporate networks drive business innovation. Yet, researchers from IESE Business School at the University of Navarra wanted to dive deeper. In 2006, Silvia Ayuso, Miguel Angel Rodríguez, and Joan Enric Ricart asked:What does it take to generate sustainable innovation?
Eroski encompasses more than 1,000 outlets in Spain including supermarkets, gas stations, pharmacies, and travel agencies. It is part of a federation of cooperatives, the Mondragón Corporation
, frequently upheld as an exemplar of corporate democracy. As such, Eroski was the ideal candidate for the case study.
The researchers gathered data via reports and interviews in which they asked managers, employees, and customers open-ended questions about innovation processes, company management of employees, and customer relations. Following interviews and data collections, the researchers then identified principal components.
Results indicated that Eroski’s sustainable innovation is fuelled by a democratic structure that facilitates dialogue – interactive, two-way communication between customers and employees. This democratic structure provides a platform for sustainability within organizational dialogue, which in turn drives sustainable innovation.
Implementation of Mondragón’s employee transfer strategy is one example of sustainable innovation. Instead of laying off workers, Eroski voted to redeploy employees from Mondragón businesses that were hard hit by the financial crisis to those that were experiencing growth (Johnson, 2013). This is in stark contrast to job-shedding at many other Spanish companies driving Spain’s sky-high unemployment rate.
At individual retailers, dialogue between customers and employees also drives product innovation. Heeding customer feedback, a hypermarket (superstore) in San Sebastián now capitalizes on local produce and over 1000 organic products as its main features. It serves as an example of a business guided by modern consumer behavior (Lunney, 2013).
Sustainable innovation is achieved through process rather than ad hoc bursts of genius, and Eroski is a prime example of this. For Txema Gisasola, president of Mondragón: "This is not magic. We are in this market, competing in the capitalist world, and the only difference is how we do things and why we do things" (Johnson, 2013).
Sustainable innovations contributed to Eroski’s corporate growth. Despite 2012 losses, Eroski’s supermarkets and hypermarkets grew at 9% and 15% respectively.