The people who work in our businesses are not two dimensional, why should the structure be?
If you have studied business, or even US history, you have likely heard the term “vertical integration”. This concept was developed by US Steel as a means of controlling the industry through control of the supply lines and distribution networks. It allows a company a lot of control and the ability to benefit from making expenses profit centers since the different parts of the supply and distribution chains can be used for non-competing products as well.
Another common concept is that of horizontal integration. This allows economies of scale as the company can create similar products within a market. General Motors was a great example of this format with the Pontiac, Oldsmobile, and Chevrolet nameplates have a number of common designs with slightly different features.
Well, those of the two external dimensions which notably ignore depth. Is there an example of a company engaged in depth integration? What would that look like? Further, what would a company look like if it engaged in all three forms of business integration to create a three-dimensional business model? There is a great example–Mondragon.
The depth integration develops from something that few US corporations would really care about (or it they did, it would likely end up as The Company Store). Depth, after all, creates an internal dynamic and this means attending to the needs of the workers and sustainability of the business. Of course, this is exactly what Mondragon has done.
First, however, they do have a fairly vertical integration in which they develop co-operatives to handle supply lines and distribution lines. Horizontally, ULGOR has been working hard to keep their place in the market by buying the smaller companies (most recently was the Brand corporation which was just behind ULGOR in market share). So far, Mondragon looks like a standard corporation operating on the global scale. This is where the third dimension arrives:
The Depth integration of Mondragon involves creating co-operatives to provide the social and human needs of the workers. This area of integration means a K-University school system, a Social Security system that provides a horn of plenty in terms of benefits and services, a banking system to meet the members needs and soon assisted living communities for the aging population. All of this works together to provide the basic needs of the workers and families.
Depth integration does more than simply keep the money in the Mondragon system. The presence of a university, management institute and trade school allows workers in unemployment to return to school and learn new skills. this not only benefits the worker, but helps Mondragon keep the correct number of workers to maintain decent wages and benefits. It provides other avenues for workers to use their knowledge and skills. A worker who can’t do the physical labor in the plant may transition to a teaching position. It allows workers to develop themselves as human being through their work. This was the ultimate idea of Mondragon’s spiritual founder, Don José María Arizmendiaretta.
In the US, we often marvel at Mondragon and people fall over themselves to either create Mondragon in the US or to expose every chink in the armor. Fortunately, there are plenty of grad students up to these tasks! However, something that we should consider is this revolutionary form of integration. We don’t need to re-create Mondragon in America, but we should consider how to develop a three-dimensional integration in our existing co-operatives. We need to see where we can partner with existing institutions and create the institutions that we don’t have.