How purpose is a business differentiator: the Fiix story

Speaker 1: The material and information presented in this podcast is for discussion and general informational purposes only, and is not intended to be and should not be construed as legal, business, tax, investment advice, or other professional advice. The material and information does not constitute a recommendation, offer, a solicitation or invitation for the sale of any securities, financial instruments, investment, or other services, including any securities of any investment fund or other entity managed or advised directly or indirectly by Georgian or any of its affiliates. The views and opinions expressed by any guests are their own views and does not reflect the opinions of Georgian.

Jon Prial: Welcome To Georgia's Impact podcast. I'm your host, Jon Prial. There are a lot of ways to look at a company. Milton Friedman's theory of driving shareholder value has been around for a long time. Perhaps to just oversimplify, a company sole responsibility is to its shareholders, but that's changed. Stakeholder capitalism has been growing in popularity where some of the key stakeholders include customers, suppliers, employees, shareholders, and even communities. Long- term value is looked at a little differently and perhaps a company chooses to become certified as a B corporation, which adds focus on social and environmental performance. And of course now lots of companies put out ESG reports, two differing degrees. You'll be hearing more from Georgian about something we see that's driving company successes. And we and other organizations are talking about a company having purpose and they'll be much more coming on that in the future. But enough of me talking. Today, we're fortunate to spend time with James Novak. James is the former CEO of Fiix, previously a Georgian customer, and now a Rockwell automation company. Fiix delivers maintenance management solutions. And although we'll touch on these solutions, our focus is going to be on James's view of running a business way beyond Milton Friedman. Welcome James.

James Novak: Thanks, Jon. Great to be here.

Jon Prial: So let me just jump right in and ask what all of this intro means to you and Fiix.

James Novak: There's a few different ways that we could look at this. Let's start with creating value. Because I think that's where the introduction started. Fundamentally, I believe that this idea of doing good and making money aren't mutually exclusive. And I think somewhere down the line, capitalism got painted with a pretty terrible brush and it's probably Wall Street 1980s cutthroat. They made movies about it. And in my view is that as the world has evolved, as new generations are now in charge of organizations and those people care about different things as individuals. I think we're getting to the point now where the creation of value isn't just about creating money, it's about doing good. However, those things are not mutually exclusive as I said. My view is that by doing good, you intersect value and it becomes this virtuous circle. So the idea is that you do good, you get more customers because customers are buying based on organizations that stand for proper things. Consumers are buying from organizations that they believe represent their values. And so the idea is that you can engage not only your customers, but your employees, your stakeholders, the community as a whole, all to increase profit, all while doing good. And it becomes this self virtuous cycle. And I think that's the thing that I fundamentally believe in that I think organizations that are performing best in the world are starting to wrap their heads around as well.

Speaker 1: That's fantastic. So there's been so much churning in the marketplace and different comments. We talked about some of these other names that are out there. How did this come to you? What made you embrace this? Obviously, at the end of the day, it's the business results, but it's not something that's a natural thought. We've had decades of maybe a little Milton Friedman here.

James Novak: I was fortunate enough, back up my career a little bit. The majority of my career I spent at Microsoft and then Blackberry. When it was cool to have a Blackberry, I had a Blackberry and then stopped being cool and I stopped being at Blackberry. And I had this amazing experience because we really felt like we were changing the world. We were changing the way people communicated. We went from basically landline to wireless communication for the first time with Blackberry. And that was our purpose. That was what we were doing for the world and that we felt like was creating some social good. So that always was percolating in me. And then when I joined Fiix, I'm not the founder of Fiix, I joined the founding team at Fiix and one of the founders at Fiix, I would call a futurist or visionary. And this was a thought that he had for some time, but he couldn't articulate it in a way and couldn't translate it into the business in a certain way. And that's I think where the match came, from the founders to the business leader that came into the organization that really worked. And it was about after a year of working with the founders of Fiix on this idea that there's a triple bottom line for the business, but that's not at the detriment of profit. And then I read a book called Conscious Capitalism by Jack McKay, who is the CEO founder of Whole Foods. And he had this idea of a higher purpose is that the organization, he felt that Whole Foods had a higher purpose and their higher purpose was to feed the world. And that's when it just clicked for me. That was the term I was missing, that connected this idea of a triple bottom line or doing good, and this idea of driving superior results. And it was this idea of a higher purpose and it came through Jack.

Speaker 1: How did Fiix start on its journey to defining its purpose?

James Novak: We knew that there were benefits to our product in the world, and we weren't talking about them, but I think every good CEO, every employee in an organization, even your customers know that there are some benefits to the organization. And so this idea that maintenance created sustainability, we didn't invent, that existed, but it just wasn't being talked about. Maintenance was, in our particular scenario, it was being talked about something that could save costs. It wasn't necessarily about the social components that were outside of money for the organization. So even though it was known, it wasn't necessarily talked about. So we took up the mantle in terms of driving that message. Where things got sticky for us as an organization, and I would imagine many organizations that'll start doing this will find it, is our employees were saying, well, James, we work with an oil and gas company. How can we create a sustainable world if one of our customers is doing coal mining? The reality is that's a difficult answer for a CEO. And my view was we were rolling up our sleeves, we were getting in with potentially some of the highest offenders in the world. If we just worked with wind turbine companies, we wouldn't be making a difference. But imagine the effects that we can have on energy reduction, in health and safety outcomes by actually working with oil companies. That's what we were doing. We were in there rolling up our sleeves. And so that was just one example of the hard things. But what I can tell you is that every employee will be looking at this through a very critical eye because they care so deeply about this personally. And that's a double- edged sword because one thing that's amazing, what an incredible way to have an emotional connection with your employee base by doing things that they care about deeply. But at the same time, they're all now going to have a sense of ownership and be very critical of every move that the organization makes. And so for me, we need to be very clear about what we were doing and why we were doing it and the role that we played in the world. And for us, again, that was around sustainability. And so we focused very specifically, we had a laser focus on sustainability, and that was the difficult thing that we had to traverse as we were first getting this idea of a product that had a purpose.

Speaker 1: That's great. So we've got Blackberry. I've got email on my phone. Clearly there's a purpose too, I won't dare to describe the Blackberry purpose, but we get it. And I got the Whole Foods piece. So let's go to maintenance management software. I'll throw one out, but please comment on, it's probably more the E of ESG is environmental and obviously is an element of sustainability to maintenance management. But talk to me a little about the Fiix solution and how that fits into this.

James Novak: First, let's understand Fiix as a solution. So we are a maintenance management software. So our customers are primarily large manufacturing or industrial organizations. They could be anywhere from oil and gas to energy to process or discrete manufacturing, but they're running large machines. And the maintenance of those machines is really critical. It's critical so that they keep their production line running, so they keep their employees safe, so they meet their production output and their production goals, they maintain quality. All of those things have a maintenance backbone to them. And so fundamentally, we believe that through proper maintenance in these organizations, they can achieve sustainability outcomes. Things like health and safety as I mentioned, or carbon emissions reduction or energy reduction or wastewater reduction. And we actually did a study with former Ryerson University or now Toronto Metropolitan University here in Toronto, Ontario, Canada. And we studied several, if not a half a dozen to a dozen different ways in which maintenance can affect sustainability outcomes. And that's where the connection between our product and our purpose came to fruition. And that all came to one term for us. And our higher purpose, as I mentioned that became the term that we generically use, our higher purpose at Fiix was to create a sustainable world. And so we believed through every time that we got a customer using our software, doing better maintenance management practices through the use of our software versus what they were doing previously, which was like pen and paper or on a whiteboard and things were getting lost and literally machines are on fire. That's the kind of stuff that you see in these organizations. You do matter maintenance and you can create sustainable outcomes for your organization. And we studied that. We had data on it, depending on your industry, et cetera, we created white papers on this. That was how the product manifested itself.

Speaker 1: That's great. So let me pull a piece of the puzzle out in terms of stakeholder management. How about hiring? How about your employees? How did you get them to understand the message? I think you did a very clear linkage between the product solution and a higher purpose, but you still have to communicate that when you're out there looking for people and retaining employees. How'd that work for you?

James Novak: The employee engagement was one of the biggest benefits that we saw as an organization that was operating with purpose. Now, operating with purpose, I believe has two very distinct components to it. The first is what you do. And what we did was maintenance management software. And we believe that that was connected through sustainability and our higher purpose. And we went and we studied that and we invested in that and we made sure that that was true. And then we communicated the heck out of it. The second part of organizations operating with purpose is how they operate their organization. And that is through their stakeholders. Things like how I operate in the community, how I treat my partners, my ecosystem, but also our employees. And what our employees were asking for was, James, if purpose is so important to you as a CEO of this organization, so important to Fiix as an organization, let's prove it. And so we went and we looked for third party quantifiable ways to view our business and if we were doing good and if we weren't and we came across B Corp. And so in the end we decided to be B Corp certified. For those that are unfamiliar with B Corp or Benefit Corporation certification, it's a third- party audit of your operations across multiple vectors. They score it. It's a non- bias type scoring. It's a lot like doing your audit, your accounting audit at the end of the year, and you do it every three years. And in order to get B Corp status, you got to have a score of at least 80, out of I think about 160 or something. And so we went and got B Corp certified. So that is the first thing that the employees asked for. The second thing that they asked for is, if we're engaging our customers in purpose, let's engage ourselves as an organization with purpose. And so quite frankly, we ate our own dog food. We decided that employee engagement was going to be a huge part of how we operated with purpose. And so we did things like mandatory volunteer days. When I say mandatory, you have to volunteer twice a year. We had a day off so that employees in our organization could vote, participate in the democratic process, which we're seeing all over the world. People are literally going to war over and giving up their lives for. And I think sometimes we take for granted in the western world. So we operated that way. We gave 1% of all revenue to our social causes that were defined by our employees, based on what-

Speaker 1: Employees.

James Novak: ...We cared upon. And tied to sustainability, this whole idea that we engaged our employees in our purpose with them and we operated with them amongst with purpose. That was really how we engaged employees. Now I have a ton of stats and that we could throw out. That said, we operated far better than our contemporaries in terms of employee attrition. We had an ability to recruit pretty much anybody we wanted to because we paid market. We had all the great benefits that you would expect from a high growth organization, but we operated with purpose and people cared about that, and that was how we were able to get talent and retain them.

Speaker 1: Did you face any challenges just getting started? What degree of buy- in did you have?

James Novak: Well, I would say you have different stakeholder groups as a CEO and as an early stage organization, you might have shareholders, you might have founders, partners, employees, customers. And so we started socializing this idea across all of our stakeholder groups at the very beginning. And we started socializing not just the idea that we wanted to operate with purpose, but the value that purpose could bring. And so I started sharing data around employee engagement, around revenue potential, et cetera. And the reality was, is that as CEO of the organization, all of those stakeholders were looking to me for direction and in particular our investors. Because for example, I said, we're going to donate 1% of all revenue to our social causes. Well, as an investor in the organization, you're like, well, James, that's a pretty big investment. You need to make sure that that works. And quite frankly, we didn't get any pushback from the organization at all. This was something that they saw that we were passionate about, they saw that our employees were passionate about, and it was just part of the magic of the organization, magic of Fiix as a company. And nobody wanted to disrupt that, even if they didn't quite understand it in its totality, no one wanted to disrupt that. And so I felt like I had an avenue to push it forward. And then in the end when everyone saw the results, they were like, geez, James, the flywheel really does exist. And so they were like, hey, let's do more purpose. Let's drive this even better. I'm like, whoa, whoa, okay, let's not bite off more than we could chew. And so it became the other problem, which was they were driving me a little too hard, but I'll take that side of the equation every time.

Speaker 1: I do see two sides of this. And we just went with the operations side and the B Corp and the employee days, can be more simply communicated, more operationalized. People would get that. And then when we first started, I'm thinking, wow, the product side's even easier. I think the employees see and feel the operation side. You still need to get them to see and feel the purpose of the product so they know what they're driving to from the product managers down to the developers, to the marketeers, everybody. Talk to me a little bit about that side of the house.

James Novak: So oftentimes I hear organizations will say, oh, it's not communicated, or the CEO has a vision and it's just not being communicated properly enough. Or We have silos in the organization. Some people know it, some people don't. I actually think that's BS. I actually think that it's not communication, it's clarity. And that's where we focused on. It's like, are we very, very clear about the purpose of our product and what we are achieving every day? And are we working towards either proving that or identifying it or making that real with our customers every day? Employees have a choice. It's a hyper intense labor market in technology today. So every single one of our employees, every single one of your probably listeners, employees, all have a choice of where they want to go work. And if you operate with purpose, great. That's like one check for employees. They're like, that's exactly what I want to see. Quite frankly, that's becoming table stakes now. And now people want to spend their time because they spend 8, 10, 12 hours a day with you as an organization. They want to spend their time making a difference in the world. And that's what the product purpose does for us. I think Fiixers, as we called them, could come to work every day knowing that they were contributing to a sustainable world. And as a management team, we work like heck to make sure that that was true and that we were building on that over time.

Speaker 1: Top down all the way through the company from that. That's great. So I listened to something recently that talked about some surveys and said, I'm making the numbers up, 62% of people believe they would rather buy from a company that's sustainable. 75% want to deal with a company has a good purpose or whatever. And the question that comes to mind is, do you feel that's a real survey? Or, surveys are always horribly inaccurate, they're giving the answers that they think they want to say, but when they still come down to it, they don't necessarily buy the package in paper, they buy the package. I just saw an ad for some mince that now in a paper package. Do they make those decisions, yes or no? What are your thoughts in terms of where the world is going, where the customers are going, and what's it going to take for this to maybe go really, really get embraced?

James Novak: Short answer is yes. I do believe that. There's countless examples of consumer behavior that have started with individuals based on generational preferences. So for example, the iPhone, that started as a consumer thing. Now it's in every business and it's a business tool across multiple applications, et cetera, verticals, et cetera, et cetera. So all you got to do is look at what a millennial cares about, who is going to be the primary generation of both wealth creation and worker creation across the next 20 years. And what we figured out was that millennials care, they care about the environment, they care about very different things than I as a Gen Xer care about. They care very different things than baby boomers care about. They care and they're voting with their wallets. And all you have to do is look at companies like Patagonia in terms of the success that they've had, in terms of consumer preferences. Now my view is those consumer preferences will make their way into business to business or B2B buying behaviors because in the end, we're all human beings and we make decisions as human beings. We did our own surveys with our customers because like you, we didn't trust maybe some of the stats that we were seeing generically. And we found that 10% of our customers chose us specifically, number one reason because of our purpose as an organization. That ended up being millions of dollars as a result. Now it scored as second, third, and fourth reason for those that maybe didn't think about it as the primary reason. But it's part of a potpourri of decision- making. And if you don't have it, I think you put yourself at a detriment as an organization. But if you do have it and you lead with it, I think you put yourself in a position to win. And that's where this virtuous cycle starts happening, this idea of result and purpose. You get bigger as you grow more revenue, you have an ability to make a bigger impact through your purpose, which then attracts more customers and thus the cycle turns. And I think that's what we were aiming to build at Fiix

Speaker 1: I just want to wrap up with you, James, and just talk about industry trends that you're watching when it comes to initiatives of this type. You mentioned Patagonia, did you see other companies, other best practices? I'd love you to wrap this up and get this out of Fiix of what you see, because obviously you've got a keen eye as you think about this space.

James Novak: There's a few different things. First of all, we're early. I think organizations are just starting to wrap their head around the value, both from a financial perspective and what they can contribute to the world. And so it's early. What I'm seeing is that there's multiple different ways in which organizations can measure themselves. And I actually don't think that any one way is probably better than another at this point. There's B Corp, there's ESG, there's the triple bottom line. In tech, since we're on the Georgian podcast, I think Salesforce has done an incredible job with this from a technology perspective across their donate 1%, across product, people, and profit. And so for us at Fiix, we just decided to begin. There was no specific metrics that we were trying to get to. We decided that we wanted to operate the company with purpose and that we wanted to connect our product to purpose. And my view is that if organizations can start doing that, at a very minimum, what an amazing world we can live in where we actually take back capitalism as this force of good in the world. How amazing would it be if every organization and every company in the world operated with a higher purpose and they were contributing not just with their people, but with their product to some social good that was connected to what they did. That to me is how private organizations take up the torch in terms of driving society forward. Because not to make it political, but governments have really shown an aptitude in driving positive social change. And so I think it's up to us, those that are creating wealth to go do it. And so quite frankly, I feel like we all have a responsibility to not only create shareholder value, but create stakeholder value. And by doing both, I think you can drive both.

Speaker 1: That is a fantastic close. James Novak, thank you so much. I have no closing message other than, hey, everybody should get started. Thanks again. I really appreciate your time.

James Novak: Thanks, Jon.