Alexander Birken: You wrote this article, didn’t you? It describes a major challenge of our time. In my opinion, the European answer could well be: let’s break up these companies! Yet that would be a reaction from the last century.
David Kirkpatrick: Yes, I wrote that. And I believe that, yes, breaking them up wouldn’t work. The only way Facebook is going to retain legitimacy is if it responds regularly to outside input, from governments, NGOs, the business world, citizens – in short, everyone. It would be an engaged process and would not necessarily constitute regulation. It would likely take a new approach as, fundamentally, these companies are relatively young. We’ve never had global companies like Facebook or Google before.
AB: True. These big players need to be kept in check, be they social media platforms or retailers, because they’re growing all the time. But people love them, so you can’t take them away from their customers either. What we need is an open debate about these new realities.
Speaking about debates and discussions: there seems to be a cultural clash between the European public in general and US tech companies which are widely accused of not sharing a European understanding of issues such as data protection or employee rights.
DK: There’s no question that all three of the American tech giants – Facebook, Google, and Amazon – convey American values, such as individual freedom, self-reliance, and competition, everywhere they go. That’s the way they are; it’s inherent in their structures, their interfaces, their presumptions. Yet they do make an effort to adapt. Facebook is starting to acknowledge, for instance, that they have done a poor job of adjusting to the specific conditions prevailing in the countries in which they operate.
AB: First of all, there are reasons why these companies started in the US. For instance, it offers a unique environment in which the entrepreneurial spirit influences how companies are created and how universities are connected to business. These American companies do more than analyse ideas. They put them into action, changing patterns and adapting business models. One cannot apply this same situation to Germany. Having said that, once you take your business abroad, you have to recognise and respect other standards and systems, such as collective pay-scale agreements, data protection, even taxes. I therefore believe we definitely need to start thinking about how we can find common ground, a level playing field with comparable conditions for all. We must endorse fair competition and working conditions in every context, whether it be taxes, workers’ rights, data protection or whatever. Today that’s not the case.
DK: I think Europe is a little ahead of the United States on this. Take the General Data Protection Regulation, for example. It was a long time coming, but now that it’s almost here it will essentially bring American companies in line with European standards. That may well be a good thing. The EU has devoted more critical thought to the digital economy. At the same time, and maybe this is an American point of view, I still think there is real value in the way the Internet and global platforms are bringing the world closer together and, to some extent, creating a global culture that benefits everyone.
However, there is a rising concern especially in Europe that globally active companies elude and ignore the rules by which everyone else has to live.
AB: Consider the environment, for example; in Europe, companies, NGOs, and politicians have succeeded in communicating openly and honestly about the issues that need addressing. At the moment, however, that is all that seems to be happening. Few companies are actually taking action, necessitating that the politicians step in, which is usually the worst solution.
DK: The 20th century was a kind of battle between capitalism and Marxism on a macro-level. Capitalism thankfully won. But I think what happened, partly because of the urgency of the digital revolution, is that business has been forced to reckon with capitalism’s consequences a lot sooner than governments – business has a bottom line which the government doesn’t have – which is why they are also more capable of adapting. In addition, the public – which is something I know you, Alexander, care about – doesn’t want to do business with companies who are hurting the planet or treating people unfairly. People understand that they can wield influence.
Speaking of people: according to a recent survey by Forsa regarding trustworthiness only 27 percent of Germans have trust in corporations and only 6 percent in their managers. (1)
AB: That is clearly a result of management decisions in the past. It all began with the global financial crisis – which is still unresolved – when billions were spent on shoring up the banks. That was the point when people started wondering. What is more, we had the aftermath of “Dieselgate” to deal with, and close on its heels the Paradise Papers affair. It is only logical that people’s faith in business has been shaken. And not only that. At the moment, all of our elites in the political, scientific, and economic fields have lost credibility and legitimacy. In contrast, populism is growing. This is a dangerous development.
DK: If people vote with their spending, they vote with their spending every day. So there has got to be more responsibility taken on the part of business. That’s a good thing in my opinion; it’s good to put in place some systems that can make you more responsive, and maybe even more so than your competition.
AB: Here in Germany, we also see growing numbers of consumers looking to exercise their buying power by patronising companies with high standards across the board. While I believe that the willingness to pay appreciably more for a high-quality product is still relatively limited, I do have the impression that things are changing. People are overwhelmed, inundated with data, and more information is constantly flooding, at an ever-faster pace. In this situation, people naturally seek safe harbours and turn to things they can trust – for instance, a company that upholds the same values and high standards as they do.
DK: I heard that you go to great lengths not to ship your apparel by airplane. I assume because of the carbon footprint.
AB: Yes, we try to transport by ship or rail.
DK: Many of your competitors use air freight for efficiency reasons and so on. Do you talk to your customers about why you made the decision?
AB: No, we have not publicised it much – yet. But we are currently redefining our
position. Although sustainability has long been part of our DNA, we are now looking at adapting our mission statement to place corporate responsibility closer to the core of our brand. We also want to relay this more effectively to both our employees and our customers. We are striving to improve every day, especially in terms of communicating our sustainability goals.
A key part of corporate responsibility in the digital age is data protection. How would you define the responsibility companies have in dealing with customer data?
AB: The data belongs to the customer. Period. It is incumbent upon us to be transparent about what kind of data is collected and from where. On the one hand, you can ascertain a household’s energy usage by collecting the data and analysing the peaks and troughs – and take decisions accordingly. Everyone benefits, which is a good thing. Nonetheless, it should be up to the individuals to decide whether to provide their data. To be honest, I don’t even know who is collecting my data right now.
DK: I agree, but I think there is a contradiction in public attitudes, where on the one hand people – especially the more informed, well-educated – are saying, I don’t want to have my data controlled by Facebook and Google, I want to have some control back, or I don’t like the idea of how much of my information is floating around the world, especially in the hands of business. On the other hand, people expect customised service. And yet, they don’t realise the degree to which, in most cases, the two are interconnected.
Another crucial consequence of the digital revolution is that companies need to become more flexible and faster and let their employees work in a completely self-reliant and responsible way. To achieve this, the Otto Group launched Kulturwandel 4.0 (cultural change) in 2016. Can you explain the important reasons behind that change process?
AB: We needed to change to remain relevant in the digital age. Command-and-control no longer works. Our main objective is to empower our employees and become more
customer-centric. To that end, we had to relinquish control of how the organisation is run. As a first step, we opened several management processes to the entire Group in a topdown and bottom-up combined approach. This rendered leadership more transparent in terms of decision-making, while empowering employees to play a more active role across departmental lines and hierarchical structures. Initially quite a few people asked me if this meant I was putting an end to hierarchy. I said no, I love hierarchy – it gives us a framework within which to do our jobs. That being said, the role of leadership is changing. It’s no longer the bottleneck through which all information and every decision needs to pass. My role has become that of a facilitator. This means that I have to set very clear directives, while being much more open and flexible.
DK: I wrote a book about Facebook, and I actually think Facebook is one of the reasons why other companies have had to make such changes. Clearly, Alexander, you’re ahead of many in how you’ve thought about it. A lot of companies have recognised the need to be more responsive to the concerns of both the customer and the employee and to be more collaborative. They also realise it hastens the speed of innovation. But they didn’t really have the choice not to do so in my opinion, because once Facebook emerged and employees got the habit of being able to express their views, it almost democratised business. I’m curious, do you measure employee sentiment and morale? Do you have any metrics on that?
AB: We regularly conduct various customer surveys and also ask our employees on all levels for their feedback. The perception of the company generally appears to be quite positive, and the employees feel taken care of. More and more people come to us and say they don’t want to work just for the money; they seek a deeper meaning behind what they do. In that sense we have achieved our goal. We will continue to stand up for our values and standards to ensure that our current and future employees and customers are proud to be associated with us. In the process, we’ll hopefully set an example for the rest of the business world.
(1) Forsa study on trustworthiness on behalf of RTL Media, 2017
Source: Otto Group Annual Report 2017/18
Values in the digital age
Watch the lively discussion between Alexander Birken, David Kirkpatrick and Andrew McAfee, scientist at the Massachusetts Institute of Technology (MIT), on YouTube.