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Our weak Sustainability Data alone digital state needs AI is no cure 12/18
POSTGRADUATE
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You can complete the Postgraduate Diploma in
Management in 18 days spread over 30 months.
Schedule a consultation now with Verena Ackels,
programs@esmt.org, +49 30 212 31 8053
www.esmt.berlin/pgdStudies show that the divide between tive for business management education in
addressing this. In November, we hosted and
interest and realization on the adoption of participated in the annual European confer-
big data in business strategy remains stark. ence of the Graduate Management Admis-
While nearly all of the respondents say sion Council (GMAC). More than 100 leaders
in business management education came
that their companies want to be data-driven, together to specifically discuss data strate-
only one third claim to have achieved it. gy and data analytics as well as the role that
educators, recruiting and admissions pro-
fessionals, and program managers can play
in helping the next generation of business
EDITORIAL Because of the global digital transformation,
business executives are challenged in vari-
leaders in the new digital landscape. To para-
phrase a question from the opening remarks
ous dimensions. How can they successfully of one of my colleagues: How can today’s use
guide their companies across an industrial of data, analytics, and artificial intelligence
landscape transformed by disrupting tech- contribute to tomorrow’s better world?
nologies? How can their companies identify In this issue of the ESMT Update, we ex-
and unlock the value of their investments in amine the ways by which players in diverse
new technologies? How do they harness the areas – private sector, public sector, and civ-
increasing flow and speed of structured and il society – are grappling with the questions
unstructured big data generated by transac- and solutions posed by big data and data
tions, social media conversations, business analytics. As regulators are commissioned
apps, support forums, and more? How do to work on our behalf to monitor and con-
they also navigate the roadblocks, hurdles, trol how private businesses use public data,
and doorways created by data privacy expec- the question arises as to how the law on the
tations and regulations on the handling of all adoption of big data in business strategy is
that data? helping or hindering their efforts. Are hidden
ESMT Berlin has long recognized these champions of the business world embracing
challenges in implementing digital strategies digitalization in ways comparable to their
and operations. Indeed, we see an impera- larger corporate competitors? What does
a comprehensive survey show of how they
have succeeded and where they have failed?
Investors are pushing corporates to evaluate
the environmental, social, and governance
effects of their corporate sustainability ini-
tiatives. How can AI-driven intelligence tools
shape their work for the better?
Join me in taking a dive into the debates
of the new data world.
Jörg Rocholl
President, ESMT Berlin
ESMT Update 12/18 3TABLE OF CONTENTS
ESMT Update
12/18
03
Editorial
Features
05
Achilles’ digital heel
by Martin Schallbruch
Public sector weakness in
comprehensive digital strategy
14
threatens our society.
22
11 Hacknight
Death defying decisions September 29–30, 2018
by Francis de Véricourt
In public health emergencies,
data is no cure-all. Inside ESMT
14
Big data –
20 24
Of Note
great power or great waste?
by Joanna Radeke and Tammi L. Coles In the News 25
Data and data analytics can play Reading Room
a role in sustainability efforts, but 20
how? Europe must be less defensive 26
about Chinese investment In Profile
by Jörg Rocholl with Hiltrud D. Werner,
Findings Volkswagen AG
12 Conversations 30
Champions of the digital Alumni at Large
transformation? 13
Hidden champions are embracing “Find digital talent
digitalization and changing the in the big cities”
German economy. with Bianca Schmitz
Imprint
29 Editorial: Tammi L. Coles, Digital Editor,
“Questions, not commands tammi.coles@esmt.org.
Contributor: Molly Ihlbrock, Head of
for top performance” Corporate Communications and Marketing.
Creative Design:
with Jan U. Hagen STOCKMAR+WALTER Kommunikationsdesign.
Printing: Köllen Druck + Verlag GmbH.
Photography: Cover photo © Björn Grochla
/ Unsplash; cover illustration © S+W; images
used under license from Depositphotos.com,
In Pictures Shutterstock.com, and by permission of
ESMT faculty, staff, alumni, and students.
Postmaster: Send changes and corrections
to: ESMT Berlin, Corporate Communications
18
11
and Marketing, Schlossplatz 1, 10178 Berlin,
ESMT Annual Forum Germany; newsletter@esmt.org.
Copyright: © 2018 by ESMT Berlin
June 7, 2018 Published biannually. Printed in Germany.
4 ESMT Update 12/18FEATURE
Achilles’ digital heel
Public sector weakness in comprehensive digital
strategy threatens our society.
F
or months now, electronic regulations and supervisory authorities, have
mailboxes have been fuller their own guidelines, and have obtained con-
than usual: the EU General sent (or not). It is almost impossible to de-
Data Protection Regulation scribe it – it is no longer understandable for
(GDPR) has taken effect and consumers at all.
forced companies to demand In my new book Weak state on the net. How
consent from all their cus- digitization puts the state into question,1 I reach
tomers and business part- the following conclusion: while data protec-
ners. After 10 years of preparatory work, poli- tion law has exploded, data protection has
tics seems to have successfully structured an suffered. In practice, the small-scale approach
important area of digitization: data protec- of data protection law largely evaporates and
tion. But is that actually true? Does the GDPR is no longer capable of protecting citizens ef-
solve the problems arising from mass data fectively, comprehensibly, and transparently
collections on international platforms? Can from the actual hazards of data processing.
we, and the data protection commissioners On the contrary, the paternalistic data pro-
on our behalf, assess, evaluate, and control
who is doing what with our personal data?
Over-regulated data protection In practice, the small-scale
You probably already access your bank account
approach of data protection law
from your smartphone. Surely, you are using is no longer capable of protecting
one of these apps – the ones in which you citizens effectively.
store the bank details to your various accounts
in one place and access online banking. The
app takes care of everything for you: queries
checkings, savings, and credit card accounts as
well as the account balances of several bonus tection legislation lulls people into a false
cards. The result is displayed transparently sense of security and virtually encourages
and is updated on demand. Of course, banking them to handle their data with carelessness.
transactions are also possible with such apps. What is worrying: Facebook, Google and
What about data protection in such an other global platforms have implemented the
app? Using the example of the market lead- new EU rules quickly and seemingly without
er, I examined the app’s work step by step in any significant impact on their profitable data
terms of data protection. Above all, one thing trading business models. At the same time,
is clear: a complete description of all data many SMEs are complaining that the GDPR
processing operations, participating institu- is making it difficult for them to implement
tions, and legal regulations are no longer pos- new digital business models, and that the
sible. The app developer, bank, smartphone speed with which they can do so is suffering.
manufacturer, mobile phone provider, iOS/ No one knows what medium- and long-term
Android operating system developer – they effects the regulation will have in the digital
all handle your personal data when using the space and in the competition between global
app, are subject to different data protection economies.
ESMT Update 12/18 5FEATURE
Blurred responsibility in digital realms al citizens, places greater responsibility on
manufacturers of hardware and software, and
Data protection is a particularly prominent also reflects the special responsibility of pro-
example of the fundamental problems faced viders towards their customers.
by the state in dealing with digitization. Yet Data protection law and the security of
another is the security of our digital everyday the networked household reveal one aspect
of the “weak state on the net”: the blurred
responsibility in digital space. Policy makers
and administrators have not yet found an ad-
equate solution to this problem. Over-com-
While individuals should plex legislation, such as data protection, is
just as unsuitable as the renunciation of re-
secure their networked digital sponsibility assignment, such as IT security.
households, they are hardly With the discussion about automated deci-
in a position to do so. sions and the use of machine learning in all
areas of society, the next field of digitization
is emerging in which government will strug-
gle to find solutions.
The weakness of the state in the distri-
life: Have you ever counted how many dig- bution of responsibilities hits the companies
ital devices in your household are connect- at least as hard as their customers. In data
ed to Wi-Fi? Are you sure that you haven’t protection law, compliance costs are explod-
forgotten an e-book reader, a thermostat, ing, and every change to business models
or a “smart” light bulb? More than twenty and processes requires a great deal of effort
digital devices in the local network are not in terms of data protection documentation,
uncommon for an average family. A second information, and consent requirements. In
question: Do you know where your data is the case of IT security, the situation is the
stored – your texts, photos, music, and vid- other way round, for example with the use of
eos? Which cloud services do you use? Even Internet of Things (IoT) devices. Missing min-
more important, which ones do you no lon- imum security requirements for such devic-
ger use but still have data stored there? One es and constantly new vulnerabilities make
last question: Do you have an overview of their use difficult, especially in medium-sized
which user accounts you have set up on the companies.
Internet? How many login IDs do you have
for merchants, magazines, clubs, game pro-
viders, transport companies, or travel plat- Government supply mandate – digitally
forms? By 2015, Internet users already had rethought
an average of 90 different accounts; by 2020,
there should be over 200 accounts. While the state is struggling to assign re-
Every Internet user now calls a multitude sponsibility in the digital space, it is simulta-
of devices, programs, Internet services, and neously facing difficulties in fulfilling its own
user accounts “their own,” without still hav- digital obligations. The poor progress made
ing an overview. Each of these programs has in digitizing government actions is widely
vulnerabilities, each of the devices is vulner- known. But now there is a new challenge.
able. Regular maintenance, the installation With the digitization of all important areas
of updates and patches, the configuration of of life – from health care to energy supply,
security settings, reaction to known attacks from logistics to the arts – much more is re-
– all of this is your responsibility. Each indi- quired of the government than digital public
vidual must take care of the security of their services.
networked digital household, yet is hardly in But our public sector has already fallen
a position to do so. behind: Health apps are more widespread
Little help comes from the state. Politics than digital offerings from the public health
and law have so far not been able to make system. Google has digitized more books
a simple distribution of responsibilities in IT than all German libraries combined. Local
security that does not overburden individu- public transport timetables are easier to find
6 ESMT Update 12/18on global platforms than via local bus com- communication technologies of the govern-
panies. Many other examples could be found. ment agencies, it’s more like defining new
Large platforms compete with the state essential utilities.
across many areas of public services. This
will advance digitalization, but it will also
pose a threat to our society, because the pri- From weakness to strength
vate providers are largely out of the control
of parliaments and governments. Transport, The digital ability of our government to act
energy, health, education, and other basic in- and to face the future, the overcoming of dig-
frastructures are increasingly evading public ital weakness is a complicated and long-term
control, and individual offerings are replacing task. Using many further examples, I examine
infrastructure planning. in my book the reasons for the weakness of
However, we urgently need digital in- the state in the digital space and work out
frastructures for successful digitization. five basic approaches to overcome this weak-
Even beyond broadband networks, politi- ness:
cians must comprehensively define some Firstly, we need a new, less-detailed dig-
kind of “government’s supply mandate” in ital law, a well-considered big one, a kind
the digital realm and carry out digital infra- of “civil code” for digital space. It should lay
structure planning. Whether it is the digital down basic rules for responsibility in the digi-
mirror image of our transport infrastructure tal realm, such as a minimum security obliga-
– from traffic lights to bus schedules – dig- tion for manufacturers of networked devices.
ital access to health care, patient files, and More than twenty years of experience with
research-relevant data, the digitization of li- legislation on the allocation of responsibility
braries, or the digital future of public broad- in the digital sphere are sufficient to move
casting, the digital transformation of the away from the many individual laws toward a
state is more than just the information and coherent digital law.
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ESMT Update 12/18 7FEATURE
Fourthly, we need digital infrastructure
Large platforms compete with planning that goes far beyond fiber-optic
networks. It must embrace all state-owned
the state across many areas of infrastructures, a future digital architecture
public services. This will advance of the healthcare system, as well as a digi-
digitalization, but it will also pose tal architecture in the field of education or
in the public transport sector: What common
a threat to our society. offerings come from the cloud? Which digital
identities are used? What are local authori-
ties responsible for and what are federal and
state governments responsible for? What do
Secondly, we must acknowledge that private companies care for and what does the
the global digital platforms, such as Goo- government retain?
gle, Apple, Facebook, and Amazon, create a Finally, we need a reorganization of digi-
kind of “town square” in the digital world tal politics. All of these issues are cross-cut-
in which people communicate, cooperate, ting issues. It is not about economic or legal
and do meaningful things together, but also issues, national security or financial issues.
spread illegal content and commit all kinds However, our institutions are not yet prop-
of crimes. Without digital platforms we can erly positioned to deal with the cross-cut-
no longer live, while at the same time “life ting question of digital politics. The German
online” may not remain unregulated by the Federal Chancellery’s new responsibility for
state. We should not simply pass the burden overarching digitization issues is a first step,
of responsibility to the platform companies. and a Ministry for Digital Affairs will have to
Instead, we should ensure that they are de- follow suit. A strong digital state is a prereq-
signed in such a way that governments can uisite for freedom, justice, and social security
assume their responsibility for the commu- in an increasingly digital world.
nity, for the protection of security and free-
dom, for the balance of competing legal inter-
ests, and the enforcement of laws – even on
digital platforms. ¹ Martin Schallbruch: Schwacher Staat im Netz.
Thirdly, we need a change in the alloca- Wie die Digitalisierung den Staat in Frage stellt.
Springer: Wiesbaden 2018.
tion of tasks to our state levels – in Germany,
the federal government and the federal states
must break free of the interlocking links, de-
fine their digital tasks more clearly, and carry
them out more independently. The only way
for the public sector to achieve greater speed
in digitization is to allow the individual insti-
tutions to act on their own, without coordi-
nating every step.
Martin Schallbruch
Deputy Director and Senior Researcher of Cyber
Innovation and Cyber Regulation, Digital Society
Institute (DSI) Berlin, and Visiting Fellow at the
Hoover Institution, Stanford University
8 ESMT Update 12/18Berlin in its totality is extraordinary.
There are young people, a strong
intellectual community, and enormous
energy.
www.braincity.berlin
Prof. Dr. Tamer Boyaci
© Berlin Partner, Philipp Jester
Director of Research
ESMT BerlinWOMEN‘S
LEADERSHIP
EXCELLENCE
MAXIMIZE THE IMPACT OF YOUR LEADERSHIP
December 3 – 5, 2019
ESMT Berlin
www.esmt.berlin/women-excellenceFEATURE
Death defying decisions
In public health emergencies, data is no cure-all.
T
he Democratic Re-
public of Congo is
facing one of the
greatest health
crises of its his-
tory. In August of
this year, its Min-
istry of Health de-
clared a new outbreak of the Ebola
virus; in November, a World Health
Organization (WHO) official warned
that the outbreak could last at least
another six months. More than 200
people have already died.
When should public health of-
ficials declare a global health emer-
gency?
In a case study on the start of the
last West African Ebola virus epidem-
ic (2014–2016), my colleague Gilles
Hilary of Georgetown University and ed the dots to form a picture very credibility plays a significant role in
I wrote about life-and-death deci- specific to the region, the timing, how organizations interpret and act
sion making in the management of and critical conditions, WHO bench- on warning system policies. When
a global health crisis. We looked at marked the outbreak against histori- agency credibility is low, risk is
two organizations – Médecins Sans cal health events of similar size, even downplayed to improve credibility.
Frontières (MSF or Doctors Without in far-flung regions. We believed that In high credibility cases, the agency
Borders) and WHO – and how each WHO, as the UN-authorized decision may exaggerate risk.
group approached the data and other maker, balanced the risk of declaring MSF declared the outbreak an
information from the earliest points an emergency against acknowledging emergency in March 2014; WHO
of the outbreak. Despite nearly iden- one – that is, the wrong assessment identified it as such in August, five
tical levels of expertise and access to could yield potentially disastrous out- months later. In the end, based on
data, the two organizations reached comes for the region’s economies. more than just data, MSF was unfor-
radically different conclusions about With Saed Alizamir of Yale Uni- tunately proven the wiser. The Eb-
the seriousness of the outbreak. versity and Shouqiang Wang of the ola outbreak resulted in more than
We opined that indicators be- University of Texas at Dallas, I ex- 10,000 deaths.
yond the virus, its epidemiology, the plored this matter in greater depth.
number of cases, and its geograph- In our award-winning research – pub-
ic spread were at play in their deci- lished as “Design of Public Warning
sion-making. Where MSF connect- Systems" – we conclude that even
Francis de Véricourt
Professor of
Management Science,
ESMT Berlin
ESMT Update 12/18 11FINDINGS
Champions of the
digital transformation?
A hidden champion is a company with a turn- Are these companies also leading the digital
over of less than 5 billion euros and a mar- transformation of the German economy? Sur-
ket leader in the world or Europe. Through vey results show that German hidden cham-
investment in R&D, hidden champions have pions are working vigorously on positioning
embraced innovation in diverse sectors, from themselves more digitally, both in regard to
manufacturing to medicine. internal processes and in relation to new
business models.
Key findings
Digitally satisfied The challenges of the On a good path Keys to success
51% of small and medi- hidden champions When it comes to a 49% of hidden
um-sized enterprises 42% of hidden champi- self-evaluation of their champions describe
(SMEs) are content with ons name a silo mental- digitalization progress, Industry 4.0 as the key
the progress of their ity and approximately hidden champions technology of
digital transformation. 54% a resistance to have already under- digitalization.
Among the corporates change as problems in taken more than half
and hidden champions, relation to the digital of the journey. SMEs
the figure is 71%. transformation. give themselves a
worse assessment;
the corporates, on
the other hand, have
already pulled
considerably clear. Sought and found
Approximately 33% of
all companies lure dig-
Stronger together Disruption risk ital experts from other
35.8% of customers of 42% of all companies industries. Among the
hidden champions are and 40% of hidden hidden champions, it
actively involved in the champions expect is 37%; among SMEs,
transformation. Among digitalization to have approximately 28%;
corporates, the figure a large impact on their Structural and among corporates,
is 43.6%. exposed position in traditionalists approximately 33%.
the market. Among The hidden champi-
SMEs, the figure is 29%; ons name co-working
among corporates, 52%. spaces (~ 25%), job
rotation (27%), and job Study concept and design by
shadowing (15%) as Matthias Teichmann, IDG Research
measures against silos Service; and Johannes Habel and
Bianca Schmitz, Hidden Champions
and as pro-innovation Institute, ESMT Berlin. Study
measures. results published November 2018.
12 ESMT Update 12/18CONVERSATIONS
Find digital talent
in the big cities
Hidden champions must be imaginative in
competing for qualified professionals to aid
their digital transformation processes. Of
course, they also still recruit via universities
and technical colleges. (Festo with its Bionic
Learning Network is a fantastic example.)
But they also find new ways, such as going
into so-called “Digi-Hubs,” where they can
exchange ideas with entrepreneurs and
accelerators.
Additionally, hidden champions are
increasingly leaving very rural areas and
taking parts of their (mainly digital) business
to larger cities. For example, Berner went
to Cologne; companies such as Viessmann,
Kloeckner (with Kloeckner-i), and Claas
(with 365FarmNet) undertook the same in
Berlin. Hidden champions are looking to
expand their business and to gain fresh
digital talent who can support them in doing
so.
Bianca Schmitz
Co-director, Hidden Champions Institute at ESMT Berlin
In conversation with ComputerwocheTV, October 29, 2018.
ESMT Update 12/18 13FEATURE
Big data – great power
or great waste?
Data and data analytics can play a role
in sustainability efforts. If only we knew
how to use them …
L
ast year, the Economist de- hand, big data is like renewable energy – it
clared “the world’s most offers a seemingly endless pool of resources
valuable resource is no lon- from which we can draw power for our work
ger oil, but data.” 1 Was it with negligible (if any) damage to people and
big hype or was it a sobering the planet. On the other hand, big data’s po-
glimpse into the future of the tential can be quickly wasted without capa-
digital landscape? After all, ble stewardship, cooperation between major
the global pursuit of oil prof- players, and the trust and support of con-
its was at the expense of our environment sumers, workers, and investors alike.
and communities. Will data and data analyt- Assuming that data analytics can provide
ics cost us as dearly as this or will big data aid powerful insights on the environmental, so-
us in reaching our sustainability goals? cial, and governance (ESG) factors of the
In our work with members of the Sus- sustainability picture, how can sustainabili-
tainable Business Roundtable, the Center for ty advocates – whether within or outside of
Sustainable Business at ESMT has seen the corporates – use big data to formulate, imple-
promise and the challenge that big data can ment, and evaluate corporate sustainability
play in our sustainable future. On the one initiatives?
14 ESMT Update 12/18FEATURE
Intelligent tools, sustainable solutions Big data in operations, supply chains
There is interest in all quarters in corporate Despite these inroads in ESG business intelli-
leadership in sustainability efforts – and the gence, the lack of full control that companies
verification of the same. Groups such as the have over their operations and supply chains
Sustainability Accounting Standards Board, continues to challenge sustainable transfor-
the CDP, the Task Force for Climate-Related mation initiatives. Here, too, big data analyt-
Financial Disclosures, the Climate Disclosure ics can help.
Standards Board, the Workforce Disclosure
Initiative, and the Corporate Human Rights
Benchmark are just a few of the agencies and
initiatives offering metrics, standards, and
analytical tools to verify corporate sustain- How can big data be used to
ability measures.
For both corporate and individual inves-
formulate, implement, and
tors, this plethora of options makes it diffi- evaluate sustainability initiatives?
cult to compare and contrast their utility.
What does the right sustainable company
or project look like for us? Which evaluation
tools and standards should we use? To what On the operational side, as detailed
degree can we rely on externally developed above, big data can provide companies with
systems to reflect our (unique) sustainability a better understanding of their environmen-
strategy? Should we create our own system tal impact. It can also increase cooperation,
internally? another factor in the environmental picture.
Here, artificial intelligence (AI) offers IBM, for example, uses big data analytics to
hope for an aligned approach that would sim- not only improve its own operations, but
plify sustainability decisions for corporate also to help other companies optimize their
executives and investors alike. The Network operations to be more energy and resource
for Business Sustainability, for example, pub- efficient. Additional efforts to increase coop-
lished a detailed report by Tal Yifat, a data eration are needed. The current linear econ-
scientist who specializes in business sus- omy model is based on the take, make, and
tainability, on the first market solutions that waste paradigm; the circular economy model,
make sustainability data collection and analy- in contrast, is based on the reduce and reuse
sis more efficient. 2 These emerging ESG busi- principle. (One company’s waste can become
ness intelligence solutions are combing and another company’s resource.) The social en-
processing corporate reporting, monitoring terprise Circle Economy is working to acceler-
and synthesizing social media conversations, ate circular economy practices within sectors
tracking regulatory initiatives, and more. The by using, among others, blockchain technol-
resulting big data can help shape ESG sus- ogy. Its use can increase data transparency
tainability strategies, including risk assess- and accountability across value chains and
ment, consumer engagement, and supply thus help build collaboration among produc-
chain oversight. “I think that these issues are ers and recyclers.
becoming more and more core to strategy,” On the supply chain side, big data ana-
said Ioannis Ioannou, an associate professor lytics can help companies improve the trace-
of strategy and entrepreneurship at London ability of ingredients or components; address
Business School. “They are not peripheral to transparency concerns in labor, compliance,
strategy. They’re not an add-on. I do not think and sustainability data collection; and re-
this is going to be a nice technology to have, duce supply chain risks. Big data can also
but it’s going to be a necessary technology, help companies engage diverse stakeholders
especially for those companies that are really in corporate sustainability initiatives relat-
genuine and serious about their commitment ed to the supply chain. The social enterprise
towards stakeholders and towards having a Provenance, for example, “uses blockchain
positive impact on society.” technology to enable secure traceability of
certifications and other salient information
in supply chains.” 3 The company works with
ESMT Update 12/18 15FEATURE
businesses to increase transparency in their divide, but also awakened the business world
operations and, thus, grow trust among their to the imperative of addressing the trust
consumers. Consumers are encouraged to deficit and foreseeing ethical and ESG chal-
track the origins of the products that they lenges to meeting sustainable development
purchase and to appreciate the social and goals (SDGs).
environmental impact of their buying pow- “Big data offers tremendous potential for
er. On the other side of the equation, the predictive analytics and solutions that will
German sportswear brand adidas collects big help to foster global sustainability across all
data from its supply chain workers via apps SDGs,” said Thomas Osburg, a leading expert
on the issue of trust and digitization and the
co-editor of the book Sustainability in a Digital
World. “The challenge, however, is the declin-
Blockchain technology can aid ing institutional trust among citizens. New
technologies lead to new forms of distribut-
efforts for data transparency, ed trust in transformational networks that is
accountability, and collaboration much harder to gain than traditional forms of
among producers and recyclers. trust in hierarchical relationships.”
Some companies are heeding the call to
engage with their consumers around data se-
curity, data privacy, and digital transforma-
and hotlines. According to Supply Chain Dive, tion themes to bridge the trust gap. The Ger-
“adidas has established worker hotlines ac- man telecom company Deutsche Telekom, for
cessible to roughly 300,000 factory workers example, has pledged to regularly and public-
in China, Indonesia, Vietnam, and Cambodia, ly focus on the question “Are we stumbling
and piloted an app in China.” 4 In this way, blindly into digitization?” 6 The company has
adidas uses data to eradicate modern slavery interviewed leading German experts in dig-
practices in its supply chains. itization on its risks and has encouraged its
customers to engage in a periodic “digital
detox.” After undertaking a joint study with
The trust deficit Loudhouse on the “future of digital trust” in
2014, its French telecom counterpart, Orange,
Big data can help solve many of the problems called for greater commitment to increasing
that corporate sustainability initiatives face. transparency in data usage and sharing, pro-
There is, however, a necessary condition for viding consumers with tools for controlling
that to occur. Companies that are mining their data, and championing the consumer
big data need to have the trust of their data role in data oversight. 7 Here, too, big data
sources – namely, consumers, sup- analytics are expected to play a central role.
pliers, and partners. This con-
dition has not been met.
A staggering 71 percent Human and machine
of consumers do not
trust that compa- Fundamentally, as Prof. Edward Freeman so
nies will use their aptly stated in a recently co-authored article
data ethically, ac- in Sloan Management Review, “Behind every
cording to a joint piece of code that drives our decisions is a
study published human making judgements about what mat-
by the Psycho- ters and what does not.” As sustainability
metrics Centre at advocates with an eye to big data as more
the University of than “the new oil,” we must thus ensure that
Cambridge and the corporate ethics and sustainability issues are
global PR firm Edel- central to the (still emerging) story of big
man.5 Recent scandals data and data analytics. We need to ensure
and data breeches in- that the humans behind the programming
volving Facebook and Goo- and the data analysis are well equipped to
gle may have deepened the deal with the diverse challenges of ESG busi-
16 ESMT Update 12/18We must ensure
that corporate ethics
and sustainability
are central to the big
data and data
analytics story.
ness intelligence and invested in the success We can only hope that equipped with big
of corporate sustainability initiatives. And data and with the help of AI and algorithms,
because even new technology solutions can CEOs and other c-suite executives will heed
be manipulated or corrupted, we must also the warnings of the machines to guide us to
be vigilant in implementing robust digital a sustainable future.
systems of checks and controls.
¹ The world’s most valuable resource is no longer oil,
but data. The Economist. Accessed November 9, 2018.
https://www.economist.com/leaders/2017/05/06/the-
worlds-most-valuable-resource-is-no-longer-oil-but-data.
² Yifat, Tal. Need business intelligence on sustainability
issues? Big data analytics have solutions to guide your
strategy. Network for Business Sustainability. Accessed
November 9, 2018. https://nbs.net/p/guide-sustainability-
strategy-by-big-data-analytics-nbsp-7f697a74-bef0-4033-
b5ff-a3f7686847ed.
³ Blockchain: the solution for transparency in product
supply chains. Provenance. Accessed November 9, 2018.
https://www.provenance.org/whitepaper.
⁴ Adidas turns to apps for help in fighting modern slavery.
Supply Chain Dive. Accessed November 9, 2018.
https://www.supplychaindive.com/news/adidas-slavery-
technology-factory-conditions-supplier-compliance/443509/.
⁵ Trust and Predictive Technologies 2016. Psychometrics
Centre at the University of Cambridge and Edelman.
Accessed November 9, 2018. https://drive.google.com/
file/d/0BxCUnF8M88ahX0dTdWRiek81d1k/view.
⁶ Challenges of digitization. Deutsche Telekom. Accessed
November 9, 2018. https://www.telekom.com/en/company/
digital-responsibility/challenges-of-digitization. Joanna Radeke Tammi L. Coles
⁷ The future of digital trust. A European study on Manager Digital Editor
the nature of consumer trust and personal data.
Loudhouse and Orange. https://www.orange.com/ Center for Sustainable Corporate
en/content/download/21358/412063/version/5/file/ Business, ESMT Berlin Communications and
Orange+Future+of+Digital+Trust+Report.pdf.
Marketing, ESMT Berlin
ESMT Update 12/18 17ESMT Annual Forum
June 7, 2018
Pictured, top:
Olaf Plötner, ESMT Berlin;
Frank Stieler, KraussMaffei Group;
Don Gao, Positec Group;
Julia Bauer, moderator;
Jack Cheng, NIO / XPT;
Ayla Busch, BUSCH
middle:
Carsten Spohr, Lufthansa Group;
students of ESMT Berlin
bottom:
Dieter Zetsche, Daimler / Mercedes-Benz Cars;
Peter Altmaier, Federal Ministry for Economic
Affairs and Energy (Germany)
Page 19, top:
Guest
bottom:
Showcase of Creating Digital Leaders
18 ESMT Update 12/18IN PICTURES
Technology is rapidly changing
our world. Whether evidenced
by the latest smartphones, smart
homes, or smart industry, these
innovations are shaping the
personal and the political, the
everyday and the future.
ESMT Update 12/18 19Europe must be less
defensive about Chinese
investment
The EU should focus instead on
improving its internal market to help
companies compete with China.
I
s Germany just a department vestment in China is still significant- China’s own developments take too
store with a clearance sale for ly higher than the reverse. German long, they just acquire the missing
China? Leifeld, 50Hertz, Gram- companies’ experiences with their expertise. Beijing’s ambitious strat-
mer – hardly a week goes by Chinese owners have been positive egy of becoming the world’s leading
without a German company be- so far: The company enters the Chi- economy in the first half of the 21st
ing targeted for Chinese take- nese market, management keeps its century is no longer a pipe dream.
over. While mergers and acqui- entrepreneurial freedom, and worker Chinese giants such as Baidu, Alibaba
sitions in general rarely arouse representatives appreciate the long- and Tencent seem to be the only in-
public interest, everyone gets riled term orientation. ternet companies that can compete
up when China is involved. Is that with the American monoliths Goo-
because of China – or because of Eu- gle, Amazon and Facebook. European
rope? Chinese interference? competitors in this context do not
Here are the facts: China is Ger- exist.
many’s most important trading part- The preoccupation with China is not
ner. Last year, Germany exported only because of its size. In contrast
€86.2 billion ($98 billion) worth of to European and American compa- What Europe should do next
goods to China, nearly tripling over nies, interest from a Chinese compa-
the past 10 years. In return, Germany ny arouses concern that the Chinese China’s combination of political and
imported goods worth €100.5 billion government is exerting direct or in- economic power scares Europe, as
from China. The mutual dependence direct influence. does the vague fear of being left be-
and benefits are huge. The central criticism focuses on hind. So Europe must become better
According to an EY study last the charge that China’s state-con- and stronger. It must create the con-
year, Chinese companies invested trolled economic system exploits ditions for its companies to be more
$57.6 billion in takeovers and invest- Western openness. According to this successful in an era of platform econ-
ments in Europe. Germany account- view, Chinese companies can act omies. The core condition for this is
ed for the largest share, $13.7 billion, freely here while German companies scalability in a market of more than
and the rate of investment is up in must deal with curbs and restrictions 500 million people because here the
the first half of 2018. German compa- in China. In this context, the annual winner takes all.
nies with global reputations as tech- meetings between China and 16 Cen- Economic policy must allow com-
nology leaders are prime pickings for tral and Eastern European countries panies setting up shop in one EU
Chinese buyers. are considered a threat to political member state to roll them out to all
But according to an IW study, the unanimity in decisions at European other member states without further
Chinese share of all foreign acquisi- level. approvals — and get cross-border
tions in Germany in 2017 was just 6.6 And China is no longer just copy- financing via venture capital. Only
percent – less than one-third of the ing business models but has become then can they reach the critical mass
American share. German direct in- the world leader in select areas. If that is important for their survival
20 ESMT Update 12/18IN THE NEWS
and prosperity beyond Europe. The
finalization of the internal market in
practice is the critical success factor
to Europe winning in future-orient-
ed sectors. The European discussion
could then veer away from fiscal is-
sues and towards common issues
of the future. And it would be easi-
er to show EU member states with
increasing success a clear alternative
to enticements outside the bloc.
The second consideration is the
question of new industrial policy or
even state subsidies, as is required
for artificial intelligence. But with
caution, because these actions can
do more harm than good. Experi-
ence shows that while the govern-
ment may not be worse than the
market in finding new technologies,
it often fails to hit the brakes in the a portion of the company remained maintained and strengthened with-
face of obvious failure. State support below the legal minimum for a gov- out the state renouncing its right to
must happen within a clearly defined ernment review, must remain an ex- intervene in precisely defined indi-
framework, especially in the promo- ception. The government, with the vidual cases with clear rules. This is
tion of new public goods such as dig- help of German development bank the basic principle of the social mar-
ital services and platforms. Signifi- KfW, intervened anyway. ket economy.
cantly increased funding of top-level Nor does it make sense, as with Europe must act in unison and
research at a European level would Kuka, to try to win German compa- build on its strengths. The recent ex-
also be a sensible way forward. nies against their will. Such interven- perience in the trade dispute with the
Thirdly, Europe, together with tion must lie with the state and not US shows what we can achieve.
the United States, must continue to with individual companies. It is not
make its demand for reciprocity clear their job or in their interest to act
in talks with China. The first success- politically. Their economic disadvan- This article was originally published on
es are apparent. The abolition of Chi- tages in China would be too great. August 17, 2018. Copyright Handelsblatt
na’s requirement for foreign manu- Rather, it is a matter of defining a GmbH. All rights reserved; republished
facturers to enter into joint ventures clear minimum threshold for invest- with permission.
is an important step — and BMW is ment reviews and then carrying out
the first beneficiary of the new regu- the review according to clear criteria.
lation. But there’s still a long ways to Not all of the burden can be put on
go in terms of real equality of oppor- Germany’s Foreign Trade and Pay-
tunity. The more Germany and Eu- ments Act.
rope can point to their own practic- If we want to prevent minori-
es as a good examples to China, the ty shareholders from having an ex-
more they will succeed. cessive say, we need to think about
rules to improve corporate gover-
nance. If one considers energy net-
Developing resilience works as critical infrastructure, then
one can establish rules for their oper-
All these tactics can make Europe ation, with clear, tough sanctions for
more resilient and increase its pros- infringements.
perity. But they don’t answer the With China’s growth, Europe and
question of how to deal with Chinese Germany are facing great new op-
takeover bids. Above all, we must portunities and challenges. Econom- Jörg Rocholl
have clear rules. The 50Hertz case, in ic openness and cooperation, the President,
which the bidder wanted to acquire cornerstone of prosperity, must be ESMT Berlin
ESMT Update 12/18 21Students hack the future
of business education
Fourteen teams, composed of coding Experts from global corporations,
students and professional developers, startups, and digital ventures, such as
participated in the first ESMT Berlin The Lean Startup Co., IBM, Daimler,
Hacknight on September 29-30. Delivery Hero, TechStars, HelloFresh!,
Led by the MBA and master’s students BCG Digital Ventures, Founder Institute,
of the ESMT Berlin Entrepreneurship Outfittery, Charité, and Helix mentored
Club, the hackathon also drew students teams. The Helix Foundation was the
from ESMT, INSEAD, HEC Paris, and main sponsor of the hackathon, and
MIP Politecnico di Milano. IBM, BRLO, Red Bull, Delivery Hero, and
METRO also supported the event.
22 ESMT Update 12/18IN PICTURES
The winning team, Athena, developed
a project on personalized learning,
powered by machine learning and
artificial intelligence. Each team member
received an award of 1,000 EUR,
sponsored by the Helix Foundation.
In a world where new technologies
are more accessible and new job
titles appear every day, we need to
rethink our educational systems and
structures to prepare future workers.
Demis Estabridis
MBA Candidate 2018 and President, Entrepreneurship Club
ESMT Update 12/18 23Of Note
ESMT events, faculty, and
research announcements
Meg Greenhouse, VP of Digital
Workplace at Zalando, at the
DigitalFuture Summit 2018,
which took place at ESMT ESMT, global alliance build new digital positive report, the council wrote that ESMT
Berlin on July 12 and 13, 2018.
learning platform “completely fulfills the requirements of an
ESMT has joined five other business schools to institution with a university status that is
offer management education through a new authorized to award doctorate degrees.”
educational technology (EdTech) platform. The (October 22)
shared platform forms the heart of The Future
of Management Alliance (FOME), the first col- Prestigious EQUIS accreditation received
laboration of its kind in business education. ESMT has received the international EQUIS
Other FOME members include BI Norwegian accreditation for an additional five years, the
Business School, EDHEC Business School, Im- maximum period for this accreditation. Ac-
perial College Business School, Ivey Business cording to the report of the accrediting body,
School, and the Lee Kong Chian School of Busi- ESMT has achieved a remarkable amount
ness of Singapore Management University. At since its founding in 2002, and its activities
the center of the alliance is a custom-built are fully consistent with its distinctive, some-
education platform, designed and provided times unique, position and aspirations. ESMT
by technology enterprise Insendi, a company bears the “Triple Crown,” made up of the suc-
founded by EdTech experts at Imperial College cessful accreditations of the world’s three
Business School. Each member school enjoys leading business education accrediting bod-
a tailored platform, enabling them to redefine, ies: AACSB, AMBA, and EQUIS. (October 5)
customize, and digitize their portfolio of pro-
grams, from MBA courses to shorter executive Dual degree program in Qatar begins
education programs and massive open online ESMT and the School of Public Administration
courses (MOOCs). ESMT went live with six and Development Economics of the Doha In-
MBA courses, three executive education ses- stitute welcomed the first intake of the dual
sions, and two customized executive educa- Executive Master of Business Administra-
tion programs. (November 1) tion/Master of Public Administration (Exec-
utive MBA/MPA) in Qatar on September 29.
Wissenschaftsrat recommends right to The 21-month program, held in English, is the
grant PhDs independently first of its kind outside of the US. The pro-
The German Council of Science and Human- gram combines business and public adminis-
ities (Wissenschaftsrat) has renewed its ac- tration. Fittingly, the class represents a mix
creditation of ESMT Berlin to grant PhDs and from leading energy, healthcare, education,
recommended that it be allowed to do so in- and financial services companies, as well as
dependently in the future. In the consistently from government ministries. (October 1)
24 ESMT Update 12/18INSIDE ESMT
Martin Schallbruch receives Stanford
fellowship
Martin Schallbruch, senior researcher at ESMT
Berlin and deputy director of the ESMT Digi-
Reading Room
tal Society Institute (DSI), has been named a Selected reading from
visiting fellowship at the Hoover Institution
of Stanford University. At the American pub-
published ESMT research
lic policy think tank, Schallbruch is working
together with international colleagues to fur- Appearing self-confident and getting credit for it:
ther develop cyber security strategies. (Au- Why it may be easier for men than women to gain influence
gust 30) at work
Laura Guillén, Margarita Mayo, Natalia Karelaia (2018)
IIP in South Africa welcomes new stu- Human Resource Management 57 (4): 839–854
dents
ESMT and the African Institute of Mathemat- Competition, loan rates and information dispersion
ical Sciences (AIMS) welcomed 26 students to in nonprofit and for-profit microcredit markets
the second intake of the Industry Immersion Guillermo Baquero, Malika Hamadi, Andréas Heinen
Program (IIP) in Cape Town, South Africa in Journal of Money, Credit and Banking 50 (5): 893–937
July. The six-month program for mathemati-
cally trained African graduates prepares stu- Crew resource management revisited
dents to transition from an academic envi- Jan U. Hagen
ronment to employment in industry. The 14 In: How could this happen? Managing errors in organizations.
women and 12 men participating in the IIP Edited by Jan U. Hagen, Basingstoke: Palgrave Macmillan
all hold a master’s degree. They come from
Botswana, Burundi, Ethiopia, Ghana, Kenya, Do credit shocks affect labor demand?
Nigeria, Somalia, South Africa, Uganda, and Evidence for employment and wages during the financial
Zimbabwe. Professors from ESMT faculty crisis
teach pro bono on topics such as business Alexander Popov, Jörg Rocholl
etiquette and presentation skills, corporate Journal of Financial Intermediation 36 (October 2018): 16–27
strategy, finance and accounting, data ana-
lytics, and organizational behavior. (July 2) The Matthew effect as an unjust competitive advantage:
Implications for competition near status boundaries
ESMT sells Schloss Gracht, moves ahead Henning Piezunka, Wonjae Lee, Richard Haynes,
with international expansion Matthew S. Bothner
Fifteen years after the start of the first ex- Journal of Management Inquiry 27 (4): 378–381
ecutive education program at ESMT and fif-
ty years after the founding at Schloss Gracht Pricing when customers have limited attention
of the “Universitätsseminar der Wirtschaft” Tamer Boyaci, Yalçın Akçay
(USW), the predecessor to ESMT, the inte- Management Science 64 (7): 2995–3014
gration of all executive education programs
in English and German has been completed. The role of leadership in salespeople’s price negotiation
Because of this successful process, ESMT is behavior
placing its focus on its main campus in Berlin; Sascha Alavi, Johannes Habel, Paolo Guenzi, Jan Wieseke
the sale of Schloss Gracht was completed as Journal of the Academy of Marketing Science 46 (4): 703–724
of November 30. ESMT is also expanding its
international and digital competencies, for Too precise to pursue: How precise first offers create
example with the opening of a branch office barriers-to-entry in negotiations and markets
in Shanghai in 2017 and, as of autumn 2018, Alice J. Lee, David D. Loschelder, Martin Schweinsberg,
the start of a dual Executive MBA/MPA in Malia F. Mason, Adam D. Galinsky
Doha. (May 3) Organizational Behavior and Human Decision Processes 148
(September): 87–100
ESMT Update 12/18 25In Profile
Conversations
with alumni
of ESMT Berlin
ESMT alumna Hiltrud D. Werner is a member of the Board of
Management of Volkswagen AG. In this edition of the Update, she speaks
with Urs Müller, a lecturer and the head of the Practice Group
Consumer Goods and Retail at ESMT, on her role and on the ethical and
compliance challenges of managing a global company.
I
n February 2017, following the depar- What did you learn about transitions in
ture of Christine Hohmann-Dennhardt, your first year as a board member? What
you were appointed at relatively short helped you; what were the problems when
notice to Volkswagen’s Board of Man- you joined the board of one of the largest
agement, with responsibility for “In- companies in the world?
tegrity and Legal Affairs.” What were
your first thoughts when you learned The biggest challenge was to change the re-
of your possible appointment? sponsibility from a specialized field of work
(i.e., IT, internal audit, or compliance) into a
On the one hand, I had great respect for this much broader more multipurpose task, which
new task, which includes the responsibility includes R&D-, sales-, investment-, and pro-
for more than 640,000 staff members world- duction-relevant topics.
wide and budget-relevant decisions on the My high affinity for cars and my experi-
Board of many billions of euros. On the oth- ence – gained in different positions held in
er hand, I had just twenty-four hours for my the automotive industry – were very helpful
decision. to fulfill my new tasks. Especially my last po-
I was encouraged by my husband to take sition as Chief Audit Executive Volkswagen
on this once-in-a-lifetime challenge. He was Group offered insights in various areas of the
a great support for me. company, which helped a lot to put some
topics into the relevant context.
26 ESMT Update 12/18You can also read
