By David De Cremer, Jess Zhang, and Leander De Schutter
Digital platform businesses are increasingly being confronted with a host of unethical consequences due to a lack of responsible leadership and regulation. In this article, the authors identify several opportunities to enhance your companies’ ethical leadership in the context of digital platforms.
Innovation is crucial to any successful business in today’s economy. Most successful businesses nowadays achieve growth by creating new value and a greater level of well-being for a variety of stakeholders. Interesting is that those companies usually employ the latest technologies that enables them to work in fast and open ways. Examples of such companies are Amazon, Apple, PayPal, Alibaba, and Airbnb. What is common to all these companies is that their business is concerned with information exchange that is built on digital platforms. Platforms enable value-creating interactions between different parties (e.g. customers and suppliers) and the use of the digital economy allows for greater efficiency and lower operating costs. These platform business models can be qualified as innovative in itself as they expand markets by bringing together knowledge flowing from different parties.
As with any business strategy that is new, revolutionary and aimed at raising growth quickly, the focus of platforms is directed primarily towards the product itself and less so at the possible long-term consequences at the societal level. This truth is especially the case for digital platforms, whose product focus is on working with information. As we all know, those who have information also have power. It is therefore suggested that with great power also comes great responsibility. For that reason, it goes without saying that ethics is a fundamental element of how platforms work and deal with information. But is ethics managed well in this digital economy age?
As was the case with financial markets, today’s businesses making use of digital platforms also seem to embrace a certain type of Adam Smith’s “invisible hand”. In other words, creating the platform is seen as the responsibility of the company whereas regulating its workings is more an issue of the platform users. Unfortunately, as the financial crisis showed that the invisible hand is more a fantasy than reality, in a similar way, digital platform businesses are increasingly being confronted with a host of unethical consequences due to a lack of responsible leadership and regulation. Take for example the following incidents happening in the two biggest economies in the world.
In the US, Mark Zuckerberg has recently been criticised that verifiably false messages distributed on Facebook influenced the US presidential elections. In response to these accusations Zuckerberg noted that it was crazy that Facebook could influence the outcome of the presidential race and downplayed the amount of fake news out there.
In China, the search engine Baidu, known as China’s Google, was accused of being responsible for the death of a student who went along with a false medical cancer treatment from September 2015 to April 2016. According to the ad this treatment was supported by research from a leading US University – which it was not! Baidu was criticised for not doing enough to screen its advertisers and rather allowed their platform to be flooded with misleading ads from unlicensed hospitals to maximise profit. Baidu’s founder and CEO, Mr Li YanHong, did not give any response to this incident till nearly a month later, under the extreme publicity pressure.
One important thing that is common in these examples is that the respective company owners did not directly feel responsible for the rules of play. In other words, as demonstrated by these platform builders, responsible leadership was and is lacking. Although I am not the first to raise the issue that better regulation is needed in today’s digitalised economy, it is surprising to see that the discussion around regulation measures stays confined to the level of legislation. A problem with relying solely on the law of the rule is that it runs the risk of lagging behind. And this is especially the case for platforms relying on rapid advancements of its technologies. As such, simply relying on legislation to tackle the ethical challenges of digital platforms is reactive at best. Because of its dynamic and rapid changing pace, businesses built on digital platforms need more than legal governance models. They need leadership with a proactive vision that tries to foresee and incorporate the ethical consequences of any digital innovation implementation. Put simply, they need leadership that sees ethics as intrinsically connected with any digital development.[ms-protect-content id=”9932″]
How to Build Ethical Leadership in the Digital Economy?
Because of the open nature of platforms, companies by definition have the responsibility to set the conditions for the rules of play. Digital platforms are recognised for increasing productivity to grow their economic existence, but at the same time they need to be clear also about how and why they will increase social wealth of all those stakeholders participating in the platform. Below, I identify several opportunities to enhance your companies’ ethical leadership in the context of digital platforms.
Create a balance. Communicate ethics concerns rather than only compliance with laws and regulation. Emphasise that as a company you are actively engaged with the ethical concerns of your consumers and identify how these concerns affect their participation in the platform. A balance is needed between showing compliance to regulations and commitment to the ethical issues included in the platform.
Be consistent. Platform businesses make use of integrated multichannel customer experiences and as such it is necessary that your business signals in a consistent way across the different channels their ethical commitments. Being inconsistent creates impressions of insincerity and unreliable business practices.
Build trust. New technologies disrupt our economy and create much complexity and uncertainties for any platform participant. A main task for companies is therefore to create the feeling that digital platform relationships are safe. Two components of trust are important to foster. First, ensure that customers have faith and show loyalty to your ideas and innovations. Second, verify and use only information that is true and will not be disconfirmed by means of customers’ experiences.
Use the power of collaboration. In a digitalised platform world building trust is not a direct relationship between the company and its customers, but more a shared experience. Whether customers will have faith in your products and truly believe what you are saying and doing is fed via different stakeholders and channels. For this reason, the philosophy underlying any digitalised platform model should be to achieve growth and high level of competitiveness by using the power of the collaborative structure of your platform community.
Important to take into account here is that if platforms increasingly grow bigger collaboration between the different stakeholders will be less coordinated and diffusion of responsibility will emerge. If this is the case, the platform community will be unable to regulate themselves. Companies are therefore advised to be present in the platform community to facilitate and coordinate the exchanges that lead to trust and cooperation building systems.[/ms-protect-content]
The article was first published in the July/August 2017 edition of The European Business Review.
About the Author
David De Cremer is the KPMG Professor of Management Studies at the Judge Business School, University of Cambridge, UK, where he heads the department of Organisational Leadership and Decision-Making. He is also an advisor to the ethics-based compliance initiative at Novartis. Before moving to the UK, he was a Professor of Management at China Europe International Business School in Shanghai. He has published numerous management pieces for corporate audiences, including his latest Harvard Business Review piece on 6 traits that predict ethical behaviour at work. He is the author of Pro-active Leadership: How to overcome procrastination and be a bold decision-maker (2013) and “Huawei: Leadership, culture and connectivity” (2017).
Jess Zhang is the Managing Director of the China Advisory board and Associate Researcher at the Judge Business School, University of Cambridge. She obtained her MBA graduate from China Europe International Business School (CEIBS) and has a special research interest in leadership, culture and innovation practices (in both established and emerging markets), with her latest research on why it is difficult for employees to really speak up published in Harvard Business Review. She was previously the Associate Director, Corporate Relations, Asia for Hult International Business School (Shanghai campus) and the Manager of the CEIBS centre on China Innovation.
Leander De Schutter is a Research Assistant and Behavioral Economics Lab Manager at the Department of Organisational Leadership and Decision-Making at Judge Business School, University of Cambridge, UK. He has a special interest in leadership, trust and behavioural ethics applications and his latest piece examined whether employees really can speak up without retribution (published in Harvard Business Review).