Why German media house Axel Springer is not a good example of digital transformation, and why you should rather look at Bosch for inspiration
Whether in SMEs, big corporations or discussions with politicians, digital transformation is an ever-present topic nowadays. This also applies to my workshops. My participants and counterparts in various discussions often refer to the same success story from Germany: Axel Springer.
Most of them tell the story as follows: A media corporation recognizes that the days of its old business model of printed newspapers and classified ads will soon be over, and therefore initiates a change on its own. Within a few years, the company transforms itself into the largest digital media house in Europe, and even in the USA it became a serious player quite a while ago.
Naturally, Springer’s top management regards itself as a prime example of successful digital transformation.
However, I disagree. I wrote a byline for German trade magazine Absatzwirtschaft explaining why Springer is actually not a good example of successful digital transformation, and why I rather consider industrial and commercial giants such as Bosch and Otto to be successful in terms of best practice. To all those who are interested in the detailed strategy behind the Bosch transformation, I recommend my book Management by Internet.
The most important arguments from my byline in Absatzwirtschaft
Basically, there are two ways for companies to adapt to digital change. You can either handle the challenge by streamlining your portfolio; in other words, you rid yourself of those parts of your corporate group that no longer fit the planned reorganized company. Or your company may try to change and progress thoroughly and in its entirety – this is meant by transforming itself. So what did Springer do? Merely looking at the figures, one could consider it a success story: the transformation from a traditional printing and publishing house, whose economic backbone through many decades were newspapers and magazines that sold millions of copies, to a modern media house. In 2010, consolidated sales amounted to just under 2.9 billion euros. The German media publication MEEDIA came to this analysis at the time: „Springer CEO Mathias Döpfner is therefore pursuing a dual strategy: The profitability of the declining core business is being continuously improved and optimized. At the same time, massive investments are being made in international and digital business. So far, this strategy has more than just proven its value. Digital business already accounts for almost 25 percent of the sales.“
The strategy pays off
The group has long since reached a completely different level of digitalization. The most recent balance sheet for the first nine months states that 69 percent of the group’s sales are now generated in digital business segments. The annual turnover now surpasses 3.5 billion euros. You can see exactly what Axel Springer has done and still does, strategically: They optimize and buy in. That is coherent and clever, but it’s not a transformation really. Because if you look at the change at Springer from the viewpoint of their employees, you can see that the corporation often didn’t take the employees along with it. In the editorial offices, in sales and many other departments, they were not part of the change. They were replaced! The management around CEO Mathias Döpfner did not transform their publishing house by building and developing digital competences and offerings, but by purchasing externally instead. Springer took over the online job platform Stepstone and real-estate portals as well as the publications BusinessInsider and eMarketer. With great financial help from an investment company, by the way. At the same time, personnel have been cut back in the old business areas for years. Only a few Springer employees now work in the traditional publishing divisions. That’s as if Mercedes-Benz took over Tesla with the help of an investor and at the same time began tearing down its old factories and laying off its employees.
The strategy is somewhat different in some of Springer’s bigger editorial offices such as Bild or Welt. Although these media brands took great pains to keep as many editors as possible and make them fit for the digital future, it didn’t quite work out. Many older colleagues have had to leave the print flagships in recent years. For medium-sized companies, especially those that are still family-owned, this approach is usually not an option. In such family-owned companies, sustainability and long years of service play a vital role – often out of necessity, of course, as rural locations offer hardly any alternative jobs or employees.
Clear focus on self-organization at Bosch
If you’re looking for a German success story in digital transformation, I would actually recommend looking at companies like Otto or Bosch. For years, these companies have shown how intelligent internal programs can convince employees to participate actively in the transformation of a traditional company and to achieve a rather organic growth through digital innovations. In such an approach, managers have a special responsibility. They must ensure that employees are not just seen as residents of the current company, but that they actually have the opportunity to play an active role in the company and its development, and thus also to make themselves fit for the digital future.
At Bosch, for example, a definite emphasis has been placed on self-organization. As stated in the Bosch Social Business Principles, a kind of rulebook for digital transformation at the German tech group: „Wherever it makes sense, teams organize themselves and take collective responsibility for the results of their work.“ Basically, the Bosch approach is reminiscent of the positive error culture at Netflix – the company that literally encourages employees in its guidelines to „take clever risks“.
Transformation to a modern corporate culture must be designed in such a way that it leaves sufficient room for all employees to engage in networking. It must also exemplify openness and transparency and allow all employees to participate (NOPA model). Such approaches can only be found in part at Springer. This is yet another reason why Springer can only partially serve as a role model for other businesses. Most have to manage transformation from within.