Tell me, Mr. Keese... should we be afraid of Google?

Christoph Keese, born in Remscheid in 1964, is the Executive Vice President of Axel Springer SE. The journalist and economist previously served as the editor-in-chief of the Financial Times Deutschland, as well as WELT am Sonntag and WELT Online. In 2013, Keese spent six months in Palo Alto to network with companies and institutions in Silicon Valley and develop new entrepreneurial ideas for digital growth. In his book "Silicon Valley - What is Coming from the Most Powerful Valley in the World," published at the end of 2014, Keese provides insights into the market power of technically centered internet monopolies and explains what this development means for the (digital) strategy of other companies. In addition to his work at Axel Springer, Christoph Keese also gives lectures. An Interview with Christoph Keese

Tell us, Mr. Keese... should we be afraid of Google?

Christoph Keese: No, we shouldn't. Google is a very large modern company with great assertiveness, and that achievement deserves applause at first. However, we must acknowledge that internet platforms like Google are converging into monopolies due to the network effect. Therefore, our society must consider what rules should apply to these monopolists in the future.

Is it a coincidence that monopolies like Google or Apple are all based in the USA?

Christoph Keese: It is a coincidence that they come from the USA, but it is not a coincidence that they originate from Silicon Valley. This tiny part of the USA with its 2.5 million inhabitants offers an innovation and financing culture that is unparalleled. The Silicon Valley exudes incredibly strong energy. The creativity of this place is fascinating, as is the courage to think anew and challenge existing business models. One rule there is: Do not cling to the existing, as everything existing is surpassable and improvable. Seek the new! That is the fundamental drive of all startups I have encountered there.

What is the commonality among them?

Christoph Keese: They want to change the world, and they want to improve the world. So, it's not just about making money but also about fundamentally solving a societal problem.

In your book about Silicon Valley, you attribute virtues like openness, tech-savviness, and the famous ability to think outside the box to the players. Have entrepreneurs in Germany and Europe lost these virtues?

Christoph Keese: Companies in this country have a proud tradition of ingenuity. At the same time, I also observe: Germany has fallen behind in digitization. We are lagging behind by one or two decades. Currently, key sectors of the German economy are under attack, and it is by no means certain that these sectors will survive in Germany.

Are the flagship industries of the German economy also threatened, such as the automotive sector?

Christoph Keese: Certainly. If we are not aware of this challenge, we may face the risk of losing traditional industries like automotive manufacturers and suppliers or even the banking sector. All these industries, along with others, must face the challenges. After all, the market economy is not known for being particularly charitable. Whether we succeed or not is of no concern to anyone. There have been enough wake-up calls – and they have been ignored. If we don't change this now, essential value creation elements of the Federal Republic are in danger.

Perhaps the most important keyword in this context is Disruption. What does it actually mean?

Christoph Keese: An entrepreneurial approach that aims to completely destroy a competitor's value chain and replace it with its own business model, with its own value chain. This is not just an innovation that changes an industry evolutionarily. The transition from vinyl records to CDs was such a sustaining innovation. The structures continued to exist, and the labels even earned more money. Music flat-rate platforms like Spotify, on the other hand, completely replace physical recordings. That is disruption. Spotify has become a dominant market factor and has since displaced established companies and their products.

How can companies respond to this disruptive threat?

Christoph Keese: The answer lies in an open-ended process. Based on the experiences of the media industry, it is not advisable to have a solution from the start, but rather to engage in a process where a solution may emerge at the end. This is crucial because attacks on existing business models aim to disrupt, but those being attacked usually cannot imagine what the disruptive attack might look like. When companies question themselves and their business model: How much naivety should, how much naivety must be part of the process you mentioned? It definitely requires a good amount of ignorance. By nature, the view of one's own actions is entirely subjective and heavily clouded by supposed constraints. This obscures the view of disruptive risks. Questioning oneself and one's business model means questioning everything, absolutely everything.

But this does not only apply to digitization, right?

Christoph Keese: No, not at all. It's about creating entirely new value chains that coincidentally find their expression in the digital realm. Here we are back to the mentioned virtues: Addressing an unsolved problem requires a lot. Especially when all experts are skeptical. People in Silicon Valley want to solve problems at all costs. They foster a culture of openness – insights and knowledge are shared with competitors.

When companies question themselves and their business model: How much naivety should, how much naivety must be part of the process you mentioned?

Christoph Keese: It definitely requires a good amount of ignorance. By nature, the view of one's own actions is entirely subjective and heavily clouded by supposed constraints. This obscures the view of disruptive risks. Questioning oneself and one's business model means questioning everything, absolutely everything.

But this does not only apply to digitization, right?

Christoph Keese: No, not at all. It's about creating entirely new value chains that coincidentally find their expression in the digital realm. Here we are back to the mentioned virtues: Addressing an unsolved problem requires a lot. Especially when all experts are skeptical. People in Silicon Valley want to solve problems at all costs. They foster a culture of openness – insights and knowledge are shared with competitors. Since books, movies, music, and newspapers are relatively easy to digitize, your industry has been dealing with new business models for a long time. That's true, the media has known for ten, fifteen years that their traditional business is under massive attack. The disruptors appear here in the form of platforms that not only have an overview of supply and demand but can also directly influence the revenue share. Once the programming costs are paid, these platforms only have variable costs on top, and fixed costs are covered by the number of customers.

How did your employer, Axel Springer SE, respond to this?

Christoph Keese: Specifically, we did two things. Firstly, we encouraged our core brands BILD and WELT to digitally reinvent themselves. This was successful. Secondly, the group invested in other startups. It cannot be expected that the core businesses will completely innovate the entire company and thereby destroy the business they operate. However, it is certainly expected that these core businesses reinvent themselves through evolving, so-called sustaining innovations. Therefore, we decided to invest in the attackers of our group. Today, we generate around 60 percent of our revenues digitally.

Should everyone with a well-filled account now buy into Silicon Valley?

Christoph Keese: Success is not a question of the wallet. Silicon Valley is absolutely non-discriminatory; anyone can succeed there, and the cultural diversity is enormous. There is only one thing that is not tolerated, and that is mediocrity. An ideal breeding ground for innovation.

In your book, you describe that in Silicon Valley, openness is also fostered in financial matters. How much openness is necessary, how much is possible?

Christoph Keese: We were always very honest about our mission in Silicon Valley and our investment opportunities. Equally important was not just asking questions but also providing answers. Germans, in particular, like to ask many questions but reveal little about themselves and refer to business secrets. That doesn't work. You have to give as much as you want to receive – at least.

Must it necessarily be Silicon Valley? What about startups in Berlin or Munich?

Christoph Keese: I strongly advise against abandoning everything and moving to Silicon Valley. Especially since we are