Successful Transformation Calls for Virtuous Rebels

- Expert opinion -

04. May 2022

How far should entrepreneurs go to put their company ahead of the competition? And how can one foster transformation without losing one’s moral compass? To find the answers to these and other questions, WHU Knowledge editor Nicolas Vogt spoke with Professor Miriam Müthel, holder of the Chair of Organizational Behavior at WHU – Otto Beisheim School of Management. Throughout the conversation, she also explained why even the most rebellious have to maintain a certain level of integrity.

Professor Müthel, you say that transformation calls for “virtuous rebels.” But what are virtuous rebels?

Virtuous rebels are courageous people who think outside the box without crossing moral or legal boundaries. They challenge current standards, structures, and assumed truths, seeking untapped avenues for competitive advantage.

How would you define “moral and legal boundaries”?

Any action has three perspectives: the moral, the legal, and the prudential. The prudential perspective relates to pursuing corporate goals, such as seeking opportunities to increase market shares. The moral perspective focuses on how one conducts business and asks whether an action aligns with one’s values and those of the company. The legal perspective questions the legality of the actions, i.e., if they are within the confines of the law.

Why is risk taking key to transformation, and which level of risk is legitimate?

When it comes to transformation, speed is vital, as only the fastest actors will be able to reap benefits. In other words, swift action is in a corporation’s best interest. At the same time, seeking speed tempts organizations to cross moral and legal boundaries, as some of the most effective options for increasing speed may be illegal or immoral. While companies that solely focus on their self-interest may be able to be faster than others, they also run the risk of being sued and/or ruining their reputation.

Can you give us an example of why and how a company crossed these boundaries and what the consequences were?

To rapidly increase its market share, Uber, for example, made use of a secret software called “Greyball,” which allowed the company to operate in cities where the use of their app was forbidden. Uber managed to operate illegally because the software could identify law enforcement officials using their social media and credit card information. When identifying someone as an officer, the software would then send a ride cancelation notice or push a phony version of the Uber app onto their phone so that they would not be able to book a ride. Of course, this was illegal, and Uber had to go to trial. Regardless, the Greyball software helped massively increase Uber’s market share, as it allowed the company to grow its market share in regions where others could not.

The fight for market share is not only about increasing one’s market share; it is also about doing so at the cost of others and asserting oneself against the competition. Uber aggressively attacked other companies. For example, they booked over 5,000 rides on Lyft (its competitor’s app) and then canceled those rides at the very last second. Of course, this is not what fair competition looks like. These and other aggressive actions toward competition revealed that Uber did not respect any commonly agreed upon societal values, such as honesty, fairness, and respect. Even worse, as they continued transgressing moral and legal boundaries, Uber lauded itself for its “cleverness” in navigating within the grey zones.

Moral and legal boundaries define those behaviors that constitute no-go areas, i.e, behaviors that, regardless of how much they may be in one’s self-interest, will never be pursued. There are some things in life one never shall do—simply because they are wrong. The corporate culture at Uber (at the time) caused not only mistreatment of its competitors, but also its employees. Because when wrongdoing becomes a natural part of daily life, toxic corporate cultures evolve. Consequently, racism and sexism became commonplace at Uber. Nevertheless, Uber’s founder and CEO, Travis Kalanick, was long celebrated for his successes, and the company was regarded as one of the hottest startups. But after a continuous chain of scandals, investigations, reports, and convictions, Kalanick ultimately became a burden for the company, and he had to leave.

How are virtuous rebels different from Travis Kalanick?

Virtuous rebels have a moral compass. They are crystal clear about their “red lines,” i.e., the behaviors they consider immoral. At the same time, they discuss corporate values and how these should inform managerial conduct. What is right and what is wrong is not always easy to define. More than ever before, companies are being called upon to find answers to moral dilemmas, such as the war in Ukraine. However, if the corporate red lines have been defined, virtuous rebels respect and act upon them consistently. In other words, there is no way that they would ever legitimize the transgression of the red line. Instead, they clarify that there are negative consequences for all those who cross corporate moral and legal boundaries—and then walk the talk.

While respecting their own red lines, virtuous rebels act courageously within the moral and legal boundaries of the firm. In doing so, they seek new avenues and may even challenge some boundaries to gain a competitive advantage. However, they do so in a joint team effort and not as lone wolves. Also, when questioning boundaries, they do so transparently and openly. Consequently, rather than arbitrarily and smugly perverting these boundaries, they rely on the strength of their own arguments and accept counter-arguments.

In the end, virtuous rebels believe in the power of value-based leadership for transformation. They stand up for their convictions without considering themselves superior to others. Instead, they act as humble servants, shaping the future of their companies together with their team.