Conversations around the global startup scene tends to focus on western Europe or, more likely, emerging markets in Asia and Africa. When it comes to the up-and-coming startup ecosystems, the emerging markets are considered to be the hottest, most promising, and the most innovative.
But the world is a big place. And the pressing need for game-changing innovation and a revitalization in economies by way of building thriving startup ecosystems (the companies of tomorrow), is by no means limited to Silicon Valley or the handful of countries that the business press tends to focus on. It’s literally everywhere. And it’s exciting!
When you think of thriving, promising startup ecosystems, Austria may not come to mind but, if the following interview by Monocle‘s Alexei Korolyov (@alexeikorolyov) with some of Vienna’s most promising entrepreneurs is any indication, you might be hearing about Ausria’s growing startup scene more often. Take a look at this list of Austria’s top startups by Startup Ranking and their music startups, and it’s easy to see why VCs are keeping a close eye on this part of the world.
Writer Alison Coleman (@alisonbcoleman) notes in a recent Forbes article on Austria’s startup ecosystem (Scaling Alpine Heights: Austria’s Startup Scene) that, while Austria is most certainly experiencing an “entrepreneurial renaissance,” startup founders still face stiff challenges that hinder growth: “It isn’t only the fortuitous return of seasoned start-up founders that has ignited Austria’s entrepreneurial spark. There are other significant factors, for example, access to talent is considerably easier here than in other start-up hotspots in Europe and US, and still comparably affordable. But starting a business in Austria is not without challenges. It is still quite costly and to a degree, start-up-unfriendly; although there are some political initiatives to adapt current law to modern day requirements, the wheels of Viennese bureaucracy turn slowly. Labour costs are also high, due to payroll-taxes and health insurance costs, but perhaps the biggest issue for entrepreneurs is a lack of real tax incentives for start-ups and start-up investors.”
Austrian entrepreneurs aren’t just keeping hope alive, their finding creative ways to innovate, to grow companies, and to reinvent how Austrians think about “business-as-usual.” Check out Alexei Korolyov’s interview below (and download the full podcast episode #170 HERE).
“Just like elsewhere in Europe, manufacturing in Austria has long been in decline, as established brands struggle to adjust to new market realities and lose their customers to cheaper international producers. Well, today, signs of revival. A smattering of new businesses have popped up that choose to manufacture on home soil, taking full advantage of eCommerce, social media, and EU Free Trade rules.”
Alexei: You might not associate Vienna’s grand imperial buildings and traditional trams with buzzy Internet trade, but this view is misleading. According to Eurostat data, Austrians are among the biggest spenders in online shopping in Europe. And it’s not just big international retailers such as Amazon or eBay that make up the statistics. Some of this new-found buzz is being generated by a brand new Austrian platform called FROMAUSTRIA (@_fromaustria). Launched a little over a year ago, it makes a point of selling only Austrian-made merchandise. It’s run by two successful entrepreneurs, Zissa Grabner and Alexandra von Quadt, who told me how they went about setting it up.
Zissa: Hi, I’m Zissa Grabner. Alex and I have been friends for almost 20 years now. Two years ago, we sat together and were like, “Okay, we want to establish something that is our own.” So we locked ourselves in, in the mountains, for a whole weekend, and we were brainstorming.
Alexandra: We had a very strict idea or strong idea of how it should look like and how it should work. That’s also why we started really fast. We started thinking about what we’re doing in November 2012, and we went online in end of May 2013 with 250 products by, I think, 25 different suppliers.
Alexei: The list has since grown to over 170 producers, making everything from food, to cosmetics, to clothing. Some of these producers are very young and green. And some are established brands that have been there for decades, sometimes centuries.
Alexandra: I always say, “We’re selling things that nobody knows and nobody’s looking for.” So we have to make them more emotional. We have to make them sexy. We have to tell a story. That’s easy because we have so many products that have great stories. We have so many companies that have been in the family for seven generations.
Alexei: Can you give an example of that?
Alexandra: For instance, we’re selling leather goods by a company called Scheer and Sons. They were the supplier of the emperors in Austria. They were making their shoes. And we’re not selling their shoes. Their shoes are about €5,000, and they’re only made to measure. So, obviously, online that won’t work, but they’re now establishing beautiful leather accessories such as iPhone cases and belts and jewelry leather. And they are still manufacturing their shoes in the house they used to make them 300 years ago.
Zissa: What we were able to create and establish is a surrounding that not only does it say, “Okay, you are from Austria.” But it also says, quality, emotions. Everything is very personal. And this friendly surrounding that we create is actually one of the main reasons why suppliers want to work with us, because nobody else does that.
Alexandra: And we talk to them personally, especially when it comes to traditional brands. They have their certain customers, but either their customer group is dying away because they’re getting old. Or, on the other hand, they don’t have the know-how and the ability to access new customers. And that’s exactly where we come in.
Alexei: One of the younger companies that is benefiting from this personal touch is Mostlikely, a Vienna-based architecture and design agency that uses FROMAUSTRIA to market its unique muzzle-shaped lampshades and jewelry. Bjorg Gundlist is one of the founders.
Bjorg: The first thing was a design for a mask for a theater play, and it got rejected by the theater crew. And the mask was just lying around in our office, and after a while we cut the hole in the top and had the idea to make a lampshade out of it. And this worked out very fine. We start at fairs. People are going crazy about it, and so we started doing more designs and more and more designs. And all of the lampshades, they turned like liberation with companies like Argot, and Baudselain, and Mühlbauer hat manufacturer. And also our jewelry series. The lampshades, it’s just a construction set. We only print out the paper, and so we stay very affordable. And the customer has to cut out, fold and glue together the construction set.
Alexei: Bjorg Gundlist says that while he does feel a part of some larger movement, he is all too aware of the problems surrounding it.
Bjorg: It’s very easy right now to found a company and to sell. On the other side, it’s very complicated as a small company like us getting contracts or getting jobs. We have to say that our product — we found it by luck. We realized that we can do more of these things. And what we try to do is produce affordable products in Europe.
Alexei: Now, on to another producer manufacturing in Vienna and marketing through FROMAUSTRIA.
Alexander: My name is Alexander Dorsky and I am from the Skoda Novena Hearst in Vienna, a kind of design label for souvenirs and gifts. And I do this with my colleague, Anka Yanera. We came together a few years before as two graphic designers from the University of Applied Arts. And our main starting point is this legend, this myth of Das Goldene Wiener Herz. This Golden Viennese Heart legend has not only a charming and cozy meaning, it’s, as well, deep, black, and mean. All this ambivalence is part of Vienna. So, for example, there is a record title of Hans Moser–he was a famous actor and Viennese folk song singer–called the Golden Viennese Heart or even a title of a social criticism publication in 1905. So you see, this can be very positive. It can be very mean and black as well.
Alexei: And back to Zissa Grabner and Alexandra von Quadt at FROMAUSTRIA for a final question. Do they feel like pioneers? After all, they do seem to be heralding, if not a wholesale revival, but certainly a gradual reawakening of Austrian manufacturing.
Zissa: It’s not easy to sell something that nobody knows. With products or something from Austria, people probably know a few things like Manufriten. They know Mutsa, they know Klimt, they know Schiller, they know Empress Elisabeth.
Alexandra: And the thing is that Austria has a very dusted image. Things just progress very slowly, and we’re like, “Okay. There’s so much more to Austria than Zapata, the Cecekin den Schiller. And we wanted to make it public that there’s so much more and, on the other hand, there are so many great inventions from Austria and so many things that initiated in Austria. And we wanted to make that public as well — to show people, this is made in Austria. You think this is from the States or from Germany or whatever. It’s like, no, this is Austrian.
The question of ethics in business has never been more prevalent, in so many diverse circles, in the past as it is today. Our post-financial collapse society (where millennials are still feeling the painful affects of the shockingly unethical behavior of many Wall Street institutions that led to a world-wide meltdown) is quite comfortable with asking uncomfortable questions of not only mega-corporations, but of fledging startups ripe with innovation, heavy funding and aggressive goals to change the world.
That’s a good thing. Startup founders, especially, should continuously question how their business models, marketing campaigns, company culture and goals will affect the lives of individuals and a society as a whole.
Producer Daniel C. Giacopelli (@danielgiaco) of Monocle 24: The Entrepreneurs (a weekly podcast featuring news and thought-provoking interviews on the best in global business), recently interviewed Susan Liautaud (Founder and Director of Susan Liautaud & Associates Limited, a UK-based advisory firm on ethics matters internationally, @susanliataud) on the ethics of business-not-as-usual. Below, Liautaud and Giacopelli give us cause for pause and food for thought — especially with regards to ethics in startups. Among other pearls of wisdom from the interview, we learn how startups should intigrate ethics into their business model from day one and that it should be done above and beyond strategy and in real-time. Using Uber as an example (among others), Liautaud presents a compelling case for redefining how we approach ethics in corporate and startup ecosystems.
“Regardless of your view on the future of society and business, but let’s be honest, it’s somewhere between darkly pessimistic to cautiously optimistic, well, one thing is certain. It will be a complex, messy, Wild West sort of place. We might not have flying cars, but we’ll certainly have driver-less ones. They’re already here, of course, and on the web front. Our diminishing privacy seems to be a given. So this all leaves us with a fundamental question, how can businesses, from big corporations to small start-ups, address and wrangle with the plethora of ethics dilemmas, which will surely come to the forefront of decision-making? Is it the founder’s role to be the ethicist in chief? ” — Daniel C. Giacopelli
Daniel: My guest is Susan Liautaud, lecturer in public policy at Stanford and founder of the course Ethics on the Edge. She popped by Majority House to give me a tutorial.
Susan: What I’m trying to teach in this Ethics on the Edge course (which is a great privilege to teach) is basically how do we make ethical decisions? How do we run businesses? How do we run non-profit organizations? How do we run government ethically and effectively in a world in which our understanding of our reality lags far behind the reality? So by way of a couple of examples, we really don’t know what it’s like to go to Mars. We really don’t know everything we need to know about e-cigarettes in terms of the science. We really don’t know what’s going to happen with some of the testing on Ebola vaccinations or prevention efforts. So the question is how do we continue to progress, to let companies grow, to enhance research, but at the same time make good decisions, make ethical decisions when we are in this world of uncertainty?
And I should say, also, that the course addresses the fact that today’s world is particularly uncertain because of accelerating technology. So things are changing faster than ever before, and also because of the complexity of global risks. We’re dealing with everything from cyber-terrorism to financial system meltdown, water shortage — I mean the list is almost endless, and so that whole constellation of challenges is the space in which we work in that class.
Daniel: And what I find interesting is also, you know, in the UK, we have the FCA, in the US we have the FCC for regulatory and financial things, but is there anything like that for ethics? Is there a global body that’s keeping an eye on how we behave corporate-wise?
Susan: Well, not really. And actually, you raise a very interesting point because there is a limit, and in my view, should be a limit, to regulation. Regulation can only go so far, and particularly in the world that I describe, of virgin galactic and drones, regulation lags very far behind reality, and that’s normal because it takes time to, again, understand the science, develop policy, regulation, etc. So no matter what, regulation is always going to lag behind. And the ethics part of it is really, what do we need to do above and beyond regulation? And another place we’ve seen this question that you raised is in the — so you talked about financial services sector. What we’ve seen over and over again is after an ethics crisis, the headlines read, you know, reinforced compliance efforts. But in fact, compliance is just the law and in my view the law is the lowest common denominator, not highest standards of ethical behavior, and importantly here, not high standards of business efficacy. There’s a lot to be gained by looking at behavior above and beyond the law.
Daniel: Do you find a lot of entrepreneurs or corporate executives want to be ethical, or do you think they find it a nuisance? It takes effort and it could also lose you money trying to be ethical.
Susan: Well, it’s a great question, and in particular with respect to entrepreneurs. So, in listening to the wide variety of entrepreneurs on your show, I can safely say that there isn’t one who wouldn’t benefit from thinking about ethics from the start. It really pays off in the long run, and it’s true that with entrepreneurs, very often, I get we’re too busy, we have other priorities, we’re trying to raise funds, we’re trying to grow, etc. Larger companies now are under more external pressure and it’s true that sometimes people think it’s more of a nuisance than anything else, but the ones who do it well, and there are companies who I would say integrate ethics into their business model — it’s just a part of who they are and how they do business — they really see the benefits and they wouldn’t turn back. I would like to see [ethics] be more integrated and real-time and, as I say to a lot of my clients, very well integrated into strategy. So we’re not quite there yet because we tend to have strategy first and look at the ethics later.
Daniel: Okay. Let’s look at a few case studies. One we were chatting about a bit earlier (before the interview) was Uber. Of course, they run into a few problems with drivers attacking the passengers (among other problems). How do you feel they could respond to that ethically?
Susan: Okay. So Uber is a really interesting example. Exciting company, great company, and a service that is really, really important around the world. They are also very well-resourced, so if anybody’s in a good position to integrate ethics into their thinking, Uber is. I think the reaction from the company, for example, on the rape case in India or on some other safety issues that have happened in other places like in San Francisco, has been, first of all, to try to fend off regulation and, second of all, to say, “We don’t have time for this. Growth is our priority and more intensive driver safety processes will slow us down.” They do say that they have very rigorous procedures. If you look at their website, they detail them. But at the end of the day, the reality is . . . the message from the company was ‘we prioritize growth’. Whereas, I think a much more effective message, both ethically and commercially, would be, “Of course, we run on ethical principles. Our top principle, our most important principle, is safety of our passengers, whether it’s against some form of aggression or whether it’s against some form of driver safety problem, and that’s our priority, above and beyond growth, and we will always keep that front and center, and we would be very happy to work with regulators around the world to see what the right balance is between the efforts that we can be making as a company and where regulation benefits everybody, but again, most importantly, passenger safety.”
Daniel: And is that ethics for ethics’ sake, or is it ethics because you think there’ll be a profit motive in the end where they’ll make more money because they’re being ethical? Or do you think it’s just a good thing to be ethical?
Susan: Well, I think it’s both. I think that it’s very hard to feel that you have a great company if there’s always this sense that passengers are not as well-protected as they could be. Anytime human safety is in jeopardy, it’s very hard to really believe in your business, in my view. But the other thing is that now they no longer operate in Delhi. So I think, ultimately, even if now they’re very well-resourced and they’re growing wildfire, ultimately, there will be commercial implications. And I know people are saying, “You know, do I really want my 17-year-old daughter taking Uber?”
Daniel: And initially, they said they actually weren’t going to pull out of Delhi, even though they were mandated to do so. Eventually, they complied and said “Okay, well, we will.” But here are all these other cab companies that aren’t supposed to be running and they’re still running, and now they’re being investigated. But, eventually, they obeyed the law.
Susan: Right, and that’s an interesting point for two reasons. One is I don’t think what anybody else does is justification for unethically running a business, and the other thing is that you mentioned the law again. So I said earlier that the law is lowest common denominator, but we all need to be making decisions and running our organizations in accordance with higher standards of ethical decision-making. But nonetheless, the law is important and I don’t know of very many cases, I could count them probably on one finger, where violating the law is the ethical solution.
Monocle: I was actually going to ask you is there ever a case when doing the right thing is against the laws of the country in which you’re operating?
Susan: There might be cases, again, where human life is at stake, and I would phrase it that way. We get cases, for example, in the NGO world where they’re extremely difficult because you have a human life at stake on both sides of the decision and it’s tricky. I mean, and sometimes you have human life and some other law that isn’t human life-related. For example, bribery. So is it okay to pay some bribes to the port authority to get badly needed medicines into a country to save some children’s lives? Then the issue there, though, is what are the consequences over time? If you’re looking at that as one decision, it’s very different from looking at it as well, this will have a lot of consequences. Maybe next time the rate of bribery is going to go so high that the NGO can’t afford it. Maybe, you know, the NGO will be arrested in another country, UK Bribery Act or something. So these things are never that simple, but there are rare cases, and I would say, there would always be a case where human life is at stake.
Daniel: And finally, what ethical lesson do you think all companies should follow, regardless of geography or industry? Is there one thing that you think, bare minimum, companies can do to be just a bit more ethical?
Susan: There’s one overall approach to any kind of a decision anyone in the company would make at any level, and that is to make sure that every time a decision is made, ethics is part of that thinking in real-time. I can’t emphasize strongly enough that when we create strategy or when we decide to accept or not accept a customer or put a product on the market, the time to think about the ethics is at the same time you’re thinking about the commercial and the economic and the practical aspects of the decision, not afterwards when the toy has harmed a child or when something else has gone wrong. It’s really that real-time thinking.
Check out the full interview below and download the entire episode (#172) and subscribe to the podcast HERE.