Professor Monika Schnitzer is a Professor of Economics and holds the Chair for Comparative Economics at the Ludwig-Maximilians-University in Munich. She has been one of the most prominent voices globally in innovation and competition policy for more than two decades now, including as a visiting professor at Yale University, Stanford University, the UC Berkeley, and Harvard University. She is Chairwoman of the German Council of Economic Experts (Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung – „Wirtschaftsweise“), the most important gremium of economic advisors in Germany, and presented her latest economic outlook analysis to Chancellor Scholz on November 9^th. Since 2020, she is also member of the Economic Advisory Group on Competition Policy of the Directorate-General for Competition of the European Commission.

Professor Schnitzer’s work on competition policy and data has had a major impact on the European debate in the past years. Her latest paper on the topic together with Yale SOM Professor Fiona Scott-Morton and other colleagues proposes a new framework for the use of personal data.

Kirsten Rulf: Professor Schnitzer, your colleagues from Harvard Business School have found that in successful companies, data governance is a leadership task and not an IT task. Both McKinsey and Drexel University come to the conclusion that implementing a Data Governance structure and becoming a data-driven company is a C-level management task. Where do you see the C-level of European companies stand when it comes to data governance?

Monika Schnitzer: In most German board meetings, C-level managers still treat the digital transformation like the transition from typewriter to PC: a PC was seen as a better typewriter when it came along, but not really as a technology with the potential to transform processes and disrupt entire business models. To this day, many large German companies do not understand digitization as something that really changes their business model, but rather as something that makes them more efficient. That is why it is not yet where it belongs in the hierarchy of most corporations, namely on the Executive Board. Most companies today only have some kind of Chief Digital or Chief Information Officer, who is usually located below the Executive Board level.

I think that this is a huge problem. A problem of knowledge and culture in those old boys’ networks, which lead the German DAX 40 companies. I'm speaking a bit flippantly here, of course.

The automotive industry, for example, has mostly engineers, trained in mechanical engineering, on its executive and management teams. They all know each other, they all have the same cultural background, went to the same type of schools. For them, building a perfect combustion engine is the pinnacle of achievement. Data, data-driven business models, their value, and data governance – that is something that they have never dealt with and have little creativity or regard for. That is why they are reluctant to appoint anyone who is a data expert.

These old boys' clubs are all the same, consequently, executive boards are all the same, and nobody gets through who could make a real difference. Unfortunately, since this is the case everywhere in the automotive industry, not even competition helps here, at least not within Germany. Tesla had to come along and disrupt them all.

Kirsten Rulf: Do you have any hopes that boards might change to accommodate data and digital experts any time soon?

Monika Schnitzer: There are examples of SMEs trying to make better use of their data. Data maintenance business models are especially popular among them. But so far, many of them have not seen any returns from these attempts. They have not seen that this is really of any use to them when it comes to revenue. Many hidden champions, world market leaders with their products, are put off easily. They say: we are world market leaders anyway, let’s use the data to improve the successful product incrementally. But they don’t have the courage or foresight for a complete reorganization of their business model using data. That, in my view, is a mistake and very shortsighted: neglecting the disruptive element, and not understanding data as something that they could use to create new business models and completely new technologies. I think this is a huge mistake.

Kirsten Rulf: Why do data nerds make it to executive boards in the U.S.?

Monika Schnitzer: In the U.S., the real data nerds are groomed for boards early on and trained in soft skills, such as communication. In Europe, most data experts who are very good at data science and technology or anonymization - the real data experts - are usually not adequately trained in communication and other management skills, so they could fill a board position including all that comes with such a responsible job. These are the types of people who often say: I like to sit in a quiet little room and focus on programming. In the U.S., experts who have the potential to one day sit on a board of directors are better trained in getting colleagues excited about their field from an early age on and getting them enthusiastic about their complex topics. They can explain their work and make it relevant. 

Now you might ask: why can’t European and German companies simply poach these trained people? My impression is that large companies here are still too stuck in their old models of talent management and an outdated idea of their employees. They have a hard time accepting, for example, what is happening in the US with agile management and how much more collaborative and horizontally integrated people work together on projects there. Our structures are still very much hierarchical and siloed. It is a totally different corporate culture in the US. One that just seems too difficult to bring into our old model here. It starts with superficially trivial issues, like the fact that Silicon Valley people naturally expect free food and then traditional German companies say: “Free coffee? We've never done that before, what are you thinking?!"

Kirsten Rulf: How will the upcoming EU regulation on data and digital markets and platforms, which will essentially compel companies to share data, play out in this environment?

Monika Schnitzer: The concern of many companies is, "if we share our data, a competitor will replace us or a startup will disrupt us". But often they don’t even know what to do with their data. They do not have the imagination; they do not have the people. On the other hand, there are many startups that need the data to develop new business models and have ideas on how to create value from them. That is exactly when you should incentivize collaboration through regulatory channels, as the EU Commission does. And of course, when data is an "essential facility", then you actually have to separate it from companies and make it available to everyone. Of course, we need to compensate the companies that provide the data in a fair way according to the FRAND principles. But this is the best way to ensure fair competition and break the power of the GAFAM companies. Now, many companies in Germany argue that they are at risk from data protection laws when they share data. But other countries in Europe have the same data protection laws and companies there share and use data much more – why can’t we do the same? The government, too, needs to share much more of its data to boost the data economy.