We “totally screwed up”: Values and Behaviors in Volkswagen business model

Volkswagen, the world’s second-biggest carmaker admitted that it has been dishonest with customers and regulators. It has installed a software in its cars that falsifies emissions data of its diesel cars. Unfortunately, it is a perfect example where the values promised to customers and the real behavior outright contradict. And because of the mismatch, Volkswagen is in a perfect storm.

Volkswagen faces a fines up to $18bn, criminal charges against its executives and legal actions from customers. At the same time a third of its market value was wiped out or the a staggering amount of around €30bn.

The head of the US operations of Volkswagen admitted that they “totally screwed up“. And I hope he meant the deed and not the disaster afterwards.

What happened? Volkswagen had to admit that 11 million of its diesel cars could be equipped with software to cheat on emission tests. The American Environmental Protection Agency (EPA) had accused the firm of faking pollution tests and thereby cheating on regulators, the public and customers.

The case is already bad enough, but what is even worse is that the deed and the behavior that lead to the deed totally contradicts what Volkswagen promises in its value proposition.

Volkswagen states in its brand three core messages of which one is: Responsible

According to the Webster, responsible means to be “able to choose for oneself between right and wrong“

Volkswagen always played the role of the company with high morals. Responsibility was their core value they wanted to pursue and used heftly in their marketing.

And cheating deliberately on emission test is just the opposite of being able to differentiate what is right or wrong. Cheating is wrong! And it is not cheating software but the whole behavior that let a whole company come up with a software to cheat. Dozens and more people at Volkswagen must have known this and did nothing against.

What does this tell us about the culture they have at the firm?

Unfortunately a lot.

And unfortunately, the car industry has a bad track record between their promises and reality when it comes to emission and fuel consumption. The car manufacturers promise low fuel consumption however, they can only be achieved in unrealistic test scenarios and not on the road. Actually, it’s legal but totally against what Volkswagen promises to be responsible.

And as a responsible company you should live up to your standards and do not try to seek loopholes in regulation to mislead customers and the public. Still car companies do.

Not your stated values are reality but your behavior in your business (model)

The deed is actually not the worst. The worst is

that the huge gap between what the management of Volkswagen promised to be their values (which the public loved and believed) and the actual behavior.

The gap and the lost trust in their value proposition is the long-term damage and probably the death sentence to one of Volkswagen’s core technologies, the Diesel, in America. That is real damage, more than any fine, any short term dive in the market value.

Not your stated values in business model are important but the reality. And in reality, your behavior really communicates the entrenched values of your firm. Don’t create a perception gap.

And that is the key take-away. Get your behavior aligned to what you promise. It’s a walk on the tightrope. Don’t overpromise. Don’t build up a brand image which is an illusion.

Having all elements and building blocks of a business model aligned in reality is art but it makes the difference between an ordinary firm and great, sustainable firm!

Hopefully, Volkswagen will get its behavior aligned with its promised values again and their action really shows their true values they promised before.

It’s still a great company – with a huge moral and business issues to cope with.