Digital tech and platform firms are rapidly losing the Silicon Valley naiveté that has characterized their activities in the past 20 years. Billions of dollars of fines and lawsuit losses for abuse of dominant positions, misuse of personal data, workplace harassment, securities violations and a host of other offenses are shaking their world.
Company leaders appear aghast and paralyzed by the developments, often unable to comprehend and effectively adjust to the forces of regulation and litigation that are acting on them globally, but especially in Europe and North America.
A good part of their bewilderment is due to blind spots in their perceptions of themselves and the place of digital firms in society. For two decades their founders, the companies themselves and digital gatherings and conventions have repeated the mantra that they are revolutionary, different, and old rules don’t apply. They have argued that digital tech frees users and firms from the constraints of national regulation and power by creating a global immaterial world based on amorphous structures and collaboration in which time, distance, and the ability to regulate are overcome.
Their perceptions were reinforced by the fact that many governments promoted and exempted their activities from taxation and responsibility for some actions as part of industrial development policies and governments permitting enormous firms to emerge by not applying competition laws.
The ingenuous view dominating the industry made it difficult for tech leaders to comprehend that as their firms grew and expanded, establishing presences in the physical world through offices and commercial activities worldwide, they were exposing themselves to the physical world rules based on authority and control.
The highly technical educations of most leaders may also have constrained their vision because it included limited social science and historical knowledge of previous technical revolutions, their social effects, and how societies responded. Many tech leaders today do not seem to understand that society has historically taken 2 to 3 decade to comprehend and respond to new general-purpose technologies, ultimately moving to oversee their activities and bringing them under the control of policy and law. That time is now up for digital tech.
Today, the prevailing perception of tech firms is being widely challenged, with industry leaders being brought before legislatures and parliaments and summoned to courts and regulatory investigations. They are being chastened by critics and policymakers, and tech companies are suffering reputational losses and having to dig into their coffers to defend themselves and pay fines proportionate to their size and activities.
The question today is whether and how well they can alter their own perceptions of their firms and activities, and their roles and responsibilities in society, and how well they adjust their strategies and operations to the demands of the new business environment. Not all will be successful in doing so.