What Startups Can Learn from the Volkswagen Fiasco

Every so often, the business world is rocked by scandal at a major corporation. In 2002, telecommunications giant WorldCom filed for bankruptcy after revealing $3-billion in false accounting entries. In 2004, engineering conglomerate Siemens AG faced heat after paying millions of euros in bribes to secure state contracts.

Most recently, car manufacturer Volkswagen admitted it installed “cheat software” on its diesel cars to pass emission tests. VW’s engineers programmed millions of cars to register false data when undergoing emissions tests. CEO Martin Winterkorn subsequently resigned but has denied involvement in the fraud.

Budding entrepreneurs might think to themselves, “What a waste!” Most businesses only dream of attaining the success and status of companies like VW. You may have idolized the founders and CEOs, only to be left heartbroken by the scandal. Well, everything happens for a reason. VW is a clear loser in this mess, but there are valuable lessons to be learned. Here are four pieces of wisdom entrepreneurs can take away from the scandal:

4 Major Lessons from the Volkswagen Scandal

1. Be honest, even if others are not


Some businessmen prioritize profit over honesty and healthy business practices. Aspiring entrepreneurs, however, should always conduct business with honor and integrity. Behaving as such from the beginning will help you instinctively act honestly later on in your career.
Customers value and prefer honest business. It is natural that they want what they paid for. Honest business practices are often rewarded by loyalty and long-term patronage.

2. There’s no shortcut to success

The recent outbreak of technological innovation has allowed many to attain prosperity overnight. This should not be mistaken for entrepreneurs taking shortcuts. They all come up with winning ideas and effectively develop and implement those ideas.

On the other hand, many businesses have been ruined by trying to cheat. In 1995, Bre-X, a Canadian mining company announced the false discovery of gold leading to a surge in its share price. Miquel De Guzman, the project manager who made the false claim, probably wanted recognition or a quick payout. Yet after the truth came out, De Guzman committed suicide and Executive VP John Felderhof faced indictment.

Your business does not have to look like that. Instead, look to Facebook for inspiration. It has achieved unimaginable success in its ten years of existence. It reported billions of income as early as 5 years after its founding without any sort of cheating.

So what accounted for Facebook’s success? Idea, action and perseverance. Those do not constitute a shortcut as time alone does not define a shortcut. It is important to recognize that there is an honest, correct path to prosperity. Hard work, creativity and honesty go a long way towards ensuring the success of a business.

3. Temptations are everywhere—ignore them

Modern business is difficult to predict.

Every now and then, your business will face hardship and you will feel the pressure to step up your game. This is a normal and good experience that nurtures creativity and innovation. However, there will periods of extreme difficulty where you may be tempted to behave immorally. During such times, close your eyes and take a deep breath. Remember the very reasons of why you’re putting up your business. Remember the ups and downs you have gone through that brought you to this point. Do you really want to risk undermining all of your hard work? Of course not. Sound business practices have helped you achieve success and will be the basis for further growth and development.

Regulations also ensure that all business compete fairly and equally. These regulations are intended to protect the public from corporate predation. Undercutting these laws for short-term gain is not worth the long-term consequences you may face.

4. It is important to understand limits

Happy child playing outdoors

Businesses, just like human beings, want more of what they have. That is the reason we work hard, right? We push our limits because we want what’s best for our business. However, it is important to not be too greedy. Greed is the state of wanting more while ignoring the potential consequences of your behavior. It is not bad to want more for your business but be sure to stay within the boundaries of morality.

The scandals afflicting VW, Siemens and WorldCom are the consequence of rash, unethical policy. As a businessman, make decisions that you will not regret. Carefully lay out the pros and cons of every option before choosing one.

CPA / Corporate Accountant
Agusan Plantations Inc.
Grabbed her CPA license at 19. A full-time accountant. A part-time bohemian. Doesn’t believe in the existence of free time. Sings in the shower. Dances in her room. Reads a lot but forgets them. If it doesn’t balance, then the figures must be wrong.