Doing Business with Principles

Entrepreneurs must take risks and be able to respond flexibly to constantly new market challenges to find creative, entrepreneurial answers to customers’ needs and the problems of the world. Michael Otto was always aware of this. The risks and ability to act quickly must never jeopardize the company as a whole, however. That is why he diversified the Otto Group by acquiring and founding individual companies, opened new markets and expanded the customer base. He made decisions that were sustainable and would secure the long-term success of the company. This created today’s globally operating Group with around 43,000 employees in 30 major corporate groups in the segments of platforms, brand concepts, retailers, services and financial services. The uncertainties of the market and the risk of innovative business were spread across several shoulders with the Otto Group’s strategic triad: “optimize, expand, internationalize.” This approach combines both agility and long-term thinking, creating room for experiments. You could be curious about new things, even at the risk of making mistakes and occasionally failing. “Michael Otto thinks in decades. He has foresight as well as the courage, will and patience to support projects that will not pay off quickly,” says Tarek Müller, co-founder and managing director of online fashion retailer About You.

This foresight and courage can be seen in many parts of Michael Otto’s career. He was one of the first entrepreneurs to commit to ecologically responsible action. In the 1970s he began with projects such as using recycled cardboard in the mail-order sales sector, and ultimately in 1986 he declared sustainable business and environmental protection to be a corporate goal. This ushered in gradual changes to processes in all areas and a check for potentially environmentally harmful production processes in the range of goods sold. For example: Under what conditions is the cotton used manufactured, spun and later dyed? And what are the options for designing these processes in a more environmentally friendly way? This approach, which is part of the Otto Group’s DNA, made Michael Otto an exotic figure at the time, ridiculed by fellow entrepreneurs. Today, the Group is far ahead of others in terms of ecological responsibility. This is also because Michael Otto never forgot to keep an eye on the company’s economic interests, alongside environmental protection. The balance between ecological and economic responsibility must be preserved. After all, an insolvent company doesn’t help either the environment or people and society. The Otto Group has been able to achieve important ecological milestones with this approach. It uses almost exclusively sustainably grown cotton, with the share being around 98 percent, for its textile product line of own and licensed brands. The Group more than halved the carbon footprint of its own business activities between 2006 and 2020. By 2030, the Otto Group wants to be climate-neutral in all core processes. Since the end of the 1990s, social standards have been systematically introduced in the supply chain. These standards are not just imposed on suppliers. Rather, suppliers are also supported by training so the standards can be achieved. Furthermore, compliance with social standards is audited by the company’s own auditors and independent ones. “I think it’s great when someone in the world of tough capitalist competition upholds and enforces such values,” says environmental scientist Prof. Dr. Ernst Ulrich von Weizsäcker about Michael Otto.

Innovation is another field that has demonstrated Michael Otto’s foresight for quite some time and continues to do so to this day in his capacity as Chair of the Supervisory Board. “Dr. Otto is always on the cutting edge. He knows basically everything about technological changes,” says Alexander Birken, CEO of the Otto Group. In the 1980s, Michael Otto started traveling with colleagues from the Otto Group to the United States – to Silicon Valley and the east coast. He visited startups and innovative digital companies to get a feel for the latest trends in IT. That is also why the Otto Group already had an online shop in the mid-1990s. At a time when only 250,000 Germans had an internet connection, and long before many other mail order companies. That gave the company time to extensively test and introduce the new technologies. The previously mentioned principle of long-term decisions that secure the economic survival of the company made it possible to engage in experiments that always carry the risk of failure. It was some of these ventures that ultimately enabled the Otto Group to create the structures that have cushioned the intensity of the changes wrought by e-commerce and digitization. Michael Otto’s curiosity about technical progress and his desire to be in tune with the times continue to shape the company to this day. Even after handing over the company’s leadership to others in 2007.