Sailing boat facing the horizon

For the opening keynote of our virtual conference Digital Thoughts on May 23rd, Jochen Werne, Director Marketing & Authorised Officer at Bankhaus August Lenz, talked about opening up to the digital transformation. It turns out, what we associate with technology and what it actually offers are often two completely different things.

Companies and people need to participate actively in the transformation

„We need to move“

It’s impossible to be a passive participant in the transformation. Many companies prefer to wait for others to take the lead. They rather watch and evaluate. Movement is, after all, time-consuming, stressful and there’s so many other things that need to be done.

Nearly every fifth company that is currently active on the financial market was founded since 2005 (source: Accenture Research, Analysis of central banks,  Analyse von zentralen Banken, other finance companies and CB Insight DATA).

So-called „Fintechs“ are dominating the field. These are start-ups and other business models that enrich the finance market with technological innovations and services. For many „traditional“ companies, these rejuvenated business models will become a focal point. Technological progress is neither good nor bad. It’s how people use the technology that adds any positive or negative values.

„Suddenly, information could be spread faster than ever before.“

The printing press: Can an invention be „bad“?

Digitalization, according to scientist and author Niall Ferguson, can be compared with the invention of the printing press in the 15th century. Education changed rapidly worldwide. Rules and standards spread faster and eventually led to the age of enlightenment. Since the invention of the printed book around 1450, the first printed work – the bible – was on top of every „bestseller list“ for 200 years.

Lesser known is the number two on the list. „Malleus Maleficarum“, the so-called „Witches‘ Hammer“ was helping spread misinformation on the topic of witches and was part of the persecution of supposed witches in the middle ages. Malleus Maleficarum was basically a „fake news“-publication with 29 editions.

But would you blame the persecution witches on the invention of the printing press? It all depends on how we use the technology that is available to us. The positives are not based on the printing press, they are based on what we print with it. But back to digitalization.

The digital transformation is equally neither a good or bad development. There are always advantages and disadvantages with every technological innovation. Fake news play a big role on modern, digital platforms. It’s hard to imagine, though, that Mark Zuckerberg and his team considered the scope of their platform and its influence on society when they established Facebook.

„We let the technology loose.“

And the technology impacts our society, politics, democratic elections and our perception.

Regulation can solve problems – or worsen them

One of the first ideas to counter the disadvantages of digitalization – fake news, for example – is the regulation via laws. But regulation can hinder progress, or even push progress in the wrong direction through false incentives or punishment. The so-called „cobra effect“ describes the effort to solve a problem and thereby accidentally worsen it.

The term has its origin in the plans of the British government in colonial India to fight the cobra-plague by offering a bounty for every dead cobra that was brought in. Businessmen used this „incentive“ to breed cobras, kill them and collect the bounty. After the government realized these practices, they cancelled the program. The breeders released the remaining cobras which increased the number of cobras in India altogether. At the end of their plan, the British government had less money and more cobras than at the beginning.

The implementation of regulations needs to be smart and balanced. We need to learn from the cobra-effect when it comes to digitalization and make sure that we are not limiting the positive effects of the digitalization when we are trying to reduce its abuse.

Digitalization might have an image problem

Enthusiastically recommended digital apps have a growing image problem. Whether it’s because of the spread of fake news, hate speech on social networks or the fear of artificial intelligence. The framing plays an important part in all of these fears.

According to a survey by The Financial Brand, more people would trust AI with surgery than with handling their finances. Users as well as customers react differently towards the same topic. It all depends on the information level, individual priorities and the way these technologies are being portrayed in their respective areas (finance and medicine, in this example).

Many of these prejudices are also being created by pop-cultural media. AI has hardly ever gotten a positive twist in Hollywood, for example. Movies like „Terminator“ or „2001: A Space Odyssey“ portray AI as the future antagonists of humankind. But a completely independent thinking and even cunning artificial intelligence is pure fiction. According to experts, we are far from designing actually „intelligent“ technology. Even the term „artificial intelligence“ is – in practice – not what we imagine it to be.

An example: Cyborgs are amongst us

What do we imagine, when we think of a „cyborg“? Super human creatures that are more robot than human? In reality, cyborgs are already living amongst us. If we go by the classic definition, these cyborgs are far from what’s being portrayed in science fiction books and movies.

Cyborg: a being with both organic and bio-mechanic body parts.

Every human who has a pacemaker, a hip replacement or an implant for diabetes can be defined as a cyborg. That’s far from scary, is it?

The framing of digital innovation

But how are these technologies being framed in public? When it comes to implants, media loves to pick controversial ideas and projects to ensure high click-rates and views.

For most, especially in culturally rather sceptic countries like Germany, those ideas seem invasive and even scary. It seems incomprehensible to think about brain implants. But if we turn the use from „nice to have“ towards „life preserving“, the acceptance towards smart implants immediately changes.

„We need to be open and less fearful towards the possibilities.“

This applies, to get back to business, equally for banking.

Discover the potential behind the myth

Can AI help to disrupt the financial sector? Dan Schulman, CEO at PayPal, once said, that the biggest hurdle for future success is past success. It’s not always helpful to continue successful strategies just like before. The development of a business also means to develop strategies, cultures and how problems are being addressed and solved. This doesn’t mean that everything needs to change.

But maybe the fear of change or rather, the fear of having to re-invent the wheel is the reason why so many people are against transformation. But if we look at the customer journey, for example, the basics haven’t changed through digitalization. First there’s an impulse, then an idea, followed by an action or interaction by/with the customer. What’s new is the transparency towards the company, when customers interact online, for example. Companies can take this transparency and create value with digital applications. The challenge for companies is, to know the technological possibilities and use them in a way that brings value to their customers.

Digitalizing the finance sector

The finance sector is pretty advanced when it comes to chatbots, identification technologies, or methods to prevent money laundering. Structured data can be easily processed. However, in other areas, we are less developed, even though the public discourse paints a different picture.

Predictions for the finance market can’t be made. There’s too many factors that play into a prediction, which means that a guaranteed prognosis is impossible. That doesn’t mean, however, that there are no other ways to use modern technology for predictions and prognosis. By the way, topics like data security play a big part in all this. Not everything that is possible, can be used because it might not be covered under the GDPR or other data security laws.

Transformation needs to be designed from the user’s perspective

We live in an age of transformation. Technology develops at an ever faster pace and there’s nearly endless possibilities.

The individual can adapt fast to changes, which can be shown by how many people already use smartphones, even if the iPhone has been on the market for merely 12 years.

In business, the transformation takes place at a slower pace, because many different people and views need to be aligned. There needs to be consensus before there can be change.

Processes and actions in organizations or within politics are moving at an even slower pace, which seems logical. Here, big decisions have to be made that impact many diverse groups of people. It’s a big gap between these decisions and an individual deciding to buy a smartphone or put a digital assistant in their living room.

The digital transformation needs to fit cultural differences

In the last two decades, technology has evolved at an incredible pace. For us, it seems nearly impossible, since we’re used to linear thinking patterns. There will always be more possibilities than one single human can think of, adapt to and develop. If we add the cultural context to this – where we come from, where we grow up, in which society and with which cultural signature – it becomes more and more difficult to present technology in a way that makes it accessible for everyone, equally.

Different people and cultures imagine technology differently

One single word, topic or behavior can have different meanings in different cultural contexts. Where in Sweden, it’s very normal to pay without physical money and body implants are accepted for lifestyle-reasons, many German customers and users are sceptic.

Going back to the word „cyborg“, we can see how far-reaching these associations can be and how strong our image of a technology can differ from its actual field of application and its possibilities. Transformation always means to consider the cultural context and to realize that different people have different views, ideas and associations towards the (digital) transformation.

Needs have to be front and center, fears need to be recognized, even if they might seem irrational from our own perspective. We need to work, to make sure that people don’t see the „Terminator“ but instead someone with Parkinson’s who – thanks to modern technology – can take part in life.

In short: „we need to move.“

We gladly help you through the digital transformation, whether it’s through software implementation, planing or helping employees be part of the change.

Jochen WerneJochen Werne is a Banking- and Marketing-specialist, Director Marketing & Authorised Officer at Bankhaus August Lenz Co. AG. He is, amongst other things, a guest lecturer at Universities, a keynote speaker, as well as an author and co-author of books and articles about leadership and digital topics.


Contact: LinkedIn