Are we looking at it from the right point of view?
One of the biggest challenges – but also chances – of our society lies in the transformation from a production society to a digital society. This is by far not just about the process of data processing through traditional IT architecture (server) to big data. There are already big differences of opinion between the market players regarding how and what to define when talking about big data (mastery of big amounts of data, exclusion through data mining, detection of patterns and/or deduction of new types of business models, etc.). Many market players look at the implications of “Industry 4.0” and “Internet of Things” only in a very limited way (many economists can tell a story about what “ceteris paribus” can mean in reality).
This process transforms the entire society and has implications on production and on connectedness, the way we think and plan, how we perform services and charge them with taxes, how we define property (virtual as well) and protect intellectual property, the way we learn in the future and how we want to understand the world – and finally how we share transformation profits (and losses) among the society.
The illiterate of the 21st century
The illiterate of the 21st century will not be evaluated on the basis of his ability to read, but by means of how fast he can learn, forget and learn anew. Agility of companies begin with each and every employee, and his ability to continuously adapt to the modified basic conditions with the help of his own skill set – the ability of pattern recognition in complex situations as a Darwinian advantage before the pure specialist and detail knowledge.
In a first step of approximation to this topic one has to deal with the question of how we as individuals position ourselves in principle regarding changes and how we face new challenges. A widespread approach many companies make use of is to ask the question: “Is my business model affected by digitalization?”. This results in defense strategies on many levels of the management, which try to secure the established (be it through marketing campaigns, changes in the procedural landscape or simply through overvaluation of their own USP’s) and think from the position of the problem.
A good example is the discussion of the banks on the topic of fintechs in the sector “mobile banking”. Many of the banks developed in-house applications which in the end only delivered services to the customer “electronically” which he would otherwise get in “traditional” ways. Defensive strategies are characterized by the fact that they are only implemented when the endangerment already shows first market success. If they had initially asked themselves the rather pro-active question “What opportunities open up through digitalization in order to give my customer an enhanced range of products resulting in a higher or new customer value, to develop new business models from existing data stock, to improve my old or create completely new “forecasting systems” [1] or to develop new business areas through digitalization of internal knowledge?” banks would definitely already have interesting new business units with innovative ranges of service.
How the internet influences the way of thinking
A possible danger of this approach is that digitalization is regarded as a means to subordinate the consumer to the business model through pattern recognition and on the basis of analysis and linking of all data in order to offer the consumer – based on the needs – the maximum consumption – which makes the consumer incapacitated and manipulable. This question has been discussed for a long time and extensively, which is reflected already in the “Edge” [2] Jahresfrage of 2010: “How does the Internet change your thinking?”. To free oneself from this clasp would mean to look at digitalization as a communication between the “technical world” and “human creativity” and thereby making it subordinated to mankind again, which means to regard new models as holistic and cybernetic systems of 2nd order [3] – or in other words: “Technology cannot map the objective reality, but it can help to organize subjective perception and thus make personal decision-making freedom in a complex world possible again.” This ultimately means the commitment to a personal decision – in an economic use of language the “entrepreneurial decision”. What does that mean in an illustrative example? Maybe the question if you should trust a fintech company which as an investment platform highly efficiently explain how you get a better performance through “crowd-wisdom” or “robo-advise” [4] – or should rather use a system over which relevant market data gets processed transparently thanks to a certified calculation engine in order to bring investment decisions in line with the subjective conception of the world.
Thus this is not a general declaration of war against the fintech companies, but rather an encouragement to create systems and digital marketplaces in order to allow the market players to play that game they have played on marketplaces since the beginning of time and where they can prove themselves – not by manipulation but through negotiation skills.
Here at green[::]match we work precisely on such a marketplace and we use digitalization to bring quality, speed and transparency to market areas which previously had been characterized by the opposite. Investments in the field of real asset were regarded as hardly comparable. This corresponded with the reality because there were breaks in the supply chain from developer to investor and all market players only believed in their own derivations. green[::]match changed this and offers the possibility to use the first fully functioning digital marketplace which provides the same and transparent general conditions for everyone. However, it does not take away the power of the user to (have to) make their own decision over the assumptions.
(In the next blog-post we will deal with the question if the USA has chosen a reasonable path in dealing with these issues and how we can – based on the answers to these questions – derive approaches for relevant challenges of the future.)
>> Continue with Part II (Can America be a role model?)
Reactions, comments and suggestions to this article are welcome: zenke@strategy-and-finance.de.
[1] Hereby explicitly included are not only rating systems but also methods of analysis, which allow to better plan product need according to the customer life cycle. “Legendary” in this field is the case where Amazon constantly advertised baby products to a 16-year old, whereupon the father made a complaint. In this case, because of the analysis of her search and purchase behaviour, Amazon knew about the pregnancy of her daughter before the family.
[2] Edge (see: www.edge.org) were born as ideas of John Brockmann and stands for the following fundamental philosophy: „To arrive at the edge of the world’s knowledge, seek out the most complex and sophisticated minds, put them in a room together, and have them ask each other the questions they are asking themselves.”
[3] „Cybernetics of second degree“ is a progressive intellectual movement in cybernetics and systems research which derive a theory from the creation of subjective realities in the neural systems that – in its extreme form – as an observation of the observation (observation of second degree) eliminates the concept of an objective reality and instead describes the inherent value of the kognitive systems as a result of recursive processes.
[4] These methods may even function (depending on where you begin to calculate). But what happens, if everyone is part of the crowd and all of them use the same robo-advisor? And where is the fun at game and competition when the world is brought into line?
Author
Harald Zenke, Owner of Strategy & Finance Advisory
Strategy & Finance Advisory is an owner-managed consulting company which sees itself as a developer and implementation guide of product and process innovations as well as new business models in the financial services sector. Harald Zenke has more than 15 years of experience in the field of renewable energies and project finance, amongst others as CEO of KfW IPEX bank and EVP Corporate Finance of LBBW. www.strategy-and-finance.de
