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4.Change Frameworks

Whoever wishes or needs to change must fully understand the levers of the reality to be changed in order to be able to make precise corrections. In this chapter, therefore, we shall examine the framework conditions of banks' present-day business models.

Starting from the findings of the previous chapters, it is first essential to understand the digital age in its key aspects as a trigger of change—only by doing so can the willingness to take the necessary steps arise (see Sect. 4.1).

Following on from that, the fundamental “levers” of banks' present-day business models will be outlined briefly. For the management of the banks these are the factors against which their success to date has been assessed and towards which they have been and continue to be oriented—and it is therefore important for successful change to once again call these to mind (see Sect. 4.2).

The chapter ends with the outlining of the fundamental factual and technical levers of financial services—since these are being challenged by the innovations of the digital age, respectively it is here that the innovations that challenge previous business models in the long run are manifested (see Sect. 4.3).

4.1 The Digital Age

4.1.1 Patterns of Change Processes

Nothing is as constant as change. Change accompanies the life cycles of individuals and organisations. In retrospect, however, the reasons why change processes were triggered can be understood logically. That which appears to us today as new and stimulating is soon integrated into our individual world view after a phase of adaptation and usually without any cognitive effort. At the levels of the individual, a subsequent behavioural adjustment is usually possible without any severe consequences.

At the corporate level, on the other hand, failure to set the right course can threaten the very existence of a company. The fundamental question is how banks can adapt to a changing environment if they have only limited advance knowledge about the changes ahead. During the industrial era we have repeatedly observed the phenomenon that the decision-makers of large and successful companies could not master substantial changes, despite their expertise and the intensive analysis of development trends (Christensen and Overdorf 2000). Thus in order to define the successful change strategy for one's own bank, understanding the patterns can help in managing change and innovation processes.

Empirical studies show that most economic growth at every stage of development has been the result of technological innovations (Solow 1957). Kondratieff found in 1926 that economic development occurs in cycles. These economic cycles encompass not only the short and medium term, but also the long term, lasting between 40 and 60 years. He identified three such long cycles since the beginning of the nineteenth century (Kondratieff 1926). The Kondratieff cycles show how the sequence of innovation cycles developed in an S-shaped manner. The basic revolutionary innovations that formed the basis of cycles one to four were the steam engine and cotton wool production, steel and the railways, electrical technology and chemistry, as well as the automobile and petrochemicals.

In the fifth Kondratieff cycle, information and knowledge play the decisive role as a foundation for growth for the first time.[1] These immaterial raw materials, which have guided the economy onto new paths of growth, lead constantly to new applications of the basic innovation, information technology. Thus the energydriven structural change has been replaced by an information-driven structural change. This has wide-ranging consequences for all information intermediaries— and therefore also for banks, as financial information intermediaries. That is the deeper significance of the digital age and the answer to the question of its importance (Fig. 4.1).

  • [1] The sixth Kondratieff cycle has begun in parallel with the intensification of the fifth. An empirical analysis has shown that health, in the holistic sense of the bearer, will be the next long cycle. The main bearers of the sixth Kondratieff are psychosocial health and biotechnology (on the further developments of the Kondratieff cycles see Kondratieff 2013).
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