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4.6 The Consequence of the Impact of the Digital Age for Banks

The statement that existing positions of success are no guarantee for future success has been proven scientifically. Time and again—and across all industries—those revolutionary developments described in the previous section arise, which upset the established business models. The developments in banking in the twenty-first century are definitely a revolutionary basic innovation that is based on the knowledge society and which suspends the previous rules of the industrial society. The key problem from an innovation perspective is that established banks are currently situated in the specialisation phase of their business models and technologies, while new technologies and competitors are appearing on the horizon, the clear significance of which has perhaps been underestimated for too long. This leads to the erosion of the existing position of success and possibly to the disappearance of many of today's providers. Thus the banks' problem in introducing measures now is that they are stagnating in the specialisation phase of their existing business model, while new revolutionary business models are already in the development phase. The innovation dilemma of many banks is therefore further developing the current service form while at the same time anticipating and integrating the revolutionary changes, with the same resources.

However, the consistent strategic orientation towards the circumstances of the digital age is essential for survival, in order to be able to be counted among the bestin-class providers. Google demonstrates this with its business model: for 20 years it has been possible to use Google free of charge, and Google's worldwide share of the advertising pie is clearly growing. As the considerations on critical mass show, the consequences of a delayed orientation towards innovative developments should not be underestimated. The self-reinforcing powers can lead to a negative spiral effect if the time point of positive feedback is missed.

Banks are definitely faced with the challenge of addressing the necessity for change. The duality of the further development of existing success positions and the revolutionary development of new ones is a key task for the management of banks. Existing customers desire evolutionary support, while “digital natives” will adopt the emerging revolutionary models immediately. Established banks are in danger of misreading the actual—disruptive—signs of the times by focussing on incremental process improvements to existing business models, and might thus make wrong decisions with regard to their own future viability. The balance between maintaining and further developing existing success positions and developing new potential will be decisive—and it should not be forgotten that it is not the technically perfect solutions that prevail in the market, but rather the speedily developed prototypes with a rapidly growing number of new users.

Understanding the disruptive logic—we find ourselves in the development phase of new revolutionary innovations—and actively addressing the question of the balanced design of business models within each bank is a necessity, both from the previous control paradigm of the shareholder perspective—otherwise the market capitalisation of a bank will also suffer greatly—and from the future-oriented win-win perspective outlined in Chap. 7, which in itself represents a disruptive change at the level of the customer-bank relationship. The decisive question is whether there are management principles that allow established banks to survive these revolutionary changes and even to contribute actively to their design.

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