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A conversation about digitalisation with EMBank CEO Sarp Demiray

Sarp Demiray is the CEO and Board Member at the European Merchant Bank (EMBank) of Lithuania. He has previously worked for Garanti BBVA and Akbank in Turkey, before heading over to Ata Online, Turkey’s foremost brokerage firm. He graciously answered a few questions we had about digitalisation of business management for us.

Q: What would you name as the most significant inflection points for the digitalization of business management? The Internet? Mobile phones? 5G?

First let’s just go over what an inflection point is: When the marginal impacts of adoption on some developments or events are increasing significantly, and the effects of the change are expected to be lasting and widespread, then we have an inflection point. In practice, this means that the world – or your business – will never be the same again.

Andy Grove, Intel’s co-founder and long-time CEO, discusses inflection point in depth in his book Only The Paranoid Survive. He described a strategic inflection point as “an event that changes the way we think and act.” He famously steered Intel through a memory-chip crisis to become the dominant microprocessor company we recognise it as. Grove wrote the book in 1988 and added some updates in the 1990s. He accurately names the founding of the Internet as a major inflection point when it is a mere spark.

Detecting an inflection point is really difficult while you are living through it. A temporary crisis or a regular change looks quite similar to an inflection point when you’re looking too close – we always have a clearer and better understanding of things retrospectively. And sometimes the opposite is true. Something that looks like a real game-changer simply doesn’t last.

Going back to the question, my honest answer is “I don’t know – yet”.

But there’s one noteworthy aspect I’d like to reflect on. History shows that sometimes an existing concept becomes a fundamental game changer only after another development takes place. For example, our use of mobile phones re-shaped with increased connection speed and data transferred. Another case is with augmented and virtual reality. Both concepts have been commonly discussed for over a decade, but only recently with better technology and speed, they’re taking off.

Today, four major technologies that may lead to a powerful inflection point would be: Edge computing, Internet of things, artificial intelligence and augmented/virtual reality. And 5G will be a crucial enabler for all of these. 5G will have two critical aspects that will change our lives: increase the amount of data transferred significantly and remove the time lag in connections.

5G looks like the most likely game changer, after a significant hardware development on mobile devices, or widespread adoption of blockchain technology, shaping of the Metaverse etc. I also find NFTs somewhat overvalued as digital art “for now” – though I’m sure it’ll get mature enough at some point and reshape the art world as well -,  but looking at it from the gaming perspective for example, it already makes sense that someone who spends many hours to develop a character gets a chance to make a trade via NFTs.

Q: Apart from the developing technology, Covid has also caused a major digitalization shift. How do you see Covid, Digitalization, and Business Management come together?

All major events in history like wars and epidemics have caused significant change in the sociocultural fundamentals of the society as well as the business environment. After a mostly negative impact, a breakdown in the defined roles of society has arrived. This has led to a need for adoption, eventually resulting in a redistribution of wealth and resources. It also causes a change in the expectations of companies and consumers in the market. A good example of this might be the Bubonic Plague that led to the death of half of Europe’s population, and the subsequent valuation of labour due to lack of workers. Serfs resisted the aristocracy in England and France, and losses from older intellectual communities ushered in new ideas, turning into the Renaissance.

The Covid-19 pandemic also highlights the vast digital divide between the poor and rich, between rural and urban areas, between advanced and developing economies and maybe most importantly between tech-savvy and tech illiterate. While most of the advanced nations are offering their citizens their booster shots already, or, in some countries, even their fourth shot, many in the developing world are still waiting to be vaccinated. And many sensible individuals are relying on vaccines to protect themselves from the coronavirus, or at least from dying from it, yet there is still vaccine hesitancy among the lesser educated masses.

As far as Covid-19’s effects on business and business management goes, broadly speaking, they arose on two domains: 1. externally—how firms interface with customers, suppliers, and other stakeholders; 2. internally—how firms manage employees and the employer–employee relationships.

Covid-19 forced many organisations to shift to remote working. It also accelerated the shift from paper-based to electronic-based processes, procedures and routines. And finally, because of domestic and international travel restrictions as well as social distancing, firms were forced to operate online rather than face to face. This challenge has been overcome, for the most part, by video conferencing and online meeting platforms.

Q: There’s a human side to all changes. What effects do digital ways of working have on people and interpersonal relations?

My personal experience is that it goes both ways; in some aspects, the digital way of communication has enhanced our capability to communicate, lets us efficiently use our time and provide a lot of opportunities in terms of connecting and contributing. On the other hand, a digital connection is way more limited in quality compared to a face-to-face contact; the depth of the relationships decrease due to limited attention spans and the way of communication brings the risk of misunderstanding each other.

Scientific research also supports this view. A recent most quoted psychology study by Ruben et.al. has tested technology use to enhance nonverbal decoding skill vs. technology use to hinder nonverbal decoding skill and the results have shown that both effects are emergent.

What I find interesting is that people who have been using social media more actively, have been more adversely affected. Passive users have not been affected less negatively.

Q: What’s expected of a bank or a financial institution in terms of a digital adaptation? What would it mean to fail to deliver them? 

Misreading inflection points has its own problems. Such as: being too early, betting on the wrong horse, doing the right thing in the wrong way or being too late.

I recall a quote from Prof. McGrath of Columbia Business School: “When it comes to successful entrepreneurs and businesspeople, they have to be willing to take a risk on something that’s uncertain. However, it’s about the ‘smart risks’.”

I cannot emphasise this enough.

One way to make the most of ‘smart risks’ is being proactive and interactive in order to understand the effects of the possible inflection points on the vendors, customers and stakeholders. Another thing is to make mistakes with a planned stop-loss and target to have small mistakes with big returns – like A/B testing or dark launching. And another thing is adopting fast to move with the rising tide – making adjustments to be flexible to use technologies outside the company to our advantage.

A financial institution is at the core of change in any dimension of the business world. Any inflection point in history creates a need for adaptation in the financial aspect. Those who are able to do so, to lead that adaptation become the big companies in the following chapter of world history. The current evolution of the fintech industry is the result of the adaptation of the finance industry to today’s digitalised, connected, mobile world.

Q: Would you say that digitalisation affects B2B and B2C businesses differently? How so?

A wise man once said: “The core difference between B2B and B2C is that in B2B, the individual researching and buying has a job to do. They don’t want to be there, necessarily — they have to be there. It is their job”. I think he has a point. Your approach to a B2B client needs to be different. You need to be offering them something that will make their jobs easier. Whereas with a B2C client, perhaps you just need to make them have a pleasant time and enjoy the experience – aside from the core utility aspect.

For both categories, that is, for both B2B and B2C, digitalization brings a necessity to excel in user-friendly design and UX, as well as looking for ways of automation in many aspects. The user experience needs to be smooth regardless of what purpose you are serving. Automation is critical for both categories.

In B2B marketing, you need to explore the company you are catering to and discover its key points and deliver accordingly. You are dealing with the gatekeeper to the decision maker, not just one person in reality. You need to be able to offer solutions to five or six aspects of the company in theory, to manage the relationship effectively.

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