Under pressure from private equity group Cerberus, Germany’s second largest lender began a restructuring process last year that targeted a meager 4% RoE by 2023 – significantly less than the investor expectations (cost of capital) of 10% return. The Covid19 crises led to a €295 million loss in the first quarter of 2020. As American celebrated the Independence Day holiday, the CEO and the chairman of Commerzbank have left. Their leaving is widely seen as a move by Cerberus, the second largest shareholder has been able to influence the exit of both the CEO and the chairman.
Based upon reinventing the firm, there is significant momentum and appetitive for total transformation. With that type of board and management support, this is the best time for Commerzbank to rethink its future and build it upon an AI centric transformation.
As the bank recognizes the importance of AI as a new paradigm for transformation, the mindset needs to evolve from viewing AI as a technology to support the strategy to seeing AI as the central strategy. This is a great opportunity to transform the bank with full scale automation. The restructuring plan was developed by a consulting firm; however, an AI centric transformation plan is different
Unlike typical deterministic planning that goes in typical strategy models, AI centric transformation is performed with a flexible and creative mindset. Creative planning happens when firms view AI as a simultaneous transformation of business model, business strategy, operational plans, and process automation. In that type of planning, firms develop competitive advantage through a systematic exploration of data. “A data centric planning approach is different you can instantly identify what type of automation is possible, when, and what to prioritize” said Michael Trejo of DataPrism.
In the past, several IT initiatives were launched by Commerzbank. Even though some of those initiatives were successful, they were not able to change the trajectory of losses or to create a meaningful competitive advantage for the firm. The use of AI remained at a tactical level. The current change offers an incredible opportunity to rethink and plan the future of Commerzbank.