Building a Blockchain ecosystem: the role of industry leaders
Blockchain, in a decade from now, will shift the locus of IT from “how can I cut cost?” to “who can profit from my business?”
Since the publication in 1995 of the HBR article “Disruptive Technologies: Catching the Wave” (Christensen, 1995), the terms “disruptive innovation” have been used exponentially in literature with very wide meaning, mainly tagging technologies that shake up an industry by lowering the overall costs/prices, rarely associating them to the creation of new markets. This has not helped to identify a clear strategic approach in leveraging innovation (Christensen, 2015).
What does this have to do with Blockchain?
Technology evangelists believe Blockchain can help to solve almost “all global issues”, from financial inequality (Mojaloop, Banqu), to global citizenship (Civic): in other words, Blockchain is seen as a true “disruptive” innovation that will become the “warp and woof” of the new business and social infrastructure.
Even if we take for true this statement, attempting to predict how Blockchain will shape the future can be a roll of dice, especially because Blockchain is not… a “disruptive” technology in a traditional sense and it will take a decade before providing a lower-cost solution to dislodge current applications (this is the main reason why Proof of Concepts can help to get an idea of the potential of the technology only if conceived around new business models).
So organizations can either observe the Blockchain phenomenon and wait for more mature time to step in (the same strategy can be applied to Machine Learning, Artificial Intelligence, Deep Learning and in general all connected topics to the digitization wave) or in the alternative, they can take part to the “race” and to contribute to the creation of the Blockchain ecosystem for their own industry.
The 5 stages of a Blockchain ecosystem building
Playing a leading role in creating the Blockchain ecosystem requires organizations to move past their traditional ideas by adopting a “coo-petition strategy” that conceives their business as an opportunity to share margins. Yes, to create an ecosystem the most important aspect is to make sure that every single member contributes and benefits from it.
Borrowing the logic from ecology, all industry members will have to contribute to the self-sustainability of the Blockchain ecosystem by developing a positive-sum competition based on their inter-dependency; rules will elicit to govern its structure and belonging communities, consequently.
In other words, to begin the process organizations need to work through specific stages to develop a clear concept of how their business looks like once the Blockchain ecosystem will be in place. This article offers a point of view on the 5 stages to be considered when observing/promoting the creation of a Blockchain ecosystem: Self-awareness, List(en)ing, Transformation, Sustainability, and Self-shaping.
Having them clear, it will help organizations to avoid to “float around” the hype and to understand the capabilities they must have in place and by when this to ensure a role in the emerging new “Profit Chain”.
Stage 1: Self-awareness
Owning the key elements. Privacy, Security, immutability, transparency, reliability, longevity, process integrity: these are key attributes of the Blockchain ecosystem, the key elements that will help to evaluate the disruptive impact on the current industry business model. Having clear what they mean in the specific industry, it helps to establish in which direction preferably the Blockchain ecosystem will evolve and to define the key characteristics of your Blockchain architecture.
Stage 2: List(en)ing (growing silently)
Casting for growth. Start small but think big. With the Blockchain attributes in mind, organizations should consider who the “actors” in their business industry are (e.g. internal departments, suppliers, lead producers, competitors, audit firms, customers). Each of them will need to be one day a member of the Industry Blockchain ecosystem.
For each of them, Blockchain promoters should list which aspects of their work uses or would benefit the most from strengthening these attributes (better ask directly). This scanning exercise will help in understanding the boundaries of the ecosystem to be considered. It is not relevant if they are currently business partners of a specific organization, what it counts is if they can contribute with transactions and data to the ecosystem growth.
Stage 3: Transformation
Exploring to differentiate. Proof of Concepts will not help you to set up a strategy but they might help to unlock future growth. So, more than looking for dislodging current applications that will generate inertia in their own organization, promoters should focus on what can transform their business, investing in what can enable Blockchain use in the future. Think differently, as the initial success will be on the novelty not on the efficiency of the Blockchain solutions you will be proposing.
Stage 4: Sustainability
Balancing the “profit chain”. The key objective is to build a self-sustainable ecosystem, which means that in each “growth stage” it will need to have the capacity to regenerate and succeed to the next “seral” stage (e.g. Blockchain architecture surviving to “pump and dump” schema that alter the value of their crypto-currency but partially counterbalanced by the “complexity” algorithm that controls the mining).
Therefore, in defining the incentive system, for each of the ecosystem members, you will need to balance profit with effort over the whole population. This is not a deterministic exercise, so look for statistical tools; game theory here can help in defining the best strategy to maximize every single actor’s payback.
In an ecosystem, each member is key or not needed. This is a simple but crucial principle to keep in mind; distributing profit, it is about valuing every single member. This is a “blue ocean” strategy so you will benefit from your ability to differentiate yourself from the crowd in a growing ecosystem; so more actors will gain from being together, easier will be the adoption, more profit you will make.
Stage 5: Self-shaping
Developing abilities. The Blockchain ecosystem will take shape around the communities that will join the journey, their needs, their feedback, and last but not least the way they will cooperate with each other. It is key to keep a close look at the different abilities that will be developed at each stage and to make the whole ecosystem self-aware (an example could be the role of standard functionalities available apple x-Code when designing new iPhone apps).
Conclusion
By adopting Blockchain technology, in a decade from now, industries will achieve stunning gains in quality and efficiency, shifting the locus of IT from “how can I cut cost?” to “who can profit from my business?”
To be ready to this disruptive change, organizations should set up their Blockchain strategy on creating an ecosystem where all members compete at unique level (privacy), over the right things (security), around agreed rules (transparency), in a consistent manner (reliability and process integrity) at the right time (immutability) and for long (longevity).
References
Bower J. L, Christensen C.M., (1995) “Disruptive Technologies: Catching the Wave” HBR, issue January–February https://hbr.org/1995/01/disruptive-technologies-catching-the-wave retrieved 26-Aug-2018 18.37
C.M. Christensen, M. E: Raynold, R. McDonald, (2015) “What Is Disruptive Innovation?”, HBR, issue December https://hbr.org/2015/12/what-is-disruptive-innovation retrieved 26-Aug-2018 18.37
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Disclaimer: Views or opinions represented in this article are personal and belong solely to the article writer and do not represent those of people, institutions or organizations that the writer may or may not be associated with in professional or personal capacity, unless explicitly stated.
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