A few weeks ago I wrote about the current state of blockchain. In particular, I asked whether blockchain is ready to cross the chasm from its early adopters, - who are already involved with blockchain in one way or another, - to the considerably larger set of mainstream users who may be considering blockchain but are waiting for results and assurances before jumping in.
I explored this question by comparing blockchain today to the Internet in the early-mid 1990s, which is roughly when the Internet made its own transition from early adopters to mainstream users. My conclusion was that blockchain isn’t quite ready for this important transition. It’s still in its early adopters stage, - perhaps akin to the Internet in the late1980s. A lot is going on with blockchain, so much so that last year the World Economic Forum (WEF) named The Blockchain one of its Top Ten Emerging Technologies for 2016. But much remains to be done in key areas, including standards, applications and governance. Blockchain has the potential to make our digital infrastructures much more secure, efficient and trustworthy, but it will take time.
The Internet in the early-mid 1990s was clearly more advanced than blockchain is today. On the other hand, the business environment in 2017 is quite different from the one back then. The Internet and associated technologies like smartphones and cloud computing have significantly lowered the costs of collaboration and experimentation, enabling innovations to emerge more rapidly. In addition to providing a good set of lessons for blockchain’s adoption, the Internet is smoothing the way for the development of blockchain platforms, applications and ecosystems.
What should your company do? Get on the blockchain learning curve now or wait until the technology is more mature before jumping in? Become an early adopter of this potentially transformative technology, or run the risk of being left behind by more aggressive competitors? How should your company decide when and how to best embrace a disruptive new technology like blockchain?
Strategy formulation
Several factors convinced IBM to embrace the Internet in the Fall of 1995. Market interest in the Internet and its economic potential was taking off, especially following Netscape’s highly successful IPO. Startups were appearing right and left. Some IBM competitors had already embraced the Internet, especially Sun Microsystems. A number of IBM’s clients were among the early adopters, and had already started Internet prototypes working with Sun, Netscape and other vendors. Our clients were clearly embracing the Internet with or without IBM.
The Internet was ushering a new model of computing. The universal reach and connectivity of the Internet were enabling access to information and transactions of all sorts for anyone with a browser and an Internet connection, making existing business processes more efficient, as well as enabling all kinds of new business models.
Startups were experimenting with many new applications, - some of which turned out to be quite innovative, and some rather silly. Part of the buzz in the air was that in the Internet-based new economy, startups had an inherent advantage over existing businesses. The legacy assets of older companies were like a noose around their neck. They couldn’t possible compete in the fast moving digital world and were therefore headed for extinction.
Our point of view was quite different. We came up with what become known as e-business, a strategy which we succinctly defined as Web + IT, based on integrating the industrial-strength IT infrastructures being widely used in business and government with the new Internet capabilities. Any institution, by integrating its existing databases and applications with a web front end, could now reach its customers, employees, suppliers and partners at any time, day or night, no matter where they were. The Internet was the beginning of a profound business and societal revolution with the potential to alter the shape of businesses, industries and economies. But, it wouldn't be a rip-and-replace revolution; it would take place as a series of incremental steps over time.
Marketplace execution
Having a clear, compelling strategy is a necessary, but far from sufficient condition. In the end, a successful strategy must be executable in the marketplace. With the Internet, the action was mostly in the marketplace, not in the labs. There was no one technology or product you could work on in the labs that would make you a success in the marketplace.
Time-to-market was critical. You couldn’t wait until you figured things out or developed a whole new set of products because by then the train was likely to have already left the station. You had to work closely with clients around the world, understand their key requirements and come up with innovative solutions that you could start prototyping and experimenting with in months rather than years.
Equally important were customer references and case studies that nicely explained what the Internet was all about and helped position IBM as a major Internet player. A lot of our work in the early months of IBM’s Internet initiative involved conducting market experiments with clients and partners across a variety of industries.
Effective marketing and communications was also essential. Given how new all this was, we had to figure out how to best communicate, in the simplest way possible, why every company should embrace the Internet and become an e-business. We successfully established the e-business brand in the marketplace by consistently telling e-business stories over a variety of communication channels, including press interviews, conferences, IT and financial analyst meetings, Web articles, and lots of client engagements. We also worked closely with our marketing agency, Ogilvy & Mather, which created a very effective e-business campaign, including memorable, award-winning TV ads that explained the value of e-business in a series of short vignettes.
Organization and culture
Established companies cannot possibly compete with startups on focus and speed. Instead, they need to figure out how to best integrate the new disruptive innovations with their key core assets. This will make it easier to then embrace the innovation as a way of rejuvenating and transforming the company and its various offerings, processes, business models and culture. If properly done, it can be a major competitive advantage over both established competitors and fast moving startups.
Top management support is absolutely essential for disruptive initiatives to have any serious chance of success. Much of what needs to be done in entrepreneurial initiative involves taking risks and breaking glass. The initiative must be carefully nurtured and protected until it has enough concrete results and marketplace successes to stand on its own. There’s no question in my mind that IBM’s Internet strategy would not have succeeded had it not received the strong and visible support from CEO Lou Gerstner and other senior executives.
IBM, like many large businesses in the pre-Internet era, used to be very inward-looking, preferring to do everything by itself if at all possible. Embracing the Internet, its open standards and overall outside-in approach turned out to be much more than a technology and strategy change, - it required a major transformation of the very culture of the company.
Gerstner saw the Internet as an all-important catalyst for change. “I decided to declare e-business as our moon-shot, our galvanizing mission, an equivalent of the System/360 for a new era,” he wrote in his excellent book Who Says Elephants Can't Dance? “We infused it into everything. It provided a powerful context for all of our businesses. It gave us both a marketplace-based mission and a new ground for our own behaviors and operating practices - in other words, culture.”
Blockchain today
Do any of these lessons learned apply to blockchain today? There are both differences and similarities. Let me briefly summarize the current state of blockchain.
- Blockchain is nowhere near as mature as the Internet in the early-mid 1990s, perhaps more akin to the Internet in the late 1980s. But, marketplace interest has considerably picked up in the past few years. Universities and research labs have launched blockchain-based projects, and there is serious interest on the part of governments.
- A number of large companies and startups have blockchain prototypes under way. But, the amount of such activity is still relatively small, with a few prominent exceptions such as financial services and supply chain management. A recent IBM survey of almost 3,000 C-suite executives found out that less that 10% of companies are actively involved in blockchain activities, while 25% are considering but not yet ready to deploy blockchains.
- IT companies are starting to offer blockchain-based services to their clients, including IBM, Microsoft, and Amazon. So have a number of new blockchain startups.
- Blockchains are generally multi-institutional and mission critical, and thus fairly complex. On the other hand, the Internet’s global infrastructure greatly facilitates the development and deployment of blockchain-based platforms and applications.
- Despite the increasing number of articles, reports and books being written on blockchain, most people have little idea what blockchain is about and why we’re so excited about such a seemingly exotic topic. It’s all still very new. Many still associate blockchain primarily with Bitcoin and other cryptocurrencies.
Will blockchain have a profound long-term impact, - like the Internet, - on companies, industries and economies? I think it will, but, it’s too early to tell how big the impact will be and how long it will take.
In The Truth about Blockchain, an article published earlier this year in the Harvard Business Review, Marco Iansiti and Karim Lakhani wrote: “TCP/IP unlocked new economic value by dramatically lowering the cost of connections. Similarly, blockchain could dramatically reduce the cost of transactions. It has the potential to become the system of record for all transactions. If that happens, the economy will once again undergo a radical shift, as new, blockchain-based sources of influence and control emerge… Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction.”
And, in a recent WEF report, Don and Alex Tapscott wrote: “We are now witnessing the rise of the internet of value. Like the first generation of the internet, this second generation promises to disrupt business models and transform industries… pulling us into a new era of openness, decentralization and global inclusion… However, this extraordinary technology may be stalled, sidetracked, captured or otherwise suboptimized depending on how all the stakeholders behave in stewarding this set of resources - i.e. how it is governed.”
Getting back to our original question, should your company get on the blockchain learning curve now or wait and run the risk of being left behind by more aggressive competitors? There is no easy answer. In the end, it all comes down to your leadership aspirations.
Very insightful article that makes a number of valid points.
Posted by: Greg Willis | August 15, 2017 at 08:10 AM