Overcoming FOMO and Nudging Companies
A medium-sized trucking company out of Memphis told me they want to do something in blockchain because the customers have been posing the question “what are you doing with blockchain?” A port operator in Mexico called me about blockchain when at a meeting with CEOs from several ports one of them brought up the subject of blockchain and nobody knew what to say. I have found through them that innovative companies do not like to say we do not know when their customers enquire. They like to say, instead, “We’ll find out.” Perhaps that is what sets them apart from the rest of the pack.
It is important to manage their expectations and take them out of the hype. It is also important to be truthful and objective about what blockchain can and cannot do. It is important to say, “No, it will not solve all your problems in every department of the company.”
I have found that companies can best be helped to overcome fear of missing out (FOMO) through the following three-stage process: blockchain 101, stakeholder workshops, and proof of concept.
Blockchain 101, which I have held dozens of times, helps companies, especially leadership, to understand how blockchain technology works at a high level. It explains how key components of blockchain work together, including ledger, consensus, network, and cryptography. Most importantly, it describes how it helps entities work in a collaborative environment. In most instances, companies will start ideating about how and where it can be applied. Blockchain 101 is the first step in managing their expectations and getting them out of the hype mentality.
Stakeholder workshops help companies identify specific workflows that will benefit from blockchain. Workshops also help companies identify specific blind spots in their workflows. You may need to hold more than one workshop—one with counterparties, another with the departments concerned, and so on.
Proof of concept is an inexpensive way of finding out whether blockchain will fix the blind spots identified in a workflow. It provides parameters for stakeholders to decide how they want to implement blockchain—integrate with their existing system or create a new one. The proof of concept provides implementation options and understands the feasibility of individual options.
Meet, Greet, and Understand Pain Points
The biggest disrupter of blockchain is trust. It will usher in a new era where individuals, machines, and companies, who do not trust each other, share goods and services. It will allow them to create mutually beneficial networks that will function on blockchain as a trust layer. It will allow businesses to lower the cost of maintaining and verifying trust, lowering, in turn, the cost of commerce.
The technology allows individuals and businesses to verify their attributes without disclosing evidence or government-provided documents. Companies can verify whether a counterparty has adequate insurance without asking for insurance documents. Verifying counterparty documents and identification will be frictionless, and that means that settling transactions will also be frictionless.
Every industry sees the potential of blockchain and how it can be applied in their business differently. When I presented blockchain 101 to furniture retailers, one of them, a large retailer, said they wanted to use it in their accounts department to reconcile and settle invoices quickly and with less resources. I never heard that before. It made perfect sense because this company receives invoices from hundreds of suppliers around the world. Before issuing payments, they must dedicate resources to reconciling each agreement, identities of suppliers, invoices, and actual deliveries.
Another group of individuals wanted to create a nonhierarchical community system engaged in moving goods in and out of the maritime port in Mexico. They wanted to create a truly transparent system where everybody contributes information and collaborates, reducing friction while moving containers in and out of the port. Before I told them about blockchain technology, they were struggling to define the system. For them, blockchain technology and consensus protocols are a tool for accountability.
A transportation engineer that I met at an automated vehicle symposium told me he wanted to create an ad hoc network for intersections where automated vehicles do not collide with each other or hit pedestrians. In the network, vehicles will be incentivized to share information with each other using blockchain as a trust layer.
A startup in California wants to use blockchain and cryptocurrency to monetize the habits of viewers, allowing viewers to sell that information to movie production companies. It will allow viewers full control of what kind of viewing habits to sell and, most importantly, without exposing their personal identifying information.
A trucking company executive out of Montreal, whom I met at the Blockchain in Transport Alliance conference, told me he wanted to create a network of other trucking companies in the area to share their resources such as drivers, trailers, and warehouses. This would allow the network to maximize the utilization of their physical assets and increase revenue from underutilized assets. But they need a trust layer, an accountability layer, which is blockchain.
In March 2018 at SxSW, I met Shelita Burke who left Microsoft as a data scientist and cryptographer to become a full-time musician. As a musician and a cryptographer, she understood the power of blockchain in music rights distribution. Ms. Burke wanted to solve the issue of slow royalty payments in the industry. She created the first generation of musicians to put their music metadata in blockchain. Burke also made her music available via Bitcoin. Payments that came into the Ethereum smart contract would be automatically distributed to her collaborators in a fully transparent environment. Her story can be found here.1
Technically, a musician putting her royalty distribution in a smart contract is no different than a logistics company putting their shipment contract with counterparties in a smart contract. The nature of the problem may be different, but technicalities of how it is solved using blockchain may be similar.
The point here is that cross-pollination between domains about the use of blockchain in solving problems is an invaluable exercise. I learned a lot from talking to the musician, furniture retailer, transportation engineer, and many others. Most importantly, I incorporated those ideas into my own startup and shared them with individuals from other sectors.
Push Back Against Familiarity Bias
During my dozen or so workshops and webinars, I have come across individuals who think blockchain technology will have slower adoption than technologies that they are familiar with, such as automated vehicles and 3D printing. I believe this phenomenon is like familiarity bias, commonly mentioned in investor circles. Investors who are unfamiliar with a technology will underestimate it compared with the ones they are familiar with.
Individuals intimately involved with automated and connected vehicles, who are used to slower adoption of technologies, said that few companies would adopt blockchain, or that it would take a long time to reach that point. Or they question that blockchain will have widespread use in mobility. What they do not know is that open source technology such as blockchain spreads like wildfire.
Technologies such as automated vehicles are at the mercy of a handful of companies, and once they are released they will be heavily regulated by the government, primarily for reasons of public safety. Blockchain technology is not owned by anyone. There are no handful of companies that control the flow of blockchain technology adoption. Nobody owns patents or rights to it. It is largely open source, and I would argue that it has a much bigger development community than automated vehicles.
Calling Out the Saying “Blockchain Is Not Ready”
Any new technology is bound to receive backlash from doubters regarding its potential. A refrain I often hear at conferences is that blockchain, especially public blockchain, is not ready for business because (1) Bitcoin can only do x transactions per second, or TPS, and Ethereum is seven TPS, so it has a scaling problem, (2) We don’t understand cryptocurrency, and (3) the price is too volatile.
I then argue that it is not blockchain that is not ready but businesses that are not ready to use blockchain. Blockchain is extremely efficient in implementing horizontal collaborative models that business entities are not used to. Businesses have long operated as silos with fully centralized data in a controlled environment. Blockchain is best utilized when sharing a ledger or being on a platform where a ledger is shared with other companies. This means revealing information as a trade-off to participate in a collaborative environment to gain new business and efficiency. If companies do not have a business reason to do so, then it is not blockchain’s problem, it is a business problem.
That is one reason for calling out the negative sentiment. The second reason is simpler: Most executives do not have a well-rounded knowledge about blockchain. Hopefully, this book will help. Most executives I have talked with have conflicting information about blockchain’s most efficient use cases, which then circles back to the earlier reason.
Don Quixote Problem of Finding a Problem that Fits the Solution
In July 2018, Forbes author Jose E. Campos wrote an article titled “Blockchain and the Don Quixote de La Mancha Syndrome.”2 In the article, Mr. Campos discussed the fallacy of blockchain evangelists trying to find the perfect problem for a new innovative technology the same way Don Quixote, a fictitious character from the year 1600, did.
Quixote believed that his chivalry would rid the world of wickedness ensuing his insanity and create nonexistent beliefs. Mr. Campos’s argument was whether in the effort to justify blockchain we are creating nonexistent problems and blindly trying to use blockchain to solve them. On the contrary, blockchain should address new opportunities such as the ones we are aware of but that have been difficult to implement. Creating highly liquid peer-to-peer digital assets is one example.
“Do You Need Blockchain?” Is That The Right Question?
In 2017 and 2018, blockchain reached its hype, the price of crypto collapsed, reality set in among entrepreneurs and investors, and the question “do you need blockchain?” became omnipresent. There are numerous flowcharts to determine whether your solution or company needs blockchain or not.3 News articles and blogs contended that in most cases databases are enough and asserted that you don’t need consensus for everything.
The right statement is that I do not need blockchain if I want to run my business the same way I’ve run for the past 20 years, and, for that matter, I do not need any new emerging technology. Do I need AI, IoT, or machine learning? No.
But what if I want to transform my business in the next decade and be competitive, improving my operation significantly. Then, yes, I need to explore blockchain along with other emerging technologies.
Whether you need blockchain or not should not be argued on the basis of the technicalities of blockchain versus spreadsheet or database. The argument should center around the future-proofing of your business. It should be based on whether you want to create new business models and trump your competition.
If a company has a problem that can be solved using blockchain, most likely there are others that can be helped as well. Increasingly, consortiums have become a prevalent way for companies to educate themselves and collaborate to develop blockchain solutions. Becoming part of an alliance is an easy first step to join the blockchain bandwagon moving toward implementation.
_______________
1 E. Blake. October 20, 2017. “How Pop Artist Shelita Burke Uses Data Science and Blockchain To Her Advantage,” Forbes.
2 J.E. Campos. July 26, 2018. “Blockchain and the Don Quixote de La Mancha Syndrome,” Forbes. https://www.forbes.com/sites/forbesbooksauthors/2018/07/26/blockchain-and-the-don-quixote-de-la-mancha-syndrome/#4f1e0f5b4cd6.
3 K. Wust and A. Gervais. August 28, 2018. “Do You Need a Blockchain?”, Proceedings of Crypto Valley Conference on Blockchain Technology. https://eprint.iacr.org/2017/375.pdf.