Unlocking The ValueOf BlockchainAnubha Dixit

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Anubha Dixit

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Abstract

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Blockchain’s current position on the technology S curve makes this the right time to make investments and innovate around this technology. There is a common consensus emerging that Blockchain is about five to ten years away from maturing and mass deployment. This makes ‘Now’ an ideal time for technology organizations to invest in making a firm and determined innovation based entry into the nascent blockchain market. Combining their data driven use cases with Blockchain’s known advantages like immutability, distributed architecture, concurrency and security, the early movers stand to reap exponential benefits as the technology matures. Integrated TMO (Technology, Market and Organizatioapproach stands out as a structural framework of choice to making an entry into the Blockchain market. A well thought through strategy execution around Blockchain technology will not only help organizations establish leadership position in the nascent Blockchain market but will also help them develop capabilities for the future.

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Introduc�onAchieving ambidexterity is the key to long term, sustainable compe��ve advantage for organiza�ons. As technology con�nues to evolve at breath taking pace, it is cri�cal for organiza�ons to secure a balance between their ‘explore’ and ‘exploit’ ini�a�ves to remain relevant in the market. Blockchain, s�ll in its infancy, promises to revolu�onize the way organiza�on and individuals’ access, consume and interacwith data just as cloud has revolu�onized the way data is stored. Blockchain driven ambidexterity is an exci�ng channel for data driven organiza�ons to innovate in adjacent technologies and markets.

Blockchain as a technology disrupter Managing data in a secure, prac�cal and yet easy, flexible way has been a holy grail for businesses through the ages. The advent of internet, ecommerce and social media has exponen�ally increased the availability of data. If mined and u�lized efficiently, this could provide las�ng compe��ve advantage to organiza�ons. From be�er understanding one’s customer to making secure transac�ons, streamlining processes and minimizing fraud, the use cases for data driven efficient business are plenty. Effec�ve u�liza�on of available data (or ‘big data’ as we now know it) is the solu�on all organiza�ons are striving to master. As technology progresses and more devices connect with each other (Internet of Things - IoT) both the complexity of data and the need for managing it efficiently will only increase.

In its simplest form Blockchain is a distributed ledger technology that enables valida�on, clearance se�lement, tracking and recording of ownership of assets as they are traded without the need of centralized authority (Finance, 2016). First developed by group of unknown developers as a technology to promote digital currency (Bitcoin) Blockchain has today generated interests in a minefield of applica�ons. Some of the dis�nguishing features of Blockchain technology are that the transac�ons happening using Blockchain are incorrup�ble, immutable, durable and robust. This makes transac�ons transparent, secure and automated. The technology can be adapted to a wide range of applica�ons including, but not limited to, transfer of digital assets, supply chain, securi�es transac�on, smart contracts, so�ware royal�es and licenses, smart payments and IoT. This covers industries as wide ranging as finance, government, communica�ons, pharma, hi tech and resources. As use cases for Blockchain technology mul�ply, Forbes forecast that the global Blockchain market will grow to over 60 Billion Dollars by 2024(Forbes.com, 2018). Even as new genera�on companies rush to embrace Blockchain, according to

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Deloi�e research 74% of tradi�onal businesses can envision prac�cal use cases with Blockchain (Forbes.com, 2018). This demonstrates the universal appeal of the technology as well as its mone�za�on poten�al.

In many ways Blockchain technology seems to follow a trend similar to the one developed by Paul Geroski in his book “The Evolution of New Markets”. Blockchain is in the same con�nuum of internet and computer industries as studied by Geroski when he laid out his three key observa�ons (Medium, 2017):

1. “Haphazard and varied development of the initial group of products or services.

2. Killer apps that emerge from a large variety of competing products.

3. A slow development of the market followed by a breakout and then a rapid uptake of technology.”

As Blockchain has incubated over the last decade, there are signs of all three hypothesis playing out in the journey so far. Like many of its not so distant technology cousins like mobile phones, personal computers, social media, Blockchain seems to be following the technology S-Curve which is characterized by slow growth- ‘wai�ng phase’ followed by an explosive ‘takeoff’ phase and finally slowing down to ‘levelling-off’. The players taking the journey along this S-Curve can be classified into innovators (BitCoin), early adopters (other cryptocurrencies), early majority (IBM, So�bank, consultancies, system integra�on providers consor�ums). The technology is yet to be embraced by late majority and laggards. In a different take on Geroski S-Curve, recent Gartner report on hype cycle of emerging technologies posi�on Blockchain as having just entered the trough of disillusionment as per Gartner’s hype cycle metrics.

Source (Bitcoin News, 2018)

Mirrored with Geroski S-Curve, Gartner’s ‘trough of disillusionment’ places Blockchain in the third phase of technology life cycle where producers of technology either shakeout or fail and investments con�nue based on improvements on exis�ng technology. In the same report Gartner es�mate Blockchain to

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achieve maturity level within the next ten years. The above trends and findings confirm two hypotheses about Blockchain:

1. Blockchain has passed the ini�al euphoria and there are tangible benefits now visible from adop�on of the technology.

2. With the early adopters being shaken out and technology maturing this is now the right �me to make investments into Blockchain technology with an eye on reaping the benefits within the next 5 to 10 years.

Blockchain led innova�on Organiza�ons making an aggressive, determined, innova�on led foray into the data driven industry segments through next genera�on Blockchain pillared offerings stand to gain from Blockchain’s current posi�oning on technology S-curve. Given the current state, an integrated Technology-Market-Organiza�on (TMO) play with a specific strategy aimed at each of the three TMO pillars could be the right approach in Blockchain market. Further a hybrid open/closed innova�on model to accelerate development of product and service offerings around Blockchain could help organiza�ons leverage the full poten�al of the technology.

Integrated TMO model

Dynamic TMO framework is best suited to be applied in the case of defini�ve Blockchain push in technology organiza�ons. While applying the dynamic TMO model, it is important to observe that, for innova�on to have the deepest impact it will need to happen at a pla�orm level rather than individual product or component or business unit level. This is similar to new genera�on firms like Apple who have gained immensely by crea�ng pla�orms that they control. In looking at technology, organiza�on and markets holis�cally, organiza�ons should strive to get to the right intersec�on as defined by their own organiza�onal boundary based on iden�ty.

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Technology

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On the technology front, organiza�ons should develop their own innova�on approach drawing from the strengths offered by exis�ng Open Innova�on and Closed Innova�on models. Idea genera�on and ini�al incuba�on should be promoted through open innova�on by invi�ng specialized data driven bodies, universi�es associa�ons and special user groups. An example of this is the Hyperledger consor�um. Open Innova�on should be leveraged and ins�tu�onalized within the organiza�on so that all businesses get access and inputs from the work happening within the consor�um. Even as idea genera�on happens within the open innova�on boundary, the dominant ideas that require specific investment decisions need to be followed through on Closed Innova�on channel within the firm. This is to ensure organiza�ons focus on their industry segment as well as to retain compe��ve advantage. The process of selec�ng ideas from Open Innova�on pool to investment driven Closed Innova�on channel should follow a ‘act fast t’ approach similar to IDEO’s “Three “R’s” : “Rough, Rapid Right” and “Enlightened Trial and Error” (Albany.edu, 2018) approach.

-based approach. To provide it more focus,

oed approach focused only

Using IBM innova�on jams as a model and as customized and deployed by Siemens, organiza�ons should develop their own innova�on jams through a web pla�ormBlockchain should be the specific topic on which innova�on ideas should be solicited. These jams will enable users from different func�ons and product lines to come out of their silon their current responsibility. Over a defined short period of �me (one to two weeks) par�cipants could submit posts on a given blockchain idea from where streams of conversa�on would emerge as users generate tags that characterize discussion and ideas. Siemens successfully deployed this model by crea�ng an open innova�on group within the organiza�on and crea�ng a pla�orm TechnoWeb 2.0 to help channelize ideas (Lakhani et al, 2015).

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Market In many ways, Blockchain shows characteris�cs of a nascent market despite being around for almost a decade through cryptocurrencies. Like in all nascent markets Blockchain today has undefined industry structure (Eisenhardt, 1989a; Rindova & Fombrun, 2001), unclear or missing product defini�ons (Hargadon & Douglas, 2001) and a lack of dominant logic (Kaplan & Tripsas, 2008; Porac, Ventresca, & Mishina, 2002) to guide ac�ons (Santos and Eisenhardt, 2009). The most important, and perhaps differen�a�ng, characteris�c of nascent markets is the ambiguity that prevails in such markets. Because of the absence of ins�tu�onalized pa�erns, it is o�en difficult to get clarity of vision and implica�ons of events or situa�ons. New firms entering the blockchain space further compound the problems related to nascent markets. These are o�en accompanied by fluid structure and business models. This makes it important for organiza�ons to start by laying out the organiza�onal boundary around their approach to Blockchain. Organiza�ons should thus follow an iden�ty-based approach to defining their boundary in blockchain space.

Organiza�ons foray into the Blockchain market should be a well thought through claiming demarca�ng and controlling CDC framework. The iden�ty mechanism illustrated by Eisenhardt and Santos (2009) to claim the market: adopt templates, signal leadership and disseminate stories could be u�lized in Blockchain context by organiza�ons to claim this nascent market. To begin with, even as an organiza�on invest in their pilot blockchain products and offerings, their front end teams should start using well known cogni�ve models from other adjacent domains to convey organiza�on’s unique iden�ty in Blockchain. These iden�ty building could be through easily understandable terms like ‘block factory’ or ‘data vault’. At the same �me execu�ves could start communica�ng to the market in a way that signals organiza�on undisputed leadership posi�on in Blockchain. For example, an organiza�on could promote best prac�ces for inpu�ng data in Blockchain enabled systems and gain visibility through forums and conferences. Finally, organiza�ons could invest a part of their promo�on budgets in dissemina�ng stories about their

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Blockchain leadership. This could be done through organizing ceremonies for introducing Blockchain enabled products and services.

As claiming establishes cogni�ve presence, organiza�ons should also focus on demarca�ng blockchain market to achieve compe��ve dominance. Controlling the nascent Blockchain market will require organiza�ons to build their own barriers to entry while increasing its own coverage. One controlling mechanism to be u�lized in blockchain market could be organiza�ons exercising so� power to subtly influence the market and its players. The form of illusion based so� power helps create a leadership image which will be helpful for organiza�on foray into the nascent blockchain market. A consolidated approach to claiming demarca�ng and controlling along with a clear defini�on of organiza�onal boundary will help organiza�ons create a unique posi�oning in the nascent blockchain market.

Organiza�on At the organiza�on level, foray into Blockchain area will need to be a well thought thorough strategic decision rather than a tac�cal play. The resul�ng innova�on model will need to be aligned to the strategy as against being rou�ne innova�on which can some�mes be myopic and short term. Given the current status of Blockchain in technology S-Curve the organiza�on structure required to focus on this area will need to be sustainable over a period of five to ten years to be able to reap benefits from investments made today. An approach that could work in this context would be forma�on of two separate and dis�nct en��es to focus on exploit and explore streams. Ge�ng the right balance between the two streams will help organiza�ons achieve ambidexterity between their current strategy while making a determined and aggressive claim to the market in Blockchain space. The figure below provides a proposed organiza�onal setup to help get to ambidexterity.

On the exploit track, organiza�ons should provide momentum to their exis�ng ac�vi�es through ‘Strategy as Diligence’. Organiza�ons should ac�vely seek to share ac�vi�es and resources between their various divisions as well as new business acquired. Due to the dynamic nature of technology industry, where

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so�ware products con�nuously become commodi�es, organiza�on differen�a�on on the exploit side lies in its ability to harmoniously bring together ac�vi�es that seems mundane and simple but, when taken together, forms a protec�ve wall against imita�on and makes the underlying capabili�es rare. This form of mundane excellence developed over diligence-based strategy is natural choice for organiza�ons differen�a�ng on customer experience. In such a strategy mundane, everyday ac�vi�es, like agile standups, will form the central focus in developing las�ng compe��ve advantage.

Even as organiza�ons pursue their strategy on the exploit front, there needs to be a separate and dis�nct focus on defining and execu�ng their strategy on the explore side. The underlying organiza�on structure needed to drive this kind of explore approach [as described in the proposed organiza�on chart] requires a long-term commitment from senior leadership of the firm along with autonomy and supported by dedicated budgets. Building a separate explore business unit under the CTO and headed by a Chief Innova�on Officer could we one possible approach to bring this focus. Within this mandate, innova�on around Blockchain [refer to hybrid model proposed earlier] should be split between Open Innova�on Unit and Closed Innova�on Unit. The Open Innova�on Unit liase with external en��es, developer community and alliances to bring in new ideas whereas the Closed Innova�on Unit focuses on current capabili�es. In addi�on to a closed coordina�on between Open and Closed Innova�on Units, there should be a commi�ee comprising of the group CEO, CTO, CFO and other leaders that would meet rou�nely to filter ideas from open innova�on to closed innova�on units. The explore unit should be given a mandate and a target to hit the market with a blockchain product in a year. This will give a tangible proof to the market of the organiza�on interests in playing in this field beyond just R&D based press releases. The approach here should be to get a product out that is ‘good enough’ rather than ‘perfect’.

Strategy execu�on for blockchain explore unit The most important guiding principle for pursuing innova�on led approach needs to be its value crea�on poten�al for customers. Choosing the value that innova�on will create, and then s�cking to that choice, is cri�cal because the capabili�es required for the future will take �me to accumulate. A parallel line can be drawn to Bell labs’ approach which was guided by the strategy to improve and develop capabili�es and reliability of phone network. In the process of the journey with this strategic vision, Bell labs created mul�ple breakthrough innova�ons from telephone exchange switch to photo-vol�c cell and the laser (Pisano, 2015).

Innova�on is o�en confused, and used interchangeably, with technology innova�on. In order to build las�ng differen�a�on in blockchain field where mul�ple players are inves�ng heavily in technology and product innova�on, it is recommended that organiza�ons pursue their strategy and create their value through ‘Business Model Innova�on”. This will not only take an organiza�on in the underu�lized source of future value but will also make it difficult for compe�tors to replicate or imitate an en�re ac�vity system when compared to a single product or process (MIT Sloan Management Review, 2012). A disrup�ve innova�on approach to complement the business model innova�on as it will also challenge and disrupt the business models of other companies. For example, the Google experience with its Android opera�ng system for mobile devices has disrupted the en�re industry not so much because it is a radically different technology but because the business model around this pla�orm is different and disrup�ve. This has posed a serious challenge to established players like Apple and Microso� by crea�ng a new ecosystem with new rules of the game (Pisano, 2015). The explora�on of a disrup�ve business model crea�on in blockchain technology promises to be a differen�ator.

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Key Considera�ons To be able to get real and tangible benefits out of an evolving technology it is important to embrace it with a long-term strategic view. Blockchain technology will not bring immediate revenues or profits as the market and ecosystem around this technology are s�ll evolving. Further the innova�on model to be pursued around Blockchain needs to have an autonomous and fairly independent existence for it to yield the necessary results. The technology is not at a stage where it can be naturally embedded into each product or project and requires a dedicated and defini�ve approach for organiza�ons to be able to mone�ze it in the medium to long term. Several aspects of Blockchain s�ll remain unclear at the business model end and the risks related to the unknown and ambiguous nature of the market require that organiza�ons take a milestone-based approach to developing products and services around the technology.

Blockchain should not be looked upon as a mere technology ini�a�ve but rather a new way of doing business. The absence of immediate gains for non-technical func�ons need to be balanced with monitory and non-monitory incen�ves for all func�ons to embrace and propagate this technology.

Finally, going a�er the Blockchain technology-based market requires a change at organiza�onal level. Change management is o�en a tricky area and it works best only when driven top down. For Blockchain to become successful it needs to have the support, buy in and long-term commitment from senior leadership which then needs to be dissipated within the en�re organiza�on.

Conclusion Not since the advent of Internet has a single technology shown such promise and wide-ranging applica�ons as Blockchain. This is a market full of ambiguity and yet opportuni�es. Blockchains current posi�on on technology S-Curve makes it an ideal candidate for organiza�ons to claim, demarcate and control this nascent market. Blockchain provides a unique opportunity for organiza�ons to leapfrog the industry and its compe�tors through a well thought innova�on-based strategy formula�on and execu�on. Las�ng compe��ve advantage for any technology organiza�on will come from differen�a�ng itself from its compe�tors and making it difficult for them to imitate or duplicate its offerings. The technology also offers a pla�orm for technology organiza�on to build its long-term capabili�es and exper�se that would then be u�lized in markets of the future.

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