August 14, 2017
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 leaping in.
I explored this question by comparing blockchain today to the Internet in the early-mid 1990s, which is toughly when the Internet made its own transition from early adopters to mainstream users. My conclusion was that blockchain isn’t fairly ready for this significant 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 mitt, the business environment in two thousand seventeen is fairly 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 hopping 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 determine when and how to best embrace a disruptive fresh technology like blockchain?
Several factors wooed 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 very 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 commenced 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 fresh 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 fresh business models.
Startups were experimenting with many fresh applications, – some of which turned out to be fairly innovative, and some rather ditzy. Part of the whirr in the air was that in the Internet-based fresh 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 rival in the quick moving digital world and were therefore headed for extinction.
Our point of view was fairly 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 fresh Internet capabilities. Any institution, by integrating its existing databases and applications with a web front end, could now reach its customers, employees, suppliers and playmates 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 form of businesses, industries and economies. But, i t wouldn't be a rip-and-replace revolution; it would take place as a series of incremental steps over time.
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 activity 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 entire fresh 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 embark prototyping and experimenting with in months rather than years.
Identically significant 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 playmates across a diversity of industries.
Effective marketing and communications was also essential. Given how fresh 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 multitude 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 brief vignettes .
Established companies cannot possibly rival with startups on concentrate and speed. Instead, they need to figure out how to best integrate the fresh disruptive innovations with their key core assets. This will make it lighter to then embrace the innovation as a way of rejuvenating and converting the company and its various offerings, processes, business models and culture. If decently done, it can be a major competitive advantage over both established competitors and quick 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 violating glass. The initiative must be cautiously 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 treatment turned out to be much more than a technology and strategy switch, – it required a major transformation of the very culture of the company.
Gerstner eyed the Internet as an all-important catalyst for switch. “I determined to announce e-business as our moon-shot, our galvanizing mission, an equivalent of the System/360 for a fresh 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 fresh ground for our own behaviors and operating practices – in other words, culture.”
Do any of these lessons learned apply to blockchain today? There are both differences and similarities. Let me shortly 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 petite, with a few prominent exceptions such as financial services and supply chain management . A latest IBM survey of almost Three,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.
Will blockchain have a profound long-term influence, – like the Internet, – on companies, industries and economies? I think it will, but, it’s too early to tell how big the influence 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 fresh 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 fall under a radical shift, as fresh, blockchain-based sources of influence and control emerge… Individuals, organizations, machines, and algorithms would loosely transact and interact with one another with little friction.”
And, in a latest WEF report , Don and Alex Tapscott wrote: “We are now witnessing the rise of the internet of value. Like the very first generation of the internet, this 2nd generation promises to disrupt business models and convert industries… pulling us into a fresh era of openness, decentralization and global inclusion… However, this extreme 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 effortless reaction. In the end, it all comes down to your leadership aspirations.