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As companies make progress on blockchain technical challenges, new obstacles are emerging—and this time they’re human. Distributed ledgers hold the power to help disparate organizations to finally agree on what’s true. This lays the rails for a new era of interconnected businesses in which organizations in successful networks could cut operational costs and co-create new markets. But for an enterprise blockchain project to truly succeed, its sponsors—often competitors—first need to trust in and execute on a shared vision of change. This is proving to be difficult.
Can Executives Make The Shift?
It’s obvious no one can benefit from doing blockchains alone. But this complete shift in mindset—setting a shared vision with competitors—conflicts with the training given to legions of MBA students and long-held beliefs in management science. Over time, the biggest barrier to execution may come not from the technology itself, but from very human historic rivalry within the ecosystem.
CB Insights’s 2019 blockchain trends report puts it bluntly, “Fostering cooperation between competing organizations remains as challenging as ever . . . in practice, distributed ledgers are collaborative, and competitors don’t generally collaborate.” A McKinsey analysis of 90 use cases identified this “coopetiton paradox” as a key reason true scale is still years away.
Classic MBA training employs analytical tools that focus on competitive threat, such as Porter’s Five Forces. These tools center on the zero-sum game of getting the largest possible share of a fixed economic pie—and ignore the value created by collaboration. Professors Adam Brandenburger and Barry Nalebuff, authors of Co-opetition, call for a new mindset rooted in cooperative game theory. In their view, firms are interdependent, and can work together to generate new value, increasing the pie.
In our digital age, we’ve seen many new kinds of alliances. Travel and hospitality brands have come together to bring more richness to loyalty programs. Apple and Nike have launched joint products. BMW and Toyota collaborate on sustainability research. But the tantalizing blockchain promise that the bigger the network, the bigger the return could take collaboration in completely new directions. Given enough time, blockchains may very well rewrite what drives competitive advantage, with collaboration championing over purist competition.
The World’s Most Powerful Push for the Power of Collaboration
We are seeing a strong signal from some of the world’s most powerful companies that this shift is gathering momentum. FedEx CIO Rob Carter recently shared that “Our greatest realization this past year is that in order for blockchain to be transformative, it will need to be much bigger than us.” DHL’s head of government affairs Eugene Laney said, “Everyone needs to be involved in the process and share as much information as possible.” In the transportation industry, 500 companies have come together to set blockchain standards through The Blockchain in Transport Alliance.
JP Morgan has established an Interbank Information Network that helps over 200 banks to address payments with errors or compliance issues more efficiently. John Hunter, who heads Global Clearing for Treasury Services for the bank explains, “The more banks that join the network, the more dramatic the reduction in payment delays. As the network scales, payments will be processed faster with less operational expense.”
The travel industry is coming together through projects like Winding Tree, in which brands including Lufthansa, Air France KLM, and Nordic Choice Hotels are working on a shared vision to use the technology to cut out billions of dollars of middlemen costs—and share the proceeds with all participants, including the end traveler. Consumer brands including Apple (through supplier Huayou Cobalt), Ford, and VW are working on a shared vision to achieve more ethical mining of cobalt, an element used in batteries and linked to widespread child labor. Maersk and IBM have recruited over 90 major global supply chain players including major port operators, shipping lines, and freight forwarders to join a platform called TradeLens. A who’s who of CPG companies and powerhouse retailers like Walmart are working with IBM on using a blockchain to improve food safety.
A New Kind of Corporate Vulnerability
But here’s the rub. These projects are only as strong as their weakest link. They don’t work unless they have complete and honest information. As Sheila Warren, head of blockchain and DLT for the World Economic Forum says, “On the blockchain, it’s ‘garbage in, garbage forever’. And there are people who will try to game the system and put in garbage information. That’s just a reality.”
This means that for these investments to pay off, competitors need to learn not only how to work together but be willing to expose enough of their inner workings that these ecosystems can truly anticipate how the technology could be gamed, and address it. This is far more intimacy than executives are used to. Will they be willing to take on this new level of corporate vulnerability?
The Uncomfortable Role of Pushing Ahead Of Disruption
Over the last several decades, companies have learned, in the words of FedEx’s Fred Smith, “If you are not operating at the edge of new technologies, you will surely be disrupted.” This means digging into the uncomfortable space of the unknown—and only those with strong motivation will make such a move. Among those companies that have a solid understanding of the technology, there is an increasing collective recognition that it could trigger a shift in business fundamentals. The companies that understand this are motivated to make the break in mindset, yet could find new power in being among the first to set standards for this next era.
For those companies that aren’t in such a position of industry influence, this shift will trigger new challenges. Investing in such a new technology is expensive. Yet hold back investment too long and they risk being locked out of the insider groups that may have a strong influence in shaping their future. The defining moment is approaching quickly, and thoughtful strategic moves are crucial.
We are just starting to see how blockchains represent a major shakeup in the way value is created. There is a long process of relearning ahead as blockchain-era business models begin to emerge. Over time, we may find more MBA programs exploring a new question: “ When collaboration is the new competition, what then drives competitive advantage? ”
May 23, 2019 at 12:34PM
Forbes – Entrepreneurs