In some regions it’s even higher. An immigrant sending money to family in Africa will work over nine days out of every hundred, just to pay these fees. Meanwhile, the financial institutions that are digitally moving this transaction do so at a compute cost that is roughly equivalent to sending an email. In contrast, the blockchain can send bitcoin across the world within minutes and for nominal cost. But the user experience of buying, sending, and safeguarding bitcoin is still poor. Many users, even those without great resources, are likely to pay a little more for services that facilitate this in a way they value.
The Sharing Economy, Everywhere
We’ve seen the creation of new value almost out of thin air with the advent of the sharing economy. And now, blockchains have the capability to overcome obstacles that have held back the sharing economy from achieving wholesale transformation of the way we purchase goods and services. What we saw with rides and rooms could jump to drones and drills, art and umbrellas.
To safely share a hard good between strangers, it would need to be documented, proven authentic, valued, located, and even insured. With blockchains, an item, say a power drill (of which there are some 80 million sitting in garages and sheds), could theoretically be registered upon purchase from the manufacturer, and with microchips, tracked through its entire lifecycle. Sensors could assess its condition and need for maintenance, and a value could be assigned to it that reflects the shape it’s in. The person who bought it could rent it out to others, with a micro-insurance policy protecting both parties involved. This model could be applied to most of our physical goods. And blockchain entrepreneurs like Australian ShareRing, German Fainin, and United States–based Origin, among others, are all working to enable this future.
What happens to Black & Decker when a single drill can be used by everyone on your block, and what should Black & Decker do about it?
We can get some pre-blockchain inspiration from the auto manufacturing industry. There is a great crisis afoot for these companies: people aren’t buying cars like they used to. Millennials, especially, value access over ownership. A single car, when shared through a service like Zipcar or divided into single-ride portions like Uber, can serve a dozen people a day, and many urban areas offer shared scooters and bikes. Automotive brands, facing a threat to their core business model, have been racing to offer subscription services of their own or wrap value-added services into a purchase. You can now subscribe monthly from brands ranging from Ford to BMW. You get a complete hassle-free bundle: a car, insurance, maintenance, and even swaps so you can have an SUV for a family road trip, or a convertible for a day at the beach. This addition of new services—services that are well tuned to customer needs—can completely change a consumer’s perception of value.
We May End Up Somewhere in the Middle
The models that become sustainable long term—those that strike the unblocked customer as just the right balance of value and cost—may be those that land somewhere in the middle. At one extreme, you can buy a car via a traditional model, with layers of baked-in costs from every party who sourced the materials, created the components, assembled them, got the finished car to the dealer, or was involved in selling and financing it. At another, you could participate in a completely decentralized car ride service in which drivers and riders deal directly with each other (without Uber or Lyft extracting fees for sitting in the middle) and payments are made without a financial intermediary of any kind. Especially over the next decade as user experience moves through its current awkward adolescence, many customers will value the handholding and services offered by a middleman, and willingly pay a price for it—just less than before.
Ethereum cofounder and blockchain luminary Vitalik Buterin has emphasized that it’s not that the intermediary will be removed, but that the role will change. “I recommend crypto discourse changes emphasis from ‘eliminating the middlemen’ to some combination of ‘shackling the middlemen’ and ‘making the market for middlemen more competitive,’” he said.68
The question then becomes: how can you become a middleman with a sustainable competitive advantage, even as the world shifts around you?
The Next-Gen Middleman
Models for more evolved middlemen are connected by the same principle: a shift to a more collaborative relationship between business and customer. Shared economy analysts and entrepreneurs have called this idea “platform cooperativism”; that is, all users qualify as both contributors and shareholders of the platforms to which they contribute. In the extreme case—and blockchains can facilitate this—there is no intermediary operator and the value produced is distributed equally among all who have contributed. But across many industries and regions, and until truly decentralized models have matured, we will see the emergence of an evolved, next gen-middleman—one who is more dialed into what their customer needs and desires, and proactively provides greatly treasured value to these customers.
Evolved middlemen models are connected by the same principle: a shift to a more collaborative relationship between business and customer.
The Importance of Clear Value
As this blockchain-driven shift begins to destabilize markets, businesses must not only find new forms of value, but also put more focus on educating customers on the value they provide, whether it is blockchain-driven or not. Across the business, from marketing to customer service to digital experience, professionals will need to be more attuned to how they are communicating their company’s value to customers.
Businesses must not only find new forms of value, but also put more focus on educating customers on the value they provide.
This impact could be felt no matter the business or customer type. Internet retailers may need to prove they can prevent counterfeit items from entering their ecosystem. Social media players may need to show they can protect your data. Advertising networks may need to demonstrate they can prevent fraud. Travel intermediaries may need to prove they are more effective distribution channels than hotels and airlines could be on their own.
The Value of an Ecosystem
Business in the blockchain future is made more valuable through partnership. The blockchain facilitates businesses working together and creating or exchanging value among them. Value can be found in understanding not only how your business can deliver to the needs and desires of a customer, but also how you can nurture an ecosystem that together can provide more value to these customers. As in the non-blockchain automotive example described earlier, a bundling of services, for example, can provide a differentiated and highly valued offering.
Visionary and engaging, Jessica Groopman is an industry analyst and founding partner at research firm Kaleido Insights. With a perspective informed by an earlier career in academic anthropological fieldwork, she specializes at the intersection of consumer-side IoT, AI, and blockchains, and has been named one of the most influential thought leaders in IoT. We recently sat down together to compare perspectives on the evolution of the space.
“I’ve been thinking a lot about how blockchains could change the shape of the entire customer journey,” Jessica said. “It’s no longer linear—they could impact the whole experience of selecting, buying, and owning a product. Ecosystem-based business models are hard to do today, because there aren’t shared ways of processing an entire experience. But with a blockchain and IoT technology, a washing machine, for example, could send out the notification that it has broken, triggering smart contracts that automatically arrange for services like support, repair, insurance, and even the reconciliation of payments. There could even be decentralized ways of rating product experiences, and activating loyalty and rewards.” But, she said, in a decentralized world, “someone will still need to be responsible if something goes wrong.”
Put a Spotlight on Hidden Value
There are many forms of value that businesses have not traditionally emphasized in their communication to customers. As decentralized alternatives enter the market, incumbents (at least those that aren’t read
y to change their model) will need to work harder to articulate the uniquely differentiated value they provide. Helping a customer understand how they benefit from the investments a business has made, when messaged appropriately, can help the unblocked customer assign more value to a middleman.
One key is to look for those forms of value that are, at least in the early stages of this revolution, best delivered by a centralized organization versus a decentralized network of users. Decentralized systems use rule-based governance and often voting to make decisions. There is a lot of work to be done in developing decentralized governance, and we will learn a lot about what is most effective in the years to come. But until there are great advancements in this practice, some initiatives will continue to be challenging to fund and manage by crowd. These could include:
User experience
Good digital products require exceptional design and user experience, which is expensive and difficult to do right, at least at the level required to encourage mass adoption.
Regulatory compliance
Lawyers and lobbies are expensive and often require centralized effort that will likely be difficult for most decentralized entities, at least until they become collectively more powerful.
Customer service
Some forms of crowd customer service work (like answering support questions), while some are much better when centralized (handling administrative-level issues).
Customer journey
We are a long way from governance models that can effectively manage end-to-end customer experience without a clear line of responsibility.
The value of these services can feel esoteric to customers. Marketing needs to find a way to communicate differently to help customers understand the value they are getting from centralized investments like these. But marketing can only bring visibility to value that exists within; delivering to the unblocked customer’s expectations will require the coordinated effort of an entire organization.
Cautions and Considerations
As customers become more sophisticated at scrutinizing value, new threats and opportunities arise. While some of these cautions and considerations are very future-focused, they are meant to provoke your thinking about what could come. This is by no means an exhaustive list, but simply additional food for thought as you prepare for this new paradigm. We can expect that these will change as the space evolves.
Cautions
Sharing economy chokes your business model
Understand your risk by carefully evaluating what kind of models, once widely adopted, could impact your business. Study not only these models and the players who are launching companies that embody them, but also how customers like yours are responding. Evaluate what it would be like if you were to get in front of potential competitors by introducing your own service, and run the analysis to understand how it would impact your business.
Competitors give middlemen the boot before you do
If a competitor were to aggressively adopt new models in their partner and supplier ecosystem, it could significantly reduce their friction and cost structure. They may pass these savings on to customers, undercutting your prices, or invest them in new services that differentiate their offering. Map your ecosystem to identify the middlemen whose elimination would most impact your business (these are the ones with high costs + high potential for blockchain-driven replacement). Use this exercise to focus your study of the market. As viable options emerge, be proactive about studying the cost and benefit of moving to a new model, and experiment with pilots for applied learning.
Executives don’t think they have responsibility for the customer
In the best organizations, every executive knows they have a role in how customers measure your value. But most organizations have varying levels of alignment around this customer-centric idea. In a blockchain world, divisions such as product, engineering, supply chain, service, and marketing will need to work together more than ever to find ways to bring customers more value. And the drumbeat needs to begin from the top.
Considerations
Get closer to what customers value
It’s hard to imagine a book that offers advice about customers that doesn’t advise you to get closer to them. The twist here is to get a better understanding of what customers truly, deeply value and what they don’t. And this applies not only to what you provide, but also what happens upstream and downstream of your interaction with them. Why are they coming to you today? What alternatives are they passing up? What do they do with your product once they get home? How does it fail, and when does it work? What services do they use that could be complementary to what you provide? What skill sets do they develop by using your product or service that they could monetize if they had a platform? Exploring questions like these can help trigger ideas to bring your customers more value—or to remove the cost associated with something they don’t.
Start marketing the value of what you are already providing
Start now to more clearly demonstrate the value of what you are already providing to your customers. Use research to better understand how they perceive value that you may not be fully aware of, and how they speak to it. Find appropriate ways to market this, and work harder across all customer touchpoints to prove the value of the relationship you already have, and develop feedback loops to tap into any shifts as they happen.
Line up a network of like-minded partners
Value can be found outside the walls of your organization. Well-managed collaborations can return more than the sum of their parts. Start by finding potential partners whose customers intersect with yours—those who share the belief that collaboration could pave a better path in a business process. Figure out which are aligned with you in a mission to bring more value to customers. Focus on key questions that you both face, and work together to research the blockchain landscape.
Seek a lower-friction place to learn
If you map your ecosystem of middlemen as described in the “Cautions” section, you’ll have a sense of where to start cutting costs. Find one area, even if it is small, to start and use that as a launchpad for gaining knowledge, while building a case for impact. For example, one area that could offer a strong business case for change is your advertising budget. Blockchains offer intriguing potential to fight ad fraud, from click farms to bots (projected to reach $19 billion in 2018).69 Start by quantifying your costs today so you can assess if it makes sense to focus resources on getting involved early with consortiums and the teams building startups in this space, and exploring pilots.
Examples
Talented and well-funded teams are attacking intermediaries across every industry. I could fill a whole book with stories of teams that are building alternatives to today’s middlemen, but here’s a glimpse of just some of the entrepreneurs and pioneers that are working to bring this dimension of the decentralized future to the world. Time will tell if they will work out in the long run, but right now, here are a few projects chosen to whet your appetite for what’s to come.
Decent: Affordable Health Insurance for All
I first met Nick Soman at a health care blockchain event in early 2018. He told me, with clear enthusiasm, that he was working on something stealth—and important. We stayed connected, and a few months later I learned just how important it was. Nick is taking on the mission to do nothing short of making health care affordable, for all.
Nick sat down with me to explain the core problem his company, Decent (a clever play on words), seeks to fix. Today, health insurance companies can keep up to 20 cents out of every dollar earned from premiums for administrative costs and profit. “This means,” said Nick, “as long as they can pass costs on to members, these companies actually make more money when costs go up. Hospitals are paid to do things to patients, not for them.” Nick grew up in a home in which this topic was frequent dinner table conversation. His father, who became the Chief Medical Executive of an award-winning, 600,000-member health cooperative after decades as a pra
cticing doctor, would say, “If future anthropologists study the US health care system, they’ll conclude that its purpose was to create reimbursable events.”
Nick and his team believe that middlemen with misaligned incentives are at the heart of the problem, and see in blockchains a path to fix this and deliver more value to patients. “Decent will align our incentives around quality affordable care,” he said. “Businesses supporting a patient’s care will only be healthy when patients are. The system will reward choices that lead to better health. We’ll all have a financial stake in our own health, and perhaps in the system itself.”
Nick’s vision goes far beyond his company. While Decent will build what is essentially a modern health care co-op, they also want to make the protocol open and decentralized, so others can more easily build health care co-ops that also remove unnecessary middlemen, boost transparency, and reduce waste.
Unblocked Page 10