Blockchain ecosystem business model: Is it the big rock barreling toward your castle wall?

[raphaeldavison]

With blockchain technology comes new ecosystem business models. Find out how integrating with partners, competitors and customers quickly and repeatedly can help your business.

One of the consequences of new technology is its ability to break down barriers and fundamentally change the competitive landscape. We saw this literally in the 13th century when the traction trebuchet crumbled castle walls that stood for centuries. We saw it figuratively in the late 20th century when the internet made globally integrating your enterprise a business imperative.

Today, we see a new business imperative emerging: the ecosystem business model enabled by blockchain technology. This new model is characterized by the ability to tightly integrate and disintegrate customer by customer (and even transaction by transaction) customers, partners and competitors into a symbiotic community focused on specific business outcomes. The ability to do this in a hybrid operating model from edge to cloud—to change it at will and to do it rapidly and repeatedly with full visibility throughout the ecosystem—is the new trebuchet aimed right at the walls of vertically integrated global enterprises.

The new trebuchet is called blockchain and the stone barreling toward your business is a new ecosystem business model.

In 1937, Ronald Coase published his article on “The Nature of the Firm.” In it, he offered an economic explanation of the factors firms consider when deciding whether to produce something themselves versus obtaining it from the market. Over the decades since its publication, technology has exerted growing influence on these decisions.

Now, we have blockchain technology enabling groups of firms, individuals and others to quickly form into a consortium, on a global scale, with a shared version of the truth based on a common set of facts. How does this change the “nature of the firm?”  Let me share with you a conversation I had over drinks with an innovator, who also happens to be a medical doctor. He got it in about two minutes.

From the managed healthcare point of view

This doctor works for one of the largest American integrated managed care consortiums in the United States with well over 11 million health plan members, 200,000+ employees and more than 70 billion dollars in revenue operating over a vast geography. The whole approach is preventative care addressing questions like: How do you provide care across the life-span of 11+ million members over a vast region?  What services should you deliver yourself? What should you obtain from the market? How do you build this consortium and at what cost? 

From an IT perspective, the managed care consortium has placed its bets. To date, it’s invested tens of billions of dollars in systems of record, systems of engagement, normalized data systems, supply chain, ERP and other integration systems. When you think about barriers to entry, big castle walls of integrated systems all designed to create a shared truth enabling lifetime care and market domination, it doesn’t get much more formidable than this! That is until you hurl an ecosystem business model at it which is exactly the conclusion my doctor friend arrived upon.

His thinking is this: There are a lot of other providers out there and it takes a lot of time and money to integrate them into the consortium’s huge IT infrastructure. If you can rapidly and cheaply integrate partners, competitors, partners and patients into an ecosystem business model, you have an advantage. You can bring to market new providers and services faster and cheaper. You might not go head-to-head but you certainly can start chipping away and establishing a position for yourself.  

Looking across industries with an eye toward supply chain ecosystem

This threat is evident across multiple industries. Supply chain is one of the most popular blockchain use cases. Imagine the advantage vendors have if their supply chain ecosystem can quickly add new suppliers, customers and vendors. Take that flexibility, add real-time visibility throughout the chain, plus a trade finance system to lubricate the whole process, and you have a competitive advantage, lower costs, tighter integration and happier customers.

This is not only exciting but also getting closer to doable with every new supply chain proof-of-concept. In financial services, for example, the value of blockchain and its ability to disrupt existing business models has been recognized for years. This industry leads in blockchain investment, billions of dollars spent globally by some estimates. Venture capitalists and banks have allocated 40% of all financial technology (fintech) investments into blockchain startups. 

When it comes to blockchain, the future is unpredictable—and exciting

Now for the standard disclaimer: blockchain technology is still in its infancy. No one knows if the current set of blockchain platforms used for almost 80% of all proof-of-concept deployments (Ethereum, Hyperledger and r3 Corda) will be the go-to platforms in the future or whether something new will come along. This uncertainty—along with still-being-defined regulatory requirements plus the fact that there isn’t a library of production-grade, ready-to-deploy blockchain apps out there—makes the future as unpredictable as it is exciting. 

We were taught back in business school that technology strategy follows business strategy and that is still true. What’s also true is technology has never moved so quickly or exerted such an influence over how businesses compete. I wasn’t around when the telephone replaced the telegraph, but I certainly was back in the early 1990s, as a CIO of a global strategic consulting firm, when this new thing called “the web” was born. Back then, being a globally integrated enterprise leveraging global sourcing was unique and unproven. Now, with the internet, it’s the defacto model for every startup you’ll meet. Today, 25 years later, the most exciting blockchain work is around consortia and how it can change the way we compete and do business. 

Things evolve. We see a lot of energy out there in blockchain. New consortia are forming, failing and reforming. Blockchain technology is coming faster than ever, and business models need to break down and reform as part as business-as-usual.

So, I’ll ask again, is that big rock barreling towards your castle walls a threat or an opportunity?