What does riding an Uber and blockchain networks have in common? One word — trust. For business models founded on peer-to-peer exchange like AirBnB and Uber, the idea of relying on strangers in such an intimate way — allowing people you have never met into your home, jumping into a stranger’s car and letting them drive you — requires enormous trust. Building such a successful ecosystem that operates on trust at all levels is a deliberate choice and requires design by intention.
Similarly, businesses coming together to form blockchain industry networks need to trust that the value driven by working with partners and competitors will outweigh the initial hurdles that come with sharing data, insights, business partners and operational processes.
As investments grow in distributed ledger technologies, companies should turn a more vigilant eye to the way they structure their business models to allow blockchain enabled efficiencies to flourish. The recently launched blockchain study from the IBM Institute for Business Value delves into the various critical considerations while setting up blockchain-based business models. One such option is the blockchain utility network, which calls for industry players to establish trust between each other and other industry partners in order to garner value through network effects — teamwork that drives increasing value for its players as the network grows.
An example of such a network effect can be seen in the TradeLens blockchain-enabled shipping network. Network effects gained from the influence of partners like Maersk and IBM are sustainable not only because of the existing trust established between each party, but also because of blockchain’s ability to easily accommodate for scaling. Since its inception, the TradeLens network has grown to more than 100 partners, including over 40 shippers, 8 government authorities, and nearly 50 ports and terminal operators. According to the more than 12,000 executives surveyed in our Global C-suite study, “…about one-third of organizations are reallocating massive amounts of capital — an estimated USD 1.2 trillion — to launch new platform business models.”
These large investments into platform-based business models are just an example of how the market has, and continues to, shift towards a more democratic way of conducting business. In part, this new mentality has also pushed the need for new blockchain business models to the forefront.
A business case is worth a thousand words (and more)
With increasing interest from businesses to leverage blockchain in their business models, a struggle has emerged in identifying a strategy for bringing together established business processes and a technology that requires thoughtful design and implementation. The success of these blockchain ventures is now more dependent on the business use case established, as this sets a precedent for the network’s advancement. As a part of this growth strategy, for industry utility-based blockchain networks, a crucial aspect of developing and retaining value is through well-planned collaboration with industry players.
Not only is the influence and “pull” of these players necessary for success, the governance of these interactions is what eventually determines the viability of the network. To this end, the trust established between all parties on the network must be carefully nurtured. As we’ve emphasized in our recent study, though the cost of this governance accounts for only 20 percent of an average cost model for blockchain networks, this work not only manages the existing working group but also expands to its partnerships and shapes the future of the network.
Trust in the time of smart contracts
Paradoxically, the use of blockchain almost vanishes the need for trusting exchange partners in some cases — as the work of smart contracts and the general transparency in the process stresses accountability — yet a sustainable network will require greater reliance between players. Given the early stage of many such blockchain based industry utility networks, the extent to which these networks will effect changes in the market and even the exact nature of the transformation is hard to elaborate.
Investment from key industry players, such as Walmart who has already begun to experiment with an industry utilities network, will be best served in the form of trust and time. Only as these networks strengthen and mature will sustainable value be garnered.
Once you decide blockchain makes sense for your problem in your industry, then the next logical step is to gather your allies and set up your network. Learn more about all the steps involved in this network by design discussed in our latest blockchain study.
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