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November 9, 2018

Business Rationale for "Paper Boat" Projects in Blockchain

(Blueprint for a Decentralized Future)

I often find myself in conversation with prospective clients about potential engagement opportunities that I call- "Paper Boat Trials", aimed towards testing the waters before diving. Notably, these prospects haven't necessarily graduated from the "Blockchain tourism" phase but they have certainly become more discerning travelers. That is to say- they now have a fair understanding of the technology and more rational expectations; they don't want to revolutionize or disrupt the world nor do they want to have a Live implementation by the end of the year. They want to explore the "art of possible". They want to gain insights by setting up a demo network; they want to start building technical capabilities, start gathering the requirements and start exploring potential business implications; and more importantly they want to do so without creating too much mess (financial and operational).

What I call Paper Boat Trials (you may very well call them Proof-of-Concepts), are low cost, low risk engagements (most often in partnership with systems integrators and platform operators) to try out first hand and gather experience. While these projects/trials vary greatly in scope and execution methods, they do exhibit certain salient characteristics.

They are Business led, and have a fixed duration and a fixed budget. Applications rarely get connected to any Live legacy systems; no existing system ever gets switched off; user interfaces remain very basic and the data is often fictitious (dummy data to demonstrate a functionality).

What good are they? You may say- that these are pet projects to quench a thirst of curiosity or to spend the innovation budget for the quarter.

But there are other reasons why it makes sense.

Understanding the Dynamics of Network Participation

The value of a Blockchain network relies on the strength of the network effect (collaboration among the players of the value chain). A decentralized ecosystem for doing business will redraw the boundaries of operational silos (in the value chain); there will be new decision rules and power shifts.

Hegemony and control of some existing power players will wane, and they will have to be incentivized. Others will see clear benefits. Players with less clout or with significantly less stake in the game may be indifferent as long as the switching cost remains low.

Engaging stakeholders in early in the process can drive participation and provide an opportunity for the project team to assess the potential barriers to network-building and gain a knowledge competency that can't be replicated easily. The project can be extended to include Design Thinking Workshops with multiple stakeholders (the eager ones) under the same roof.

Isolated teams can get so immersed in solving technical issues or formulating frameworks that they fail to listen to the other side (the critical partners of the Business network). The barriers/inhibitions for each stakeholders are unique and has to be acknowledged before any adoption framework or strategy can be formulated. There has to be broad consensus or agreement among parties to collaborate on the first place- a shared vision (a charter); to reach such a broad consensus, project teams may have to incorporate principles of Behavioral Economics and Organization Design and invent new strategies for networking, incentives and collaboration. Without these collaborations (without this network) there can be no successful Blockchain.  Paper Boat Trials establishes that starting point to think about the dynamics at play.

Avoiding Costly Mess

Executives, although keen about innovation are often a little hesitant to spend too on them, especially if the exploration involves deep diving too much into the unknown. There could be many reasons for this hesitation. Not having a clear goal or an ROI makes decision making difficult to be justified. Exploratory or Innovation projects may lose track or relevance very quickly; it is not easy to determine when stop funding a project and extremely difficult to cut funds from a bleeding project after much investment had already been made.

Blockchain (or DLT), a foundational technology like the internet will have to wait its turn to take off in the everyday world.

There is wisdom in not going full throttle yet; in most cases there is after all no strategic urgency.

Starting early can help, and it is beneficial have the learnings (data) first hand, but early failures shouldn't swamp business as usual.  Paper Boat Trial is less risky with little impact on cash (usually the innovation budget comes from cash in hand not expensive debts). A cap on the downside risk makes it easier for executives to sponsor such projects. The business case for these projects apart from innovation could be around- Market sensing, prioritizing use cases and assessing potential impact on business, building Basic competency, exploring opportunities, market signaling etc.

Playground for the Decentralized Future

Firms may consider these Trials/projects as playgrounds to develop the necessary motor skills before they can jump into more real-life business implementations. Paper Boat Projects are unique opportunities to set up a basic infrastructure (technology and organizational) that can be leveraged by the firm to jumpstart future projects quickly.

These projects are laboratories of Business innovation. Business impact can't be assessed and strategic priorities can't be determined on spreadsheets alone. Business leaders (now more than ever) need to develop a taste of technology in order to make sense of the forces that is already shaping the world.

There could be a business opportunity lurking in plain sight to be discovered by the lucky or the competent.

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