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In recent years, business ecosystems have emerged as a way for networks of organizations to create incredible market value through collaboration and competition. The estimated $ 60 trillion in annual sales is expected to be redistributed across the economy through ecosystem growth by 2025. However, simply working in a business ecosystem by no means guarantees success – less than 15% are successful in the long run. Given the lack of trust and wrong governance decisions among the main causes of ecosystem failure, it is becoming clear that the rules of the game matter.
Just take the failure of the digital platform for buying and selling cars, Beepi. In 2015, Beepi was valued at up to $ 546 million as customers could buy inspected used cars with the push of a button. However, as a new player in the field, consumers did not recognize the Beepi brand and did not trust their inspectors or sellers. As a result, buyers were reluctant to buy a car without testing it for themselves. Without its customers’ trust in its ecosystem, Beepi was unable to scale and fold in 2017 as it failed to deliver on its promise to disrupt the industry.
In an environment where trust comes first, blockchain is becoming the ideal arbiter. Blockchain provides a decentralized and impartial ledger that no actor has control over, providing guarantees that encourage participants to join or deepen the ecosystem. Blockchain acts as a single source of truth for the ecosystem, overseeing all transactions and ultimately maximizing its value proposition.
Ecosystems need an arbiter
An ecosystem is a network of actors that can include suppliers, distributors, customers, agencies, and competitors. Ecosystems are dynamic communities in which participants develop together through collaboration and competition. The inner workings of these networks reflect the dynamics of a team sport. Different players need to work together to collectively improve their value proposition in order to thrive and benefit. Yet more than $ 50 billion in capital is lost to failed ecosystems every year.
In order to maximize the opportunities for value creation, the value network must be expanded and consist of committed and active participants. Unless some basic skills are in place to attract more participants and encourage more engagement, the ecosystems will not be able to achieve the full value potential for their participants.
A big part of attracting new players and partners is providing a solid foundation of trust. New actors will not consider joining if there is a lack of trust – regardless of the vision of the ecosystem. With fewer participants and resistance from companies to join, the network effects of the ecosystem will find it difficult to grow. In addition, they must be able to make money successfully. The monetization model and revenue sharing model for the various participants become questionable without trustworthy practices.
Blockchain can play an important role here. Blockchain can act as the perfect intermediary as it is a decentralized system that is neither owned nor operated. As an impartial ledger, it gives partners the confidence to operate in the ecosystem without fear of unethical practices by other participants.
Blockchain: the perfect referee
When a particular ecosystem adopts blockchain, a trust dividend is instantly created, allowing partners to focus on the mission and vision built into that system. The technology guarantees fair and honest activity between all parties involved to ensure the level pegging that players need to compete and collaborate competitively.
Just as the referee holds proceedings accountable on a sports field, blockchain provides an incorruptible and immutable record of activity that is sure to make it possible to conduct transfers, supply chain activities, sales and purchases, and more.
A good example of how blockchain has been used to build trust in an ecosystem is the global shipping industry. Today, two-thirds of global container freight is tracked on the blockchain-based digital platform TradeLens. In such a lucrative industry, replacing inefficient and manipulable manual information exchange systems with an impartial technology-based approach that enables instant verification provides a level of accountability that is welcomed by all.
In other industries that have traditionally had to fight corrupt or anti-competitive behavior such as banking and finance, blockchain provides the basis for trustful interactions and eliminates the need for costly third-party services that previously provided the guarantees for the safe action of the actors to work together.
Blockchain means more opportunities to create value
Look no further than Plastic Bank for a telling example of how competing players have been able to pull value from a blockchain-based system. The Canadian social enterprise is helping address the dual challenges of plastic waste accumulation and social exclusion in some developing countries. The system provides for plastic waste that would otherwise have mostly ended up on landfills and waterways in Brazil, Indonesia and the Philippines, collected by often marginalized members of the local population and bought from “banks” for a premium.
The result is twofold. First, by getting a fair wage for such work, participants can meet their needs and work towards a better future. At the same time, large companies are supplied with so-called “social plastic” – a sustainable material source that is generated by a verifiable supply chain that is free from corruption and exploitation and contributes to environmental clean-up.
Thanks to the ecosystem’s blockchain technology, materials can be tracked from the point of collection to final reuse, with the credit, compensation and delivery of the materials being able to be verified every step of the way. With accountability built into the system, expect more stakeholders to participate as consumer awareness and support increase. This ultimately brings more value to all stakeholders involved in the ecosystem, including consumers who are willing to pay a premium for ethical materials. The Plastic Bank is already preparing for the start in Egypt.
Ecosystems undoubtedly need more than just blockchain to thrive. Standards and strategies for sharing data and monetizing products and services are critical to an ecosystem’s efforts to maximize its value proposition. However, by using the technology, those involved can focus on developing such standards and strategies with confidence.
In an ecosystem built on blockchain-based trust, direct competitors feel much safer when it comes to “cooperation,” where they work together effectively to build an ecosystem from which they can then derive more value.
Greater accountability also enables traditional industry-based value chains to become increasingly interconnected. Without having to rely on trust that has been built up over time within a value chain, a wider range of actors can be brought together. Ecosystems have always crossed industry boundaries and brought different interest groups together. However, blockchain technology enables even deeper networking and collaboration.
As highlighted by efforts like Plastic Bank, this will ultimately pay off on a societal level. The world today faces a variety of challenges, including climate change, social exclusion and sustainability issues. By interacting with accountability and trust, blockchain allows us to tackle such challenges along with the trust we need to make a real difference while strengthening the bottom line.
Golnar Pooya is a consultant at 7 Gate Ventures and has for the past two decades helped F500 companies seize opportunities in new disruptive technologies and expand their ecosystems.
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