Gennaro Cuofano's Blog, page 215

The Importance Of Brand Building And How To Create A Brand Identity

Brand building is the set of activities that help companies to build an identity that can be recognized by its audience. Thus, it works as a mechanism of identification through core values that signal trust and that help build long-term relationships between the brand and its key stakeholders.

The modern father of brand building in a tech-driven world

As Steve Jobs put it in a speech dated 1997:

To me marketing’s about values this is a very complicated world it’s a very noisy world and we’re not going to get a chance to get people to remember much about us no company is and so we have to be really clear on what we want them to know about us.

This statement alone might well be considered the essence of brand building, and what it really means to build a brand. Indeed, as Steve Jobs highlighted building a brand is not about writing your mission statement, creating your list of values so that you can match that to who you think can be your customers.

That way is doing it backward. Brand building is about who you are and the kind of company you want to build. And communicating it clearly is not about words.

A business making money is not a brand. And you can still build a business that makes money without building a brand. However, as that company grows your brand will be a way to align people within and outside the organization, thus enabling those people to relate with your company.

This isn’t just a matter of philosophy, where to paraphrase a popular business author, you need to “start with your why.”

There are deeper implications of brand building, that have an evolutionary value, and that might make the long-term survival of your organization depending on your ability to build that brand.

Identity: beyond the job to be done to define who you are

In the same speech in 1997, Steve Jobs was trying to revitalize Apple‘s brand. As he got back to the company after being ousted more than a decade earlier, Apple‘s sales had experienced a massive decline. Several CEOs were hired and paid millions just to make things worse.

Steve Jobs had pretty clear what had happened to Apple. As he highlighted:

The question we asked was our customers want to know who is Apple and what is it that we stand for where do we fit in this world and what we’re about isn’t making boxes for people to get their jobs done although we do that well we do that better than almost anybody in some cases but apples about something more than that.

And he went on:

Apple at the core its core value is that we believe that people with passion can change the world for the better. That’s what we believe and we’ve had the opportunity to work with people like that…and those people that are crazy enough to think they can change the world are the ones that actually do.

Beyond the inspirational quotes, Steve Jobs made an important point. In a tech-driven business world, where technological innovation might seem to be the main driver of success. And where digital channels make it easy to track your marketing strategy.

It’s very easy to get confused about the things that really matter. The rational and conventional approach, based on jobs to be done, starts from several assumptions that might make it hard to build a brand in the first place.

Some of those assumptions are:

People always want convenience and low prices.
If A is more functional than B, then everyone will want to have A, rather than B.
Rationality is what drives people’s actions.
What cannot be explained by rationality is either stupid, irrelevant, trivial or not worth our attention.
Marketers are liars trying to manipulate people.
Perceptions don’t matter as much as engineering.
People are biased, and we need to leverage those biases.

I could go on listing dozens of those assumptions, but you get my point. In a tech-driven world, where tracking visible metrics has become inexpensive, those metrics become the key drivers of startups, that neglect their brands and focus on building functional products.

And the thing is, large tech players, with the most valuable brands in the world, are aware of the fact that their brand-building activities are a key element of their success. But they pretend those don’t count.

Companies like Alphabet (Google), Amazon, Apple, and Microsoft, spend billions of dollars in advertising, brand building, distribution, to pass the message that the reason they are so dominating stands with their superior technologies, innovation, supply chain or accounting department.

There is more to the story and this is called brand building. Referring to Nike, in the 1997 speech, Steve Jobs explained:

Nike sells a commodity they sell shoes and yet when you think of Nike you feel something different than a shoe company and their ads as you know they don’t ever talk about the product they don’t ever tell you about their soils and why they’re better than Reebok so what Nike is doing in their advertising they honor great athletes and they honor great athletics that’s who they are that’s what they are about.

Trust: how do I trust you if you don’t “waste money” on branding?

A flower is a weed with an advertising budget. ― Rory Sutherland, Alchemy.

Rory Sutherland, Vice Chairman of Ogilvy in the UK, in his book Alchemy, explains the evolutionary forces behind branding. As he highlights ever since science has become so powerful in explaining physical processes.

More and more intellectuals tried to apply the scientific method to real-life scenarios, where there is an extremely high degree of uncertainty. As former trader, Nassim Nicholas Taleb explains in his book Antifragile, in the real world, what’s really hard is understanding the problem in the first place.

Indeed, often we try to solve a problem that makes us look good but it’s the wrong one, we tend to apply rationality and logic (that look good on paper) to situations of high uncertainty. In short, as Jeff Bezos highlighted and recounted in a Shareholders letter in 2006:

We have made a decision to continuously and significantly lower prices for customers year after year as our efficiency and scale make it possible. This is an example of a very important decision that cannot be made in a math-based way. In fact, when we lower prices, we go against the math that we can do, which always says that the smart move is to raise prices.

In short, this is not a sort of decision that can be made with mathematical models, but it requires vision and the understanding of hidden facets of reality (which the human brain might be wired for).

Where Amazon is endowed with price elasticity models able to predict in the short-term that lowering prices has short-term negative consequences on the bottom-line, Jeff Bezos highlighted:

Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com.

While this decision didn’t make much sense from a purely economic standpoint, it did generate the so-called Amazon Flywheel or virtuous cycle.

In short, there are certain decisions, where optimization is worth pursuing. And in these cases, quantitative and mathematical models do work well. In all the other cases, where there is a high degree of ambiguity and uncertainty, those models won’t work.

But there is more to it. In a scenario of ambiguity and uncertainty (as most of the important business decisions), Rory Sutherland highlights how psycho-logic plays a key role. In short, what seems irrational it has an evolutionary value that can’t be explained by logic.

Rory Sutherland in The Wiki Man highlights:

I think if you set out to build a great business, you’ll stand a fair chance of building a great brand. I am not equally confident that someone aspiring to build a great brand will build a great business.

And money spent on branding seems to be one of those things that while can’t be explained by economists, it is instead an element of trust. In short, as a subconscious assumption, if you’re spending money to build a brand and a reputation, you have more skin in the game, and more to lose.

As such you might deserve more trust (this isn’t supposed to be rational or logical, but rather make sense to our subconscious).

Reputation and social proof: I show you who I am by telling you who you are

“capitalism is not “materialistic,” but “semiotic.” It concerns mainly the psychological world of signs, symbols, images, and brands,” ― Geoffrey Miller, Spent: Sex, Evolution, and Consumer Behavior.

Advertising and branding play a key role in building up trust. And we might argue that those are the backbones of capitalism itself. In short, larger companies that have a presence that goes beyond the neighborhood, need brands to thrive. And this is even truer in the digital age.

Imagining a train of thoughts of the person that engages with our brand and expensive branding campaign, the subconscious might implicitly say something along these lines “hey if you can afford to spend money on advertising your product, it must be good. And besides, you have money to allocate for that, which tells me you are financially more reliable. Thus I know you’ll be able to assist if the product won’t work and you’ll stick around long enough for me to trust you.”

In addition to that, branding has a social role, that Geoffrey Miller explains well, in his book, Spent:

All ads effectively have two audiences: potential product buyers, and potential product viewers who will credit the product owners with various desirable traits.

And as he explains in the same book:

The rich covet the new iPod not for the sounds it can make in their heads, but for the impressions it can make in the heads of others.

The power of perception: 2+2 does not equal 4

Engineers, medical people, scientific people, have an obsession with solving the problems of reality, when actually … once you reach a basic level of wealth in society, most problems are actually problems of perception ― Rory Sutherland, Alchemy.

This isn’t easy to grasp and internalize, however, perception can enhance our products. However, perception isn’t just about improving the user experience, building more technical specifications in your product, or adding features.

Perception can be way cheaper to implement yet more powerful. However, it requires a shift in mindset, as things that might sound trivial, irrational or illogic will suddenly unveil their genius.

Coca-Cola knows that well when it developed a unique shape for its bottles. And that happened a century ago. As the story goes, when Coca-Cola wanted to preserve its brand, it invited its bottlers to come up with a “bottle so distinct that you would recognize if by feel in the dark or lying broken on the ground.“

Also, tech giants know that. When Google launched its search engine, its super-clean design, not only enhanced user experience. But it also signaled one thing (as Rory Sutherland explains in Alchemy) that Google was actually good at search!

So much so, that “google it” became a synonym for “search it” and it actually now became ever more used:

[image error]

How “google it” has become more popular than “search it” (according to Google Trends). In short, not only Google has become a synonym with search, it has expanded its meaning, as it has made searching go mainstream, thus educating billions of people to google things out.

There are thousands if not millions of hidden possible ways we can use perception, at no additional cost, or capital investments to improve our business right now, by changing the way our product or service is perceived.

It just requires creativity and the ability to think that what might seem illogical can actually turn out to be subconsciously rational, even if hard to explain.

Signaling: how I look and what I do have nothing to do with how I look and what I do

“The peacock’s gaudy tail does not enable him to fly any higher, but it raises his status in the eyes of the peahen.” ― Nicholas Humphrey, Consciousness As Art.

If you think that showing off, advertising and branding are just synonyms of stupidity, let’s try to consider them from a different perspective. According to evolutionary psychologists, like Nicholas Humphrey, there are hidden reasons why we act the way we do, even when it seems irrational.

And it is often due to signaling. According to the signaling, theory from an evolutionary standpoint, those signals need to be costly. For instance, in the peacock case, the signal of fitness is so costly that it actually becomes a handicap.

According to the Handicap Principle,” reliable signals must be costly to the signaler, costing the signaler something that could not be afforded by an individual with less of a particular trait.”

Some evolutionary psychologists might go as far as saying that developing wings in the first place was for sexual selection and that flying was a side effect of that.

Thus, if you do understand signaling in that context, you also understand why it becomes important for brands as well to advertise themselves to become “fit.” And the best way to advertise themselves to choose to build a business that lasts.

Context and meaning

A last key principle to internalize is the importance of context in human decision making. The way we perceive things is driven by context. That might sound trivial, yet it is important to recall that wearing a mask or costume at the office on Halloween is acceptable (also among engineers) but wearing the same costume on a regular day would qualify you as a freak.

Understanding the kind of context people experience your product or service. Or determining the kind of context you want to create for your brand it is critical to building a successful brand.

References and suggested readings

The ideas behind this guide have been inspired by several books and authors:

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Other business resources:

What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas

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Published on November 03, 2019 14:31

Value Proposition Canvas And Design In A Nutshell

A value proposition is about how you create value for customers. While many entrepreneurial theories draw from customers’ problems and pain points, value can also be created via demand generation, which is about enabling people to identify with your brand, thus generating demand for your products and services.

Breaking Down Value Proposition In Business

A value proposition can be defined as the promise of value to be delivered and a belief from the customer that value will be experienced.

Creating a value proposition is a part of a business strategy. Kaplan and Norton say “Strategy is based on a differentiated customer value proposition. Satisfying customers is the source of sustainable value creation.”

As Ash Maurya points out a business model describes three things:

value creation,
value delivery,
and value capture.

And they are all related to customers. For that matter an entrepreneur becomes a business designer:

[image error]A business designer is a person that helps organizations to find and test a business model that can be tested and iterated so that value can be captured by the organization in the long run. Business design is the discipline, set of tools and processes that help entrepreneurs prototype business models and test them in the marketplace.

One of the most used, yet most confusing concepts in the business world is “value proposition.” Many believe they know what they’re talking about, yet you’ll be surprised to discover that what they call value proposition is either a value proposition statement or a distorted version of what it is.

The problem with this kind of distortion are multiple:

Lack of alignments
Lack of clarity
Inability to design a proper value proposition

To have a deep understanding of how value proposition works, we’ll look at the prevailing theories of values available to entrepreneurs.

Jobs-To-Be-Done Theory of value

Theodore Levitt said, “people do not want a quarter-inch drill, they want a quarter-inch hole.”

Therefore, this theory focuses on the jobs-to-be-done by the potential customer. A jobs-to-be-done analysis allows switching the focus toward

The “job” the customer is trying to get done. This is the unit of the analysis
Groups of people trying to get a job done define the market, rather than focusing on a product, or features of a product
Customers become job executors
This implies that you can group customers’ demographics and psychographics based on the struggles they experience in getting the job done

A job is defined as:

A “job” is not a description of what the customer is doing, the solution they are using, or the steps they are taking to get a job done. Rather, the “job” statement embodies what the customer is ultimately trying to accomplish.

[image error]

Source: jobs-to-be-done.com

According to the jobs-to-be-done theory, which also informs the value proposition canvas, those jobs can be summarized as:

Functional jobs
Social jobs
Emotional jobs
Supporting jobs

But is this theory all that is when it comes to value proposition? This, of course, is one model available.

Value proposition: tell me why I should buy from you

Kotler – in his book “Kotler on Marketing” – defines a value proposition as to answer a key question for your potential customer: “why should I buy from you?”

According to Kotler, a value proposition is critical as it helps define the context in which the product needs to be positioned. More precisely the value proposition development has to go through four steps:

Band positioning
Specific positioning
Value positioning
Total value positioning

In the brand positioning, for instance, Michael Porter advised a company should be focused on achieving an advantage either as a product differentiator, a low-cost leader or a niche.

Other frameworks, like the three-way framework from Treacy and Wiersema, proposed the value disciplines, or becoming the product leader, the operational leader, or achieve customer intimacy.

In all those cases, focus is key.

And just to be sure, it isn’t like being competitive in all those aspects can’t be possible. It is that for that to happen, you need such a budget that a few organizations would make it.

The specific positioning is about – in many cases – choosing a single major benefit that ranges across possibilities such as best quality, best performance, least expensive, easiest to use and more.

More precisely, according to Kotler, the specific positioning could be

Attribute positioning
Benefit positioning
Use/application positioning
User positioning
Computer positioning
Category positioning
Quality/price positioning

In choosing a value proposition, Kotler argues that buyers think in terms of “value for money: or what they get for what they pay.”

This implies:

More for more
More for the same
The same for less
Less for much less
More for less

If we go with this definition of value proposition it becomes easier to understand how to deliver value to our customers.
It all starts with a profitable and scalable business model

A value proposition design is critical for the success of a company. Yet it is important to insert it in but to make it work you need to insert it in the context of a scalable and profitable business model.

Thus, before jumping into the value proposition design, you can deeply understand what a business model is and how it works.

What Is a Business Model? 30 Successful Types of Business Models You Need to Know

Once you understand what a business model is you can start designing it. There are several methodologies to do it, I’d suggest you start with the business model canvas.

What Is a Business Model Canvas? Business Model Canvas Explained

As you will notice, while the business model canvas is a great tool at “hindsight” to analyze and understand other organizations’ business models, you might want to use the lean startup canvas to draft your startup business model.

The value proposition canvas
The value proposition canvas is among the most used tools to design and draft a value that customers can get from your product or service. The value proposition canvas leverages on the jobs-to-be-done theory of value.

Once you get through those resources you’re ready to dive into the value proposition canvas.

In fact, the value proposition canvas is like a plug-in to the business model canvas.

In fact, the value proposition canvas focuses on two segments of the business model canvas: “value propositions” and “customer segments.”

[image error]

What is a value proposition? The value proposition is about how you create value for customers.

In short, it describes the benefits customers can expect from your products and service, and how it can help them solve pain points and generate short and long-term gains.

What is a value in the value proposition canvas?

[image error]

The value proposition is really about understanding your customer’s problems and needs.

In short, this is the primary reason that makes you unique compared to others.

You don’t need a thousand words to communicate your value proposition. You need a line:

[image error]

In this blog, we analyzed several aspects of the DuckDuckGo business model and how DuckDuckGo challenged Google with a compelling value proposition “the search engine that doesn’t track you.”

In fact, today one of the most critical drivers for DuckDuckGo growth is privacy.

Where Google has built its business model on the data of its users, DuckDuckGo throws that data away to make the search experience as private as possible.

Thus, with a single line, DuckDuckGo is communicating what makes it unique compared to other search engines, what issue can it solve (privacy) and what gains a user has (avoid tracking from Google).

As pointed out on strategyzer.uservoice.com there are several elements of the product or service that help craft a compelling value proposition:

Newness
Performance
Customization
“Getting the job done”
Design
Brand/status
Price
Cost reduction
Risk reduction
Accessibility
Convenience/usability

Those elements are critical to putting together a value proposition that comprises two main aspects: customer profile and a value map.

The customer profile

A customer profile needs to be understood in the function of the market in which the customer is served.

In other words, it doesn’t make sense to make grandiose plans or assumptions about your customers.

Those need to be tested and validated by looking at three aspects.

Understand what’s important and what’s insignificant about customer jobs

Understanding customer jobs might comprise the set of tasks your customers are trying to perform what problems they are encountering and what needs they’re trying to satisfy.

The aim is to prioritize and find what’s important and what’s insignificant. There are several types of jobs to take into account as explained by strategyzer.uservoice.com:

Functional jobs
Social jobs
Emotional jobs
Supporting jobs

Understand what extreme and what’s moderate about customer pains

One of the most valuable aspects of a product or service is its ability to relieve customers from a pain point, a problem they have, the obstacle that prevents them from getting the job done.

Thus, this process is really about understanding customers’ frustrations, problems, and pain points.

The main aim is to understand the intensity of those problems as a sort of thermometer that tells you what issues are extreme and what are moderate.

Understand what’s essential and what’s nice to have by generating customer gains

Those comprise the gains that customers required, expects, and desires within the product or service to make them come back.

Also, there is another critical aspect which is about unexpected gains that can be a powerful lever to hook your customers. Hooking is not about creating tricks that make them stick. But creating so much value that they want to get back to your product and service again and again.

Once profiles the customer it is essential to create a value map.

The value map

Once understood the customer profile, the value map is the tool to fill in the blanks and make the customer profile reflected in the product or service.

In short, the value map allows you to be clear and structured on what specific steps to take to make your customers happy, avoid the pain and what particular features will help.

Thus you want to focus on three aspects:

products and services
pain relievers
gain creators

It’s all about product-market fit!

The goal of the Value Proposition Canvas is about designing the value proposition that can make you reach the so-called product-market fit.

Have you reached it yet? If not, it’s time to design your value proposition with the value proposition canvas:

[image error]

Source: businessmodelsinc.com
Beyond value: demand generation and why it matters

The common and most accepted entrepreneurial theories of value, stem from the assumption that value exists. That in many cases that can’t necessarily be generated a new. However, that is not the case.

Extremely successful companies are those able to create a brand that resonates in people’s minds so that even a commodity will be perceived as a status quo, a tool to feel special or to communicate identity.

One example of that is Nike and its ability to use “innovation” as a way to infuse demand generation into its shoes, which otherwise might be well-considered commodities:

[image error]Nike’s vision is “to bring inspiration and innovation to every athlete in the world.” While its mission statement is to “do everything possible to expand human potential. We do that by creating groundbreaking sport innovations, by making our products more sustainably, by building a creative and diverse global team and by making a positive impact in communities where we live and work.”

You might want to call it marketing, branding. But in reality, this is about perception, identity and how you want your people, the ones that identify with your brand, feel about themselves.

In short, what you make of your brand is not about you, but about how the people that buy your brand want to feel, think, identity with.

This is called demand generation, and it’s at the base of a strong brand, thus a company with a strong business model, where the value proposition is not drawn from existing pains potential customers might experience, but it’s rather created by the brand, and it leverages on psychological clues that help the desired audience feel moved and inspired.

Demand generation isn’t an inexpensive endeavor. Quite the opposite, finding and distributing the message the amplifies the brand requires a lot of experimentation. And once you stumble on that message, ensuring it gets properly distributed might cost real bucks.

For instance, by 2018, Nike spent $3.5 billion in demand generation alone:

[image error]

As Steve Jobs put it in a speech dated 1997:

To me marketing’s about values this is a very complicated world it’s a very noisy world and we’re not going to get a chance to get people to remember much about us no company is and so we have to be really clear on what we want them to know about us.

And referring to Nike, Steve Jobs explained:

Nike sells a commodity they sell shoes and yet when you think of Nike you feel something different than a shoe company and their ads as you know they don’t ever talk about the product they don’t ever tell you about their soils and why they’re better than Reebok so what Nike is doing in their advertising they honor great athletes and they honor great athletics that’s who they are that’s what they
are about.

Apple value proposition case study

[image error]Apple is a tech giant, and as such, it encompasses a set of value propositions that make Apple’s brand recognized, among consumers. The three fundamental value propositions of Apple’s brand leverages on the “Think Different” motto; reliable tech devices for mass markets; and in 2019, Apple also started to emphasize more and more about privacy to differentiate from other tech giants.

Apple is a champion in demand generation. Yes, the company is a tech giant, with billions of dollars spent in R&D. According to LinkedIn the company employees more than thirty-six thousand engineers and almost thirty thousand IT people as of November 2019. And by 2019 it spent over $16 billion in R&D.

At the same time, the company spent over eighteen billion in sales and administrative expenses primarily due to higher spending on marketing and advertising and infrastructure-related costs (FourWeekMBA Analysis from Apple’s financial statements).

Apple always focused on creating iconic ads campaigns to amplify its brand values:

Amazon value proposition case study
[image error]A company like Amazon has multiple value propositions, as it serves several target customers in different markets. With its mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online and endeavors to offer its customers the lowest possible prices,” Amazon value propositions range from “Easy to read on the go” for a device like Kindle, to “sell better, sell more” to its marketplace.

While Jeff Bezos has highlighted over and over again that Amazon is about customer obsession. Don’t be fooled by that. While Amazon does leverage operational efficiency, speed, and convenience, the company’s brand is as important to make sure people trust it enough to prefer that to the local store in the neighborhood.

This might sound trivial, yet Amazon is a global player that offers more and more localized distribution. This requires an extremely strong brand!

Handpicked business models:

What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas

Business model case studies:

How Does PayPal Make Money? The PayPal Mafia Business Model Explained
How Does WhatsApp Make Money? WhatsApp Business Model Explained
How Does Google Make Money? It’s Not Just Advertising!
How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained
The Google of China: Baidu Business Model In A Nutshell
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained

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Published on November 02, 2019 17:09

Blockchain For Business: The Rise Of Super Platforms With IBM’s Jerry Cuomo

https://fourweekmba.com/wp-content/uploads/2019/11/blockchainforbusiness.mp3

For this session, we have with us, Jerry Cuomo. IBM fellow and Vice President of Blockchain Technologies. With IBM since 1987, he had an extraordinary career. And in 2015 Jerry Cuomo became Vice President of Blockchain Technologies. He is also the co-author of a great book, which is called “Blockchain for Business.”

With Jerry, we focus in this session about blockchain, enterprise blockchain, blockchain-based business models and in which ways might the blockchain really change how we do business. And as business people what playbook we need to develop to move toward that era.

What drove you to focus on a blockchain?

Jerry Cuomo: I’ve had the pleasure of working on transaction processing in my career at IBM, and I would say we are now with blockchain in the third generation of transaction process Generation One.

In fact, IBM was vibrantly involved in Generation One, which was the era of the mainframe transaction. And in fact, that era is still running as we speak. You know, with systems like Sabre running many of the airline and hotel reservations.

And then Generation Two, and this is where I got involved, with generation two which is web-based transaction processing. So we helped the likes of eBay create their web-based auctioning system.

Many people said that you wouldn’t be able to really do a credit card transaction over the internet. But look, people laugh today, of course, you can. So you know, all banks and insurance companies and governments and everything in between have web-based, now mobile-based means to transact.

What got me involved in 2015 is, what was the next generation? Was there even going to be another generation in transaction processing, or would AI and IOT and Cloud make those go away.

And earlier, maybe in 2013, 2014 I saw Bitcoin, but something happened. In 2014 I saw Ethereum, and really what impressed about Ethereum was smart contracts. And that’s where I thought the value of blockchain could be applied to any industry.

And you know, the very elegant thing about blockchain, it’s about… It’s as basic as the notion of teamwork. Meaning, a group working together is more likely to provide or produce a better outcome than any single member of that group working by themselves. It’s pretty logical. And that’s kind of at the center of blockchain.

It’s this decentralization that brings trust to data.

So in 2015, again seeing Ethereum with smart contracts, we got this view that blockchain could be applied to any industry.

And that’s set off the journey for what has now become IBM Blockchain, powered by a very compelling open-source project called Hyperledger and Hyperledger Fabric, which is, I’d say the blockchain technology that was made from the ground up for business.

So in 2015, it was a twinkle in my eye that this was possible. And I’m really glad here, a few years later, seeing the fruits of that starting to pay off.

What are the key elements of the Enterprise Blockchain?

Jerry Cuomo: Enterprise blockchain has many common characteristics of blockchain non-enterprise, I’m not sure what you would call the opposite of enterprise blockchain, but let’s just say there are some base qualities to the blockchain, and there are some enrichments that make blockchain more enterprise savvy.

Blockchain in a nutshell

So the base characteristics of blockchain that apply to any type of blockchain, you will see a shared ledger that is not managed by a single administrator, it’s managed by a group through a process of consensus.

And that when transactions are consented on, they are appended to a shared ledger in a way that is cryptographically secured with the prior block, thereby making a chain that is resistant to tampering, and forms an audit log that becomes the center of trust. And I think that is indigenous to blockchains.

A crash course in Enterprise Blockchain

But then enterprise blockchain and Hyperledger fabric was probably the first enterprise blockchain, not the only one today, but certainly the first. We set out, and we looked at four or five additional qualities.

The first is accountability. So prior to this type of enterprise, blockchain members were anonymous in participation. And there was good rhyme and reason for that, for cryptocurrency emulating the property of cash.

Cash is a bearer instrument, no need necessarily to figure out who the person is, or who the institution is. But through proof of work, very clever, it was possible to gain trust in an institution that was participating in the blockchain without knowing who they are.

But in an enterprise to pass government regulations and things like in healthcare, HIPAA or, and for around privacy and identity, GDPR, the members must be accountable.

And that’s where the notion of permission blockchain, so members are known to the network. That’s number one.

Number two is while they’re known, enterprises need to operate with confidentiality and privacy. So looking at additional capabilities around blockchain for privacy and confidentiality. I mean, Hyperledger fabric supports a notion, if those users out there are familiar with Slack, and this notion of a channel where you can subdivide the ecosystem based on a particular topic. So Hyperledger fabric supports that. And that allows for more private… Not everyone in the network gets to broadcast the same transaction, but you can subdivide and add this level of confidentiality, privacy. That’s number two.
Number three is needed for immense performance and scalability. Enterprises have an insatiable appetite for performance. So performing and transacting at thousand transactions per second or more is a base requirement for the enterprise.
And the other one is finality, which means the network, once it arrives at an answer, the answer can’t fork, it has to stay, it has to become final. And with Ethereum and Bitcoin, there’s been forks of the network. Certainly, we’ve worked very hard with Hyperledger fabric to ensure that a transaction once committed, is final.
And then last, the fifth is fault tolerance security. So not every enterprise participating in a blockchain network is going to be the same. Meaning, some might have big IT budgets, some might have small IT budgets. Some may have great security architects, others lesser so. So the network has to keep running, even in the presence of actors that might be sloppy. So if you’re not running the latest patches of an operating system, and you have a failure in your node, you can’t take the network down. It just has to keep running. So accountability through permissions, privacy, confidentiality, performance, finality, and full tolerance security is what differentiates enterprise blockchain from all the other blockchains if that makes sense.

How do you need to change the mindset in a blockchain-driven business world?

Jerry Cuomo: Businesses have spent the last hundreds of years responsible for themselves. I talked about teamwork, and a group working together. I like to say blockchain is a team sport.

Businesses today aren’t structured to work in teams. Yes, there’s business to business, B2B. But even in a B2B transaction, you’re still responsible. Like if you’re in a B2B lending network, and you’re depending on a third party to vet the authenticity of a particular client that you’re lending money to, and they turn out to be a bad actor and the government comes after you for lending money to a bad actor, you can’t say, “Oops, it wasn’t me. It was someone I trusted in my network.” No, you are responsible. You go to jail, they don’t go to jail.

The big trick in the business playbook is to design business processes that can be worked across a team.

And that might sound difficult, but again, in a B2B world, we’re already working together as a team.

I can mention shared reference data. This is an example from financial services where companies, financial services companies, usually hire intermediaries to distribute the results, the day end results of an exchange, to be able to record the reference data associated with the price of a stock, let’s say.

It’s not like my reference data is better than yours.

We all get the same reference data, but we all spend a lot of money in distributing reference data. So if we can just distribute it to ourselves, perhaps that’s a more efficient way to do it, and we’d save money, right?

In a financial services situation, there’s another example. Like if I get a fraudulent act to happen in my bank, I might want to be a good citizen and share that with some of the other banks so that the same bad actor doesn’t cause fraud in their banks.

So setting up a network. Those are win-win networks. It involves teams sharing information, where they haven’t necessarily shared before, or would hire intermediaries to disseminate that, adding friction.

Change to the playbook number one.

But now with blockchain, you can create a business model that is shared across companies.

And again, initially cost savings. So I do think one of the biggest tricks is looking at those business models.

In 2019, I can go almost industry for the industry and talk about the top two or three that have emerged in that industry, where it’s really not a debate anymore. Companies are collaborating on it.

Change to the playbook number two is, I would say a variation of that, and that’s governance.

So once you have a great idea that leverages the power of the group versus the individual company, how do you govern that? Like what are the rules, who are the referees, and what is the mechanism by which you manage and operate such a network? What are the obligations, what are the rewards?

Governance becomes the next big important factor in your playbook.

And I guess the other thing is, like any new technology, being able to dream big about what the technology could ultimately do to transform your industry. Think about some, of the quotes from Walmart in the food industry, working as part of the Food Trust network.

Again, not even the world’s biggest food companies have complete visibility across the supply chain. It would take Walmart seven days in a test they did, they did to trace back a packaged mango from one of their stores to the farm in which that mango came from.

On this blockchain network, with more diverse organizations sharing data, they can now pinpoint, let’s say a foodborne illness in 2.2 seconds. That’s transforming.

The question is, is any transformative thought, what’s the scope? Where do you start? Number one. So how big of a bite do you take out of the initial project? And some people might call that your MVP, what is your minimum viable product that’s going to take the first bold step against that big idea?

The next big question in a blockchain, from a business playbook perspective, is who are you going to take that step with? You know, what is your MVE, what’s your minimal viable ecosystem?

Doing it with one company is hardly an ecosystem, that’s like an ecosystem of one. Although some companies are diverse, both geographically operating across the different countries and regulatory jurisdictions.

But you know, one company might be too small, 20 companies might be too big, it may take too long to get off the ground. Although a decentralized network does bring a better trust model, often it is the harder place to start.

So starting more centralized might be a better place to start. But the problem with centralized is you may start quicker, but then how do you convince others that if you’re joining and you’re number five to join, that members one, two, three and four don’t have an unfair advantage, right? So you have to prove that out as you go forward.

So all that said, the playbook at some levels changes based on the plurality of blockchain.

You know, working with groups, but you don’t have to take it to an extreme, where you’re working with hundreds just to get your idea off the ground. You know, you can start with a group of three or four, just enough decentralization to get your idea moving such that everyone in your group has control, but no one is exclusively in control.

So I think that’s the balance in the new blockchain-based business models that we see.

Gennaro Cuofano: Thanks, Jerry, it was very interesting. Actually, as you were talking, I was thinking probably one of the most revolutionary things from the business standpoint is also the fact that we go behind the corporation because in a blockchain the whole purpose might be about creating an ecosystem of companies that might look like a platform business model. But in a platform business model, we still have a company. We think a case of Google, Amazon, Facebook. I mean, those companies still centralize most of the profits, still have control over the platform, still have the ones which are really managed interactions on those platforms. I mean, those are the ones who make the rules of the game. In a blockchain-based on a business model, instead, we go behind the intermediary. So it feels to me like we are making the platform not relevant anymore.

Does the blockchain make centralized platforms irrelevant? Or is it an evolution of them?

Jerry Cuomo: It’s a different type of platform. I think it’s still a platform. I mean, when you look at these networks, they look like platforms. The better ones have well-constructed API’s.

You know, people think about and say blockchain is web 3.0, it’s the web of value versus the web of information.

And in order for web 3.0 to take root, it needs to at least be web 2.O. So the better networks look like platforms that are programmable, they have APIs, and in fact, a really good platform based on a blockchain doesn’t ever even say the word blockchain. It’s just a valuable network.

And if you talk about what, again, the obligations and rewards are for joining the network, and the fact that it was built with blockchain, and I think that is that an interesting conversation over dinner, but when you’re sharing the value of it, it may or may not even have to come up.

But the economics are different. The economics are different from today’s more single company centered platform business models. It’s not to say that single companies for different types of networks aren’t going to benefit, but I do think this really favors the ecosystem.

And I do think, again, we’ll see, and are seeing, a new style of platform that looks from a programmability perspective like what we saw on web 2.0 platforms. But I think economics is more balanced around a consortium or a group versus an individual company.

What is a Minimum Viable Ecosystem (MVE) and how to kick it off?

Jerry Cuomo: Just to give you an example, the best ecosystems are the ones that are already there. And your best partners are the ones that you already have. I mean, IBM as a company, as a buyer of services, has about 20,000 suppliers.

And that’s not unusual. I mean, I’m sure if you look at companies, there are probably companies that have 100,000 suppliers. But neighboring companies like us most likely have the same.

They’re buyers for similar suppliers. And you know, our chief procurement officer knows many of the other chief procurement officers and companies that we do business with. So as a real story, our chief procurement officer is now working with, I’d say about a dozen other chief procurement officers and companies like IBM, to create a blockchain network to help the buyer-supplier relationship.

So that was a group of people starting initially with three companies, IBM and two others, with a business partner. And we had good relationships. I mean they were there, we had common pain that we felt, and inefficiencies of modern-day processes.

Once our chief procurement officer figured out that, and they asked us to prove that blockchain could address some of these inefficiencies, they were off to the races with three. But again, I would always recommend starting less, more centralized than decentralized.

I also think even when I’ve been in rooms with a dozen banks looking to join a consortium, and while that looks decentralized, the fact of the matter in any group’s surroundings, you’re going to get the group leaders to emerge right away.

And there’ll be about two or three. So in the end, you typically start with two or three, whether it’s just two or three, or two or three in a group of 12. It’s just natural group behavior that we’ll start that way.

So when you start with a smaller group, you just have to spend more time figuring out why let’s say if you start with three, why would the fourth ever join? What’s their obligation? What’s their reward? If you take all the rewards as the first three, come on, you wouldn’t join that club. So why would they join the club?

So you have to keep the door open, and that has to be factored in if you start more at centralized. If you start more decentralized, then you have to figure out how you ever get to your MVP.

If more than the three people that I mentioned who are usually vocal or vocal, if you have to answer to 12 lawyers, it’s going to take you a very long time to get to your MVE completion.

The bigger MVEs usually are run by only a few people who have strong opinions. So, in the end, you’re always typically working and starting a group with a small group, and building from there. So again, your results will vary based on the industry, and based on the actual use case. But that’s my experience.

How does the blockchain inject trust in a business model?

Jerry Cuomo: You can say, “Jerry, why should I trust you?” And I can give you a list of things I’ve done in my life that make me trustworthy. And you can step back and consider those things to see whether that truly makes me a trustworthy person or not.

You know, again, you can look at my reputation and all of this kind of stuff, talk to other people, and you might get a good view. In a blockchain, it’s mathematical, it’s algorithmic. So you don’t have to quote-unquote trust someone because of their reputation.

You trust someone because it is very hard to tamper with the data. So you know, again, it stems from the actual technology, that trust emanates and grows from the technology. It’s enforced through it. So very, very simple, a database has a single administrator.

I mean it wouldn’t be right to compare blockchain completely to a database, but it’s easier to reason this way. But you know, a blockchain has multiple administrators, multiple businesses, each with a copy of the ledger, each getting to weigh in on the consensus process, each getting a copy of the ledger once they consent on a transaction.

And you know, unlike a database that has commands like update and deletes, a blockchain is append-only, right. And once that block is appended, it’s cryptographically linked to the previous block, creating a chain that is very hard to tamper with.

And that audit log becomes the foundation of trust. It’s not something about necessarily about reputation, it’s about that algorithm, and that ledger was when the data is in it, and we all consented, there it is. And we can sleep at night knowing that it was, that no single company went in and altered or doctored the data.

So the business trust is anchored in that algorithmic computational trust that is built. So it transcends from being hard to manage or hard to quantify reputational thought, into a highly quantifiable, algorithmic, provable thought.

So that’s… And whether a business understands it or not is another story, but it does anchor that trust between businesses in a way that was very difficult to do before this technology.

How does economics change?

Jerry Cuomo: I think that that is a key aspect of the whole economical approach of blockchain. I actually think so much about blockchain is about a new economic. In fact, when you think about traditional Bitcoin, there’s a very interesting economic there.

Like you give something in the form of energy, and you get a piece of a token back. And you know, I think around instance economics and also how tokenization plays in, I think is a very interesting concept. And we go over that in the book quite a bit. And I do think there is a role in enterprise blockchain for tokens, and for thinking about your business in that form.

I mean, digital assets are key to any kind of digital transformation. The problem is that for five digital applications today, their assets are represented in five completely different ways. So with a token, you have a chance of reasoning about a digital asset across applications.

I think something that Marley Gray from Microsoft is driving at the token taxonomy initiative, which is one of the enterprise Ethereum functions that IBM is participating in. I’m trying to help this economic effect really take root through standardization, so the TTI is an initiative to try to classify and create a taxonomy around tokens that could be applied to any technology, whether it’s Hyperledger fabric or Ethereum or anything in between, to help kind of liberate the digital assets that are in these applications. And of course blockchain is ripe for this.

But even in blockchain, the ability right now, if you have 10 networks, you kind of have a tower of Babel effect going on. And there’s no easy way for one network to reason with another network.

Thinking about the economics around this, and then thinking about how to quantify the economics in something. And I think tokenization comes to mind around that are key things to do. It’s, again, a good blockchain idea, the best blockchain ideas start as a business idea. And from that really the fun begins.

And you know, I think blockchain doesn’t change the art of business. It just, I would say, restructures it a bit around the group.

And the interesting thing is that we always heard about teamwork, and we all know teamwork provides the best results. I just think in business it’s been hard to enforce that.

And I think with blockchain technology, it’s the perfect peanut butter and chocolate, a perfect combination of good things coming together to form a new outcome.

Because I think businesses do work together in B2B networks, but you can’t be responsible for others’ actions. But in blockchain you can, the network can be a responsible entity. And I do think that expands an economic that that is pretty cool.

Key takeaways and quotes

In a blockchain-based business, it’s decentralization that brings trust to data.
The key elements of an enterprise blockchain are accountability, confidentiality, and privacy, performance and scalability, finality, tolerance security.
“The big trick in the business playbook is to design business processes that can be worked across a team.”
“Governance becomes the next big important factor in your playbook.”
“Economics is more balanced around a consortium or a group versus an individual company.”
“A blockchain has multiple administrators, multiple businesses, each with a copy of the ledger, each getting to weigh in on the consensus process, each getting a copy of the ledger once they consent on a transaction.”
“Blockchain doesn’t change the art of business. It just, I would say, restructures it a bit around the group.
“Businesses do work together in B2B networks, but you can’t be responsible for others’ actions. But in the blockchain you can, the network can be a responsible entity. And I do think that expands an economic that that is pretty cool.”

Suggested reading: Blockchain For Business

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Other suggested resources:

What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas

Business models case studies:

How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does WhatsApp Make Money? WhatsApp Business Model Explained
How Does Google Make Money? It’s Not Just Advertising!
The Google of China: Baidu Business Model In A Nutshell
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Does Pinterest Work And Make Money? Pinterest Business Model In A Nutshell
Fastly Enterprise Edge Computing Business Model In A Nutshell
How Does Slack Make Money? Slack Business Model In A Nutshell
Fastly Enterprise Edge Computing Business Model In A Nutshell
TripAdvisor Business Model In A Nutshell
How Does Fiverr Work And Make Money? Fiverr Business Model In A Nutshell

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Published on November 02, 2019 04:00

Blockchain For Business In A Nutshell With IBM’s Gerry Cuomo

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For this session, we have with us, Gerry Cuomo. IBM fellow and Vice President of Blockchain Technologies. With IBM since 1987, he had an extraordinary career. And in 2015 Gerry Cuomo became Vice President of Blockchain Technologies. He is also the co-author of a great book, which is called “Blockchain for Business.”

With Gerry, we focus in this session about blockchain, enterprise blockchain, blockchain-based business models and in which ways might the blockchain really change how we do business. And as business people what playbook we need to develop to move toward that era.

What drove you to focus on a blockchain?

Gerry Cuomo: I’ve had the pleasure of working on transaction processing in my career at IBM, and I would say we are now with blockchain in the third generation of transaction process Generation One.

In fact, IBM was vibrantly involved in Generation One, which was the era of the mainframe transaction. And in fact, that era is still running as we speak. You know, with systems like Sabre running many of the airline and hotel reservations.

And then Generation Two, and this is where I got involved, with generation two which is web based transaction processing. So we helped the likes of eBay create their web based auctioning system.

Many people said that you wouldn’t be able to really do a credit card transaction over the internet. But look, people laugh today, of course you can. So you know, all banks and insurance companies and governments and everything in between have web based, now mobile based means to transact.

What got me involved in 2015 is, what was the next generation? Was there even going to be another generation in transaction processing, or would AI and IOT and Cloud make those go away.

And earlier, maybe in 2013, 2014 I saw Bitcoin, but something happened. In 2014 I saw Ethereum, and really what impressed about Ethereum was smart contracts. And that’s where I thought the value of blockchain could be applied to any industry.

And you know, the very elegant thing about blockchain, it’s about… It’s as basic as the notion of teamwork. Meaning, a group working together is more likely to provide or produce a better outcome than any single member of that group working by themselves. It’s pretty logical. And that’s kind of at the center of blockchain.

It’s this decentralization that brings trust to data.

So in 2015, again seeing Ethereum with smart contracts, we got this view that blockchain could be applied to any industry.

And that’s set off the journey for what has now become IBM Blockchain, powered by a very compelling open source project called Hyperledger and Hyperledger fabric, which is, I’d say the blockchain technology that was made from the ground up for business.

So in 2015 it was a twinkle in my eye that this was possible. And I’m really glad here, a few years later, seeing the fruits of that starting to pay off.

What are the key elements of the Enterprise Blockchain?

Gerry Cuomo: Enterprise blockchain has many common characteristics of blockchain non-enterprise, I’m not sure what you would call the opposite of enterprise blockchain, but let’s just say there are some base qualities to the blockchain, and there are some enrichments that make blockchain more enterprise savvy.

Blockchain in a nutshell

So the base characteristics of blockchain that apply to any type of blockchain, you will see a shared ledger that is not managed by a single administrator, it’s managed by a group through a process of consensus.

And that when transactions are consented on, they are appended to a shared ledger in a way that is cryptographically secured with the prior block, thereby making a chain that is resistant to tampering, and forms an audit log that becomes the center of trust. And I think that is indigenous to blockchains.

Crash course in Enterprise Blockchain

But then enterprise blockchain and Hyperledger fabric was probably the first enterprise blockchain, not the only one today, but certainly the first. We set out, and we looked at four or five additional qualities.

The first is accountability. So prior to this type of enterprise, blockchain members were anonymous in participation. And there was good rhyme and reason for that, for cryptocurrency emulating the property of cash.

Cash is a bearer instrument, no need necessarily to figure out who the person is, or who the institution is. But through proof of work, very clever, it was possible to gain trust in an institution that was participating in the blockchain without knowing who they are.

But in an enterprise to pass government regulations and things like in healthcare, HIPAA or, and for around privacy and identity, GDPR, the members must be accountable.

And that’s where the notion of permission blockchain, so members are known to the network. That’s number one.

Number two is while they’re known, enterprises need to operate with confidentiality and privacy. So looking at additional capabilities around blockchain for privacy and confidentiality. I mean, Hyperledger fabric supports a notion, if those users out there are familiar with Slack, and this notion of a channel where you can subdivide the ecosystem based on a particular topic. So Hyperledger fabric supports that. And that allows for more private… Not everyone in the network gets to broadcast the same transaction, but you can subdivide and add this level of confidentiality, privacy. That’s number two.
Number three is needed for immense performance and scalability. Enterprises have an insatiable appetite for performance. So performing and transacting at thousand transactions per second or more is a base requirement for the enterprise.
And the other one is finality, which means the network, once it arrives at an answer, the answer can’t fork, it has to stay, it has to become final. And with Ethereum and Bitcoin, there’s been forks of the network. Certainly, we’ve worked very hard with Hyperledger fabric to ensure that a transaction once committed, is final.
And then last, the fifth is fault tolerance security. So not every enterprise participating in a blockchain network is going to be the same. Meaning, some might have big IT budgets, some might have small IT budgets. Some may have great security architects, others lesser so. So the network has to keep running, even in the presence of actors that might be sloppy. So if you’re not running the latest patches of an operating system, and you have a failure in your node, you can’t take the network down. It just has to keep running. So accountability through permissions, privacy, confidentiality, performance, finality, and full tolerance security is what differentiates enterprise blockchain from all the other blockchains, if that makes sense.

How do you need to change mindset in a blockchain-driven business world?

Gerry Cuomo: Businesses have spent the last hundreds of years responsible for themselves. I talked about teamwork, and a group working together. I like to say blockchain is a team sport.

Businesses today aren’t structured to work in teams. Yes, there’s business to business, B2B. But even in a B2B transaction, you’re still responsible. Like if you’re in a B2B lending network, and you’re depending on a third party to vet the authenticity of a particular client that you’re lending money to, and they turn out to be a bad actor and the government comes after you for lending money to a bad actor, you can’t say, “Oops, it wasn’t me. It was someone I trusted in my network.” No, you are responsible. You go to jail, they don’t go to jail.

The big trick in the business playbook is to design business processes that can be worked across a team.

And that might sound difficult, but again, in a B2B world we’re already working together as a team.

I can mention shared reference data. This is an example from financial services where companies, financial services companies, usually hire intermediaries to distribute the results, the day end results of an exchange, to be able to record the reference data associated with the price of stock, let’s say.

It’s not like my reference data is better than yours.

We all get the same reference data, but we all spend a lot of money in distributing reference data. So if we can just distribute it to ourselves, perhaps that’s a more efficient way to do it, and we’d save money, right?

In a financial services situation, there’s another example. Like if I get a fraudulent act to happen in my bank, I might want to be a good citizen and share that with some of the other banks so that the same bad actor doesn’t cause fraud in their banks.

So setting up a network. Those are win-win networks. It involves teams sharing information, where they haven’t necessarily shared before, or would hire intermediaries to disseminate that, adding friction.

Change to the playbook number one.

But now with blockchain, you can create a business model that is shared across companies.

And again, initially cost savings. So I do think one of the biggest tricks is looking at those business models.

In 2019, I can go almost industry for industry and talk about the top two or three that have emerged in that industry, where it’s really not a debate anymore. Companies are collaborating on it.

Change to the playbook number two is, I would say a variation of that, and that’s governance.

So once you have a great idea that leverages the power of the group versus the individual company, how do you govern that? Like what are the rules, who are the referees, and what is the mechanism by which you manage and operate such a network? What are the obligations, what are the rewards?

Governance becomes the next big important factor in your playbook.

And I guess the other thing is, like any new technology, being able to dream big about what the technology could ultimately do to transform your industry. Think about some, of the quotes from Walmart in the food industry, working as part of the Food Trust network.

Again, not even the world’s biggest food companies have complete visibility across the supply chain. It would take Walmart seven days in a test they did, they did to trace back a packaged mango from one of their stores to the farm in which that mango came from.

On this blockchain network, with more diverse organizations sharing data, they can now pinpoint, let’s say a foodborne illness in 2.2 seconds. That’s transforming.

The question is, is any transformative thought, what’s the scope? Where do you start? Number one. So how big of a bite do you take out of the initial project? And some people might call that your MVP, what is your minimum viable product that’s going to take the first bold step against that big idea?

The next big question in a blockchain, from a business playbook perspective, is who are you going to take that step with? You know, what is your MVE, what’s your minimal viable ecosystem?

Doing it with one company is hardly an ecosystem, that’s like an ecosystem of one. Although some companies are diverse, both geographically operating across different country and regulatory jurisdictions.

But you know, one company might be too small, 20 companies might be too big, it may take too long to get off the ground. Although a decentralized network does bring a better trust model, often it is the harder place to start.

So starting more centralized might be a better place to start. But the problem with centralized is you may start quicker, but then how do you convince others that if you’re joining and you’re number five to join, that members one, two, three and four don’t have an unfair advantage, right? So you have to prove that out as you go forward.

So all that said, the playbook at some levels changes based on the plurality of blockchain.

You know, working with groups, but you don’t have to take it to an extreme, where you’re working with hundreds just to get your idea off the ground. You know, you can start with a group of three or four, just enough decentralization to get your idea moving such that everyone in your group has control, but no one is exclusively in control.

So I think that’s the balance in the new blockchain-based business models that we see.

Gennaro Cuofano: Thanks, Gerry, it was very interesting. Actually, as you were talking, I was thinking probably one of the most revolutionary things from the business standpoint is also the fact that we go behind the corporation because in a blockchain the whole purpose might be about creating an ecosystem of companies that might look like a platform business model. But in a platform business model, we still have a company. We think a case of Google, Amazon, Facebook. I mean, those companies still centralize most of the profits, still have control over the platform, still have the ones which are really managed interactions on those platforms. I mean, those are the ones who make the rules of the game. In a blockchain-based on a business model, instead, we go behind the intermediary. So it feels to me like we are making the platform not relevant anymore.

Does the blockchain make centralized platforms irrelevant? Or is it an evolution of them?

Gerry Cuomo: It’s a different type of platform. I think it’s still a platform. I mean, when you look at these networks, they look like platforms. The better ones have well-constructed API’s.

You know, people think about and say blockchain is web 3.0, it’s the web of value versus the web of information.

And in order for web 3.0 to take root, it needs to at least be web 2.O. So the better networks look like platforms that are programmable, they have APIs, and in fact, a really good platform based on a blockchain doesn’t ever even say the word blockchain. It’s just a valuable network.

And if you talk about what, again, the obligations and rewards are for joining the network, and the fact that it was built with blockchain, and I think that is that an interesting conversation over dinner, but when you’re sharing the value of it, it may or may not even have to come up.

But the economics are different. The economics are different from today’s more single company centered platform business models. It’s not to say that single companies for different types of networks aren’t going to benefit, but I do think this really favors the ecosystem.

And I do think, again, we’ll see, and are seeing, a new style of platform that looks from a programmability perspective like what we saw on web 2.0 platforms. But I think economics is more balanced around a consortium or a group versus an individual company.

What is a Minimum Viable Ecosystem (MVE) and how to kick it off?

Gerry Cuomo: Just to give you an example, the best ecosystems are the ones that are already there. And your best partners are the ones that you already have. I mean, IBM as a company, as a buyer of services, has about 20,000 suppliers.