Blockchain projects continue experiencing failure rates in excess of 90%, and it seems that with each passing moment, more and more “successful” companies are adding their underperforming blockchain project to the graveyard. One of the most recent victims of the blockchain failure was Moller-Maerskwhich recently announced the termination of its highly publicized offering TradeLens, a global trading platform based on IBM’s blockchain technology.
These failures, however, were entirely predictable and, in many cases, would be avoidable if companies took a closer look at certain lessons in the diffusion of innovation.
Lesson 1: Innovation is not monolithic. One of the biggest mistakes companies make is treating innovation as a monolithic concept. Innovation is anything but monolithic. Unfortunately, business associations, the business press, and business schools love to create a never-ending parade of innovation lists and innovation awards that reinforce the idea that all innovation is equal.
Clayton Christensen New York Times Best Selling Book The innovator’s dilemma it was one of the first major attempts to distinguish types of innovation. Their work was helpful in starting the conversation, but a better framework for categorizing innovation comes from Rebecca Henderson and Kim Clark, who identified four types of innovation: incremental, modular, architectural, and radical.
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While there are innovations that can fit into the modular and architectural category, blockchain is, at its core, disruptive. As disruptive technologies replace existing frameworks, interactions, and intermediary institutions, the most successful early applications and innovations will come from smaller or start-up companies rather than IBM, Maersk, or other Fortune 100 companies.
Lesson 2: Complexity is an innovation killer. This is especially true for radical and modular innovation. Everett Rogers observed the inverse relationship between complexity and the willingness and ability to adopt an innovation. This complexity is not only related to the application of the blockchain itself, but also to internal decision-making processes, the level of change that needs to be adopted, and the amount of new knowledge that needs to be implemented.
The experts have border the difficulty of implementing projects like TradeLens, since “the technology is complex, requires more computing power, and is more expensive to run than existing databases.” Adding to the complexity of the IBM-Maersk blockchain shipping project was the highly complex nature of the two large multinational corporations.
In the last round of major tech innovation, namely the social media space, it wasn’t the established players that built the tools, technology, platforms, etc. that drove early innovation and adoption. These were start-ups: organizations where decision cycles were short, minimal internal change was required to adapt, and new knowledge could be assimilated almost instantly.
Given this dynamic, initial successful innovative breakthroughs for blockchain are more likely to be found in simplistic applications developed by much smaller, more entrepreneurial companies that replace or reshape simple processes around how work is done, products are made, or facilitated. transactions between two parties.
Lesson 3: Different types of innovation require different levels of risk tolerance. One of the key differentiators between the four types of innovation is the risk tolerance required to be an effective innovator. The risk tolerance level for incremental innovation is low, while radical innovation requires significantly higher risk tolerance.
One important note is that tolerance here is not just looking at risk or the probability that a project will fail. The innovation risk assessment also looks at the probability of catastrophic failure for the entire organization, which means that if adoption or innovation fails, the entire organization is at risk of failure, not just the innovation.
Billy Beane’s application of sabermetrics to the construction and management of the Oakland A’s roster in the early 2000s is a well-known example of a modular innovation application. This innovation posed a high personal and organizational risk that no other major league team was willing to take.
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Failure for the A’s would not have been catastrophic (ie, the team ceasing to be a major league franchise). However, the costs would have been extremely high. Beane would have lost his job (as well as many others). A dissatisfied fan base would have punished the team by staying home and stopping buying clothes, causing a massive drop in revenue. And the A’s would have become a glorified minor league team.
Blockchain, as a radical innovation, requires an even higher level of risk tolerance for innovation and adoption: the willingness to risk it all. Companies that play on the edges (incremental or architectural innovation) with a project, where if the innovation fails they can just walk away, are much more likely to experience blockchain failures at this early stage of innovation.
Blockchain and other decentralized technologies hold great promise for a much-needed shift away from the current trend toward more concentrated modes of production and energy. The ultimate task is to align our time, efforts, and resources with the innovation lessons provided here to give this blockchain technology revolution the best chance to succeed.
swim lyall is the director of innovation for Atlas Network. He has a doctorate in education with an emphasis in organizational leadership from Pepperdine University. He has a bachelor’s degree in communications and an MBA from Brigham Young University.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
