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Think 2019 / DOC ID / October 11, 2019 / © 2019 IBM Corporation 1
Think 2019 / DOC ID / October 11, 2019 / © 2019 IBM Corporation1
Building your blockchain advantage
Fresh insights on how to create value, scale fast and open new markets
THINK Summit Brussels 2019
11th October 2019
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Industry consolidation Turning to sustainabilityEmergence of platform
business modelsGrowth of the sharing
economy
Why blockchain
The world is in a state of distrust, with the U.S. recording the steepest ever measured decline in trust in 2018
Introduction
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This report draws on insights from case study analysis of over 25 blockchain networks in various stages of production across multiple industries and geos.
Detailed analysis of each business case including their incentive models, governance structure, monetization strategy and market approach was conducted followed by selected interviews to validate the new insights in this report.
Methodology
Introduction
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Business differentiation networkto enhance existing processes
Create private network with partners
Industry utility networkto optimize shared processes
Collaborate with competitors
Open to industry participants to consume services
New market networkto innovate new platforms
Collaborate with non-traditional partners
Create or consume services on new cross-industry marketplaces
The combination of types of networks and roles organizations can play opens up a variety of opportunities to create value
Introduction
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1.In search of value
3.Designing for new markets
2.Getting to scale
Whatever your role or the type of network, blockchain business model design requires a strategic approach
Introduction
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1. In search of value – Organizations that design and test a minimally viable ecosystem (MVE), rather than a minimum viable product (MVP), have a greater chance of launching a successful blockchain network
– An organization’s strategy to grow the blockchain network will be iterative, but its evolution must be carefully planned
– Incentives, which are rewards to members for their contributions to the network, may not always be apparent
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Complexrisk coverage
broker
IoT
An illustrative roadmap for a blockchain network in the insurance industry
In search of value
Hedge fund
Provider
Insured
Insurer
Shared value created
Network maturity
R At fault insurer
Reinsurer I, II etc.
Group benefits Parametric insurance Risk exchangeClearing and
exchange services
Differentiation
Differentiation
Utility
UtilityMarket
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Reducing working capital
Other secondary benefits
Saving cost Growing revenue
Organizations must consider all types of benefits, correlated with effort, risk and roles of each member
In search of value
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2. Getting to scale – Network effect on blockchain is best measured by transaction volume
– How network competition will play out is not precisely known, but the fight for industry utility status could be fierce
– The biggest challenge in getting to scale is collaborating with other industry players
– Governance includes business, legal and technical responsibilities of coordinating activities and growing the network
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3.Companies are placing big bets in expertise, data and platforms
“A much-needed, open, neutral and
consistent standards-based solution for
our industry.”
Charles WellensPresident and Chief
Operating OfficerFlexivan
Shared Ledger
Getting to scale
TradeLens sees strength in numbers
Government authorities
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Ports, terminal and operators
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Shipping lines
5+
Shipping events tracked per year
500M+
Inland providers
3
Shippers and others
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Governance pyramidGetting to scale
Expand the working group by seeking new global members
Manage working group membership and govern the network
Run and operate the network, security, performance and capacity management
Build future feature updates into the solution on behalf of its members
Governing body(e.g. working group)
Network Operator
The working group needs an entity that has a responsibility to run and grow the network from a business perspective, create the governance models and define and enforce the network policies.
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3. Designing for new markets
– New market models on blockchain can radically shift power to the consumer
– How a network monetizes its investmentdetermines its viability – pay for apps, pay for basis points, pay for insights
– As new blockchain networks continue to emerge, significant structural changes to the economy are possible
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Pay for basis points
Pay by volume and value of transactions on the blockchain network
e.g. 0.01% of a transaction on a global payment platform
Pay for apps
Pay for access to a blockchain based service available via an app.
e.g. A monthly subscription fee
Pay for insights
Pay by degree of insight available from the blockchain solution.
e.g. Fee for status of product, lower fee for port to port status vs door to door status
The key to monetization of blockchain networks is to find the right unit of measure
Designing for new markets
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An illustrative 3 year blockchain network cost modelDesigning for new markets
Shared costs Develop (40%) Govern (20%) Operate (40%)– Blockchain as a Service– Other SaaS
– APIs– User interface– Smart contracts– Infrastructure
– Legal services– Governing entity set up– Standardization– Onboarding members– Application governance– Member needs e.g. training– Dispute resolution
– Standard deployment Technical onboarding
– Authentication– Performance and security– Help desk– Ongoing application
maintenance
Local costs Integrate Process redesign
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A tokenized circular economy
Designing for new markets
IssueRedeem
Use
Use Use
Incentivize changed behavior
Transfer ownership and (micro) value at high velocity
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Collectors deposit recyclables
Plastic Bank turns waste plastic into currency
Designing for new markets
Notify Plastic Bankto issue asset
backed token
Manufacturing
Sustainablemanufacturer
payment
Plastic offsetmanufacturerpayment
Social plastic
Collector paidwith tokens
Collector’s credit rating
Token TokenCollector’s smartphone
Reimburse retailer
Redeem
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4.Future-proof your network
2.Measure ecosystem viability
3.Calculate the network equation
1.Scan for opportunities
5.Keep your options open
The path to value
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Are you ready to tap into the blockchain advantage?
Key questions to consider:– What problems slow down your supply chain or
plague your industry?
– How could you differentiate your organization with enhanced processes or a superior brand proposition?
– What initial market size needs to be achieved in order for members of your ecosystem to accrue expected benefits from blockchain?
– What further scaling options exist for your blockchain solution? Could the solution be licensed to other geographies?
– How will your blockchain network as a whole monetize its initial investment?
– How could tokens incentivize new behaviors or facilitate new peer-to-peer and prosumer markets on blockchain?
The path to value
Reach out, engage, let’s work together!
Smitha Soman
Blockchain Strategy & Research
IBM Institute for Business Value
https://www.linkedin.com/in/smithasoman
Download the full study:ibm.biz/blockchainbizmodel
Download all Blockchain@IBV studies:ibm.co/blockchainseries
