Observers can gain insight from IBM and Moller-failed Maersk’s attempt to establish TradeLens, a blockchain-enabled global trading platform.
Blockchain initiatives continue to endure failure rates in excess of 90%, and it appears that with each passing instant, more and more “successful” corporations are burying their failed blockchain projects. One of the most recent blockchain failure victims was Moller-Maersk, which terminated its highly advertised TradeLens service – a worldwide trade platform built on IBM blockchain technology — only recently.
However, these failures were entirely anticipated and, in many instances, could have been avoided if businesses had adhered more strictly to basic principles in innovation diffusion.
Lesson 1: Innovation is not monolithic. One of the greatest errors businesses make is treating innovation as a singular notion. Innovation is far from monolithic. Unfortunately, business associations, the business press, and business schools love to create an ongoing procession of innovation lists and innovation awards that perpetuate the misconception that all innovation is identical.
The Innovator’s Dilemma, a New York Times bestseller written by Clayton Christensen, was one of the first significant attempts to classify types of innovation. Rebecca Henderson and Kim Clark identified four types of innovation: incremental, modular, architectural, and radical. His work was useful for initiating the discussion, but a better framework for categorising innovation was developed by Henderson and Clark, who identified incremental, modular, architectural, and radical innovation.
While there are advancements that may be classified as modular and architectural, blockchain is fundamentally disruptive. Given that disruptive technologies replace established frameworks, relationships, and intermediary organisations, the most successful early applications and breakthroughs will emerge from smaller/startup enterprises as opposed to IBM, Maersk, or other multinational corporations.
Lesson 2: Complexity is an innovation killer. This is especially true for innovations that are modular and unconventional. Everett Rogers identified an inverse association between complexity and the willingness and capacity to accept a new technology. This complexity pertains not only to the blockchain application itself, but also to internal decision-making procedures, the level of adoption shift necessary, and the amount of new knowledge required to deploy.
TradeLens implementation is tough, according to experts, because “the technology is sophisticated, takes more computer power, and is more expensive to operate than existing databases.” The extraordinarily complicated natures of the two huge multinational organisations added to the difficulty of the IBM–Maersk blockchain cargo project.
In the most recent wave of significant technical innovation, namely in the social media sector, it was not the established firms who developed the tools, technologies, platforms, etc. that spurred early innovation and acceptance. It was startups – firms with quick decision-making cycles, low internal change necessary to adapt, and near-immediate assimilation of new information.
Given these dynamics, the initial successful innovative breakthroughs for blockchain are more likely to be simple applications developed by much smaller, more entrepreneurial firms that replace or reshape simple processes regarding how work is performed, products are manufactured, or transactions are facilitated between two parties.
Lesson 3: Different innovation types require different levels of risk tolerance.The risk tolerance necessary to be an effective inventor is one of the primary distinctions between the four categories of invention. Low risk tolerance is required for incremental innovation, whereas a substantially larger risk tolerance is required for radical innovation.
Importantly, tolerance in this context does not just refer to the risk or possibility that a project would fail. Assessing innovation risk also considers the probability of catastrophic failure for the entire organisation, i.e., if the adoption or innovation fails, the entire organisation is at risk of failure, not just the invention.
Billy Beane’s use of sabermetrics to the Oakland Athletics’ roster creation and administration in the early 2000s is a well-known instance of a modular innovation application. No other Major League Baseball team was willing to incur this great personal and organisational risk.
Failure for the A’s would not have been disastrous (i.e., the team ceasing to be a Major League franchise) (i.e., the team ceasing to be a Major League franchise). However, the expenses would have been astronomical. Beane would have lost his job (as well as many others) (as well as many others). A disappointed fan base would have penalised the club by staying home and halting gear sales, which would have resulted in a significant revenue decline. And the A’s would have been reduced to a Minor League club.
Blockchain, as a radical breakthrough, requires an even higher level of risk tolerance for innovation and acceptance – a willingness to risk it all. Companies who dabble around the edges (incremental or architectural innovation) with a project, in which case they may simply walk away if the innovation fails, are far more likely to encounter blockchain failures in this early stage of innovation.
Blockchain and other decentralised technologies hold great promise for a much-needed shift away from centralised production and power structures. The ultimate objective is to align our time, efforts, and resources with the innovation lessons presented here in order to give this blockchain-based technology revolution the best possible chance of success.
