This article was first published by ClickZ.
Big banks have a branding challenge. Nearly all look, act, and sound the same. And in a world experiencing breakneck technological change, radical transparency, and still recovering confidence from the financial crisis of 2008, the same old tricks no longer cut it.
Similar to the internet’s proliferation of information access and transfer, blockchain will accelerate and facilitate value transfer and exchange. Extraordinary opportunities lie ahead, but only for brands savvy enough to anticipate and navigate coming advances.
Intro to Blockchain
So what is blockchain? It’s not Bitcoin, blockchain’s first large-scale application. Blockchain’s underlying technology is the true innovation. Blockchain’s fundamental blueprint was outlined in a 2008 white paper by Satoshi Nakamoto (a pseudonym yet to be unmasked).
The paper defines blockchain as a distributed ledger which: 1) bundles two-way transaction records into “blocks,” 2) crowdsources the verification of those records using cryptographic keys and 3) timestamps and links the verified blocks together to form an immutable, unbroken chain—a single version of transactional truth.
This combination of independent and interdependent authentication all but eradicates fraud. Whereas existing marketplaces require outside parties to establish trust, the basis for trust is inherent in blockchain’s system itself. Blockchain’s applications and implications, therefore, stretch far beyond currencies, potentially impacting global trade, securities and insurance markets, to name a few. Even regulators are embracing it to improve tax compliance and collection.
Blockchain for Brands?
How will brands—across industries—be impacted by wide-scale application of blockchain? For generations, big financial institutions’ competitive advantage was their very institutional status, marked by big buildings, armies of suits, slick corporate sheen, a lexicon designed to keep laymen guessing. These elements were all calculated to reinforce bank's biggest intangible assets: trust and authority.
Blockchain was introduced just as the 2008 financial crisis began eroding trust in banks as reliable mediators. Today, instead of denying blockchain’s viability, financial powerhouses are embracing it openly and actively road-mapping its future. The R3 Consortium is the most visible amongst many such prescient actions, representing an ever-growing group of name brand institutions facilitating blockchain-based innovations. For example, Deloitte recently spearheaded creation of a blockchain-based bank and IBM is throwing substantial clout behind a whole host of sophisticated business solutions leveraging this nascent technology. Blockchain is also inspiring irrational exuberance, such as Accenture’s “editable” version, which appears to miss the point of the technology for the sake of appeasing skittish Wall Street execs.
New Kids on the Block
Blockchain innovation is already beginning to spill beyond finance. Vienna-based Grid Singularity is exploring a decentralized electric grid built atop blockchain, allowing individuals to buy and sell energy, enabling integration of smaller, scattered renewables such as wind and solar into the energy system. Blockchain is also promising to democratize and demystify the recording industry’s broken royalty system. Grammy-winner, Imogen Heap’s latest release was launched as a blockchain application, directly linking digital rights management, streaming and reimbursement to the music itself. Similar novel ideas will continue to affect increasingly diverse industries in unpredictable but profound ways.
Embracing innovation effectively requires understanding new rules, estimating their impact on current strategies and then deliberately seeking gaps between present strengths and future opportunities that provide optimal leverage. Uber and Airbnb upended their respective verticals by allowing direct connection within transactions traditionally brokered by middlemen. Netflix’s insight was seeing past the need for costly transportation and inventory and realizing shipping physical discs was a needless extra step towards delivering actual value. Amazon’s success came from appreciating the power unlimited shelf space and robust search would provide a massive audience with a staggering number of buying options. This blindsided the established leaders, like taxis, Blockbuster and Barnes & Noble.
Your Link to the Future
Blockchain currently places myriad brands at an identical, existential crossroads. Outsized rewards await organizations that are capable of reframing their current business models to capitalize on the new efficiencies and realities that blockchain presents. However, brands with a deep understanding of their core fundamentals will be better poised to identify and integrate such opportunities. Inspiring corporate reinventions like Marvel, Lego and Polaroid prove that brands with defined identities have a fixed vantage point to align their perspective with new technology.
Imagine your current business with all transaction intermediaries removed. Which of your offerings would be made redundant? What new value could you provide? Would these changes gut your brand and business? To best address these pressing questions, avoid the temptation to look to new technologies for the solution. First, clarify your brand promise. Then you will be able to chart a course to navigate this ever-shifting landscape with confidence. Only your brand’s depth of foresight, purpose and reputation will determine if the coming blockchain wave will strengthen your connection to customers or expose your business’ weakest links.