Ecosystems are a team sport – and blockchain must be the referee

In recent years, business ecosystems have emerged as a way for networks of organizations to create incredible market value through collaboration and competition, with an estimated $60 trillion in annual revenue set to be redistributed across the economy by 2025 through ecosystem growth. But simply operating within a business ecosystem by no means guarantees its success — less than 15% are successful in the long run. With a lack of trust and wrong governance choices among the principal causes for ecosystem failure, it’s become clear that the rules of the game matter.

Just take the failure of the digital car buying and selling platform, Beepi. In 2015, Beepi was valued as high as $546 million as it allowed customers to buy inspected used cars at the touch of a button. However, as a new player in the space, consumers did not recognize the Beepi brand, nor did they trust its inspectors or sellers. As a result, buyers were reluctant to purchase a car without test driving it themselves. Without the trust of its customers in its ecosystem, Beepi was unable to scale and folded in 2017, failing to fulfil its promise of industry disruption.

In an environment where trust is paramount, blockchain is emerging to be the ideal arbiter. Blockchain provides a decentralized and impartial ledger that no actor is in control of, thereby offering guarantees that encourage participants to join or deepen their engagement with the ecosystem. Blockchain acts as a single source of truth for the ecosystem, overseeing all transactions and ultimately maximizing its value proposition.

Ecosystems need a referee

An ecosystem is a network of actors, which can include suppliers, distributors, customers, agencies, and competitors. Ecosystems are dynamic communities in which the participants co-evolve through collaboration and competition. The inner workings of these networks closely mirror the dynamics of a team sport, with disparate players needing to work together to collectively enhance their value proposition to thrive and profit. Yet over $50 billion of capital is lost every year as a result of failed ecosystems.

To maximize opportunities for value creation, the value network needs to expand and should consist of engaged and active participants. Unless some foundational capabilities are in place to attract more participants and drive more engagement, ecosystems will fall short of realizing the full value potential for their participants.

A big part of attracting new players and partners is being able to offer a solid foundation of trust. New actors won’t consider joining if there is a lack of trust — regardless of the vision of the ecosystem. With fewer participants and resistance from companies to join, the ecosystem’s network effects will struggle to grow. Furthermore, they need to be able to successfully monetize. The monetization model and revenue share model for the different participants become questionable without trustworthy practices.

Here’s where blockchain can play a vital role. Blockchain can act as the perfect middleman as it’s a decentralized system that is not owned or operated. As an impartial ledger, it gives partners the confidence to operate in the ecosystem without fear of unethical practices from other participants.

Blockchain: The perfect arbiter

When a given ecosystem adopts blockchain, it immediately creates a trust dividend that empowers partners to focus on the mission and vision built into that system. The technology guarantees fair and honest activity between all involved to provide the level pegging that players need to compete and collaborate with confidence.

Just as the referee on a sports field brings accountability to proceedings, blockchain provides an incorruptible and unchangeable record of activity that allows transfers, supply chain activity, sales and purchases, and more to be undertaken with certainty.

One good example of how blockchain has been used to build trust in an ecosystem is in the global shipping industry. Today, two-thirds of global container freight is tracked on the blockchain-based digital platform TradeLens. In such a lucrative industry, replacing inefficient and manipulable manual information exchange systems with an impartial technology-based approach that allows for instant verification provides a level of accountability that is welcomed by all sides.

In other industries that have traditionally had to battle against corrupt or anti-competitive behaviours — such as banking and finance — blockchain provides the basis for confident interactions while eliminating the need for costly third-party services that previously provided the guarantees needed for actors to confidently work together.

Blockchain means more value-creation opportunities

Look no further than Plastic Bank for one powerful example of how competing actors have been able to draw value from a blockchain-based system. The Canadian social enterprise helps to tackle the dual challenges of plastic waste accumulation and social exclusion in some developing countries. The system sees plastic waste that would otherwise have largely ended up in landfills and waterways in Brazil, Indonesia, and the Philippines gathered by often marginalized members of local populations and purchased by “banks” at a premium.

The result is two-fold. First, earning a fair wage from doing such work allows participants to cover their necessities and work towards a better future. At the same time, major companies are supplied with so-called “social plastic” — a sustainable source of materials generated by a verifiable supply chain free of corruption and exploitation, and which is contributing to environmental cleanup.

The ecosystem’s blockchain technology means materials can be tracked from the point of collection to final reuse, with the credit, compensation, and delivery of the materials verifiable every step of the way. With accountability built into the system, more and more actors can be expected to participate as consumer awareness and support increase. Ultimately, that brings more value to all actors involved in the ecosystem, including consumers willing to pay a premium for ethically sourced materials. Already, Plastic Bank is preparing for launch in Egypt.

Everybody wins

Ecosystems undeniably need more than just blockchain to thrive, with standards and strategies for sharing data and monetizing products and services crucial to an ecosystem’s efforts to maximize its value proposition. But using the technology allows those involved to focus on developing such standards and strategies with confidence.

In an ecosystem underpinned by blockchain-based trust, direct competitors feel far more confident about engaging in “coopetition,” whereby they effectively collaborate to build up an ecosystem from which they are then able to draw more value.

Greater accountability also allows traditional industry-based value chains to become increasingly interconnected. Without having to rely on trust built up within a value chain over time, a wider range of actors can be brought together. Ecosystems have always crossed industry lines and drawn together disparate stakeholders, however blockchain technology allows yet deeper interconnectedness and collaboration.

As highlighted by endeavours like Plastic Bank, this will ultimately pay dividends at the societal level. The world today faces a great many challenges, including climate change, social exclusion, and issues surrounding sustainability. By imbuing interactions with accountability and trust, blockchain allows us to collectively confront such challenges with the confidence we need to make a genuine difference, while simultaneously bolstering bottom lines.

Golnar Pooya is an advisor at 7 Gate Ventures and has worked for the past two decades helping F500 enterprises capitalize on opportunities in new disruptive technologies and expand their ecosystems.