25 June 2018: Creative destruction. To many of us, it describes the feeling when a team member or client rejects an inspired creative idea. To 18th century economist Joseph Schumpeter, it was a critical spark of insight: how capitalism spurs unending innovation in which new ideas continually replace old.
The term Schumpeter coined is more relevant today than ever. Back in the ‘60s, the average firm stayed on the S&P 500 for more than 30 years. About 50 per cent of companies in the S&P 500 today will be replaced during the next 10 years, if current churn rates hold. A big part of this accelerated substitution in the coming years looks set to be due, at least in part, to the rise of blockchain.
At Vivid’s recent Ideas Exchange in Sydney, Chris Monk, Head of Asia for Decoded, says there’s massive hype around the term but it’s not without good reason. Blockchain is about a lot more than its cryptocurrency poster child, Bitcoin.
There are applications across a variety of industries, from healthcare to financial services, manufacturing to government and retail to education. This is because there are ledgers in almost every industry. Almost all money is recorded in ledgers, for example, as is property ownership and evidence of our qualifications.
“What the internet did for information/communication costs, blockchain will do for transaction costs,” Monk says.
Transaction costs impact so many areas of our lives: payments, property and supply chains to name a few. This could mean anything from the effectiveness of vaccines we use to stay healthy or the food we eat.
As an international tech education company that has set out to ‘demystify’ technology, Decoded deals with major brands looking to understand the impact blockchain could have on their business models, innovation strategies and revenue streams. It’s a message that resonates because nobody wants to become the next Blockbuster.
“Think back to 1995 and imagine if you were aware of what the internet would do to your industry,” Monk says. “What would you do to make sure you were part of the disrupters and not the disrupted? That’s where we are.”
As a digital ledger, the blockchain is a distributed database that includes a list of records. That doesn’t sound super sexy. But it is. Its power lies in its role as a single source of truth that has no single location, with integrity assured through this decentralised nature.
No one is in charge, so no one can manipulate it or dictate terms. Its automation means that what used to take months and enormous legal fees to decipher – think buying or selling a house – can be done in seconds. Transparency and efficiency are among its most valuable attributes.
Start with the problem
But let’s take a step back. IBM chief executive Ginni Rometty, CEO of IBM may have said that blockchain will “transform the world” once widely adopted, but Monk is quick to caution that it won’t be the solution to every problem. Companies should be careful not to put the blockchain before the horse.
“Start with the problem. What are you trying to solve? It’s not a matter of just doing something because you can. But if there are multiple systems, multiple people, and you need consensus and trust, then blockchain may be a solution,” he says.
Blockchain will offer direct use cases in the media and marketing world we work in. Kodak – now famous for being the world-leading photography company that failed to capitalise on the switch to digital cameras – was among the first to jump this time.
It announced a blockchain initiative that it says will help photographers protect their image rights in an era when copyright infringement is more problematic than ever. Some were sceptical, but the company’s stock price tells a different story. It rose 266 per cent within several weeks, slowly falling back but remaining almost double what it was pre-announcement.
The stories we tell
For communications agencies, the impact of blockchain will be most keenly felt in the changes taking place within the brands we serve and the stories we tell as a result. Just as with the internet, Monk talks about blockchain’s coming contribution to the gradual evolution of how companies do business and meet customer expectations, eventually culminating in a disruptive revolution touching almost every aspect of our lives. And because it’s applicable across so many industries, it’s not just tech communicators who need to understand the possibilities.
Every company disrupted by blockchain will need to tell a story about why it still has value and deserves to be front of mind. Those on the other side of the equation must convey what’s on offer that their more established competitor doesn’t have.
It’s also worth bearing in mind the broader cultural zeitgeist blockchain is part of, in which technology is democratising processes, shifting power away from large, centralised institutions and dispersing it among the many.
Think of how Airbnb made hotel owners of us all and Uber let anyone with a car make a living from driving around their neighbourhood. Blockchain will reduce costs, increase access and force established players to up their game. As author and academic Rachel Botsman puts it, we now live in an age of ‘distributed trust’ where we look to each other, not old-fashioned institutions, to take care of what matters most.
This is why it’s incumbent on communications companies to get to grips with blockchain. Of course, we’re not going to get stuck in the weeds. Our job is to peer through the technicalities to find the core of what it means for customers and what they care about. Mainstream adoption may well be five to 10 years away but the journey is underway.
So what do we need to know?
- Blockchain is about efficiency and transparency, putting power and information into the hands of the many, not the few. It’s reducing the cost of trust.
- It fits into a broader trend away from centralised powerful institutions to decentralised trust based on mass, networked participation.
- Blockchain is a digital ledger detailing a series of transactions. Each block is a record of a unit of information.
- Its tamper-proof security relies on a process called hashing. Hashing takes a given piece of information – a word, name or whatever you want to make a record of – and turns it into a unique and seemingly random series of letters and numbers. Effectively, a digital fingerprint.
- Blockchain is called blockchain because each new block or record of information (e.g. I sold my house to Dave) takes part of the hash from the previous block and incorporates it into the new hash. In this way, each block contains a record of all previous blocks, helping to ensure the ongoing integrity of the data.
Blockchain may be in its buzzy, confusing infancy – no commercially viable products and services have been launched yet – yet it’s by no means a fad we can afford to ignore. It’s about the change the game for many of our clients and, in turn, for those who tells stories about what makes brands great.
By Alison Lowe, Content Manager