What our organizations can learn from the decentralized online world

“Crypto,” and Bitcoin in particular, are highly controversial. What a few years ago evoked associations such as cybercrime, money laundering and speculation, is now an established alternative asset class. The underlying blockchain technology might even become the technical platform of a new, digital future. In this article, we try to bring in perspectives on how the blockchain world can inspire us in terms of organizational culture & development, , leadership and innovation.

The next digital revolution

A quarter of a century after the DotCom Bubble burst, the world’s largest companies are inextricably linked to the Internet: Google, Facebook, Amazon, Microsoft, Apple. Mass adoption of revolutionary technologies usually always takes longer than expected, but ends up being even more profound than anticipated.

Despite, or perhaps even because of, the success of this technology, the Internet has not kept its original promise – namely, to be an open, decentralized network where everyone can participate democratically (key words: net neutrality and data protection). With the development of Web3, the pioneers of the blockchain and crypto world are trying to counter this centralization with an attractive alternative: a decentralized and free Internet.

While Bitcoin (the first successful blockchain application) has a clearly defined use case as “digital gold”, other protocols such as Ethereum, Cardano, Solana or Polkadot go one step further. They enable, in addition to the decentralized transfer of value, so-called smart contract functions. In simplified terms, this means computer programs that trigger payment flows fully automatically according to an if-then logic as soon as certain conditions are met. Smart contract platforms combine digital processes with digital contracts/signatures and payments. Many see this as the potential for the greatest digital revolution of our era – an “automation revolution”. Especially in combination with the Internet of Things (IoT), blockchains can highly automate processes and even to some extent organizations.

From our point of view, we are still in the pioneering phase and it is by no means clear which platforms and applications will ultimately prevail. Just like twenty years ago, there is likely to be another speculative bubble that will burst sooner or later (or has burst already/again). But one thing seems clear nonetheless: the blockchain, and its paradigm of decentralization, is here to stay.

What does that mean for people?

In addition to the benefits of digital services in the form of DApps (Decentralized Apps), we as users can participate in so-called DAOs (Decentralized Autonomous Organizations) and thus assume a steering and control function. From the perspective of organizational development, DAOs are therefore highly interesting. They are a decentralized, transparent and programmable organizational model, a “company” existing autonomously and purely on the Internet, which can function with highly reduced management effort. All the rules that would otherwise be defined in a shareholder agreement or articles of association are programmed as smart contracts and are thus fully automated and transparent for all participants and can be changed – if the majority decides so.

As with the purchase of shares, the acquisition of so-called DAO tokens allows one to participate in important decisions (“On-Chain Governance”), for example about changes to the protocol (internal rules and processes written in code), or to make a proposal. DAOs are thus supposed to be run according to direct democratic principles, much more so than stock corporations.

This doesn’t mean that in classic organizations management and leadership tasks will now be replaced by the blockchain. Nevertheless, the new technical possibilities disrupt some old conventions.

How can we imagine the Web3?

Comparable to the Internet protocols HTTP and TCP/IP, Ethereum, Bitcoin and many other blockchain protocols constitute the basic infrastructure in the form of a decentralized, transparent, forgery-proof and unmodifiable database in which all accounts and transactions are stored. Based on these protocols, many applications have already emerged in recent years: Translated into our “old world,” these then include shopping malls, art markets and galleries (keyword NFT: Non-Fungible Token), banks and insurance companies (keyword “Decentralised Finance”), amusement parks (gaming, metaverse), social media and search engines. The big difference to the old world, respectively the current Web2.0: People have control over all their data again and transactions are peer-2-peer (i.e. no intermediary or central server).

What can we learn from the ecosystem?

Regardless of how you feel about this utopian/dystopian crypto and blockchain world, there is a lot to learn from it, especially when it comes to getting technology-savvy people excited and involved. One might think that the prospect of high financial gains is the only reason for the hype. But if you look behind the scenes a little more closely, you discover different drivers for success that can also work in the “old world,” especially when it comes to the younger generations. So, what are these drivers and how can we learn from them?

Purpose: Power to the people!

Power over your own data

Web3, the new and decentralized Internet, should make it possible for people to regain control over their data (keyword: Self Sovereign Identity). Everyone can decide for themselves whether and which data they want to monetize, and how. In contrast to Google and Facebook, where data is collected, processed and sold for advertising purposes, on the Web3 everyone should have the opportunity to earn money with their data if they want to. The important thing here is that people are in a position to decide for themselves (for example: Which data do I want to sell to advertising platforms or pass on to my health insurance company in order to get better conditions?). The blockchain is very well suited for this purpose, as it can protect one’s own data with the help of its encryption technology.

Peer-2-Peer and Sharing Economy

Even though today blockchain platforms are still primarily used for financial applications, gaming and “art” (NFTs), they could be a technical platform through which we build a sustainable sharing economy in the future. For example, there are already applications for energy communities, charging stations for electric cars, car sharing, etc. that are built on Smart Contract platforms. At their core, smart contract platforms are always about mapping transactions in a decentralized, secure, peer-2-peer manner and about transferring value – thus leaving more with the end customers. Professional groups and companies such as notaries, banks, insurance companies, and all kinds of brokers are therefore facing massive disruptive currents.

“Beating the purpose drum”

These two aspects are powerful in themselves; however, this purpose must also be communicated effectively and repeatedly. Charismatic masterminds and pioneers, such as Vitalik Buterin (co-founder Ethereum) or Gavin Wood (Ethereum and later co-founder of Polkadot) convey visions, values and principles in a very clear and modest way and thus strike a chord and manage to inspire.

Culture: Community and Incentivization

Anyone can participate in blockchain projects with no entry barriers and become part of the community – and community is a key aspect of the blockchain world. Enabling such an active, open community requires “community management,” an evolution of the human resources department. Blockchain projects use a distinctive symbolic language with references to nature and wildlife in marketing and branding (manta rays, canaries, etc.). This provides a high level of identity-building and promotes group cohesion.

In many blockchain projects, there are special tokens for early supporters that work like an exclusive membership card and open certain “doors”. For example, one can test the beta version, participate in early token sales and much more.

A prominent feature in blockchain projects and companies is the easy incentivization of contributors. This is because by distributing (initially worthless) tokens, everyone who contributes can benefit financially at an above-average rate if the project is successful – namely when these tokens are traded on crypto exchanges.

New Work: self-determination, transparency & open source

In the blockchain world, it is less important who you are and what position you hold, than what you contribute to the community or the project. This meritocratic approach is supported with an open learning mindset, transparency and open-source principles. Thus, the source code is made public and others can access it, test it or develop it further and, more importantly, build on it. In a global open source community, you don’t have to reinvent the wheel every time, everyone has access to all the information and so innovation can be driven very quickly. Coupled with an almost radical self-determination (no one tells you what to do – everyone has to figure it out for themselves…), this creates a strong focus and a sense of “flow” for many individuals. This extreme kind of self-determination can also be seen as a counter-reaction to hierarchical organizations. It will be interesting to see if this radical expression softens as these organizations grow.

Decentralization and resilience

In many situations, decentralized structures are more resilient and agile than centrally managed ones. Especially in times of Covid-19 (and aftershocks, keyword Supply Chain) this became evident. Decentralization can, despite sometimes higher costs, lead to more customer proximity, as well as more individual, tailored and thus more resilient solutions. For use cases and digital implementation, blockchain provides the technological basis. An interesting question that arises from this: Where would a little more decentralization do our company good and make it fit for the challenges of the future? And how can we make that happen?

Learnings for my organization

What can we take away for our organization from this brief dive into the blockchain world? Here we want to invite you to think about questions around corporate governance, decentralization, leadership and collaboration:

  • Governance: how centralized / decentralized is decision-making in our organization?
  • Purpose: How much does the purpose of our company inspire employees, customers and other stakeholders? How do we / I communicate the purpose?
  • People: What are the strengths, needs and desires of our young talent?
  • Culture: What kind of corporate culture would young employees like to see so that the company’s purpose can be pursued energetically and effectively?
  • Community: What communication channels exist to connect within our organization? Are these being used? Why / Why not? How can we succeed in building a community with clients, shareholders and suppliers? How can we engage and communicate with them?
  • Incentives: What new or different incentives do we need to get people excited about our organization and to actively shape it.

There is no question that blockchain is polarizing. However, the organizational principles behind it open up a world of new possibilities – and not only on the Web3, but also in our organizations.