Unblocked

Chapter 4. THE GENESIS OF THE UNBLOCKED CUSTOMER

The Consumer Technology Created

Today’s consumers have more power than ever, and they know it. They type, swipe, and click their way to nearly anything they desire.  They put a few words in a search bar to comparison shop across thousands of sources. They summon groceries and gas, dinner and dates—all with a few taps and the help of accurate geolocation services. They expect free shipping. They assume you can anticipate their needs. They expect you to know them, whether they are using their tablet, smartphone, or even a watch. They want to reach you whenever, however, be it via voice, web, chat, email, video, or social media. And if they’re under 40, you can bet they’ll abandon you the moment there’s friction.

Today’s consumers type, swipe, and click their way to nearly anything they desire.

How Did We Get Here?

The industrial revolution marked a shift to factories and mass production, and with this new industrial capacity came a surplus of goods. The answer to this surplus? Using advertising to create markets—which launched a new relationship between a business and its customer. Money flooded into the advertising industry, and spots in newspapers, magazines, direct mail, radio, and television sprang up like dandelions. This relationship was relatively “light touch”—hear about my product, buy it, use it, and buy it again—and these behaviors were encouraged by consistent advertising and the emerging practice of brand marketing.

Maintaining this basic cornerstone of “being heard” became a lot more difficult in the internet era, as shown in Figure 4-1. Channels and information exploded, and all of a sudden it became staggeringly difficult to stand out among all the digital noise. But it got even more complicated: consumers expected you to hear them as they shouted out their gripes and delights about your products on dozens of social channels, review sites, and blogs. Now, the relationship meant not only being heard, but listening—and responding.

Figure 4-1. How the internet triggered new challenges for brands

Whether a young startup or an established brand, companies that have a good relationship with their customers today have recognized the shift in power, and have found a way to deliver to it.

But they are not done.

In his outgoing speech, John Chambers, Cisco’s CEO of 20 years, warned 25,000 listeners that “Forty percent of businesses in this room will not exist in a meaningful way in 10 years . . . companies cannot miss a market transition or a business model or underestimate your competitor of the future.”²³

Companies cannot miss a market transition or a business model or underestimate your competitor of the future.

John Chambers, Former Cisco CEO

Whether you have a good relationship with today’s customer or not, be warned: the world is about to shift again.

The Internet: Built to Fail

In the 1980s, scientists at European physics lab CERN were struggling to share, track, and collaborate on their research. Tim Berners-Lee, a contractor with the lab, provided an answer: he created the World Wide Web. Tim designed this new platform to be permission-less and free, an open space for creativity, innovation, and free expression that transcended geographic and cultural boundaries. And in many ways, it still is. But something else happened: “free” services that made revenue by harvesting the attention and data of millions of users became the prevailing force on the internet.

They were staggeringly successful: the average American now spends 24 hours a week online.²⁴ Affluent millennials spend over 50 hours.²⁵ The internet has become the dominant global platform for social interaction, commerce, media, and entertainment. And with it, a new dynamic has emerged: power has become concentrated in the hands of a few giants like Google, Facebook, and Amazon. They wield undue influence as a result. Everything you post, click, or search for online is recorded, and it is used to influence your behavior and make money for a broad range of companies—but not for you. Entire industries have sprung up to perfect the harvesting of your attention so that someone else can monetize it. Meanwhile, all this data that is being collected is often poorly protected by the companies who have taken it. Even those organizations that are serious about security are under a constant barrage of cyberattacks, with quite a few suffering breaches.

Because nation-states can censor, media outlets can prioritize the content you see, and finely tuned AI and bots can create and distribute content that appears legitimate, our view of reality can also be easily manipulated. And, with great irony, many of today’s hyper-connected and broadly social-networked people report feeling more disconnected than ever. Tim Berners-Lee himself has sounded the alarm. “Over the last 12 months, I’ve become increasingly worried about three new trends,” he has asserted—namely, how we have lost control of personal data, how easy it is to spread misinformation on the web, and a lack of transparency.²⁶ “The web has evolved into an engine of inequity and division, swayed by powerful forces who use it for their own agendas.”²⁷

There was nothing in the original specs of the internet to code trust between two participants.

How did this happen? A key driver: there was nothing in the original specs for the internet to code direct trust between two participants.

Enter Blockchains

Staggeringly complex, disarmingly raw, and complicated by a seemingly distracting (yet crucial) tie to cryptoassets, blockchains can be intimidating to even seasoned technical executives. Yet they hold the seeds of deep transformation that could equal—or perhaps even eclipse—what we have seen in the last decade.

Blockchains offer a wealth of new functionality that can address the shortcomings of the internet’s original design.

Blockchains offer a wealth of new functionality that can address the shortcomings of the internet’s original design, and are poised to shift the way we interact with each other, with brands, and with businesses. At the center? An ability to replace subjective trust with code. The dominant feature? They do so through decentralization—removing power from a centralized body and instead giving it to the crowd. This feature has become one of the core tenets of the blockchain movement, the ethos of which is being coded into protocols (the standards dictating access and exchange of data on a network), being written into governing standards, and stoking social movements targeted at bringing change to a range of industries across the globe.

In the 1440s, Johannes Gutenberg launched a technology onto the world that would permanently alter the very structure of society: the printing press. Books, once painstakingly copied by hand and available to few outside of the church, broke loose into the population. Rather than deferring to the clergy, laypeople could access a book, and the ideas within it, directly. Likewise, ideas could spread from a single individual to an entire population quickly through the authorship of a book. This technology fractured the church’s hold on renaissance Europe and paved the way for social and scientific revolutions. Information and revolutionary ideas could now transcend borders and social classes. Centers of power and authority were threatened and monopolies of the literate elite were broken.

Blockchain technology releases a modern, but analogous, shift in society.

Launched in the wake of the financial crisis, Satoshi’s infamous whitepaper described a striking solution to widespread discontent with centralized financial institutions. It showed how to circumvent centers of power by coding trust that could, through decentralization, function even between strangers. This was the first blockchain, and its first application was a digital currency designed to work without any bank, central government, or organization. Like the printing press, the technology it described would loosen the hold of centralized bodies and give new powers to the people.

The Era of the Unblocked Customer

At this very moment, as you read these words, there are tens of thousands of pioneers and provocateurs around the globe coding a new foundation for our digital future. At its core is the concept of decentralization, and all the benefits this brings to an individual or a business. Behind many of the new protocols being developed is a social movement. Some of these protocols will never turn into much, but others will cluster and build, channeling great human and financial capital into educating people about this new alternative. In some areas, change will come in a matter of years. In others, it will move slowly, in small gradients that eventually, over decades, change the underlying hue. But the movement—and it is a movement—will gather force and gradually, over time, bring about a new, more powerful customer.

This new customer will be able to cut you out. To go direct. To see if you are really standing by the values you claim. To know if what you sell is what you say it is. To barter or sell their own attention, data, posts, reviews, writing, and photos. To make money doing what you used to do. This is the customer of the blockchain-era world: the unblocked customer.

There is an important place for businesses and brands in this world, but for many it will likely look very different from today. Competitors—both new and old—who “get it” first will debut new products, packaging, pricing, services, and value that deeply resonates with the unblocked customer. And in doing so, they will train this consumer of the future to have these same expectations of you.

The unblocked customer has a lot to give, but she expects a great deal more in return.

By what it makes possible, this technology has the potential to forever change the relationship between a customer and a brand. The unblocked customer has a lot to give, but she will expect a great deal more in return. Unblocked customers will know the value of what they’re contributing to your business because someone—perhaps a competitor—is willing to pay them for it. They will be skeptical of you if you sit in between them and what they want. They may be willing to give you more—more data, more content, more exposure to their inner workings—but only if you demonstrate you are worthy.

A Whole New Layer of Expectations

Many companies have become quite adept at listening and responding to meet internet-era customer demands. But this new customer will demand a new kind of relationship. They will change the power dynamic, and the businesses that understand this will see that this requires a relationship that looks a lot more like a partnership.

This means companies will need to dive much deeper into understanding their customers and what they really value. And they will need to more actively engage across the entire organization to discover and deliver on this. They will need to learn how to communicate differently, so customers understand and respect all that a business brings to the relationship. And they will need to recognize—even reward—the value customers themselves contribute to the business. This is a new ethos, and it is based on collaboration.

Blockchain-Era Expectations Will Put More Pressure on Businesses

The businesses that pull ahead in the era of the unblocked customer will be those that regard their relationship with customers as a form of collaboration. This means that customer and brand find and exchange value in ways that drive great benefit to them both, as shown in Figure 4-2. In many areas this is a natural progression from where we were already headed. Customers have been demanding increased transparency—they want to know where products are from, and how data is used—and some companies have worked hard to provide this. Platform players such as Airbnb and Uber have created significant markets out of people selling a night in their house or a ride in their car, to great benefit for buyers, sellers, and the platform. For years, loyalty programs have compensated consumers for behaviors and buying decisions that benefited a business. In these examples, blockchain technology could simply make it possible to do these things better—sometimes much, much better. In other areas, it makes entirely new business models and incentive structures possible.

Figure 4-2. How the blockchain era will evolve customer relationships

This shift may start in a few seemingly disconnected areas where blockchains solve a pressing pain—international remittances or title insurance, for example. But it will spread, slowly yet steadily, to influence many customer relationships—from B2B to B2C to B2B2C and any other configuration. The technology naturally favors businesses that understand the importance of partnerships, consortiums, and collaborative ecosystems. At their very core, blockchains are a team sport, making it possible for multiple organizations to work together to do more than they could do on their own. Ultimately, this could very well rewrite what drives competitive advantage, with collaboration championing over purist competition.

The businesses that pull ahead in the era of the unblocked customer will be those that regard their relationship with customers as a form of collaboration.

For some organizations, blockchain capabilities may become the next add-on to digital transformation initiatives. Others may, more dramatically, disintermediate digital transformation and create their own next-generation blockchain-first competitors. But regardless of approach, smart organizations will also focus on transforming their relationships to meet new blockchain-era expectations as the technology is more broadly adopted. They will focus on delivering real, authentic value to customers, and demonstrate their alignment with customer needs and values. They will proactively work on shifting internal mindsets and developing a new way of interacting with customers and partners. They will change how they think about marketing, branding, customer experience, digital experience, customer service, product development, and even core business models. They will learn a new paradigm that is, essentially, the business of trust.

Smart organizations will also focus on transforming their relationship with customers to meet new blockchain-era expectations.

It will be much harder to be a successful business in the era of the unblocked customer. But those who are able to make the shift have a chance to get in exchange a more holistic view of their customers, an opportunity to build stronger, more authentic and trusted relationships, and deeper loyalty. And, ultimately, as the technology matures, it has the potential to bring both direct and indirect impact to the bottom line. Many established brands will not be able to make the transition. Many startups will fail to capture this new paradigm. But the companies that pull ahead will be those that understand these new dynamics and proactively work to shift their relationship with customers even before they’ve mainstreamed blockchains as part of their business. It is quite possible that this next era will be remembered for its great shift toward more equitable power between organizations and individuals, and the amplified influence of the crowd.

Why Now?

When you’re finished changing, you’re finished.

Ben Franklin

It was just three decades ago that Tim Berners-Lee first sketched out the idea of the World Wide Web. Today, the internet has become so pervasive in our lives that people need to go to great lengths to avoid it.

As a society we have shown a pattern of adopting new technologies at an ever more rapid pace, as shown in Figure 4-3. It took 35 years for the telephone to be adopted by one-quarter of the American population. The web took only seven years to reach this milestone.²⁸

Figure 4-3. Society is adopting technology at an increasingly fast pace

This accelerated pace is one of the key reasons businesses have struggled to respond quickly to new technologies as they become mainstream. The web, mobile phone, and even personal computers required adjustments to business as usual—and with each new wave, companies have had less time to react to these new, fast-approaching realities and the threats and opportunities that come with them.

We can expect blockchain applications to blindside even more businesses than previous waves of technology change did.

If the adoption of blockchain applications follow this well-worn pattern, we can expect it to blindside even more businesses than previous waves. And the adoption curve could be further fueled by characteristics of the technology itself. It contains, as social media did, attributes that encourage network effects to build quickly, seemingly out of nowhere. However, in many ways, one could argue that the blockchain version is supercharged, because additional incentives are built in. Participants—whether individuals or organizations—can directly benefit from the growth and success of the network.

Yet there is an argument for an even stronger catalyst for adoption: it is hitting at a particularly ripe moment.

A Huge and Disillusioned Generation

New York Times writer David Brooks traveled to college campuses to understand how students see the world. In a story he wrote after the experience, starkly titled “A Generation Emerging from the Wreckage,” Brooks describes a cohort with diminished expectations. Their lived experience includes the Iraq war, the financial crisis, police brutality, political fragmentation, and the advent of fake news as a social force. In short, an entire series of important moments in which “big institutions failed to provide basic security, competence and accountability.”²⁹

To this cohort in particular, blockchains’ promise of decentralization, with its built-in ability to ensure trust, is tantalizing. To circumvent and disintermediate institutions that have failed them is a ray of hope—as is establishing trust, accountability, and veracity through technology, or even the potential to forge new connections across fragmented societies.

Jeremy Gardner cofounded Augur, a blockchain project that, for a time, reached a market cap of over $1 billion when he was in his early 20s. He also founded a hedge fund, a blockchain publication, and Blockchain Education Network (BEN)—a nonprofit that seeds education at college campuses around the globe (and counts members from nearly 100 countries). Jeremy coined the hashtag #GenerationBlockchain to describe the students who, once they have glimpsed what blockchain technology makes possible, cannot go back. After meeting at an event for BEN, Jeremy and I caught up by phone as he traveled around the world for his work.

“We have the potential to create a generation of youth who think about blockchains as intuitively as we approach email or social media,” Jeremy said. “It’s bigger than money—this is about values. The internet has been this incredibly powerful, revolutionary tool for the uploading and dissemination of information. But if you want to exchange value, you rely on the same centralized intermediaries that have existed for decades, or even centuries—banks, governments, clearing houses—or central repositories such as Facebook, iTunes, and Netflix. Our digital lives are owned by these oligopolies. But in the age of blockchain technology, the individual can have sovereignty of their digital life. It is such a powerful notion. And it’s a reason young people are the ones at the ground level of this network-driven software movement, they are the ones evangelizing this, and they are the ones that will drive adoption.”³⁰

The youth are not alone in their discontent. Diverse adult populations across the globe have escalating skepticism of institutions, with moves on Wall Street triggering financial crisis, corporations proving poor stewards of data in an age of continuous cyberattack, governments failing to protect citizens, and economies collapsing. A widening gap between the rich and the poor, and deliberate manipulation of the news, has contributed to deeper fragmentation.

On the cusp of surpassing baby boomers as the nation’s largest living adult generation, millennials are a massive force. In the United States, they are also becoming the wealthiest: over the next 30 years and as they are entering their prime earning years, millennials will inherit $30 trillion from their baby boomer parents and grandparents. Receptive and quick to adopt new technologies, millennials, through their influence and demands, have already played a huge role in shaping the way we shop, work, and live. They may very well be one of the first—and highly influential—major segments to adopt blockchain-fueled development. A recent Pew Research Center study found that just 19% of millennials (those born from 1981 to 1996, according to Pew Research) feel that “most people can be trusted.”³¹

Blockchains’ capabilities match up in seemingly ideal alignment to this perfect storm of discontent. It comes at a particularly potent time. Entire populations are activated, and ready for change.

I recently sat down with European Parliament member Eva Kaili, who also chairs the Science and Technology Options Assessment (STOA) panel aimed at assessing AI, fintech (technology used to support financial and banking services), and blockchains, to hear her perspective on adoption. “Young people discovered this technology that makes it unnecessary to have intermediaries,” she said. “I first heard about blockchains from 20-year-olds—they’re very comfortable explaining it and working with it. For them, it’s natural for everything to happen on an iPhone, and they very easily understood the potential of digitizing value. They don’t have traditional ideas that value can be restricted by borders.”

“When ATMs first came out,” Eva went on, “everyone thought it would be difficult for customers. There were some people who needed an explanation, of course, but now we have so many people that never go into a bank, because they can do everything online. Now I see this next generation who will be able to do anything on their phones—sell a house, buy something, without intermediation.”³²

The First Technology with Democratization Baked In?

Columbia Law School professor Tim Wu has found that throughout history, information technologies, from the telegraph to radio to movies and the internet, behave in a similar, recurring cycle. From a utopian, democratic birth, they end up centralized and hegemonic.

“History shows a typical progression of information technologies: from somebody’s hobby to somebody’s industry,” Wu says in his book, The Master Switch: The Rise and Fall of Information Empires. “From jury-rigged contraption to slick production marvel; from a freely accessible channel to one strictly controlled by a single corporation or cartel—from open to closed system. It is a progression so common as to seem inevitable.” When radio operators began stringing up towers in the early 1920s, he goes on to explain, it was so people could talk to each other and share ideas over an open broadcast medium. The assumption was that disconnected communities and houses would be united through radio as they were never united by the telegraph and telephone. But that’s not what ended up happening. By the mid 1920s AT&T and RCA had created the National Broadcasting Corporation, NBC, which controlled access to bandwidth via what has become a massive multinational company. Wu believes there is no question more important than who owns the platform by which people access and share information. “Before any question of free speech,” he writes, “comes the question of who controls the master switch.”³³

But decentralization of that switch can be baked into blockchains, which, if done well, makes them less susceptible to co-opting. Could this be the first technology that successfully resists centralized control? In its original design, the first blockchain intended just that. It is important to note, however, that an authoritarian regime could require use of a restricted, private blockchain to gain access to government services and participate in the economy. In this case, that regime would control the master switch—and could thus use it to exert dystopian, near-complete control and monitoring of all its citizens’ data, including their economic activity, crime records, education history, military service, and health records.

Amber Baldet is the former blockchains lead at J.P. Morgan and now the cofounder and CEO of blockchain startup Clovyr. She recently wrote about how several nations are experimenting “with creating tokenized versions of their sovereign currency on ledgers they control, which gives them much more granular access to individual transactions of its citizens and anyone else using the new currency. Combined across supply chains that span people, businesses, and government entities, these projects may end up giving governments, banks, and businesses alike more direct access to all our day-to-day financial activity than ever before.”³⁴

Like any technology, this one can be used in a way it was never intended. But with their promise to create opportunity that sits outside of centralized control, blockchain capabilities conceptually match up in seemingly ideal alignment to a brewing “perfect storm” of discontent. They come at a particularly potent time. Entire populations are activated and ready for change. In many ways, blockchains represent not just a technical revolution, but a political, social, and economic movement all rolled up into one.