The IBM–Maersk blockchain effort was doomed to fail from the start

The IBM–Maersk blockchain effort was doomed to fail from the start

Blockchain projects continue to experience failure rates in excess of 90%, and it seems that with every passing moment, more and more “successful” companies add their underperforming blockchain project to the graveyard. One of the most recent blockchain failure victims was Moller-Maersk, which recently announced the termination of its highly publicized TradeLens offering — a global trade platform built on IBM blockchain technology. 

These failures, however, were totally predictable and, in many cases, would be avoidable if companies more closely observed certain lessons in innovation diffusion.

Lesson 1: Innovation is not monolithic. One of the biggest mistakes companies make is to treat innovation as a monolithic concept. Innovation is anything but monolithic. Unfortunately, business associations, business press and business schools love to create an endless parade of innovation lists and innovation awards that reinforce the idea that all innovation is the same.

Clayton Christensen’s New York Times best-selling book The Innovator’s Dilemma was one of the first major attempts to distinguish innovation types. His work was helpful in starting the conversation, but a better framework for categorizing innovation comes from Rebecca Henderson and Kim Clark, who identified four types of innovation: incremental, modular, architectural and radical.

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While there are innovations that may fit in the modular and architectural category, blockchain is, at its core, disruptive. Given that disruptive technologies replace existing frameworks, interactions and intermediate institutions, the most successful early applications and innovations will come from smaller/startup firms rather than IBM, Maersk or other Fortune 100 companies.

Lesson 2: Complexity is an innovation killer. This is especially true for modular and radical innovation. Everett Rogers noted the inverse relationship between complexity and the willingness and ability to adopt an innovation. This complexity not only relates to the blockchain application itself but also to internal decision-making processes, the level of change required to adopt, and how much new knowledge is needed to implement.

Details of IBM-Maersk’s canceled plan to build a blockchain platform. Source: IBM-Maersk

Experts have outlined the difficulty of implementing projects like TradeLens, as “the technology is complex, requires more computing power and is more expensive to run than existing databases.” Adding to the complexity of the IBM–Maersk blockchain shipment project was the highly complex nature of the two large multinational corporations.

In the last round of major technological innovation — namely, the social media space — it was not the established players that built the tools, technology, platforms, etc., that drove early innovation and adoption. It was startups — organizations where decision-making cycles were short, minimal internal change was required to adapt, and new knowledge was able to be assimilated almost instantaneously.

Given these dynamics, initial successful innovative breakthroughs for blockchain are more likely to be found in simplistic applications developed by much smaller, more entrepreneurial firms that replace or reshape simple processes around how work gets done, products get made or transactions are facilitated between two parties.

Lesson 3: Different innovation types require different levels of risk tolerance. One of the key differentiators between the four types of innovation is the risk tolerance required to be an effective innovator. The risk-tolerance level for incremental innovation is low, while radical innovation requires a significantly higher risk tolerance.

An important note is that tolerance here is not just looking at the risk or probability that a project might fail. Assessing innovation risk also looks at the likelihood of catastrophic failure for the entire organization — meaning if the adoption or innovation fails, the entire organization risks failing, not just the innovation.

Billy Beane’s application of sabermetrics to the roster construction and management of the Oakland Athletics in the early 2000s is a well-known example of a modular innovation application. This innovation posed a high personal and organizational risk that no other Major League team was willing to take.

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Failure for the A’s would not have been catastrophic (i.e., the team ceasing to be a Major League franchise). However, the costs would have been extremely high. Beane would have lost his job (as well as many others). A dissatisfied fan base would have punished the team by staying home and ceasing apparel purchases, leading to a massive drop in revenue. And the A’s would have become a glorified Minor League team.

Blockchain, as a radical innovation, requires an even higher level of risk tolerance for innovation and adoption — a willingness to risk it all. Companies that tinker around the edges (incremental or architectural innovation) with a project, where if innovation fails, they can just walk away, are much more likely to experience blockchain failures in this early stage of innovation.

Blockchain and other decentralized technologies hold great promise for much-needed change away from the current trend toward more concentrated modes of production and power. The ultimate task is to align our time, efforts and resources with the innovation lessons provided here to give this blockchain technological revolution the best shot to succeed.

Lyall Swim is the chief innovation officer for Atlas Network. He holds a doctorate in education with an emphasis in organizational leadership from Pepperdine University. He has a bachelor’s degree in communications and an MBA from Brigham Young University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Sam Bankman-Fried's holding company files for bankruptcy

Sam Bankman-Fried’s holding company files for bankruptcy

Emergent Fidelity Technologies, a Sam Bankman-Fried holding company based in Antigua and Barbuda, has filed for bankruptcy protection.

According to court records filed on Feb. 3, Emergent Fidelity Technologies submitted a voluntary petition to declare bankruptcy under a Chapter 11 filing in United States Bankruptcy Court for the District of Delaware. The company was already the target of a lawsuit filed by crypto lending firm BlockFi in November regarding the status of roughly 55 million shares of Robinhood.

The Robinhood shares — worth more than $590 million at the time of publication — have been a point of contention among parties including BlockFi, FTX creditor Yonathan Ben Shimon, and Bankman-Fried himself. The Justice Department announced on Jan. 6 it had seized the shares as well as roughly $20 million in U.S. dollars as part of the case against FTX and its executives.

Emergent Fidelity Technologies claimed ownership of the shares and the $20 million as its “only known assets,” previously held by brokerage firm Marex Capital Markets before the DOJ seizure. According to a declaration by Angela Barkhouse, one of the Joint Provisional Liquidators in the case, Emergent Fidelity Technologies filed for Chapter 11 in the same court as FTX to pursue a “form of joint administration” between the two bankruptcies.

“The [Joint Provisional Liquidators’] duties are to the Debtor’s creditors, whoever those creditors may be,” said Barkhouse. “Given the many parties claiming to be creditors or outright owners of the [Robinhood shares] in proceedings in the U.S., the JPLs believe that chapter 11 protection is the only practical way to empower the Debtor to defend itself, the Assets, and its creditors’ interests in the U.S.”

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According to Barkhouse, Bankman-Fried owns 90% of the firm, and FTX co-founder Gary Wang owns the remaining 10%. Bankman-Fried’s criminal trial is scheduled to begin in October, while Wang has already pled guilty to fraud charges.