The IBM–Maersk blockchain effort was doomed from the start

Blockchain projects continue to experience failure rates of over 90% and it seems that with every passing moment, more and more “successful” companies are putting their underperforming blockchain project in the graveyard. One of the latest victims of blockchain failure was Møller-Mærsk, which recently announced the end of its highly publicized TradeLens offering – a global trading platform built on IBM’s blockchain technology.

However, these mistakes were completely predictable and in many cases would have been avoidable if companies observed certain lessons in innovation diffusion more closely.

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

Clayton Christensen’s New York Times bestselling book, The Innovator’s Dilemma, was one of the first major attempts to distinguish innovation types. His work was useful for 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 can fit into the modular and architectural category, at its core blockchain is disruptive. Given that disruptive technologies replace existing frameworks, interactions and intermediate institutions, the most successful early applications and innovations will come from smaller/start-up companies rather than IBM, Maersk or other Fortune 100 companies.

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

Experts have outlined the difficulties in implementing projects like TradeLens, as “the technology is complex, requires more computing power and is more expensive to run than existing databases.” The highly complex nature of the two large multinationals added to the complexity of the IBM-Maersk blockchain shipping project.

In the last round of major technological innovation – namely social media – it was not the incumbents who built the tools, technology, platforms, etc. that drove early innovation and adoption. They were startups – organizations where decision-making cycles were short, minimal internal changes were required to adapt, and new knowledge could be assimilated almost instantly.

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

Lesson 3: Different types of innovation require different levels of risk tolerance. One of the most important differences 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 the probability that a project may fail. Assessing innovation risk also looks at the probability of catastrophic failure for the entire organization – meaning that if the adoption or innovation fails, the entire organization is at risk of failure, not just the innovation.

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

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A failure for the team would not have been catastrophic (ie, the team ceasing to be a major league franchise). However, the costs would be extremely high. Beane would have lost his job (as well as many others). A disgruntled fan base would have punished the team by staying home and stopping buying apparel, leading to a massive drop in revenue. And the team would 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 everything. Companies tinkering 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 failure at this early stage of innovation.

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

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 herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.