Many enthusiasts see the blockchain as a perfect solution to address a lot of problems in different sectors. But at the same time, industry experts think the first-mover advantage doesn’t apply to blockchain technology right now.
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Though the blockchain industry has seen a lot of attention from financial institutions and other industries lately, some experts feel the first-mover advantage is not as significant as far this technology is concerned. It is important to be prepared for the future, but no one should venture into the blockchain world without thinking it through properly.
Larry Tabb, founder of the research and strategic advisory firm TABB Group, posted an article on Tabb Forum on May 18th, explaining why blockchain has a first-mover disadvantage. It is the first time someone refers to this technology as potentially disadvantageous in such a manner.
While Tabb does not deny blockchains are a significant technological breakthrough, he prefers to err on the side of caution as far as this hype is concerned. According to Tabb, the power of the blockchain comes from “ubiquity and scale,” although the latter is somewhat problematic in the world of Bitcoin right now.
Enterprises all over the world are always on the lookout for the next opportunity to gain a competitive edge. In most cases, it would be preferable if this solution provides a return on investment or at least limit the downsides it presents. For those achieving first-mover advantage status, this is always a bit of a risk, yet previous technological breakthroughs have proven to be worth their while, according to Tabb.
Despite the potential blockchain technology holds, the first-mover advantage may not be the best strategy, in his opinion. There are a significant investment and execution risk associated with embracing distributed ledgers at this stage, however, it is equally unwise to remain behind the adoption curve as well. Businesses have a tough decision to make in this regard, as they seem to walk a fine line between striking it rich and losing everything.
Larry Tabb explains this situation as follows:
Blockchain/distributed ledger technology, however, doesn’t fit into this paradigm. Investments such as blockchain do not come with first-mover advantage; it is the opposite – they have first-mover disadvantage. The first mover makes the investment; however, if no one follows, that investment can be a total write-off. In fact, by not investing, the first mover’s competitors can actually precipitate the first mover’s failure.
Blockchain adoption may not hinge on the first-mover advantage, but that does not mean enterprises should delay making the switch either. Tabb explains how there are three different scenarios, of which at last one needs to occur before blockchain adoption becomes an absolute necessity for the business world.
Consortiums need to make a mutual investment into this technology, similar to what R3 CEV and the 42 banking partners have done. Secondly, an outside vendor would have to bankroll the investment, which has not happened yet. Last but not least, solutions need to be co-opted from something that already exists.
Following Tabb’s logic, the R3 CEV and HyperLedger initiatives alone may not be enough to tip the proverbial scales in favor of blockchain technology soon. Keeping in mind how the R3 consortium is looking for external funding, they are close to checking two out of three scenarios, though. Assuming they can find a willing partner to bankroll their $200m USD endeavor, the future may be blockchain after all, despite the risk factor.
What are your thoughts on the future of blockchain adoption? Is Tabb right in his assumptions, or is there a mystery factor involved? Let us know in the comments below!
Source: Tabb Forum
Images courtesy of Larry Tabb, Shutterstock