Founder led consortium is one form of industry partnership in context of blockchain adoption. Founder led consortia have their own place and can be useful in some situations. After reading this article blockchain enthusiasts will learn about one of the methods of consortium formation when adopting a blockchain solution. Based on the information you can inform your consortium strategy.
As I explored various ways companies build their business networks during their blockchain journey I found different models show up. I explored what Walmart is doing in their blockchain journey. This deep exploration helps understand what is needed for a founder led consortium to succeed. Along with a few other factors to keep in mind while defining your consortium strategy. Learn from what Frank Yiannas, then Walmart's Vice President - Food Safety, has to describe about Walmart's experience.
What kind of consortium to work with is an important decision which needs a lot of research before deciding to move forward. Otherwise it will undermine the whole success of the project.
What is founder led blockchain consortium
Founder led consortium typically involves an industry leader providing early lead in adoption of blockchain technology. Often the founder acts as the steward of the business network and be responsible for providing technological and organizational lead and bring its business partners along in adopting a blockchain use case. It isn't always a dominant industry player fulfilling this role. Sometimes there could be group of companies coming together to agree and solve a shared business problem but one of the peers within the group would end up taking the lead as the steward of the network. One of them, however, does need to provide leadership to the group in structuring the alliance. Irrespective of the profile of consortium steward, all participants work together to build out the solution, prove it, and invite others in the industry to join. In this case, the maturation of the product and the consortium would likely progress in parallel. Technical maturity, among other things, includes the progression of developing the solution, establishing standards protocols, defining integrations etc. Organizational maturity, among other things, includes the progression of the group in defining the operating model, governance etc. and growing the network by making it attractive for other partners to join the consortium.
This consortia structure typically starts with a smaller number of participants which helps better manage the politics of competitors needing to adjust to the new paradigm of working together towards a common goal. A steward of the blockchain network has to tackle the technology, economics, and politics as different facets of the consortium. Having a smaller number of starting members helps to not complicate the politics. When speed of decision making is an important factor for the success of the solution and consortium, having this approach of a bigger player leading it can help move things forward at a faster clip. Other players, who are part of the consortium, have a similar idea as to what the solution should be, also helps.
The needed balance
While keeping the number of consortium members small, there is still a need to have large enough numbers, so that they matter. After all the success of the consortium is influenced by network effects. You can't start a really good blockchain use case that provides value with really small players as it is unlikely to have enough weight. It's a fine balance - keep the numbers small to keep it manageable but large enough to have the outcome be material and attract other industry participants.
On the flip side though, this structure might cause friction for later joiners to the consortium They might fear that the progression will benefit the initial members more and the rules could be skewed against them. This can give reason for newcomers to hesitate and thus provide friction for adoption and come in the way of growing the consortium.
Example: Food safety
Wal-Mart and food safety
An example of this consortium is in the retail industry centered around food safety. This has had heavy involvement by Wal-Mart. Wal-Mart stores is one of the world's largest retailer and an early adopters to pilot blockchain technology. Frank Yiannas, the Vice President of food safety at Walmart, has come to appreciate the transformative possibilities of Blockchain technology. As he explains, "I happen to be a big believer that blockchain is a new and emerging technology that has extreme relevance for food. But I have to tell you, when I first started at this, I was a major blockchain skeptic. But after working with it, and more importantly, piloting it, I've become a blockchain believer for sure."
The Food safety challenge
The Centers for Disease Control and Prevention (CDC) & The U.S. Department of Agriculture (USDA) data has documented the impact of contamination in food supply chains. CDC estimates that 1 in 6 Americans get sick from contaminated foods or beverages each year, and 3,000 die. The U.S. Department of Agriculture (USDA) estimates that foodborne illnesses cost more than $15.6 billion each year.
Challenges of food contamination
With technological advances the food supply chain has grown a lot but it comes with the challenge of keeping food safe throughout the system. Food contamination episodes have widespread impact on the players in the ecosystem, starting from the producer and all the way up the chain to the retailers. It also negatively impacts consumer confidence. Consumers can go to the extent that they stop consuming certain food products for fear of health hazards. Even if it is one lot that has problems, retailers have to remove entire shipments from the shelves as it takes a very long time to trace back the origin of the problem and they want to err on the side of safety.
Challenges with origin tracing
Origin tracing is difficult and time consuming because of various reasons. For one, no one has full visibility into data on movement of goods across the complete supply chain. Typically each player in the supply chain only has knowledge of their transaction up the chain with their supplier and down the chain with their customer. A complete picture has to be put together one piece at a time. Stitching it together isn't easy either because much of the record maintenance is not standardized. There is a widespread use of paper records which means that the tracing has to be done manually and takes much longer compared to if there were digital records. Because the records have been maintained manually - on paper - there is also higher chance of mistakes in data due to user error. To get a true picture, the errors need to be reconciled. There are a lot of foods that see comingling from multiple sources coming in from different countries, and traceability further gets complicated.
Gains with blockchain adoption
With early adoption of blockchain, Wal-Mart has seen some early gains. Walmart is focused on food safety using Blockchain technology to help them better manage their supply chains. In their blockchain projects, Walmart used IBM blockchain solution, that is based on Hyperledger. They decided to tackle two use cases to run pilots- pork in China and mangoes in US. These pilots have helped Walmart reduce time to track the origin of items and also allows them to have better availability of associated food related data through the supply chain to improve food safety and reduce waste. In their blockchain pilot on pork supply chain in China they were able to reduce the time needed to track down the source of meat from 26 hours down to a few seconds. For the pilot on mangoes, as confirmed by, Frank Yiannas - "We tried to trace mangoes, sliced mangoes back to the source. Current process took us about seven days, you know, pretty much the industry benchmark. Maybe a little bit faster than at times that happens in some of these health investigations. After blockchain, we could do it in 2.2 seconds."
How blockchain helps
Food safety is an area ripe for the use of blockchain technology. Players in food safety ecosystem have incentive to work together to solve the problem using blockchain technology because by it's very nature the ecosystem lends itself well to what blockchain can bring to the table. Participants in the whole ecosystem are incentivized to cooperate because food safety is not a competitive issue. When a food safety issue happens - nobody wins. if there is an E.Coli outbreak with consumption of fresh spinach, in the interest of consumer safety, all the spinach that can't be traced, gets pulled from the shelves. This even hurts those players whose supply chain did not carry the tainted products. This provides the motivation for the industry participants to work together and make the solution work. Over and above that, the overall system is too big for any single player to solve it by themselves, so it makes sense to co-operate with the competitors.
To provide traceability throughout the complete supply chain, this kind of effort needs leadership from a key player and coordinate other stakeholders and show them what blockchain technology can bring to the table in solving their collective challenges. The consortium has grown to include companies like Dole, Driscoll's, Kroger, Tyson Foods etc. For it's efforts to be successful the consortium has to ensure defining the value for all participants in the ecosystem. Otherwise wider adoption by breeders, processing plants, cold storage facilities, distribution centers, and retail stores will be difficult to pull off.
- Ep. 32. Frank Yiannas: Leading Food Safety at the World's Largest Retailer | Listen Notes
- Breaking Down Blockchain with Brigid McDermott: VP of Blockchain Business Development & Ecosystem at IBM and Frank Yiannas: VP of Food Safety at Walmart | Listen Notes
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