SLOANREVIE W.MI T.EDU WINTER 2017 MIT SLOAN MANAGEMENT REVIEW 13
Raising Capital We believe blockchains will also transform
the process of raising money. In our view, the blockchain has
the potential to disrupt the way the global financial system works
and change the nature of investment. Mindful of this prospect,
the New York Stock Exchange has invested in Coinbase Inc., a
digital currency wallet and platform company headquartered
in San Francisco, California. For its part, the Nasdaq Stock
Market is also experimenting with blockchain technology.
Integrating the Pieces
So how will blockchain help companies become stronger competitors? How can a company use it to integrate the various
pieces? Blockchain technology provides a platform for people
to work together with the persistence and stability of an organization but without the hierarchy. Consider ConsenSys, a venture
production studio based in Brooklyn, New York, that builds decentralized software applications and end-user tools that operate
on blockchain. Founder Joseph Lubin describes the company’s
structure as a hub-and-spoke arrangement rather than hierarchical; each project operates on its own, with the major contributors
holding equity. For the most part, people get to choose what they
work on. The central hub provides supporting services to the
spokes in exchange for a share of the ownership. The various
rights and relationships are codified in smart contracts that
hold the entity together.
In recent years, we have been reminded all too often that
managers don’t always act with the highest degree of integrity.
(Think of the scandals at Enron, AIG, and Volkswagen, for
instance.) What if we could codify ethics and integrity into
the circuitry of the enterprise, or reduce the moral hazard that
too often sees management gambling with shareholder capital?
Through smart contracts under blockchain, shareholders
will be able to enforce the commitments executives make.
Companies can specify relationships and state specific outcomes
and goals so that everyone understands what the respective
parties have signed up to do and whether those things are
actually getting done.
On blockchain, executives will someday no longer need to
attest that their books are in order once a year or every quarter;
the blockchain will keep a company’s books in order in what is,
in effect, real time as a matter of course. Financial statements
will go from snapshots of the enterprise at one point in time
to a transparent, three-dimensional view of the whole enterprise.
Shareholders and regulatory agencies alike will be able to exam-
ine the books whenever they choose. Institutional investors will
have the ability to create their own credit dashboards based
on the facts, as opposed to relying on interpretations by ratings
agencies. And ratings agencies themselves may overhaul their
rating systems based on information from blockchains.
In contrast to the internet, which took two decades to develop
and yet another decade to become commercial, the blockchain
ecosystem is developing more rapidly as an economic platform.
For executives, this means there is little time to waste. They will
want to examine their industries and their competitors with an
eye toward identifying opportunities for profitable growth.
Executives should begin by identifying people within the
company who are interested in the technology or using digital
currency. They should talk to people in the company’s IT depart-
ment about the technology’s implications, buy some bitcoin,
and experiment with purchasing inexpensive items on the block-
chain to see how it works. At the same time, they should identify
nearby companies using blockchain — take the opportunity to
visit their operations and talk with people involved, and invite
experts to meet with the team. Now is the time to reimagine
how your company organizes the way it creates value. If you
don’t, someone else will.
Don Tapscott is the chancellor of Trent University in Peterborough, Ontario, and CEO of the Tapscott Group Inc. in Toronto.
Alex Tapscott is founder and CEO of Northwest Passage Ventures,
an advisory firm incubating early-stage blockchain companies,
in Toronto. They are the authors of Blockchain Revolution: How
the Technology Behind Bitcoin Is Changing Money, Business,
and the World (Portfolio, 2016). Comment on this article at
http://sloanreview.mit.edu/x/58222, or contact the authors at
Reprint 58222. For ordering information, see page 4.
Copyright © Massachusetts Institute of Technology, 2017. All rights reserved.
Shareholders will be able to enforce the commitments executives
make. Companies can specify relationships and state specific
outcomes and goals so that everyone understands what the
respective parties have signed up to do.