Business Models for Blockchain-based Ventures: An Exploratory Study

As the total amount of funds invested through ICOs in blockchain-related ventures reaches twelve billion dollars (Q1-2018) accounting for more funds raised than the entire 2017 [1], it becomes paramount to gain a crisp understanding of which business models may be leveraged to deliver on the promises to build a new breed of solutions harnessing the potential of the internet of value.

With this awareness in mind, we (Michele Osella, Riccardo Rostagno and myself) set off to conduct an international exploratory study on the business models emerging in the ecosystem of public blockchains. More specifically, the study aimed at answering the following research questions:

RQ #1: Along which dimensions can the blockchain ecosystem be mapped?

RQ #2: What are the key archetypal actors and their strategic positioning?

RQ #3: What emerging business models are enabled by blockchain?

To answer the above questions, thirty-two ventures leveraging public blockchains were analysed, resulting into twenty business models identified. In the remainder of the post, I will briefly outline the highlights of the study while a more comprehensive view of the results obtained may be found in the presentation linked at the bottom of the post.

A number of notable attempts have been made so far to map the blockchain ecosystems (eg: Lange and Nussbaum, to name a few). Nevertheless, despite being commendable efforts, most of the early outputs generated suffered from a number of methodological shortcomings having to do with lack of exhaustivity as well as lack of homogeneity in the categories used. We are thus proposing a “blockchain value ecosystem framework” (see Figure 1) as a first step toward overcoming the issues listed above. The framework identifies four technological layers clarifying the primary ingredients constituting a blockchain-based solution. It consists of a simple yet clear representation that may help companies in understanding what DLT (distributed ledger technologies) may offer and how to approach them.

    Figure 1. Blockchain value ecosystem framework

In the picture below (Figure 2), a few real life actors have been mapped against the framework to exemplify how it may be used to understand the different levels of vertical integration that any given company may decide to adopt with respect to blockchain absorption. It goes without saying that the higher the level of integration the higher the requirements in terms of technological skills and financial resources necessary for developing and adopting a blockchain-based solution.

 

Figure 2. Map of real life actors

For the classification of the key archetypal actors and their strategic positioning with respect to the different blockchains available on the market, the framework was complemented with an additional dimension considering whether the company analysed was operating on a single blockchain or on multiple blockchains. This resulted in a two by two ecosystem matrix answering RQ #1 and identifying four strategic positions, one for each quadrant (Figure 3):

1. Decentralized-application Providers
2. Protocol Providers
3. Financial Platform Providers
4. Protocol Innovators.

 

 Figure 3. Four strategic positions

By placing the ventures analysed in the different quadrants, it was subsequently possible to cluster them into eleven archetypal actors (RQ #2): five of which positioned in the distributed-applications providers quadrant and two situated in each of the other quadrants (Figure 4). In this respect, it is important to note that while DLTs are still in an “infrastructural phase”, that is to say a phase in which enabling infrastructures are still being developed, a dominant design has not emerged yet and most of the value generated is captured by the lower layers of the technological stack [2]. Moreover, the upper left quadrant - where distributed applications (DApp) are designed - represents a very fruitful business model innovation sandbox for devising approaches that have the potential to disrupt large rent-seeking incumbents across many different industries in the long-term.       

 Figure 4. Eleven archetypal actors

From the analysis of the real life actors, it was subsequently possible to single out one or more business models that could be associated to each archetypal actor. To exemplify, among the mining companies analysed, four business models were identified: (1) solo mining in which the mining activity is conducted by a single company fully shouldering the infrastructural costs and the risks associated with the mining activity; (2) pool mining in which companies are sharing their infrastructure and the risk associated to mining; (3) cloud mining in which the company is renting its computing infrastructure to third parties thus shifting the risk associated with mining on the clients; and (4) mining marketplaces that are acting as brokers between infrastructure owners and buyers of mining services.

Due to length constraints, it is not possible to discuss in-depth all the business models identified, nevertheless for each of them a Business Model Canvas explaining the underlying value logic has been inserted in the appendix of the presentation linked at the bottom of the post.

 

Figure 5. Twenty emerging business models

Finally, the analysis of the thirty-two ventures brings to the fore dissimilar maturity levels in terms of business model robustness for the various quadrants. More specifically, the quadrants of protocol providers (lower-left) and that of financial platform providers (upper-right) show a higher level of maturity in terms of presence of a wide users’ base, identification of a clear value proposition and tested value appropriation mechanisms. For what concerns the other two quadrants instead, the situation is diversified among the actors operating in the distributed applications quadrants (upper-left) while a low level of maturity is present in the protocol innovators quadrant (lower-right) which is made up of companies that are still exploring possible business models for solving technical scalability issues.

Figure 6. Business models maturity

To conclude this post, we would like to share a number of reflections on the relationship between blockchain and business strategy spurred by the analyses conducted during the exploratory study.

First, a clear understanding of the ingredients composing a full stack blockchain-based solution needs to be acquired by CEOs willing to leverage blockchain in their core business activity. In this respect, the blockchain value ecosystem framework provides an accurate yet intuitive instrument for choosing the appropriate level of vertical integration in the adoption and development of blockchain-based solutions.

Second, four strategic positions were identified with significant differences in terms of capital intensity, technical proficiency required and depth of understanding of the overall blockchain ecosystem. Choosing the right position for a venture requires a careful analysis of the presence, possibility to access and ability to manage the above aspects.

Third, twenty business models were mapped with different levels of maturity with respects to their ability to clearly identify their value proposition and the mechanisms for capturing part of the value created. In this respect, the availability of significant financial resources for startups at a very early stage of development combined with the presence of seigniorage economic benefits coming from the possibility to mint tokens, in many instances has reduced the pressure on cash flows thus allowing companies to focus more on technical challenges. While this in the short-term this may help raising the level of technological excellence of the blockchain ecosystem, in the long-run it could pose serious sustainability challenges.

Finally, from a business model perspective, the emergence of blockchain technologies seems to have generated three types of innovations: (1) the birth of business models for blockchain-specific activities such as mining; (2) the possibility to combine into a single business model activities previously conducted by different players (eg: payments & reputation, chat & payments); (3) the emergence of light intermediation opportunities in which the middleman may adopt revenue-sharing mechanisms that promote a fairer redistributions of the overall value generated by all the engaged stakeholders. 

Should you be interested in discussing more in depth the results of the study, don’t hesitate to get hold of me via Linkedin or Twitter.

Research wants to be free, but it is costly to produce. Please consider supporting our market education activity by making a donation. 

EOS account: cryptoenrico
BTC: https://tippin.me/@egferro

Enrico Ferro.

[1] Coindesk, 2018, “State of Blockchain Q1 2018” Retrievable at link 

[2] Pantera Capital, 2017, “VC’s Missing 97% of the Trade” Retrievable at link

Business Models for Blockchain-based Ventures from Enrico Ferro

Watch my interview with David Orban in which we talk about business models for blockchain.

Presentation of the study at the Blockchain Challenge Conference (in Italian)

Five Reasons Tai Chi Should be Taught in Top Business Schools

                                               ....for a generation of future-proof executives....

This post draws on my 10+ year experience as an innovation professional and Tai Chi [1] instructor to explain why business schools around the globe should seriously consider the inclusion of Tai Chi in their curricula as an invaluable tool for facing some of the major strategic challenges of the decades to come.

We are living in a time in which the combined effect of a number of technical, political, environmental and socioeconomic trends are exerting significant changes to life as we have known it so far. Some prominent long term effects of such trends are briefly summarized below: 

• The pace of change has moved from linear to exponential and this has radical consequences. To exemplify, the average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today [2].

• The world is experiencing higher levels of interconnection and interdependence. This is true at international level - due to the globalization of economic processes - but also at a local scale where more and more companies blur their organizational boundaries to tap into collective intelligence through open innovation practices.

• The reduction in communication and transaction costs brought by a wide diffusion of information and communication technologies coupled with a need for more flexible and agile organizations is generating an increase of network structures. Such shift requires interactions to be based on a connection and collaboration paradigm rather than the command and control logic typical of hierarchies [3].

• The aging of population and workforce is putting a significant pressure on welfare systems, and at the same time is reducing the ability of organizations and society at large to adapt to frequent, significant and abrupt changes.  

• The notion of performance is moving from purely financial metrics to include social and environmental ones, gradually evolving towards a triple bottom line framework [4]. A complex challenge requiring leaders to widen their mind-set and embrace the notion of circular economy.

In such scenario, business schools should carefully ponder how to revisit their curricula in order to offer tools and skills necessary for the creation of a new breed of executives capable of understanding, managing and successfully overcoming the challenges posed by modern times. At the same time, the increasing rates of obsolescence make it hard to identify the proper knowledge to offer and the risk of irrelevance is very concrete. For this very reason, it is paramount to go at the roots of wisdom to guarantee enduring usefulness.

Going back to the title of this post, what role may Tai Chi play in the situation depicted above? And, above all, what value may it offer to present and future generations of executives in addressing the above-mentioned challenges? Below I attempted to articulate a compelling, yet non-exhaustive, answer in five brief points:

1. Tai Chi is based on a number of simple yet very profound philosophical principles (e.g.: yin/yang, wu wei, eight directions, five elements) that go back to the essence of life and survived the test of time. A theoretical - yet practical - framework that promotes a circular approach to life and allows to gain an enhanced clarity of vision in the assessment of key long term aspects.
2. Tai Chi promotes an ecosystemic style of leadership based on roundness and gentleness (not to be mistaken for weakness), capable of letting go of control and engaging people across boundaries by appreciating similarities before acknowledging differences. In other words, by considering boundaries as points of contact rather than points of separation.
3. Tai Chi is the art of flexibility and adaptation in the constant flow of change life is made of. But flexibility is a property that emerges from a regular training of both mind and body (as a stiff body results in a rigid mind-set and vice versa). Thus a mere theoretical study of resilience and change management is not enough to deeply modify a person’s attitude and to counterbalance the gradual rigidity that comes with age.  
4. Tai Chi is also known as the boxing of supreme polarity as it is about finding a dynamic balance between opposite yet complementary aspects. Therefore, its practice allows to move out of a mono-directional view of the world (i.e., more is always better) thus embracing the notion of decreasing marginal returns. In other words, it increases the ability to balance a plurality of personal and organizational constraints (e.g., self-assertion and integration, strategy and operations, social impact and profit) contributing to generate open, ambidextrous, socially responsible and sustainable business ventures.
5. Tai Chi helps focusing on the positive aspects of life and on the causes of problems rather than on the effects (as we often complain about effects but we nurture causes) thus contributing to significantly increase people’s wellbeing and effectiveness.

The above arguments are just a small appetizer of the depth and wealth that the practice of Tai Chi may offer. Nevertheless I do hope they are compelling enough to entice the reader into further exploring the social and individual benefits that can be drawn from a wider diffusion of such discipline. To conclude, Tai Chi may be considered an activity generating significant economies of scope at both professional and personal level, therefore it represents an effective way for executives to allocate their precious time (being it a scarce and non-renewable resource). 

Enrico Ferro

REFERENCES:

[1] Tai Chi definition: http://en.wikipedia.org/wiki/Tai_chi
[2] Foster R. & Kaplan S. “Creative Distruction: Why Companies That Are Built to Last Underperform the Market--And How to Successfully Transform Them” Doubleday, N.Y., USA, 2001.
[3] Friedman T., “The World is Flat: A Brief History of the Twenty-fist Century” , Picador USA ,2005
[4] Savitz, A.W. and Weber, K., “The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success—and How You Can Too”, Jossey-Bass, 2006

Social Innovation Pioneers: A Recipe for Change

... TEDx Pioneers ...

"Change is not an option, we may only choose in which direction we want to stir our evolution. So ask yourself: Which values am I going to use to light my way?  Which community am I going to join to increase my impact? Because your contribution matters for your and for our future"

Excerpt from the talk I gave at the TEDx event organized on April 13th in Turin at Talent Garden.

Intelligence for What? Framing the Smart City Challenge

.... the path to triple sustainability ....

Since the approval by the European Commission of a long term strategic investment plan aimed at turning European cities into smarter ecosystems, many commentators from both industry and academia have embarked into proposing how to make our cities more intelligent.

As suggested by Alberto Cottica, two main visions have emerged overtime from the international debate. The first, mainly advocated by big corporations like IBM and CISCO, in which technology and interdependence play a key role and intelligence, mainly residing in ICT labs and universities, is infused in technological artifacts (e.g. the Copenhagen wheel). The second, stemming from the hacker culture and the world of social innovation, in which the main idea is to redesign cities to make them more comfortable, simple and sustainable either through high or low technological solutions. In this vision intelligence is highly decentralized and resides in the heads and hearts of citizens.

Whether a dominant approach towards the promotion of smartness will emerge across Europe is yet to be seen. Nevertheless, a key fundamental question still remains to be addressed: how may the intelligence of cities be turned into triple sustainability (economic, social, environmental)? And how may the challenge faced by cities be formalized simply and clearly enough to be fully understood and tackled successfully?

In the remainder of this post, I will try to address the above questions by introducing the "Smart and Inclusive Sustainability Framework" (or SIS Framework) that builds upon two posts I published on this blog. The first, on The Role of ICT in the Governance of Smart Cities in which it is argued that "the real smart city will have to learn how to reconcile individual and collective needs, in other words: channel individual aspirations towards the creation of value for society at large through the attainment of economic, social and environmental objectives". The second, titled The Tao of Academic Research which suggests that the search for a dynamic equilibrium between opposite yet complementary elements represents a key principle underlying the attainment of any objective. 

- The Smart and Inclusive Sustainability Framework -

The SIS framework unfolds along two main dimensions. A vertical one, dealing with the allocation of resources and representing the tension between heterogeneity (of abilities) and homogeneity (of basic needs). At the upper end, it is possible to find the strive towards excellence entailing rewarding merit and performance through the concentration of resources on a limited set of worthy individuals.  In so doing, an incentive is provided to put one's energies into value creation activities that may generate positive externalities for the individual as well as for society at large. At the lower end, it is possible to find a uniform and indiscriminate distribution of resources for guaranteeing the recognition of a number of basic universal rights (education, employment, housing, health, etc..). If a community positions itself at one of the two extremes of this dimension, it may either generate a situation in which the concentration of resources leads to unsustainable levels of social injustice or - at other end of the spectrum - a situation in which the process of resources allocation does not provide any incentive to more capable individuals to realize their excellence potential, thus resulting in a generalized loss of competitiveness for the entire socioeconomic system.

The second dimension of the SIS framework deals with the consumption of resources. Along this dimension a balance has to be sought in the usage of resources for individual and collective needs as well as between current needs and future needs (including those of future generations). At the extreme left, it is possible to find a situation of uncoordinated consumption characterized by individual voracity or collective shortermism while at the other extreme, it is possible to find a more conservative behavior leading to an under-exploitation of the potential available at any given point in time.

Finally, within the space of options identified, it is possible to draw a diagonal line representing a boundary between self-interested and more altruistic behaviors.

If we use the model as a lens to look back at the socioeconomic history of the last decades, it is possible to realize that until the late 80s the western world was marked by a dichotomic alternative interpretation of how societies could be organized. On the one hand, there were western societies highly relying on market principles (remuneration of individual performance, promotion of consumption, etc.) and, on the other hand, eastern societies characterized by government-led economies promoting higher levels of social homogeneity (planned production/consumption, uniform distribution of financial resources, etc.). The fall of the Berlin wall was interpreted by many as proof of the unsustainability of the government-led model and as sign of the validity of the market centric model. Twenty years down the road, the severe financial and economic crisis that hit the world showed that an approach purely based on a market logic may generate dangerous levels of social injustice and environmental unsustainability, and that a balance between the two visions should be sought.

Moving back to cities, at this point a legitimate question could arise: how could balance be obtained in practice? The answer is not straightforward and may depend on the fields considered, nevertheless a few suggestions may be put forward to translate a theoretical framework into useful advice.

To foster excellence, selection is a key principle to apply. The process of selection should be as open and transparent as possible and highly relying on distributed intelligence and peer review mechanisms. At the same time, conditionality should be used as a counter weight to promote social and environmental sustainability. To exemplify: scholarships promoting excellence among students could be designed to require gifted students with financial needs to help one or more colleague with learning difficulties. Another example would be to grant higher levels of public co-funding to R&D endeavours leading to labour-intensive innovations in virtue of their contribution to the attainment of a plurality of results, a generation of a competitive advantage or a more sustainable product/process and, at the same time, a reduction of the unemployment rate. From a private consumer perspective, citizens could exert their power by applying selection and conditionality principles in their purchasing choices. As a matter of fact, peer-reviewed assessments activities conducted by Internet communities about products sustainability may be employed to inform citizens purchases and influence the way companies manage their processes (packaging, supply chain, recycling, salaries etc.) and promoting the development of a circular and fair economy.

Another activity that may help smart cities in finding a virtuous balance between the consumption and the preservation of resources has to do with the promotion of access versus property. Favouring a shared consumption of any kind of asset leads to a multiplication and redistribution of value without necessarily impacting on the amount of resources consumed. Car and bike sharing/pooling services are a good exemplification of this concept that should be extended to many more aspects of city life. The promotion of collaborative consumption represents a good balancing mechanism as it leads to higher levels of assets utilization, lower usage of resources and higher amounts of value generation. In this respect, it is important to mention the need to work towards the construction of higher levels of trust representing an essential ingredient for the establishment of better and more effective relationships and a precondition for any sort of collaborative behaviour.

Concluding, the value offered by the SIS Framework is to provide a simple and clear representation of the tensions which cities will need to manage in a smarter way to increase their level of sustainability. In other words, the intelligence of communities will primarily need to be applied to finding effective methods for a balanced allocation and consumption of resources.

Enrico Ferro.

The Role of ICT in the Governance of Smart Cities

                          .....how to turn technological infrastructures into value for society.....

An overwhelming body of scientific evidence now clearly indicates that climate change is a serious and urgent issue [1]. In parallel, the unprecedented growth in the world population occurred over the last centuries coupled with the gradual increase in developing countries’ spending power has contributed to exacerbate the unsustainability of existing consumption patterns. The drawing of world’s natural resources at a faster pace that they can be restored, has been proven over the decades to be one of the main pitfalls of modern socioeconomic systems [2]. The combined effect of the above phenomena is gradually but steadily leading the world towards a global environmental, economic and social collapse. As put in the Stern review: “There exists a serious risk of major irreversible change with non-marginal effects on modern life as we know it today” [1].

In such a scenario, many commentators identified cities as the battle-ground in the fight against climate change and ICT as a strategic lever for success. A vision that gives rise to two questions: how is the transition that cities will have to undergo going to be governed? What role will ICT play in the governance of such process?

The following post represents a first attempt to explore the latter question. In particular, I devised a synoptic framework attempting to provide a unifying view of such role as well as some of the ingredients necessary to turn technological infrastructures into value for society.

- The Smart City House Model -

The framework was baptized “the smart city house” model with the intent to run a parallel between the process of building a house and that of value creation. The model should be read from the bottom upwards. In the foundations of the house, it is possible to find a socio-technical infrastructure [3] containing the contextual factors that need to be present in an ecosystem in order for it to be able to fully exploit the potential of ICT. The key ingredients are networks, data, software, brainware (people) and laws that should be respectively accessible, interconnected and innovation-friendly.  It is important to underline that value does not simply reside in the individual resources (e.g. data or software, etc.) but also in the links and connections that it is possible to establish between the different resources. This of course in the belief that – as asserted by complexity theory – the whole is greater than the sum of its individual parts. In this respect, interoperability - in all its possible declinations (technological, semantic, organizational, etc.) - represents a key value driver for society.

Moving up one level, we find the pillars of the house representing the key strategic contributions that ICT may offer to the creation of value and to the transformation of cities in smarter and more sustainable environments. In particular, three main contributions have been identified. The first has to do with the possibility of enabling new paradigms of production, distribution and governance. To exemplify, let’s think of the energy sector, where the emergence of distributed generation paradigms is bringing along significant changes such as the need to build networks with smarter peripheral nodes. In such a framework, ICT may cover a complementary role by offering an important contribution in terms of management, planning and control of production to both energy “prosumers” and energy network operators. The second contribution has to do with the possibility to transform the way in which many daily activities are conducted. In this respect, we may think of telework, telemedicine leading to a decoupling between activities and the physical location in which they are conducted. Another example could be the opportunities offered to local communities to self-organize [4] to manage different aspects of their lives (e.g. fair-trade collective purchasing promotes the consumption of local products and the disintermediation of the distribution chain with deep social and environmental impacts). The third and final contribution has to do with the role of ICT in informing individual choices and behaviors. As a matter of fact, the reduction of the carbon footprint of an urban area inevitably requires the modification of everyday choices of millions of individuals. Inducing such change is not an easy task and surely may not be achieved by a mere top-down approach. The wise use of ICT may help in diffusing a greater environmental awareness and sensitivity leading to the emergence of social norms incentivizing more virtuous behaviors. In this respect, the role of the web and, in particular, of social media as a useful source of information, training and debates may turn out to be central in igniting and accelerating the process of change among significant portions of the population.

Moving now to the final part of the house, the roof represents the value orientation that any smart initiative should never lose sight of in order to generate positive externalities for society. The triangular shape has been divided into three different layers in order to generate a stack configuration with different and interrelated levels. Each level, in fact, depends on the level below in terms of existence similarly to what happens in other hierarchical models present in the literature (e.g. Maslow pyramid, stack OSI/ISO). The introduction of society’s needs in a layered structure intends not only to stress the importance of a value orientation but also to stimulate the reflection of what value should be produced. To exemplify, the mere push towards economic growth to the expenses of the environment and public health that has dominated the world’s economy over the last century, when put in relation with this hierarchical schema clearly shows its shortcomings linked with the attempt to build the second layer without having assured the existence of the level below. I am of course aware of the fact that the model proposed represents a simplification and that in the real world it may be necessary and possible to privilege economic aspects to the expense of more fundamental needs. At the same time, it is important to stress that this misalignment of priorities may only be considered a temporary solution as it is clearly unsustainable. Looking at it from economic theory perspective, long term strategies should therefore attempt to wisely balance the actions aimed at producing resources with high value in exchange and actions aimed at better employing environmental resources with a high value in use.

The framework proposed provides a simple and synthetic representation of how ICT infrastructures may be turned into value within urban areas and, more in general, in any type of social ecosystems. It contains an organic depiction of the relationship between the necessary inputs (the foundation), the expected outputs (the pillars), and the desired outcomes (the roof) of a smart and sustainable urban ecosystem. This representation on top of offering a useful tool in the definition of smart city strategies may also provide precious inputs in the design of impact assessment frameworks for the evaluation of a city performance against a number of long term policy objectives to be operationalized in terms of value creation.

Concluding, if a conclusion may be drawn, there seems to be a great potential for the application of ICT in the governance of the change that urban areas will have to undergo in the decades to come. In order to deliver on their promises, such technologies will have to be employed not only to increase the intelligence of socioeconomic systems but also to establish incentive structures promoting the creation of sustainable public value. The real smart city - in fact - will have to learn how to reconcile individual and collective needs, in other words: channel individual aspirations towards the creation of value for society at large through the attainment of economic, social and environmental objectives.

Enrico Ferro.

PS: This post was inspired by the following papers:

Ferro E., Caroleo B., Leo M., Osella M., Pautasso E. (2013) "The Role of ICT in Smart City Governance" International Conference for E-Democracy and Open Government, Krems, Austria.

Ferro E., Osella M. (2017) "Smart City Governance for Sustainable Public Value Generation" International Journal of Public Administration in the Digital Age (IJPADA),  DOI: 10.4018/IJPADA.2017100102

REFERENCES:

[1] N. Stern, Stern Review on the Economics of Climate Change, Cambridge University Press, 2006

[2] D.H. Meadows, DL Meadows, J. Randers, Limits to Growth: The 30-year Update, Chelsea Green Publishing Co., White River Junction, 2004.

[3] R. Lock, I. Sommerville, Modelling and Analysis of Socio-Technical System of Systems, 15th IEEE International Conference on Engineering of Complex Computer Systems , Volume: 42, Issue: 5, Publisher: Ieee, Pages: 224-232, 2010

[4] A. Cottica, Wikicrazia, Navarra Editore, 2010.

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The Tao of Academic Research

                                               ...the path to high quality research...

As a Taiji (Tai chi) practitioner, I have always being amazed by the depth of oriental teachings and by the many positive externalities the study of Taiji generates on different aspects of a person's life. From a methodological point of view, I have always been convinced that my Taiji experience had significant value to offer to my professional life. Therefore, I recently decided to test this belief and below you may find the main results of my endeavor.

One of the most important preachings my Master (Wang Zhi Xiang) often stresses is: find the root and focus on it!  A very simple sentence but with extremely profound implications. The first obstacle in applying this teaching is to truly understand what root means. The root is represented by a law of universal validity that provides you with some practical guidelines on how to behave. Such law is common to all human activities but requires some contextualization in order to become useful. In Taiji, the root is contextualized through a number of principles, one of which being the tridimensionality of movements, that is: the ability to move in a number of opposite directions at the same time (forward-backward, upward-downward, to the right-to the left). The practice of Taiji also requires to develop the ability to conjugate other opposites among which: softness and hardness, tension and relaxation. In other words, the essence of Taiji is about learning how to keep opposites together, that is why it is also known as the boxing of supreme polarity.

Thus, the universal law from which Taiji derives its principles may be expressed as follows: the search for a dynamic equilibrium between opposite yet complementary elements (in other words, the yin and yang of the Tao).  If applied to everyday life this law may be contextualized as follows: to conduct a sound and happy life it is necessary to find a balance between isolation and sociality, giving and taking, pleasure and duty, etc.

Moving now to academic research, in order to derive useful indications out of this universal law I had to find along which dimensions the search of a dynamic equilibrium between opposite yet complementary elements could be contextualized in this field.

I approached this search by looking back at my ten-year carreer in research and tried to represent the most common mistakes I committed in terms of unbalances between two opposite elements. Below you find the eight dimensions I identified:

•   Reuse of existing knowledge  vs.  original content production
•   Abstraction vs. practical exemplification (the aim should be meaningful and convincing generalization)
•   Precision vs. relevance (sometimes going beyond a certain level of resolution may provide little or no additional value)
•   Correctness vs. clarity (of language) 
•   Competence in a specific field vs. the ability to see things with a fresh look 
•   Ideas generation vs. ideas execution
•   Planning vs. adaptation
•  Collaboration vs. competition (often called coopetition)

Although there is no expectation of exhaustivity, this list represents a first indication of useful aspects that researchers should keep in mind during their daily work. An important thing to stress is that each research endeavor requires to find a specific balance, and difference balances may be needed in different points in time (remember: we are after a dynamic equilibrium).

Finally, the proposed approach may also turn useful for managing discussions. As a matter of fact, in the western world we tend to adopt a dichotomic and alternative approach to problem solving. Some good examples are immigration and crime. In the first case we have commentators that are in favor of closing borders while others are more inclined to helping needy people coming from more disadvantaged countries. When discussing crime management, instead, some people are in favor of severe punishments while others believe that crime reduction may only be attained through the diffusion of education and culture. Of course, in both cases the solution may not be found in a single answer but rather through a mix of policy actions, nevertheless the need for such balance is rarely acknowledged in public debates. This attitude often leads to fruitless discussions. The approach proposed may be a useful tool to find a way out of the impasses generated by the fact that people tend to polarize their opinion by positioning themselves on one of the opposite elements failing to recognize the importance of keeping  the two ingredients in balance.
To conclude, the Tao (i.e.: the way) of academic research consists in the identification of a list of relevant opposite elements and their dynamic dosage throughout the different phases of any given research endeavor.

Enrico Ferro

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Emerging Business Models in PSI Reuse

                                   Join the discussion on Linked-in & Twitter: #psi4profit

Public sector information (PSI) has been under the spotlight for some time now, mainly for its double role as key driver in the promotion of transparency and accountability, and as important ingredient in the development of modern knowledge economies. Nevertheless, many barriers are still hindering the realisation of PSI full potential. Some of the obstacles concern its accessibility and reusability, others are related with a limited understanding among private actors about the mechanisms of value creation and the real business opportunities deriving from the integration of PSI into new or existing product and service lines.

Many of the studies so far published on the topic (e.g. PIRA, MEPSIR)  focused on two main aspects: the quantification of PSI value (answering the question “how much is it worth?”) and upstream information (i.e., public information for which the PSI holder is the sole source and faces no signicant competition in its supply). All this in the belief that once data is made available to the public, the invisible hand of the market will take care of the rest.

The study we carried out (the colleague Michele Osella and I) takes stock of the contributions already present in the literature and proposes a slightly different angle from which to look at the problem. In fact, we concentrated our attention on downstream information in an attempt to answer a so far overlooked question: “How may a public good (PSI) be turned into a profitable business venture?”. In particular, we looked at the problem from a business model perspective in order to understand how value may be created, delivered and appropriated by a company.

More in detail, the exploratory study aimed at answering the following research questions:

1. Are there profit-oriented organizations capable of generating revenues from information produced by the public sector?
2. What are the value creation mechanisms present in this sector? How is value created and appropriated? 
3. In light of non-rivalry and non-excludability characterizing PSI  - when released as Open Data -  which are the key factors playing a pivotal role in the pursuit of sustainable competitive advantages?

To answer the above questions we developed an analytical framework that, in combination with Osterwalder's business model ontology, was used to analyse the case studies selected. Such analytical tool proved very useful and could probably be adopted in the development and assessment of any data intensive business venture (see slides 12 to 14).
The main findings and policy implications emerged from the research work conducted are briefly summarized below. 

MAIN FINDINGS

- The mapping exercise of the most significant experiences present in Europe, showed that PSI reuse by profit-oriented organizations represents a non-marginal phenomenon with heterogeneous levels of maturity among member states.   

- Two market types have been identified  (fluid vs. oligopolistic) characterised by different levels of openness with which PSI is released and different mechanisms of value creation (volume aggregation vs. creativity).  

- From the analysis of the value chain it was possible to identify four main strategic positions that may be employed for the classification of enterprises reusing PSI for profit. In particular, with reference to the role covered in the process of value creation it was possible to distinguish between enablers and tout-court re-users. From a strategic point of view, instead, it was possible to distinguish between enterprises that consider PSI as a key ingredient of their value proposition and enterprises that look at it as a complementary attraction tool. Among the latter, it is noteworthy to mention enterprises that make use of service advertising, that is to say: enterprises developing freely available services to which they associate a brand they intend to promote.

- The case studies conducted allowed to identify eight archetypal business models currently employed by the actors present in the PSI-centric ecosystem. In particular, the choice of the business model to adopt is function of the position covered in the value chain and of the strategic choices made.

- With the establishment of the Open Data framework a new paradigm in information fruition seems to emerge on the horizon. While in a world characterized by barriers hindering the access to information, its fruition is subject to a monetary disbursement. With the advent of a framework  oriented towards data openness (i.e. open by default), access to information occurs free of charge and different forms of payment may be required for restricting the access to derivative works.

POLICY RECOMMENDATIONS

- Opening up PSI, thus emphasising its non-rivalry, non-excludability characteristics,  does not seem to hinder its reuse in for-profit activities. The increase in openness and accessibility, in fact, seems to change the value creation mechanisms shifting the sources of competitive advantage from technological and financial aspects to knowledge about specific vertical domains and functional aspects.

- The main profit oriented activities identified are operating at national or international level. Such evidence suggests the presence of a minimum efficient scale necessary for rendering such activities financially sustainable. This result underlines the importance of coordination activities at European and national level in order to improve the impact of local efforts in terms of data openness.

- From the review of the business ventures selected, it emerged that the main sources of public sector information attracting more interest from the private sector at European level seem to be: financial, legal and geographical information. For what concerns Italy, there seems to a be a significant potential in the reuse of touristic and cultural information still to be exploited.

- The interviews conducted allowed to single out a number of policy measures that could significantly   contribute to foster the development of PSI reuse. They may be summarised as follows: 1. The definition of a clear legal framework capable of surviving periodical administration changes, 2. Higher standards in terms of data quality and updating, 3. The promotion of a new organizational culture among civil servants allowing to appreciate the value inherent in PSI as well as to clearly distinguish between property and stewardship of data.

The study was sponsored by the Government of the Piedmont Region, one of the most active European administrations in the open data landscape. The slide set below contains a slightly longer summary of the study, while the full report may be downloaded from the website of the Piedmont ICT Observatory. [FULL REPORT, POLICY BRIEF in Italian].

Enrico Ferro

Post Scriptum: Since the publication of this post, we wrote two short papers in English that were presented at international events organized by W3C, below you find the references and the links to the pdf files:

Ferro E. Osella M. (2012) "Business Models for PSI Re-Use: A Multidimensional Framework", Using Open Data: Policy Modeling, Citizen Empowerment, Data Journalism Workshop, European Commission Headquarters, Brussels [PDF]

Ferro E., Osella M. (2013) "Eight Business Model Archetypes for PSI Re-Use", Open Data on the Web Workshop,  Google Campus, London [PDF] 

The content of our study was inserted in the white paper published by the Government Agency for Digital Italy: "Guidelines for Semantic Interoperability Through Open Linked Data" (in Italian).

Finally, this post was cited in two O'Reilly Radar articles in USA, the links are provided below:
Article #1: "Open data economy: Eight business models for open data and insight from Deloitte UK"
Article #2: "Making dollars and sense of the open data economy"

  

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Building Excellence: Tips for Knowledge Workers

Being a manager, I often found myself struggling with helping my coworkers to acquire two basic skills that are fundamental in knowledge intensive jobs: report writing and sensible reasoning. 

Since I was a child I have always had a curious and analytical mind, some sort of natural inclination to solve problems by decomposing them into simple elements. A few years ago, I decided to look for a simple yet effective recipe that could be used as a guiding light in the production of high quality knowledge outputs.

First of all, I had to find a way to succinctly define excellence. The first word that came to my mind was: compelling. The choice was linked with the polysemic nature of the word allowing to capture with a single term two concepts: 1.evoking interest, attention, or admiration in a powerfully irresistible way (Oxford Dictionary) and 2.convincing  (Merriam Webster Dictionary). The problem (and the opportunity) was that the tool had to be used in Italy where the beauty of such word would have risked to be lost in translation. To the best of my knowledge, in fact, there is no Italian equivalent of the word compelling. Therefore, I had to create a recipe based on more than one word. So I came up with a framework based on three pillars listed in order of importance: beautiful, clear and smart. 

You may wonder why I put smart at the end, let me give you a brief explanation.

I once received a very good piece of advice about writing: "Remember: apart from your mother, nobody else in the world will ever read a report just because you wrote it. You need to convince the reader that your report is worth his/her time". This is something many people lose sight of and that represents the foundation of my reasoning. 

Good manuscripts need to solve three issues: 1. Convince the readership to take the time to look at what is inside the document (time and attention are the real scarce resources here), 2. Put a message across, 3. Produce value by offering a message that makes sense for the target audience.
Moreover, one of the problems many writers struggle with is about what to write, how to find something clever to say. The fear of emptiness [a.k.a: horror vacui] makes everything else look less important - while - putting the creation of a beautiful and clear output at the top of your priority releases a little bit the pressure on finding something clever to say. In addition, you should not forget the importance of first impressions; remember: people often prefer to bend reality rather than changing their minds.

Going back to my three-pillar framework: if you write a report that is clever but unclear, most readers will not get what you are trying to say and drop the document ASAP. If, instead, you write something that is clever and clear but in a document that does not look good, very few people will look at it and, even if they do, you will have to fight against a bad first impression. The best case scenario is when you write a document that looks beautiful, that contains very clear sentences and that conveys sensible concepts (if smart, even better!).

You may now rightly say: "Easier said than done! How can this be operationalized in practice?". Although I still have to find a final answer to this question, I can say I have produced a first actionable work in progress that I have inserted in the slide set you may find below.

I would like to hear what you think about this post and your suggestions to improve the framework.

Don't be shy, share your writing experience. Thank you. 

Enrico Ferro

Engineering Excellence

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PS: If you are interested in the topic, you may want to have a look at these three books:
1. On Writing Well
2. Bird by bird
3. Simple & Direct

If you liked this post please take a second to stumble it, by clicking on the red button in the "share this page" bar that appears when you scroll down the page. Thanks.

What value can social media offer to policy making?

                                         ...connecting the dots....

Social media, have been under the spotlight  for a few years now. In March 2010 an issue of the European journal of ePractice was devoted to understanding whether the use of such tools in a government setting was - as the title suggested - hype, hope or a reality to come.

At that time, I contributed to the debate on the journal with an article co-authored with Francesco Molinari in which we attempted to frame the use of web 2.0 in government within a wider process of public sector innovation. In that article we intended to convey two main messages: the first was that the use of social media by public administration could have contributed to the construction of a more open, transparent and collaborative government. The second message was that social media could have helped tackling some of the problems encountered in the first wave of government digitalization, such as: the lack of orientation towards creation of value for the final user,  the focus on automation rather than on innovation, and the  consequent low levels of take up/participation. 

More recently, the work conducted within the European research project PADGETS has been very useful in gaining a deeper understanding of the relationship between social media and policy making. In particular, the project introduced the concept of "policy gadgets" that I had the chance to discuss in detail in a recent article presented at the ePart 2011 conference that took place in Delft. In that article we introduced the concept of Padget campaign that is defined as: a set of activities covering creation, distribution, interaction, monitoring and termination of one or more padgets for a specific goal. Moreover, we tried to single out what value a Padget campaign could offer to each phase of the policy cycle. The table below provides a brief bird-eye view of the prominent contributions we could identify (for a more precise definition of the concepts: awareness, interest and acceptance, please see this article)

Stage in policy making cycle	Padget campaign value proposition
Agenda setting	Elicitation of needs and priorities
Analysis	Opinions gathering
Formulation	Acceptance estimation
Implementation	Assessment of awareness and interest
Evaluation	Evaluation of impact perception

More in general, we could say that social media could represent an ideal bridge across Governments’ institutional boundaries allowing to establish a bidirectional communication flow between policy makers and society. The value generated by such tools unfolds along a number of dimensions, is perspective dependent (citizen vs. policy maker) and may vary among the different phases of the policy making cycle (as we may see from the table above). Nevertheless, in its essence it may be conceived as a reduction in the distance occurring between policy making and society’s needs, both in terms of time and tools required. In other words, the use of social media could allow to better inform the policy decision process by providing a clear and dynamic vision of the disparate stakeholders’ opinions and priorities.

Finally, as it emerged from the review conducted within the CROSSROAD project, the use of ICT tools for decision support in policy making has traditionally been a “closed door” activity usually carried out with static external inputs in the form of codified or unstructured data coming from different sources (e.g. statistical offices). Such approach often suffers from a number of important limitations: the lack of a direct connection with the external reality on which the policy decision has to impact, an inherent delay present in the policy response due to the lead time to collect and process the relevant data necessary for the analysis. To exemplify with a metaphor, such process could be compared to driving a car by only looking at the rear view mirror (an indirect and delayed input) rather than through the windscreen. The innovation brought by web 2.0 consists in offering the opportunity to open up the policy making process by integrating it with the activity carried out over social media platforms. This allows to establish a direct link between the decision process and the external world as well as to reason on fresh and relevant information (going back to the metaphor, driving while looking through the windscreen and, in the near future, with the possibility to use additional on-board instrumentation). Concluding, once the necessary organizational processes are in place, I am convinced that the use of social media could significantly contribute to produce a much more responsive and effective style of decision making in government. 

Enrico Ferro

PS: Since the publication of this post, I wrote an academic article on Government Information Quarterly on the experience gained in the context of the PADGETS project. Below you may find the reference to the paper linked to the journal website:

Ferro, E., Loukis, E., Charalabidis, Y., Osella, M., (2013) “Policy Making 2.0: From Theory to Practice”, Government Information Quarterly, Volume 30, Issue 4, pp. 359-368.

@ Google Zurich

Three things surprised me during my visit at the Swiss subsidiary of Google:

1. The incredible attention to security: nearly every door required a badge to be opened
2. The amount of enthusiasm and excitement that being there generated in people
3. The fact that Google placed second and third in two best employer competitions