Two sides of the blockchain coin: technology and organization

In an earlier post I listed some features that are important for blockchains from technologial point of view. But that's not all – for a blockchain to be successful, it needs also a well-functioning community around it.

Blockchains enable anonymous individuals around the world to cooperate with each other, without fear of somebody taking all the money and running away. But the trust for valuable monetary transactions is not the whole thing. There is a lot more in the system.

So the trillion dollar question is: How we can build a good organization around a blockchain?

The first step is to design a governance process to the blockchain itself. There needs to be a defined way of making any kind of decision regarding the blockchain. Easiest way of this is to enable voting on the blockchain so token holders can vote in tough questions that can't be answered with just discussing on a forum. I've written about this earlier: How to design efficient and resilient DAO.

But the next steps are much harder. It's not enough that you have a good governance model if people are not using it. If the system is completely new, there is probably a need to teach how it should be used until enough individuals truly get it. This is a lesson learned from Bitshares: It has very good governance model but the community has – even today – difficulties to understand how to use it effectively.

Then there is the business side of the blockchain. Most projects are actually DACs, decentralized autonomous corporations/companies. Their goal is to make money for the core token holders. A DAO is a little bit larger concept, it includes also non-profit organizations.

As we have seen so far, despite hundreds of blockchain-based projects, there is very little real world usage. Most of them are just based on hyping and deceptive marketing, trying to convince investors that someday the project will do something actually useful. But the business development is pretty much neglected because developers and early participants don't have a clue how to do it.

Currently I'm researching lean literature to understand better how great companies are made. Toyota is the leading example. It has developed it's own unique culture for decades now with great results. I highly recommend reading The Toyota Way by Jeffrey K. Liker. It's a great read even if you are not in any way interested in car manufacturing.

One big mistake that many people do even today is to think that lean can be applied only to manufacturing business. Quite the contrary – if you dig deeper into the topic, you can see that lean is not a collection of efficient manufacturing tools but a way of thinking.

So the next question is: How we can teach this kind of thinking to an organization?

The reason why Toyota has been so successful in this regard is that they are the best at teaching the lean way of thinking to everybody. It's rare to see Toyota hiring managers from outside the company because outsiders are not grown into lean thinking.

Mike Rother has done great job in researching this topic. After reading The Toyota Way my next suggestion is his book Toyota Kata. You can also get a quite good understanding by watching this presentation:

BTW, also his next book seems to be very promising: Toyota Kata Culture.

Teaching lean thinking is hard in traditional companies. For decentralized organizations it's even harder because participants are often pseudonymous or anonymous and they will join and leave the project whenever they want.

More practical ideas for DAOs might be found for lean books for startups, like The Lean Startup, Nail It then Scale It and Running Lean.

Conclusion

There is no conclusion yet. These are just my initial thoughts.

But the point I'm trying to make is that the blockchain scene has emphasized way too much the technological side and forgot the organizational side. The coin has two sides and we can't just forget the another one.

The most successful blockchain will be able to balance these two sides and create a DAO that has robust and resilient basis on technology, with a community that can use the technology to make great products fast and efficiently. My intuition says that lean thinking might be the most lucrative direction to achieve this.