From Hype to Reality: Navigating Enterprise Blockchain Adoption | KBW2023

[Music] good afternoon good afternoon everyone we're right in the middle of lunchtime absolutely we'll make sure you don't fall asleep yeah we should uh we should Promise free food here on the stage that's great look today uh my name is Yong I am a managing director and partner at BCG and I cover web stre and digital assets and we have the pleasure today to welcome Gary together with us found and CEO of terminal 3 and obviously Gary had a very successful career uh both as entrepreneur and CEO so why don't you maybe start a bit and talk a bit about yourself what's your path today leading to Enterprise blockchain oh man uh okay so I I'll keep this really short so I started off in very traditional US tech companies uh so I've been through Google AOL um all on the ad technology side and then eventually ended up at Spotify SP ify when Spotify was still relatively small in the United States uh there was about 20 employees we had just gotten our licenses in the US I helped build the attech for Spotify uh and then LED Labs there for uh a number of years uh that's when we were first started investing in and building with big data it's it's kind of funny to think now that 10 years ago Big Data was not really a consumer application technology yet wow um and then uh and then I joined a media technology startup called dig I think some people here might remember dig.com um so CEO of dig and then somehow ended up in Hong Kong 7 years ago took over a very old newspaper which is 120 years old now called South China Morning Post and was responsible as CEO for uh its transformation over six years uh and then made my way into blockchain um and the reason I did that was because all these years in consumer technology and the newspaper is consumer technology uh I came to realize um that there was a a very very significant paradigm shift and what a next generation of consumer expected from their interactions with and their effectively ownership and stakeholdership with uh Enterprise Brands we saw that in the news industry we saw that in the retail industry and even though it might still be a few years away from scale um to me their expectations exactly match um what decentralized the decentralized internet can offer so I became convinced of web 3 and decided to build in it that's how I ended up in web 3 that's amazing part right seems like you are the perfect person to leak the real campaign right for big consumer tech company to move into web3 so how has it been so far right what kind of like killer use case have you seen I I haven't seen any killer use case yet wow I think we're really really early in Enterprise adoption of blockchain um we have effectively in my mind been through uh kind of three stages of this so far the first phase of Enterprise adoption of blockchain was just blockchain as Ledger technology even though of course blockchain started off as uh I mean Bitcoin it was a it was a a value hold for Enterprise adoption their first introduction to blockchain often times was like hyperledger it was sold to them as a more effective more efficient type of database uh easier to build on it was all private you don't have to worry about security you didn't have to worry about um uh you know external hacks and whatnot and that was their introduction um that was phase one didn't quite scale didn't quite work out because there were not enough engineering there not enough applications Frankly Speaking it was actually really hard to convince an Enterprise CIO why blockchain was better than all the scaled centralized Data Solutions that were out there then phase two was that Finance came into the fold right the fintech application of blockchain started to scale these protocols and platforms uh made it easier for people to transact across different uh you know digital products across different borders and there are some companies that started to adopt those fintech applications of blockchain uh and that you know some interesting government applications some iny scaled Enterprise applications and then phase three has been the most recent phase which was marketing and loyalty that's the nft craze right everyone wanted to get in on the marketing side of web 3 they wanted to ride the hype train a lot of projects were launched most of them were abandoned right and now we're in this law where the Enterprise applications that were planned during the Bull Run have all effectively launched and fewer and fewer Enterprise applications are being launched right now I think the killer use case is still to come and I think that there is a very very long phase four that's going to happen before the killer use cases and that phase four is is going to be infrastructure adoption right um and so the Baseline rails and Roads that allow a Enterprise company to move into web 3 with ease and this is the key thing yes with ease those Technologies need to be built Enterprise needs to adopt them before they can figure out what the real killer use case is okay but you know then how do you convince an Enterprise right if you are like sitting as a CEO of a multi-billion company how do you convince them that blockchain is so important that you to invest now for something that you cannot see in the near future right that okay that's such a tough question I'm not going to answer it yet I want to ask you actually YH before I answer this question if you're asking me about killer use cases you've seen a lot too do you agree with me because you look like you disagree with me when I said that there were no killer use cases in Enterprise yet well to be honest I think you know like it's um I partly agree and partly disagree right so the the reason why I would agree is because I mean it depend on the definition of what do you mean by killer right if you think a killer is a billion users then I totally agree right so I don't think that Enterprise blockchain has seen a chat gbt moment and and you've seen like you know AI everybody talked about AI for like so many years right and it became really popular with chat gbt right so what's the chat gbt of essentially blockchain is something I don't think we have a agree with right but but if we look at chat gbd is a great example because if we actually look at ai ai went through four five six phases before we got to the chat gbt moment and some of those phases were very very similar started off with Enterprise technologies that made recommendation engines and whatever algorithms you run in the background for Consumer technology to be easier and then that got applied then it went into Academia um and then it went to you know a a cross functional adoption and then eventually you got to the the point where infrastructure made it so easy that anyone could build on top of AI Tech you no longer needed your own AI technology you can just literally uh there are apis for this you can use somebody else's Tech and somebody else's large language models to change the um the the utility of your own business and then we had the chat GPT moment right so I I actually think AI is a great example of the patience that will be necessary before we get to that scale event for a blockchain in the consumer Enterprise world that absolutely agree and and I think you know like when you think about use case we also think about you know the back end and the front end right so for instance if you look at the financial industry right essentially you know the fintech revolution has actually been on front end Revolution right so if you have revolute or n26 or whatever fintech art you have on the back it's exactly the same as a bank right it doesn't change anything but it change the user experience so it's more visible for the consumer right do you think that the speed of settlement that is existing that exists in fintech which is part of their value proposition and especially now in blockchain powered fintech the speed of settlement do you think that that's still just front end isn't that a very significant backend shift that makes blockchain applications in the financial services world so much more compelling not only for banks but especially for consumers um I tend to agree I think it makes a difference but when you think about what really creates adoption is not a 20% difference it's a 10 times difference right so if I use a consumer fintech right and I basically transfer money you can actually still settle in a you know a very ly manner on the on the back end but on the front end your screen will change and you will move from $100 to $50 because I transfer you $50 and the front end can be seamless and the back end reconcile and messy in the back right but the consumer doesn't realize how messy on how costly it is on the back right so essentially I think you know I I tend to agree it creates a difference right but is it really noticeable from a consumer point of view that's TBD right and it's the same for the AI right so I think you know you make a very good point in the beginning you still have a lot of AI application in research in customization Etc but that's not the consumer uh can see right so whether you receive recommendation driven by AI on Tik Tok do you know it's really AI I don't personally I just see video flipping by right if I see search engine result which is customized do you think it's AI I don't right but when I see chat gbt wow I feel like it's AI right and probably the math and the algorithm behind it is the same right but the fact that consumer experience is different Drive the whole hype and adoptions right so then back to the question that you asked previously what do you like how do you convince a corporate executive to invest and start building in this technology that might still be years away from consumer skill years away from the chat GPT moment probably not that far away but you know not immediate um I think you have to convince them that there are obviously these these corporate advantages that come before consumer scale so one of the things that that we've seen when it comes to the efficiency of Ledger technology versus centralized databases is that marketing and targeting when you use decentralized ledgers properly becomes the iteration cycle of marketing and targeting becomes significantly faster right so as an example a great corporate Enterprise use case that for whatever reason is rarely talked about is that there are major airlines around the world including both of us live in Hong Kong um and the Hong Kong Airline cath Pacific that I think most people know very well have for years been using blockchain technology as part of their CRM stack they have no decentralized loyalty uh uh program not like Starbucks or Lanza now but they have their customer information part of it sitting in blockchain Technologies now the question is why the reason is because their CTO years ago figured out that targeting using uh using customer information off of of blockchain Technologies to run targeting and marketing campaigns means that um the settlement of those mileage points even though the mileage points are still centralized the settlement of those mileage points is significantly faster and less manual because there is a single centralized there's a single Universal Ledger that all of the marketing campaigns can actually refer to that didn't exist before blockchain Technologies for them so there's a corporate efficiency case for blockchain adoption increasingly there are going to be security reasons why companies should be moving to blockchain Technologies versus the existing centralized technology Stacks they use today they're going to be Regulatory and compliance issues why corporates are also going to move so they're going to be cost savings first before the revenue opportunities that's my that that that's my interpretation of of the phasing right so the convinc cios and CTO to uh invest in blockchain today I think the easiest way to sell them into now that we've passed the kind of the CMO um nft uh craze is cost savings first and then the revenue opportunities for Consumer scale will come later I very much agree and I actually very much like your framework on you know what's the shortterm right what do you do to fund the journey and how do you basically convince on the big picture and and somehow I I agree that the first phase will always be G Saving right but the problem with the first phase with the CIO is that blockchain technology is competing against other technology for the same effect right and you can argue that you can do slightly better slightly worse right but it's not an absolute win right you need to fight for your fair share of the market I think that's one the second thing you know like which is even higher at the board level chairman level or coo agenda the reason why for some industry you need to adopt is for optional value right because you know some industry I think you know will just be like marketing and loyalty but if you don't have a loyalty program does it kill the business essentially not really right you can live know with worse marketing you spend a bit more less money right uh but essentially for some industry such as the financial service spacee you know the technology really has disruptive potential right and and those are regulated entity where changes of landscape happens every 10 years right and if you are like a second tier player that's the only way you catch up with the number one play player right you have one chance every 10 years at the same time if you are leading players that's how you become an underd dark right you can lose everything in in in in in the span of like 10 years right if essentially uh the technology doesn't follow so how do you basically protect yourself against that how do you hedge that how do you make sure that you are not disrupted it's actually by investing in that technology because if you don't do that and Regulatory Clarity comes and everyone start to do that then might fall behind very very big time so I think there is a bit of like cost-saving effect right which is immediate benefits but there is also a bit of like optional value or Insurance value if you're a large player there is a lot of corporate and Enterprise education that needs to happen before any Enterprise players actually understand um that adopting these two technologies is going to hedge for the future I I mean you guys as a consulting firm spend a lot of time in Education First I assume right um I find that we haven't actually had the inflection point where Enterprise executives are uh well they're certainly not informed yet but they're not even willing to be informed yet I don't know when that inflection point comes I think that this is where you know it it's very odd right in this technology um we we often talk about Enterprise adoption of new technologies um and ask the question whether or not first movers are better off or fast followers are better off the vast majority of the time I would say for Enterprise adoption of Technologies the fast followers are better off that's what I would generally say okay because the first movers make all of the mistakes they deal with a really really bad infrastructure that is not mature yet they're the ones who actually pay into the pot and then the fast followers take from the pot but I actually think that in this case for blockchain adoption first movers are going to have a significantly greater Advantage there are couple of reasons for that number one is that they get to set the standards this is a technology where there is the Playbook is not written at all and standard setting is going to be incredibly important and standard setting by the way includes regulation and it's the first movers who get to decide on regulation and so if the big players decide to step into the fold right let's take Banks as an example if the world's largest banks are active with Regulators today they actually have the poll to Define how security Regulators how Commodities Regulators around the world understand digital assets and they can actually I think maneuver regulation today to benefit major players who have first mover Advantage versus the fast followers they Define the rules the second reason is because the nature of the decentralized internet is that the more decentralized an digital asset is the more wallets have that asset in it the more powerful that asset becomes and so as a first mover the longer you're in the game the more likely you're going to be decentralized the more likely you're going to be in many many wallets especially with the whales the people who really have the moving power for technology and therefore you're going to beat out the actual fast followers right um and then the third reason I actually think is that there is a credibility issue in our industry and today that credibility issue is combed by a few things one of it is longevity I know it's silly we have an industry that is only a couple years old but if you're a project that's been around for more than 18 months it already shows some it already it lends credibility to who you are to what you're doing that you continue to invest in it so for those three reasons I actually think for Enterprises first mover matters in blockchain adoption and in decentralized technology and I would recommend for CTO and cios to act fast even if it's small scale project to act fast rather than wait and see I tend to agree right so I think you know like it's um I I would even say you know it's all about building a muscle right so essentially if you build a muscle before the big battle you will be fit for combat right when it really comes and when competition start to do it at the same time right and it's it comes back to essentially what's the optional value of having that right because what happened in the worst case scenario if you don't have that for some Industries nothing will happen it's going to be nice to have right but for others and we talking about some Financial Services I think it's going to be totally disruptive it's going to be you know we can argue advertisement is probably also one of them right where the current industry is under huge pressure and they will be reshaping of the value chain right in some shape or form enabled by technology right and the way it will happen right will actually be having a huge impact on your own Industries right so I think you know investing in it totally makes sense right but I don't think it's only about education and I don't think it's only about technology right because the first question that people will ask is what do I do with that technology right so I think painting the picture of what will happen if I don't invest or I do nothing it's really really important to understand actually the optional value of investing that technology right uh I I might piss off a lot of people here um I actually think that one of the major missed opportunities in our industry was the death of Facebook's Libra project DM I actually think that if if uh if I already see people frowning in the crowd I'm making friends oh gruning but I actually think that had that actually happened whether or not we agree with the centralization of meta but if if that had happened there would have been the kind of critical mass understanding and Adoption of what uh borderless uh digital Cur like actual digital currency could mean in Daily consumer lives and because of that the Enterprise adoption would have been so fast if suddenly billions of Facebook users all had the opportunity to own and then therefore spend digital currencies I think the adoption would have been the Enterprise level adoption would have been so fast it would have accelerated the actual decentralization of our world even if DM itself was heavily centralized it would have spurred the move towards decentralization if there is a jet gbt moment it might in our world be that it might be the thing that for obviously Maxis for people who really care about decentralization may find kind of vomit inducing but it will be the thing that will accelerate the actual ad Enterprise level adoption to get to Greater decer uh uh decentralization so this is also the reason why I think we we have to pay really close attention to what PayPal is doing today right with PayPal's stable coin uh being able to turn on that any wallets PayPal accounts to effectively become digital asset wallets and have the rails that already exist that people already familiar with that people already trust to become onboarding rails into a de digital asset world as an as a gate into the fully decentralized world is going to give us so many more advantages that I think most of us who are Builders are willing to admit today so um yeah this is me just circling back to the chat gbt moment An Inconvenient opinion I think I have is that it's going to come from a heavily centralized um entity that actually opens the door to digital assets first before we get to decentralized assets I agree and I think you know like look when I think about it there is two element to mass adoption that you need right so one is how to onboard users which today to be honest like you know if my Grandma had to basically buy an nft she would have to go to an exchange put money do kyc transfer to a wallet and then get into a smart contract on openc which obviously she is you know might not be able to do it by herself but with PayPal as you mentioned right that could be an option I think now that's that's one element and one of the missing piece how to onboard a billion users but the second thing which I think is even more important is you know having a really really differentiated Slash widespace use case right what do I mean by that is you know having a CH gbt moment is because it's something that you have never seen before right if it was just sir which was powered by the same algorithm you would not be as excited right this is the reason why I believe if the use case is still like payment yes for sure it's cheaper yes it's more effective yes you know it have no restriction you don't have to pay interchange it's faster but is it really a 10 time difference obviously you can do it with a traditional system right so you really need to find a way where you the use case need to be wides space need to be something which is nonexistent today and this is actually how you basically unlock the new wave of users right oo um I got to think a little bit about that um I I mean I think we're so far into just technology adoption um I have a hard time finding true White space uh it's much easier to say okay here's X example of consumer behavior that exists in web 2 let's create a decentralized version of it that adds additional value I so so whites space is an interesting question I I actually don't know how to answer that but I will say that I think that there is a difference between a 10x use case and kind of a killer use case that accelerates adoption those two things to me are different and I'll give two examples of um what I you I'll give an example each of what I think a killer use case and web 3 really is for consumers versus a 10x use case I think a killer use case is it's it's pretty commodity it's a pretty commodity use case I think it's ownership of a certain digital asset that people care about um and So eventually I think a killer use case well killer use case is the wrong it's sort of that adoption moment um is going to be some digital asset some Pokemon moment where there is going to be be a generation of kids who all want that one digital asset who during Christmas and birthdays for a 24 month cycle say that's the thing I want my parents to buy um and I think we're close to that I think that there's going to have to be a front-end um a company and it's a I'm talking about an IP company a well-known IP company whether it is a Nintendo or a uh you know a Disney or something like that who decides I'm willing to kill my Golden Goose of the traditional business that I sell right now in IP and make a massive ship in the digital asset launch something that everyone wants and all the kids decide to tell their parents I want to buy it I think that that is a pivotal uh watershed moment but I don't think that's a 10x use case because that is just a replication of the existing collectible use case right ownership use case but in digital assets I think a 10 next use case that we've already started to see today is is loyalty and when one of the major loyalty programs in the world Maria bonvoy as an example okay decides I am willing to shift my loyalty points into a decentralized world and the big thing they have to get over is the fact that I can no longer control the actual rewards points I can't just devalue my rewards points whenever I want I can't control the the secondary Market trade of those rewards points but they figure out a way to make it so that because they give up control their rewards points become more valuable because more people can suddenly adopt it as their native rewards Point as consumers and as Enterprises I think that's going to be the 10x moment that's a 10x use case when we start to earn um assets by basic behavior and those assets have reward value not only as holding value but as transactional um Redemption value and it can be it it can be almost Universal that's a 10x uh that's a 10x use case for the decentralized economy so to me those two things are a little bit different sort of the adoption use case versus the 10x use case I don't know if that makes any sense I think that makes sense and I think you know I can relate to the to the second point on the 10x use case right so basically creating more fungibility and utility of your point right totally agree the only point I would arguably challenge is is marriage really going to do that right because you can argue that you know you basically have two type of players in the Loyalty program right either you are like Merit or Asia Mar in Hong Kong and you already have somehow High spender a lot of customer behavior and somehow Monopoly right so your incentive to change and your pinpoint is not that high where I would see actually the value coming is you know from the second tier loyalty players those are the guys where I'm sure you have like coffee points you know second tier hotel chains or second tier airlines that you don't use those are the people who actually have points in the wallet but 80% of them don't use it right because they have no utility it's not compatible with other program this is where actually the technology can allow intercompatibility and switching across right so if you are a second tier Hotel chain and you are not marit this is your only chance to have a competitive loyalty program to at least compete against Merit whereas actually someone like Merit would almost always lose except if the point value increase which is actually hard to guarantee right so I would see I totally agree with the use case I would probably see the adoption coming bottom up versus top down yeah I think I would agree with you on that that I'm using Marriott as an example because it's one of the largest loyalty programs in the world and it really would be a world changing moment if they made that call I agree with you it's very very unlikely I mean Mar frankly they are product well actually I shouldn't just crap on Marriot because all major loyalty programs are like this we love marit yeah especially you as a consultant um they are a product that is masquerading as a platform but really for there to be that world shift you actually have to think about loyalty program as a protocol and so you are right you're probably right I mean yeah you're smarter than me so I I'll say that you are right that the uh the the second tier programs are going to be the ones that are going to willing to make that c change bet and become a protocol yeah that's right look I think we had a very very good discussion any last I went off topic I've actually no idea yeah any any any last advice actually you know for any Enterprise in the room who want to adopt the technology right we talked a lot about it right but one single advice what should they take away today um when you think about decentralized Technologies don't just think about it as actually consumer technology that fits the the use case for a next generation of consumer that I think is the way to convince executive corporate Executives on why it's important to adopt this Tech it's not just for the tech itself it's the fact that the Next Generation gen Z have a completely new set of behaviors that we have never ever seen before and we don't pay anywhere near enough attention to that set of behaviors today once you start paying attention to it you'll start realizing that what they believe identity to be is is nothing like any generation before what they think asset ownership looks like is nothing like any generation before and then what they think their relationship with Brands ought to be which is not as a customer but as a stakeholder is nothing like anything we've dealt with before so before you even look at the technology if you are able to actually study gen Z and realize that their behaviors the way that they make consumer decisions is completely different you'll start to see the value of decentralized Technology and why that is going to be necessary for you to be relevant for that next Generation very wise world thank you very much Gary to be with us today appreciate it thank [Music] you