I have written extensively about blockchain, initial coin offerings and identity in the last year.  Sadly blockchain is still and confusing and scary topic for most people.  So when Alex Marsh from Invest In Blockchain reached out to me recently -I was both relieved and delighted to learn that someone has taken another swing at making this vital new trend, understandable to the masses in this article by Chantelle LaFaille (here).

Now that we are into May, 2018, I have learned of ANOTHER must read post on the subject by Julian Goldie – (here).   Thank you Julian for such an exhaustive examination of ICOs.

The ICO swirl has been a series of insane ups and downs and now with the SEC coming down hard on how ICOs need to behave, it’s not surprising people are getting a little sheepish about ICOs, and thus blockchain.  One of the bright spots in this whole landscape – that compliments the Invest In Blockchain message is the new company that serial entrepreneur Andy Singleton has just launched – AboveBoard, it’s offering a rigorous, disciplined way for white label investors to get into the blockchain companies that interest them most, and the way he has done it is brilliant – because it’s so hard to track all of the global securities laws in every country – the premise is that AboveBoard pays people tokens to keep up on all of those rules – so when an investor from Spain wants to buy a security in the US, whether or not it has anything to do with blockchain, AboveBoard can inform the investor whether or not they can do this.  Seems pretty basic, but until now, cross border securities investments have been cartoonishly complex.

So thank you Invest In Blockchain for this new piece – they are both true Must Reads.

If you are still new to blockchain, cryptocurrencies, and ICOs, in addition to the three previous posts on this subject – there are four new valuable things we have uncovered in our ramp to getting ready for our own token sale at AuthenticID.

• The 101 video: If you don’t know what a hash, or a block, or a token is yet – you have to watch this https://www.youtube.com/watch?v=_160oMzblY8 – it’s by Anders Brownworth and he does a great job
• The book. If you haven’t yet read The Business Blockchain, but William Mougayar, it is a must.  It jumps right in, so if you don’t have the 101, it will be slow going.  He really gets into things in his chapter 1 where he talks about what the internet is, and isn’t and then builds on that to get into the ten properties of the blockchain and why blockchain is so key.
• The Model: Recently the Securities and Exchange Commission (SEC) came out with some statements about where cryptocurrencies fall in terms of whether they are a security and someone shared this incredibly helpful link with guidelines on how to launch an ICO and how to be aligned with the SEC. https://www.coinbase.com/legal/securities-law-framework.pdf
• The Guidance. We talked with the team at CoinPit who are doing their own ICO and got some great feedback on how to think about an ICO – and he basically said if you are a startup with an idea, you should be raising a small amount of money, but if you are an established company that can be a real game changer in blockchain and cryptocurrencies – as we think AuthenticID is with Identity Trust Scores and true identity authentication, it is important to lay out how that is going to become a multi-billion dollar business and why our roadmap calls for more than $50 million in additional investment.

So what’s the missing piece of this puzzle?  What could possibly go wrong if you follow all of this guidance and have a successful token offering?

 

We were talking with Blockchain and continuous delivery guru Andy Singleton today and he was talked about some companies that have raised over $100 million in Ether from their token offerings, but that they are currently stuck because they can’t access the funds.

 

Why can’t they access their funds – having executed a hugely successful token offering?

 

This is the Achilles of the blockchain and cryptocurrencies – and it is called AML.

 

The blockchain is built on trust (because of its architecture, trust is inherent) and decentralization.  Those are among the most basic aspects of the blockchain.  Ironically, the inherent trust of the blockchain that has a build in non-repudiation model we have talked about in previous posts (that is – there is no going back once a transaction has posted – unlike a credit card or a bank where you can call and claim fraud or false charge) is that transactions are anonymous.  Trust and anonymity don’t seem to go in hand, but that is at the core of blockchain today.

AML stands for Anti-Money Laundering and there’s an almost infinite amount of literature about it – but in short – it means that you need to know where money is coming from – otherwise it could be coming from a criminal or a so-called “bad actor” (and we are not talking about Steve Guttenberg) and banks won’t touch transactions where the source is not known because someone could be trying to launder their funds.  So if you can’t cash in your Ether because the banks are tied to AML rules – you’re stuck right?

For now – there is truth to that.

What’s needed is a way to know the source of the funds, so the AML requirements are met, and since blockchains are for people all over the world, that can be really hard to do.  If you could authenticate the identity of the person involved with the transaction (on chain or off chain) – which can be done with linking a government issued photo ID and a selfie with some sophisticated facial recognition software – then those transactions are just as trusted as the rest of the information in the blockchain and you meet the banking AML (and KYC – know your customer) requirements.

 

That’s the way to solve the Achilles of the ICO and the company that solves that first will make a lot of people very happy – and probably make some of those bad actors pretty unhappy.

 

That’s going to break the dam on some of the potential of blockchains and cryptocurrencies.

ICO is the hottest new thing.  Yesterday a search on “initial coin offering” on Google yielded a little over 500,000 hits.  That number was up over 20% overnight.  That maths out to about 350% growth a week.  Alex Wilhelm wrote a summary of the ICO in this WTF piece.

You have probably heard of Bitcoin, the digital currency.  That’s in what is now a category called cryptocurrency which is a combination of blockchain and money.

What that means is that if Blockchain is like the US Dollar, then these cryptocurrencies are like other foreign currencies.

An ICO sounds like an IPO, bit is more like a Kickstarter in that you aren’t getting equity in the company, you are paying in advance for a product they are building – and in this case the product is the money – the cryptocurrency which is presumably currency you can use, that might appreciate in value (like a stock, or a foreign currency).  This is a list of current ICOs going on right now.  Forbes did a very good piece on this three days ago and that’s here.  Reuters has already written about some of the dangers of the ICO and they are on the right track.

The issue is that from a trust and security standpoint, they are more like the $100 bill of 20 years ago, where there was very little built into the currency to have confidence that it was real, not counterfeit, when converting it to another currency.

The blockchain model is fine within its own ecosystem – it’s when you take it out of one blockchain and either cash it out into traditional currency or move it to another cryptocurrency blockchain that you run into issues.  This is, yet another, example of where traditional ID/password authentication falls short when it comes to trusting a person and you need facial recognition linked to a government ID to have confidence that the person is who they say they are – and that goes a long way to trusting – and having accountability for the person trying to use the cryptocurrency.

Once that additional element of trust and confidence is there, then I think ICOs and cryptocurrencies can start to fulfill their promise.

The problem is that so many people switch from waterfall legacy systems model, to agile and fail (most “failures” in business are relatively minor – but failure to successfully adapt to agile can cause maintenance costs to spin out of control and halt delivery cycles – unchecked that’s lethal to most businesses).  The rub is that there are several reasons for these failures.

One of the things that is more complex than it seems is the vision for the end state.  You might think everyone needs to share and understand – grok the end state.  But that’s not the case.  Particularly with large transformations, only a few need to share the vision for the end state and the interim success milestones.  Here are some images to illustrate the point.

Sometimes something is completely obvious to you but other people don’t see it, and it’s easy to show them, like the arrow in the FedEx logo.

Then there are things you can see that others can’t, even if you circle it, like the number 15 in the diagram below that you can probably see if you are not color-blind.

Color blindness test

The image below is called a stereogram and it also contains an image.  Some people can see it right away, others need to stare at it for a while – and others may never see it.  I haven’t seen it yet otherwise I would tell you what’s in it – I will spend some more time looking at it and update this post if I see it.

Stereogram

Leading any change in an organization requires a vision of what that organization will look like at the end of the change. Bill Barnett wrote this really insightful piece on disruptive change – but not all transformational changes in an organization lead to an external disruption.

Sometimes the change is small having the vision for that end state is straightforward like the FedEx logo.  Banks allowing customers to withdraw cash using ATMs instead of going to a teller is an example of a change that’s pretty easy to picture.

But the pace of change in business has accelerated across the board and to keep up and stay competitive, most organizations need to restructure, even refactor if they are to continue to achieve their goals. One area where major change is needed is in how they manage technology.  When organizations migrate from supporting a few legacy software systems for things like CRM and ERP that might have quarterly or annual release cycles to a model where they now need to release software every month, or every week or even every day as some do now – it can be a lot harder to picture what changes are needed.   So as changes get more complex and become transformations, chances are the end-state vision will be more analogous to a stereogram where not everyone can see it.  That’s because complex transformations often require significant changes in three things – the structure of the teams, the governance model that is used to manage what work is done, and the metrics used for that work. Major transformation in structure, governance, and metrics can be very hard to imagine.

Especially when teams aren’t used to going through a major transformation, and all they know is the way they have been doing it for many years, it can be even harder for everyone to see the image in the stereogram.  Transformations can be a lot like innovation in that if that’s all you do, you get really good at it, and the odds of your success go up every time you do it because you get better and better at it.

Because few organizations are in a constant state of transformation – they often hire people who do it all the time to help not only create the vision – but also help them execute the transformation to help them be successful.  In our experience – success for a large transformation has to excel in the three areas mentioned above – governance, structure, and metrics.  Absent rigorous and disciplined change in governance (making sure people are working on the right things), structure (the way teams are organized and the skills they have – which are often very different from the skill needed in legacy/waterfall team), and metrics (delivering working, tested software that meets the needs of the business), organizations will fall short of their transformation needs and goals.  If you are considering a transformation  – make sure you have these three bases covered in your vision and your execution.

It is very tempting to want to get everyone on the same page and make sure everyone can see the vision before moving forward.  This is not necessary.  As long as the leaders of the transformation have a clear vision on the end-state of the transformation (agreeing that it’s the number 15 to use the simplistic color-blindness test example above) – that is what is required.  We would go so far as to say it’s smart to assume that not everyone can see the future state – and that is part of the structure, governance, and metrics needed to ensure success along the way.  If there are people who don’t share the vision – they won’t know if they are off track for the work they are doing, so communication among team members needs to be disciplined – even explicitly baked into the 90 day plans that should be in place for a transformation of this scale.  We have seen many examples of cases where organizations have successfully defined and achieved their vision – and even more cases where organizations have stumbled.

Contact us and we will share our lessons learned with you.

I recently read an article about declining rental car usage and it was blamed on Uber.  Like a lot of people, I use Uber often, even where I live, so the article did not surprise me.  Thrifty has a plan to fix that and it’s smart.

Last weekend I went to Atlanta for a work trip.  Having experienced really high rates from Hertz and Avis in the past, I have mostly used Thrifty in the last five years when I have needed to rent a car.  Now I realize Hertz owns Thrifty, and in the same vein that Old Navy, Gap, and Banana Republic are owned by the same company, I get that there can be several brands and markets (low, medium, and high-end) within a given industry.  VW is also part of the same company as Porsche and Audi, but that’s very different (VW doesn’t make any money – by design) and I will  blog more about that some other time.

I will start by telling you what happened.

I went online, starting at Trivago and learned that wasn’t the right place to start even though I do love that site.  Then I went straight to Thrifty.  I entered my airline information and told them my pick up/drop off dates and it offered me a car for $50.  At first I thought that was a daily rate – and then I realized that was the total price for a three-day rental.  It was $13 per day plus taxes.  I couldn’t believe it.  And like most rental car companies, you can book a reservation without even entering a credit card (that’s bound to change soon), so there’s never a penalty for a no-show.  So I booked it.

Then on Friday night I got to the rental car counter.  The discussion started off pretty predictably with the woman behind the counter asking for a driver license and a credit card.  Then she started explaining some of the insurance options.  Now I have been told for over 20 years that you always decline insurance on a rental car, especially when it’s for work and you are paying with American Express, which I was.  But today she was very convincing and I actually thought about it – she pointed out some specific coverages for accidents with people who don’t have coverage and I really thought about it.  Part of my thinking was – well it’s only $13 a day, maybe another $25 for insurance isn’t such a bad idea.  She told me their gas prices are really high and that if I was planning to drive a long distance (which is almost inevitable in Atlanta) it might make sense to pre-buy the tank.  These are questions I never think twice about and always decline, but today, I was really thinking about it – because the way she asked the questions was different.  And again – my base was $13 a day, so I kept thinking, what’s the harm.  But in the end I said “no” to everything and went on my way.

As I was driving up North, it hit me what had just happened, and why Thrifty is so smart (I am guessing – I haven’t spoken with them about this).

They don’t want to fight the battle for your business online.  They want to get you face-to-face for the real selling.  So they completely undercut the competition online – $13 a day is nuts – and that’s probably a marketing expense for the people like me who make it to the counter and don’t bite.  If I came that close to caving, I bet more than 50% of people buy some of the insurance, car seat, GPS, gas, or other add-ons, and by the time it’s over – they are right back at the $50 per day I have come to expect with a car rental.  Paying $13 per customer is a high marketing cost in a vacuum, but if that’s what it takes to get someone to go all the way from Seattle to the Atlanta rental car counter – that’s smart money.

On the spectrum of smart, smarter, smartest,  Thrifty gets my Smartest Company award for the month.

I will admit that I expected to pass a gas station on the way back to the airport and there wasn’t one, so I still got stung on the not filling up gas charge, but next time I will know better.

 

P.S. The punchline on VW is that they sell large volumes, which helps drive down the cost of their parts.  Audi and Porsche use a lot of those parts and that’s why it makes sense for VW to operate at a black zero in terms of profit, and how Audi and Porsche are hugely profitable.    And Thrifty doesn’t offer any of those cars.