Market Vision in Web3: How Organizations Driving Radical Innovation Succeed — Part 1

Why is it that some firms seem to be in the right place at the right time when the next big technology comes down the pipe? Is it just luck, or is there something firms can learn or actively do to improve their chances of success with choosing the next ‘‘killer app’’?

Having the ‘‘right’’ market vision (MV) in new product scenarios involving high degrees of uncertainty has been shown to help firms achieve a significant competitive advantage, which can ultimately lead to superior financial results.

These quotes were sourced from the introduction of a research paper titled “Market Vision and Market Visioning Competence: Impact on Early Performance for Radically New, High-Tech Products (2010)”.

The emergence of distributed ledger technologies and associated web3 applications have kicked off a paradigm shift in how we manage and exchange both value and data, as well as how we represent our digital identities. In a similar fashion to the emergence of the Internet, which drove massive global and societal changes, web3 technologies will do the same.

Organizations driving the development of new products in yet-to-be-developed markets face an uphill battle of change and uncertainty. In order for web3 to “cross the chasm”, participating organizations must overcome challenges on the product innovation and development front, but also on the fronts of legal/regulatory, economic, and societal acceptance.

Organizations can best equip themselves to overcome these challenges by formulating a strong and genuine market vision or “market thesis” as a foundational signpost. A market vision is a documented projection of the market in which they play, over the next 4–5 years, with clarity and actionability. This document is developed by an organization’s leadership and may include contributions by inter-organizational experts. The document is typically revisited once a year and adapted to reflect real-world market changes.

The importance of both defining and documenting a strong and genuine market vision cannot be overstated. It’s foundational to the formulation of business strategy and subsequent go-to-market planning; it aligns individuals within an organization, as well as external contributors; it offers purpose and pride for contributors; it attracts new users who come to believe in the same vision and contributes to overall product adoption. The absence of its declaration is the delta between an organization’s potential success and failure.

This article is part 1 of a 2-part series that attempts to synthesize research-backed findings through the lens of web3 organizations (whether it be layer 1 & 2 networks, Defi protocols, DAOs, or other open source and permissionless organizational structures). It offers a deep dive into how market vision is formulated through understanding the market visioning competencies needed at an individual and organizational level, as well as defining market vision and its core components from an extrinsic and intrinsic perspective.

After reading, you’ll be better equipped to improve your organization’s market visioning competence, required for market vision formulation, and better understand the individual components that comprise a strong market vision.

Glossary of Terms & Definitions

MV (Market Vision): Formulating a viable Market Thesis with clarity and actionability which lends itself to an organization defining product-market for new and advanced technologies.

MVC (Market Visioning Competence): The ability of individuals in organizations to link advanced technologies to market opportunities of the future.

NPD (New Product Development): The development and iteration of new products which satisfy the unarticulated or projected needs of their users.

Market Visioning Competence

To develop an effective market vision, organizations require market visioning competence. To be successful, MVC requires a subtle balance between the dynamic learning capabilities of individuals (e.g., networking, idea driving) and of the organization in which they participate (e.g., proactive market orientation, market learning tools).

Formulating a market vision with clarity and actionability requires strong market visioning competence (MVC). The components of MVC consist of :

• the capabilities of individuals and contributors (individual-level dimensions) within an organization, and
• the structure of the organization itself (organizational-level dimensions): whether it employs a ‘proactive market orientation’ and empowers individuals within an organization with market learning tools.

Individual-Level Dimensions

Due to the decentralized nature of web3 and its novel / unorthodoxly organized structures, such as decentralized autonomous organizations (DAOs), there exists a diminished hierarchical structure. This leads to more equitable influence by contributors, as well as more frequent ideological debate. Its consequences are two-fold: greater success in innovation, but longer cycles and an outsized noise-to-signal ratio if the organization lacks a shared vision to which everyone is aligned.

With that in mind, formulating a market vision that aligns an organization’s contributors becomes especially critical in web3; while, at the same time, recognizing that the barriers to its formulation are further pronounced.

Web3 organizations must become skilled at identifying two types of individuals and nurturing their unique attributes in order to bolster MVC, contribute to a strong MV, and reduce the noise-to-signal ratio:

• Boundary Spanners: individuals who contribute to adjacent organizations or projects and/or form relationships with its participants.
• Champions: Individuals responsible for pushing ideas forward from the individual level, up through an organization.

BOUNDARY SPANNERS

External webs of relationships developed by individuals of the firm, or networking, is a key element in creating effective visioning competence.

Employees and contributors of web3 organizations who participate laterally (whether they contribute to or form strong relationships with the participants of adjacent organizations or projects) are called “boundary spanners”. These individuals live at the periphery of your organization and typically perform tasks relevant to its marketing, operations, and product development.

What’s more significant about these individuals is how they think and behave — through boundary spanning, they relate their own organization with elements of their external environment and broaden their thinking by drawing on new and different areas of knowledge and product applications.

Their success is dependent on the structural features of their external networks, including their breadth (size), variety of participants’ interests, and degrees of centralization.

How to Optimize for Boundary Spanning
An organization’s competitive advantage in this realm is determined by how quickly these structural features can be capitalized upon. Two ways of ensuring successful boundary spanning are by identifying and recruiting boundary spanners and forming partnerships with adjacent organizations.

When recruiting individuals to your web3 organization or project, their skills pertaining to a role are table stakes but their network and network formation capabilities are just as valuable. Individuals naturally practicing boundary-spanning activities typically have a strong social presence at in-person events, such as conferences and workshops, as well as digital watering holes (Twitter, Discord, GitHub, etc.).

Questions to ask when recruiting include:
1) Do they fulfill the skillsets and cultural fit required for the role?
2) Are they integrated across social circles that comprise my target audience and, if not, how strong are their abilities to integrate?
2) Will the resulting bi-directional interaction deliver value to your organization and help shape its market vision?

Organizational partnerships are similar — individuals found in adjacent organizations with which you partner create bi-directional value. Whether co-developing an integration or co-sponsoring events and workshops, the individuals participating determine the outcome of boundary-spanning activities.

CHAMPIONS (IDEA DRIVERS)

Idea drivers (champions) make a decisive contribution to an innovation by actively and enthusiastically promoting its progress through critical stages, particularly during the more uncertain phase early on in the new product development (NPD) process.

Champions are the persons responsible for pushing ideas forward from the individual level, up through an organization, to both drive radical innovation and contribute to MVC.

In web3, due to its open-source, equitable, and decentralized nature, ecosystem participants have a greater opportunity to become an organization’s champion. Champions can be hired employees, but oftentimes they’re external contributors that partake in:

• 🛠 building the plane (core contributors, EIPs, BIPs, HIPs),
• ✈️ flying the plane (operating network infrastructure, using dapps), and
• ✨ creating in-flight experiences (building dapps, wallets, and developer ecosystem tools and libraries).

How to Optimize for Idea Driving
It’s important for champions to know how to gain and accelerate the commitment and involvement of senior leaders and influential community members for proposed ideas.

Senior staff or influential decision-makers are repeatedly solving the principal-agent problem. In this problem, principals act as owners of an organization or project, while agents act as individual contributors. Agents may begin to display principal mentality and behavior, and it’s in the organization’s best interest to identify and uplevel their influence.

Innovation at its core is both a political and social process of change; it makes rigorous ideological debate necessary and is directly related to MVC leading to a strong MV. Individuals must be both engaged and comfortable to produce an environment of free-flowing and innovative ideas; fostering this type of environment requires feelings of trust by individuals to express openness, vulnerability, and accountability.

People don’t want to be right as much as they want to be heard — if both heard and understood, but a better idea is ultimately adopted, they’ll still feel positive about their involvement.

Organizational-Level Dimensions

Considering the nascent nature of web3 organizations, the approach to market orientation and market learning tools must differ from organizations playing in more established markets with established products.

PROACTIVE MARKET ORIENTATION
Market orientation is an approach by organizations to prioritize identifying the needs of users and building products that satisfy them. Most organizations consider the opinions and needs of their target market as a core component of their new product development strategy.

To understand and define a ‘proactive market orientation’, how to employ it, and why it’s important, we must first understand a ‘classical market orientation’. This includes identifying its failures when applied to emerging markets and products and specific scenarios in which it’s safe to use.

Organizations that partake in listening and focusing too acutely on customers’ expressed needs (The Innovator’s Dilemma) are using what’s otherwise called a reactive or ‘classical market orientation’.

Across web3, it’s common for organizations to fall into the trap of employing this market orientation—this is especially prominent during ‘bull cycles’, whereby early success is found in a particular innovation or ‘killer app’ and endlessly replicated; another common trap which happens early in the lifecycle of is believing that a market leader or innovation exists prior to the market having actually been formed.

Classical market orientation is measured in terms of three behavioral components:

• 1) Customer orientation
• 2) Competitor orientation
• 3) Inter-functional coordination

These measures are focused on customers’ expressed needs in established products and markets, but fail in most cases when applied to emerging technologies in still-developing or yet-to-be-developed markets.

Despite the limitations of a reactive market orientation strategy, it can still be useful (when done well) for creating a steady stream of iterative product improvements, which help sustain a market leader’s initial success.

Real-World Example of Classical Market Orientation in Web3
Organizations developing a decentralized exchange (DEX), following its initial breakthrough and implementation, are participating in a classical market orientation strategy.

We’ve seen DEXs through three generational evolutions (The Evolution of the Decentralized Exchange: A Brief History):

• 1) currency or chain dependent, relying on a specific network,
• 2) contract-dependent, relying on smart contracts and Ethereum, and
• 3) currency agnostic / protocol-based / partially decentralized hybrid, which isn’t limited to a specific network.

Subsequent to each evolution (most notably the latter two, where copying and pasting an open-source smart contract is effortless) is a duplication of the same innovation by hundreds of organizations, oftentimes operating on the same network, saturating the market. In this example, organizations recreating the DEX multiple times over are reactively and repetitively satisfying the expressed needs of users, while distracting themselves and funneling resources away from new product development.

Defining and Optimizing for Proactive Market Orientation
Practicing a ‘proactive market orientation’ forces an organization to focus on two attributes proven to foster MVC:

• solutions to unarticulated customer needs and
• discovering new needs.

As an example of a ‘proactive market orientation strategy’ in practice is Hedera’s native Consensus Service — the service is essentially a decentralized messaging bus with a data model similar to Kafka (topics & messages with the ability to publish and subscribe to topics). It enables use cases across supply chain, security, advertising (payable events), DAO, network bridges, and more.

The Hedera Consensus Service: A Proactive Market Orientation
The Hedera network offers a native cryptocurrency service for account creation and crypto transactions in its native $HBAR token. The network’s underlying hashgraph consensus mechanism brought scalability, consensus timestamps, and low, fixed fees, resulting in the ability to perform microtransactions of $HBAR. These microtransactions cost $0.0001 per transaction, included publicly verifiable consensus timestamps, and the ability to append 100bytes of data in a memo field.

In looking at on-ledger data, the Hedera team discovered that a subset of developers began to use this service for creating a low-cost stream of immutable, publicly verifiable data, using the memo field.

This was an unarticulated customer need that, once discovered, drove the team to create a new native service dubbed “the Hedera Consensus Service”. It enabled developers to take full advantage of writing immutable, timestamped, and publicly verifiable data inexpensively to the network.

Today, this service is utilized by web3 projects and enterprise organizations in production — it makes up over 38% of the network’s real-world, application-driven transactions. This includes Avery Dennison’s Atma.io supply chain platform (3+ billion products), EVERYWARE’s cold storage tracking for COVID-19 vaccines, Theom’s cloud data protection platform, AdStax’s advertising platform, The Coupon Bureau, Hashport digital asset bridge to Ethereum and Polygon, DAO tooling by Calaxy, and many more.

LEARNING TOOLS

An organizational dimension of MVC is the market learning tools available to firms involved in the task of probing and learning about new markets in the case of radical innovation.

Engagement with customers is oftentimes not possible or productive during the “fuzzy front end” of product development (The Fuzzy Front End of New Product Development for Discontinuous Innovations: A Theoretical Model) — this is especially true in web3 due to the permissionless and pseudonymous nature of users. The fuzzy front end consists of the time and activity prior to an organization’s introduction of a new product idea, and therein lies the root of the innovation’s success.

How to Optimize for Learning Tools

The learning tools found to be most successful are ones that construct scenarios that plan for the future. Integrating the techniques listed below into a web3 organization fosters an environment ripe for innovation and contributes to overall market visioning competence:

• 1) Scenario analysis and planning (link): An objective way to determine which business decision is best when presented with multiple choices.
• 2) Technology opportunity analysis (link): Using data and objective methods to analyze and generate ideas likely to have more novelty and value than others.
• 3) Roadmapping (link): Determining the actions, steps, and resources needed to take the initiative from vision to reality.
• 4) Backcasting (link): Defining a desirable future and working backward to identify policies and programs in an order of operations that will connect that specified future to the present.

In addition to the above, it’s proven that the technique of “learning by using” is incredibly valuable; by encouraging individuals within your organization to play with new technologies, market insight may come through the continuous interaction between the user/developer and the technology itself. This can be encouraged by covering the costs of playing with said technologies, carving out dedicated time for “play”, and creating communication channels where the sharing of new discoveries is rewarded.