March 19th, 2019

Aligning Incentives: Imaging a B2B Demand-Gen Blockchain

by Glen Drummond, Chief Solution Architect

Blockchain might be in the trough-stage of the “hype-cycle,”  but there are some convincing arguments that blockchain will change things. These arguments are not, incidentally, dependent on the success of bitcoin or blockchain currencies generally. Rather, they are based on the compelling integration of a distributed ledger, smart-contracts and micro-payments. 

I have a hunch, one that I’ll lay out in a minute, that this combination could have an impact on the B2B demand-gen space. Before that, let’s step back and look at the kind of blockchain use cases that are already underway.      

There’s nothing particularly mysterious –  or blockchain-dependent – about “smart contracts.” They’re already a part of our lives.  When you step out of an Uber ride, you’ve executed a smart contract – with the help of the Uber platform and your credit card. When you close the door to leave your Airbnb you’ve executed another. When you buy groceries in an Amazon Go store, you’ve executed yet another.  

From a user’s standpoint, what makes these contracts smart is that they focus your experience around the core satisfaction of your goal. Everything that’s not core is automated out of the foreground and into the background of your experience. The experience in other words, is more about what you want, and less about what you have to do to get it[2] . In a not unrelated extension of this point, what makes these contracts smart from a business standpoint is that they kick the stuffing out of incumbent business models and grab market share like a gangsta. Especially when network effects tip in their favour.    

Now, clearly, from the examples above, you don’t need a blockchain in order to have smart contracts. So, what conditions make it helpful to combine the concept of blockchain technology (an indelible, distributed record of events) and the concept of a smart contract? The answer cited by blockchain experts is in conditions where there are numerous independent participants in a value chain.

Think, for instance, about the farm-to-table journey of a single bag of pre-washed lettuce. 

Let’s run a speculative tally of independent participants in this value chain: 

  1. The primary producer who grows it and hauls it to the processing plant. 
  2. The processor/packager who buys the lettuce and prepares it for its journey to market. 
  3. The long-haul transport that moves it from the packaging facility to food terminal or retailer warehouse.  
  4. The food terminal or retailer warehouse. 
  5. The transport firm that moves it from warehouse to retail point. 
  6. The retailer.   
  7. The purchaser. 

Potentially, that’s five different databases through which the record of that bag of lettuce needs to travel.  

So what? 

Well suppose that bag of lettuce is determined to have some E. coli problems. Tracing the problem back to source goes more quickly and certainly when all of these independent members of the value chain collaborate in a single system of record that tracks each skid of lettuce in an indelible, externally-validated way. (If you want to learn more about this sort of farm-to-table traceability, there’s lots written about it, like this essay in Medium.)   

Now let’s overlay smart contracts on this case.   

Let’s suppose the retailer knows that the progression of E. coli in a bag of lettuce is a function of (a) bacterial levels at origin, (b) the management of the cold-chain over the journey, and (c) the duration of the journey. Still assuming, say that the retailer is very interested in not having any customers getting sick, or worse, from ingesting produce purchased at their store. In that case, it would be in the retailer’s interest to orchestrate a system in which smart-contracts link compliance with source quality assurance testing, cold-chain standards (as measured by IOT sensors) and delivery-timing standards to payment. 

Non-compliance with standards could produce non-payment. Performance above standards might produce incremental incentive payments. And once translated into smart contracts, this system of aligned incentives could operate persistently without much cost and effort devoted to enforcement, validation or back-office. This kind of thing is actually happening now and other examples are coming very soon.   

Now that we’ve established the lettuce use-case as the basis for an analogy, let’s think about the number of independent participants involved in enterprise-scale B2B demand-gen. We’ll begin with software providers.   

At last count, according to Scott Brinker, the marketing organization of the average enterprise employs 91 cloud services, and Sales uses another 43. To develop the analogy, think of the IP address of a prospective customer like a bag of lettuce, traveling through the hands of dozens of separate parties (the cloud-software providers) on its journey to a purchase from the enterprise.  

Granted, these hand-offs happen very quickly because they take place in virtual not physical space. But they happen, and they certainly cost a substantial amount of money – paid for today mostly through SaaS subscriptions. (More on that in a moment).  

Then there are the creative contributors. Most Enterprise B2B firms have some combination of agencies (plural), in-house contributors, and freelance talent. Are enterprises today able to truly connect remuneration with performance from those contributors? Attribution of marketing effectiveness (ROMI in industry jargon) is not yet an exact science. And that’s probably putting it mildly.

So then, what if an enterprise involved in B2B demand-gen were to approach the providers of both technology and creative services and ask them to restructure their compensation model into smart contracts instead of monthly SasS fees on one hand and, creative and professional services fees on the other?

Imagine a blockchain infrastructure, spanning the host of technologies that  span the journey of a prospective buyer’s web-browser, from first contact to signed contract.   

Imagine smart contracts arranged around indicators of progressive buyer engagement, executing micropayments for content that works, and software processes that help.  

And imagine an incentive framework in which there’s no question that the work that matters is rewarded, and the work that doesn’t is of less and less concern to everyone involved.

Of course there will be many obstacles.  

We will need a blockchain platform that is vastly more energy-efficient than the one powering  bitcoin. 

We will need a blockchain platform that is viable for micropayments at the fraction of a cent level and free of the transaction overhead levels associated with traditional financial clearing services.  

We will need at least one determined and courageous enterprise to create the conditions for technology and creative contributors to join this loose-knit smart-contract consortium.  

We will need a period of experimentation and learning.   

And, perhaps most difficult, we will need the people in charge of those technology and creative firms to deliberately challenge  their current business models.[3]   

But, with the relentless drive for more accountability around marketing spend, it’s not hard to imagine how attractive it would be for an enterprise to focus [4] remuneration more directly around the core satisfaction of their goal, while everything that’s not core is automated out of the foreground and into the background of their experience. 

No more agency hourly rate cards discussions.  

No more scope-change discussions. 

No more annual SaaS subscriptions.  

No more “supplier lock-in” worries.   

The enterprise will, instead, automate remuneration for both technology and creative services through smart contracts triggered by purchaser behaviour. It’s a “pay-for-performance” model with almost unlimited granularity, and once established, very low friction.    

With seven thousand mar-tech software firms now competing for a share of the same B2B enterprise demand-gen budgets, it’s not hard to imagine that late-comers on the long-tail of this community would seek an invitation to the party by means of a business model shift.  For the major SaaS players, smart contract revenue could offer a strategy for reaching a broader market, and for testing new offers. 

With agency business models under pressure from all sides, there are clearly incentives for a change that better rewards creative excellence and expertise according to the value of its performance. Smart contract revenue could also buffer the revenue volatility inherent to businesses with a handful of big clients that come and go, since smart-contract revenues could continue to flow from content that continues to perform in the aftermath of a client’s departure.  

Blockchain enthusiasts have suffered from the accusation that blockchain is a hammer looking for a nail; a solution looking for a problem.  But in B2B demand-gen, we have pent-up stubborn problems at multiple points in the value-chain.   

When we look at how the incentives of all these players align around this new model, there are reasons enough to imagine that network effects will eventually kick in, if someone can get this ball rolling. But what will it take for that to happen? 

As noted above, we’ll need some new technology – specifically a blockchain platform that is energy-efficient and can handle micro-transactions at scale. 

We’ll need a handful of firms in every stage of the value-chain who view their business model as an instrument of their strategy rather than an expression of their identity.  

We’ll need a leader who goes first:  An enterprise marketing leader who is willing to take the risk of creating a new paradigm for managing B2B demand-gen, in order to achieve persistently  guaranteedreturns on marketing investment in both technology and content.

And, we’ll need a community of innovators, all across the demand-gen value chain, who want to collaborate on solving the novel problems that will come up.

So, there you have it – a back of the napkin (abeit a big one) sketch of a B2B Demand Gen Blockchain. Nearly impossible. Or inevitable. Or both. What do you think? I’d love to hear your thoughts.


Leave a Reply

Your email address will not be published. Required fields are marked *