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How Maersk’s Bad Business Model Is Breaking Its Blockchain

Maersk—the largest shipping container company in the world—took the bold step of forming a blockchain-enabled platform called TradeLens to transform the shipping industry. However, up until now, only a single shipper has signed on to use the platform, and it’s my view that few others will join. Although the concept is a natural fit for blockchain, the business model threatens to doom the project.

Maersk and IBM created the joint venture that owns TradeLens (including the platform’s intellectual property), and there’s the rub: Because Maersk is an owner of the joint venture, it will enjoy a benefit not shared by the other participants on the blockchain platform. That is, Maersk will be enriched from the growth of the actual TradeLens platform, while the other participants on the network will not.

Why would Maersks’ competitors want to use a technology platform (and fledgling at that!) that would enrich their biggest competitor? 

There are fantastic benefits to be had from a blockchain-enabled shipping platform: cost savings, reduced error, increased profit, etc. However, these benefits can’t outweigh the undeniable reality facing Maersk’s competitors: to join the TradeLens network is to make Maersk more profitable.

Another obvious issue is that Maersk owns the intellectual property that the TradeLens platform is built on. Even assuming safeguards are put in place (to ensure that unfair advantage is not taken by Maersk or its agents), the optics are terrible.

It has been argued that a rising tide lifts all container ships. Here, Maersk has the opportunity to lift all the container ships on the sea. But it will require that Maersk put itself on equal footing with the putative participants of the TradeLens platform. In other words, Maersk will need to unhitch itself from TradeLens’ intellectual property, as well as the profit motive associated with growing the TradeLens platform. This would address Maersks’ competitors’ objections about Maersk’s unique competitive advantage qua owner of the TradeLens platform and, in doing so, enhance TradeLens’ chances of success.

This same problem will continue to repeat itself in other contexts involving enterprises, until and unless the question of the control and ownership of the platform (and underlying intellectual property) is addressed satisfactorily. Blockchain technology for enterprise demands new business models. In this case, Maersk should develop a model for sharing the profit across the participants in the network (after it recoups its investment), rather than profit from its first mover advantage. Of course, figuring out what the new business model should look like will be tricky. But it has to be And who will win as a result?  Certainly Maersk, its competitors and everyone else in the shipping ecosystem, plus all of us, society. We will benefit from a smarter, safer, and more efficient shipping industry. Let’s hope that Maersk realizes this, and fast.

Posted in Forbes October  30, 2018

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