To predict whether an innovation will be successful in the market, organizations should consider four important factors:
- Economic: Market segment capabilities, incentive perceptions
- Organizational: Innovation structure, culture, goals, execution capabilities
- Behavioral: Priorities, ability to try new ideas
- Structural: Governance, infrastructure.
One recent innovation that still leaves users conflicted is digital currencies. While some have been relatively successful (e.g. Etheruem), others continue to struggle (e.g. many alt-coins). Needless to say, digital currencies are affected by the same factors that influence innovation adoption – each of which can either stimulate or hinder adoption depending on how it is played for the digital currency in question.
While innovations tend to spread across society in an S-shaped curve comprised of different users types (e.g., Innovators, Early Adopters, Late Majority, and Laggards), actual success is measured by the rate of adoption. The details below explain how the success of digital currencies hinges on these factors:
Relative advantage – the degree to which an innovation is perceived as being better than the product it supersedes:
Digital currencies reflect the perceived value of a project and are mostly seen as utility tokens associated with the project. Their value can be expected to grow as adoption, a function of user behavior and perception does. If the decentralized application provides easier or better access for users to the desired set of services or products, they are likely to adopt the application. In some cases, there are no comparable applications available and the decentralized application opens up a completely new market or introduces new services.
Example – Ethereum seems to have a relative advantage over bitcoin blockchain when it comes to establishing decentralized applications with smart contracts. As a result, the number of Dapps coming over Ethereum with ERC-20-based digital currencies has been significant.
Compatibility – the degree to which an innovation is perceived as being consistent with existing customer experiences and needs:
A Dapp and its corresponding digital currency serve the specific needs of customers. How well the services provided align with user needs can significantly influence adoption. But, if there is little or no alignment, users won’t be motivated to adopt the application, thus limiting the growth potential of the digital currency. Since alignment is not easy, it is important to test market adoption potential. Because adoption is the basis for success in blockchain projects, regular beta tests by users and continuous feedback are critical.
Example – identity verification projects, such as Selfkey or Civic, because applications provide a secure and convenient way for users to manage their digital identities.
Complexity – the degree to which an innovation is perceived to be difficult to understand or use:
Many Dapps are not very easy to use for non-technical users. That’s why many projects mask blockchain use, making it convenient for users to use the applications without necessarily even knowing that blockchain technology is at play.
Example – DENT Coin enables users to buy tokens with fiat currency on their mobile app and use them to transfer data packages to their contacts more conveniently and at a much lower cost.
Many users think that blockchain is complex because of the hash algorithms, concuss models, DLT, etc. involved. If businesses build applications that don’t necessarily expose users to all the complexity of blockchain technology, adoption rates could be much higher, giving the digital currency the chance to grow in value.
Trialability – the degree to which an innovation can be experimented with on a limited (trial) basis
This is an established practice wherein users try the applications out and value is delivered to improve adoption. It lets the user experience the application and assess how easy it is to use, what services it offers, and what operational advantages there are to be had. If the user sees a relative advantage or finds the applications easier to use, adoption generally improves and the digital currency is more successful. Many applications built over blockchains now offer users this capability. User testing/feedback is used to improve the project before it is launched to a broader user base.
Example – DENT offers 30 coins upon sign up, encouraging users to learn about the capabilities of the application and try it out.
Observability – the degree to which the results of an innovation are visible to others
This is another critical aspect behind improving the adoption of the application. Adoption rates increase significantly in projects where results and advantages are easily visible to other potential users. Organizations approach this in various ways, including creating referrals systems for users to share results and invite others, establishing project-building communities over Slack or telegrams to share success stories, or providing user feedback over applications. However, the results must be not only visible but also easily understandable. End users would want them to be personalized and with clear value terms (e.g., money saved by the user on the data package taken over DENT). If projects do this well, adoption will likely improve. However, compared to the factors discussed in this article, this is the one with which many businesses struggle the most.
As explained above, the adoption and success of a project and its associated digital currency adoption depend on how projects are positioned on these variables. Recent trends indicate that businesses are gradually realizing the significance of these factors and trying to include them in their roadmaps and business plans.
In summary, digital currencies and blockchain projects have shown tremendous potential for innovations. The monetization of these innovations is not proving to be easy though. Addressing right user’s needs (untapped needs as much as possible), integrating well with existing ecosystem, providing great user experience, proving value with results are some of the things which projects need to focus on well to be able to make an impact.