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Crypto companies are struggling to attract customers—real, living, breathing humans to use the thing they raised millions to build. So what’s the problem?
Well, in business, much like in politics, if you’re explaining, you’re losing:
“The battle should be fought and won by looking at what the advantages are of the product for consumers, instead of any fancy words about the democratization of finance or enabling a trustless society,” says Cesare Fracassi, associate professor of Finance at the University of Texas at Austin and director of the school’s Blockchain Initiative.
So how should entrepreneurs communicate their ideas about new technology to their customers (or even potential investors, assuming they didn’t already raise a gazillion dollars a year ago)? Here’s some advice from an expert:
Keep it simple.
If you don’t absolutely need to mention the word “blockchain,” don’t do it, says Fracassi. “The best technologies are the ones that you use without even knowing that you're using them.”
It’s not that “blockchain” has become a “bad word” necessarily, he says, but the fact is that your clients are likely not as concerned with the underlying technology of your product as you might think. “Clients care about [three things]: Is this a cheaper system? Is this a safer system? Is it a more convenient system? If the answer is 'yes' to any of these three, then it's a better technology,” Fracassi explains.
Crypto winter or not, the only tech companies that ever survive, says the professor, are the ones that can convince customers that the technology they’re pushing—blockchain or otherwise—is much better than whatever the customer is currently using. And dollars usually make the most sense.
Focus on economic value.
“I feel that one of the biggest issues in this blockchain boom and bust is that people don't really talk about economic value,” says Fracassi.
But what about your grand vision for a decentralized, trustless society, you say? Customers. Don’t. Care.
People love talking about blockchain in grandiose, philosophic strokes, says the economist, but if your business uses a decentralized ledger of some sort, then you need to be able to articulate the economic advantages of doing so. “In the end, all the consumer cares about is how convenient and how cheap a service is,” he says. And the best way to get that message across is through data.
- Know your numbers.
If your product can reduce your prospective clients’ costs by, say, 20 percent—or increase their productivity, or perhaps it’s safer to use than other technologies in some measurable way, then these are the things you should be focused on.
“If you want to tell me that by using Ripple XRP I can transfer value better, faster than I can with a bank account, then show me the data. How much faster?”
Trying to sell the “trustlessness” of a blockchain doesn’t really work, Fracassi says. For starters, what does that even really mean? “As an economist, I don't really understand 'trust' very much. I understand probabilities or expectations,” he says. “When people say, 'I don't trust a bank.’ What does this actually mean?” If you’re really trying to convince someone that holding Bitcoin is safer than holding money in a bank, then you should be prepared to demonstrate that in a quantitative way.
In other words, numbers don’t lie—and that’s the sort of “trustlessness” that customers and investors prefer.
When the time comes to get technical, return to step one (KIS).
Let’s say you’ve got a prospective client or investor on the hook, but they really want to know how your technology works—from a technical perspective—before you can reel them in. Where do you start?
With his students, Frascassi says an “intro to blockchain” begins with the basics: “Before you can even understand what a distributed ledger is, you need to understand what a ledger is.”
After you explain that a ledger is simply a list of transactions—whether it’s stock transactions, supply-side transactions, or even interactions between employees and firms—then you can “introduce the idea that a ledger maps economic and social relationships,” he says. Once people—be they customers, investors, or whomever—understand that, it then becomes easier for them to see how blockchain technology is applicable in so many different areas.
The question then becomes: How do we manage a ledger? “There’s this mantra—especially in blockchain circles—that decentralization is always better than centralization. But that’s actually not true,” Fracassi says. There are pros and cons to decentralization—just like any other tool, he explains. “You can kill a fly with a nuclear bomb, but that’s not the most efficient way to do it.”
So if you’re using a decentralized network to govern your ledger, then you need to be able to explain why your product is better for it—and how it benefits your customers. For example: “By decentralizing the consensus, I’m finding the best route in moving my money from me to you. That’s how I achieve cost reduction. Instead of using your usual merchant bank system, I’m finding a more efficient way of moving money from point A to point B.” Or, you know, whatever it is your blockchain does.
Say no to ICOs.
Fracassi offers one final piece of parting advice: If your company hasn’t already performed an initial-coin offering, it’s best to avoid it. The quality of your product—and of the industry in general—will be better for it.
The idea that people aren’t using decentralized applications or other blockchain-based services because the technology “won’t scale” or some other technical reason is mostly hooey, he says. Fracassi believes the real problem is that blockchain entrepreneurs mostly just aren’t building very good products because the incentives within the industry are completely out of whack. And ICOs are to blame.
Clients care about three things: Is this a cheaper system? Is this a safer system? Is it a more convenient system? If the answer is 'yes' to any of these three, then it's a better technology.
“This ICO stuff is crazy,” he says, “mostly because you exit before you even enter” as an entrepreneur. After raising “boatloads of money,” the people behind the business will naturally lose incentive to “really make sure their customers have a good experience.” Likewise, there is no incentive to demonstrate to investors that you have a solid customer base that genuinely appreciates your product. “That’s not how business and investing has worked for any other industry,” says Fracassi. “In any other industry, the focus is on getting customers, getting the user experience right, so that you can get the next round [of investment].”
“There is no ‘next round’ [in crypto]. You’ve raised $50 million. You’re done.”
There’s a reason why VC and angel networks have functioned the way they have for so long, says the professor. It’s designed to help sift out the good ideas from the bad—the real entrepreneurs from the swindlers and scammers. “We don’t have to reinvent the wheel here,” he says.
Solid advice. But would it be better on a blockchain?