Web3 can finally deliver the internet’s promise of democratized experiences

The Situation: The web promised to transform how we organize our businesses to optimize experiences for customers, employees, and partners. So far, it has failed to reach its potential. Too often, it reverts to being a broadcast medium—more of an “information superhighway” than a transformative enabler of radically new ways of connecting and co-creating value. Web3 promises to bring the technological muscle, finally, to make the radical promise of the web a OneEcosystem reality (Exhibit 1).

How Web3 is different—OneEcosystem in action

The web, as we know it, focuses on enabling users to interact with content. It has been marked out by the growth of user-generated content alongside improvements in interoperability and improved user experience (UX) and customer experience (CX) for end users. It is characterized by encouraging and democratizing interaction and collaboration through design rather than technology.

Web3, encompassing the semantic web, is a new iteration of the web based on blockchain technology. Blockchain does not store information centrally; it copies and spreads information across every computer (and potentially every mobile phone) on the network. This technology supports a genuinely decentralized network for passing data to its owner’s control to create more meaningful and intelligent interactions. Users retain ownership of their data and can choose how to share it.

Why user data ownership and storage, challenge the status quo

All your favorite social networks have one thing in common: They own and profiteer from user data. Building a social network on Web3 gives users complete control of their personal information. Fragments of user data are stored on multiple computers distributed across the internet rather than centralized in Facebook or any other database. One example, Subsocial, allows anyone to create a social network built on a blockchain, enabling the trading of content by associating it with non-fungible tokens (NFTs), providing proof of ownership.

Web3’s metadata focus (hence metaverse) drives a new level of interoperability, helping make data readable for humans and machines, removing the need for centralized intermediaries, and introducing the universality of (equality of access to) information. Artificial intelligence powers and refines machine-to-machine interactions. Distributed ledger technology (blockchain) does more than enable decentralization; it delivers the trust to support the fair distribution of risk and reward for individual entities choosing to work together.

Exhibit 1: Web3 provides the technical muscle to enable the OneEcosystem™ mindset

Source: HFS Research, 2022

Updated infrastructure will drive converged efforts with benefits for all engaged

With its updated infrastructure, Web3 enables the new ways of working HFS identified in its HFS OneEcosystem, where leaders look beyond their organizations’ “four walls” to collaborate with multiple like-minded organizations with common objectives. It is OneEcosystem in action. Ninety percent (90%) of C-level execs in Exhibit 2 should be licking their lips in anticipation.

As supported by Web2, central ownership of applications often leads to the proliferation of high-cost copycat tech delivering little benefit for the end user. The decentralized applications enabled by Web3, written in open-source code and hosted as fragments of encrypted data on multiple computers distributed across the internet, mean projects can be built on the best of what has gone before, lowering development costs and time to market. Ecosystems targeting shared goals can work together toward them rather than in siloed seclusion. Collaboration cuts unproductive waste and targets an improved end-user experience with shared benefits for all those choosing to engage.

Exhibit 2: Ninety percent (90%) of executives believe ecosystems will be even more critical in our post-COVID-19 world

Sample: N=158 C-level executives across Global 2000 enterprises
Source: HFS Research, 2022

End-to-end data flows are king in Web3, with each accounted for by its outcome contribution

In a Web3-enabled HFS OneEcosystem, end-to-end data flows become king, and the processes enabling them will connect you effectively and in real-time with your customers, employees, and partners. Design processes to provide the data you need to be effective in your job, whether it’s helping to improve internal knowledge, predict customer demand, or understand how to optimize supply chains and external environments. Executives will be judged on the data their processes provide for management decision making.

These data flows must run between entities to realize the promise of Web3 (Exhibit 3), leading to a fundamental shift in how enterprises organize and consume business services. Enterprises must align incentives and success metrics to support growth rather than savings if they want to find new sources of value from Web3 in the OneEcosystem. For example, procurement teams should prepare to be judged for the revenues they derive from their relationships across ecosystems rather than how many dollars they can shave off a bulk purchase of paper clips.

Thanks to Web3, motor insurers, for example, can create seamless dataflows through every stakeholder, from the customer submitting a motor claim through the garage completing the repair to the leasing company providing a temporary vehicle. Blockchain enables a decentralized source of record all parties can access while sharing only the data necessary to make the process flow. Allianz is doing this right now to enable collaboration and seamless dataflows between its 23 European subsidiaries. Allianz says it cuts both administration and cost burdens while making happier customers thanks to faster settlement times.

Exhibit 3: Data flows must run between entities to realize the promise of Web3

Source: HFS Research, 2022

Web3 success requires a shift in enterprise organization

Processes will cross industries as traditional boundaries blur to serve the best possible realization of stakeholder value. Think of these processes as combining and recombining the best available small pieces of data, functionality, and resources from wherever they can be sourced, each aligned with a shared purpose across the process value chain. For example, regulatory approval in the airline industry between airlines, original equipment manufacturers (OEM), and authorities can be hugely accelerated and improved when the stakeholders come together to build common processes. Stakeholders across the healthcare, pharma, retail, and regulatory ecosystems could come together to improve the efficacy of vaccines in a pandemic.

To be successful in this environment, you must significantly reorganize your organization; structure teams and technologies to optimize each process outcome to respond to data flows generated by machine and human interactions.

Bundling the processes core to your organization will define what your business is, and selecting software that best reflects your purpose and delivers cross-enterprise interoperability, will be how your organization delivers. The application of blockchain to prove your purpose and validate shared risk and reward is the North Star toward which your ecosystem partnerships will navigate.

Why we need to move to a new version of the web: Social media has failed as a democratized intelligence medium, and four controlling corporations—Facebook, Amazon, Netflix, and Google—dominate

The rise of social media reveals how Web2 has both worked and failed. In theory, social media should be a great example of the web’s promise to reduce the effort required to organize toward an outcome. It offers the opportunity to bring a niche of people together around a shared purpose (something they care enough about to want to fix), get them talking, and enable them to co-create solutions. This co-creation of value should have been the business model for the likes of Facebook and Twitter.

Instead of investing in simple technologies to enable businesses to co-create better-fit solutions to this easily accessible pool of vocalized customer needs, social media’s big guns caved to pressure from their Venture Capitalists. They fell back to slapping adverts everywhere to monetize the attention their users generated for each other. This is effectively a mass-media, broadcast business model—not designed to benefit from the OneEcosystem disruption Web3 offers. The recent attempts by the world’s richest man, Tesla CEO Elon Musk, to purchase Twitter symbolized the complete lack of democratization of the world’s largest social media network.

FANG’s fat head distorts supply and demand

In the Web2 model, long tails develop very fat, dominant, assertive, powerful, all-consuming heads (think FANG: Facebook, Amazon, Netflix, Google). These fat heads are bound to distort the flow of supply and demand on a playing field that is less than even, thanks to the data they generate and own.

When HFS Practice Leader David Cushman wrote and presented his white paper on the long tail at the 2008 International Conference on Social Software in Cork, the assumption then was that the web would live up to its promise of enabling the ever-closer matching of supply to demand through collaboration and co-creation with insight data—used as its owner chooses—at its core.

Fourteen years later, Web3 is set to deliver the technological muscle to enable the original dream.

The Bottom Line: Web3 offers a reset, but only for those prepared to kill off silos and organize around ecosystem-wide processes and data flows

Enterprise executives kept awake by worrying about how to close the data and insight gap opened by early adopters have an answer in Web3. Here is a technology designed to even things up. Metadata will make it easier for everyone and every machine to interpret and act on data. It will no longer be about how much data you can own and stockpile but how effective you are at building out, engaging in, and responding to data flows.

Silos are dead. You must prepare to organize around co-created end-to-end processes in which competitive advantage resides in the data flows they deliver, how well you can partner, and how willing you are to collaborate.