A recent study from the University of Surrey has illuminated significant challenges within the blockchain startup ecosystem, revealing that up to 90% of blockchain initiatives are likely to fail. Interestingly, this high failure rate is not primarily due to shortcomings in the technology itself. Instead, the study points to a lack of strong leadership and clear strategic vision as the primary culprits. Blockchain, often heralded as a revolutionary business technology, demands more than technological adeptness; it requires robust management and clear objectives to thrive. Startups loaded with ambition but deficient in these critical areas tend to succumb to the weight of their aspirations.
The research, published in Operations Management, underscores a crucial yet often overlooked element of technological adoption: the importance of effective leadership. The findings suggest that many founders of blockchain companies lack the necessary authority and influence to guide their ventures to success. This leadership deficit critically impacts decision-making processes and the pursuit of innovative ideas, causing companies to stagnate. This challenges the assumption that the primary hurdles in adopting blockchain technology are merely technical, highlighting the pivotal role of founders’ managerial capabilities instead.
Professor Yu Xiong, a co-author of the study, emphasized the necessity of a “founder mode” moment. At this turning point, the influence and management style of the founders could decisively impact the company’s future. He pointed out that strong leadership can transform an embryonic idea into a successful enterprise, whereas weak governance is likely to doom even the most innovative projects. The professor noted specific problems in how decisions are made within these companies, with some founders adopting an overly democratic approach that, while inclusive, can lead to confusion and delays. For instance, if a team cannot reach a consensus on implementing a new feature for their blockchain service, the resultant indecision can lead to significant delays.
The study’s methodology included an in-depth analysis of five blockchain startups over five years, employing interviews, internal document reviews, and direct observations to gain insights into decision-making and management behaviour dynamics. The results indicate that the most successful founders seek inspiration beyond the blockchain sphere and adopt centralized decision-making styles that enable swift adaptation and innovation. This contrasts sharply with less successful startups, which often get caught in a cycle of internal exploration focused solely on blockchain, leading to slow progress and limited scalability.
Professor Xiong also highlighted the benefits of fostering a culture of creativity and encouraging cross-departmental collaboration, which can help startups better align their blockchain solutions with market demands. This approach enhances operational efficiency and helps avoid the pitfalls associated with adopting new technologies. Such strategies have proven critical in overcoming the barriers that have plagued many firms in the blockchain industry.
In conclusion, the study advocates for a paradigm shift in how blockchain technology is perceived and implemented. It calls on entrepreneurs and investors to acknowledge the critical role of founder influence in the success of blockchain initiatives. Shifting focus from a purely technical perspective to a more holistic view that includes leadership dynamics and strategic management could be the key to resolving many of the issues that have hindered the success of blockchain startups. This broader approach is essential for those in the blockchain industry who aspire to survive and thrive in this complex and rapidly evolving market.
More information: Yu Xiong et al, Success and Failure of Blockchain Technology Providers: Founders’ Power, Beyond-Blockchain Exploration and Centralized Decision-Making, Journal of Operations Management. DOI: 10.1002/joom.1364
Journal information: Journal of Operations Management Provided by University of Surrey