Is An ICO Right For You?

Initial cryptocurrency offerings are the rage.  Don’t get caught up in the hype.  Listing a coin and raising money doesn’t do anything by itself.  Everyone can pat themselves on the back but without any meaning or use case behind the coin, it will eventually be worthless.

Speculators are driving up the prices of coins because they are looking for the next Bitcoin.  A corollary, just because a stock is cheap doesn’t make it good.  There are a lot of crappy penny stocks out there.

The only way an ICO works is if it is tied to a business strategy or function. Period.  I don’t think an ICO can take the place of an IPO.  It might be a replacement way to raise startup capital.  I think that there can be two asset classes on a companies balance sheet, equity and crypto.  But, the value of the crypto is not really the true equity value of the company.

Is there an advantage to figuring out a way to pair a network to your business?  There are plenty of businesses out there that are currently structured as vertical silos.  Does it make sense to try and change the silo to a network?

My friend Professor Mike Gibbs likes to talk about two different companies that are structured in two different ways to execute in their respective businesses.  He wrote a book called Personnel Economics in Practice.  Mike studies labor economics and looks at organization structure, hiring and firing.  He applies microeconomic concepts to it which gives it a really interesting twist.

One company he has studied is Mrs. Field’s Cookies.  Their entire corporate structure is highly centralized.  They do this even though they have franchisees.   Why?  They are selling food and the risk that something could go wrong and cause problems is so great that a highly centralized structure is the best way to assure that doesn’t happen.

The other business he likes to talk about is Ritz-Carlton.  They have a very decentralized structure and really empower all employees down to the lowest levels to make decisions that take care of customers.  This allows each property to have highly customized service.  It also means some properties aren’t exactly like others.

Should Mrs. Fields think about using an ICO to layer on a network to their centralized structure?  They certainly could issue coins.  People might buy them.  But, unless the company felt like they could empower a network, the coins would just become mere coupons and worthless.  There wouldn’t be any turnover in the network even though coins might be used for transactions.

Would it benefit Ritz?  Again, hard to say.  In existing businesses, you have to see where actions are taking place that lends themselves to an ICO.  Many hotels use points for rewards-what if those points were coins instead?

Most people are looking at consumer-facing functions when it comes to ICOs.  But, what about a supply chain network.  What if a business could issue tokens to entice the best suppliers and most efficient suppliers into their supply chain?

We are barely scratching the surface on what cryptocurrency really is.  I think there is a lot more.  The end result should be less variability in supply chains, better allocation of resources, and more service with lower prices to end users.

Tomorrow I will write about a hypothetical use case for an ICO in an old staid mainline company.  Would love your opinion.


  • awaldstein

    What is Steemits business model?

    Fred’s statement from the other day contradicts this post, what William is constantly saying and what common sense would say:

    “The crypto playbook is a disruptive one. It is not a new way to raise money. It is a new way to architect a business. The profit motive is flipped upside down. You extract profits with your currency, not your business model.