How the blockchain and digital economy are combined, this article explains

Text 丨 Interlink Pulse Editing Department

[Inter-chain Pulse Press] In the second half of 2019, the pace of digital currency research and development by the central bank accelerated, and blockchain technology is also seen as a breakthrough for the integration and development of big data, LoT, and AI. Economic activity. In the past, the digital economy meant an economic form that people realized by using big data. Now, based on the integration of multiple technologies, blockchain and the digital economy are also interacting with each other. The combination of the two may provoke new economic vitality. But the way to combine them remains to be discussed. To this end, Interchain Pulse specially invited Zhu Xiaowu from China University of Political Science and Law to explore the way of combining blockchain with the digital economy, with a view to bringing some guidance to the development of technology and applications.

Zhu Xiaowu:

He is currently the director of the Global Value Chain and Bill Finance Research Center of China University of Political Science and Law, and the deputy director and expert member of the Decision Simulation Professional Committee of the China Management Modernization Research Association. His research interests include digital business strategy, fintech innovation, and sandbox virtual simulation supervision. He used to be the Deputy Dean of the Business School of China University of Political Science and Law and the director of the Department of Capital Finance. He has published a number of academic papers (SCI and CSSCI) that have significant influence on fintech research. "Excellent teaching cases", two of which were rated as "hundred national outstanding management cases".

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The following is the body part:

At present, the blockchain technology is highly concerned. The blockchain provides new technical support for the IT capabilities of enterprises, which has also led to changes in business models in the era of the digital economy. The transaction cost of a distributed autonomous organization based on blockchain technology is low. Compared with traditional enterprise organizations, it has the advantage of scale expansion. It is a new organizational model in the digital economy era.

So, how does blockchain and digital economy combine?

The author believes that the link between the two lies in business model innovation . Based on this, the author proposes a business model driven by blockchain technology and constructs its theoretical framework.

Theoretical framework of business model driven by blockchain technology

This framework consists of four major modules: the company's strategic intentions, the driving factors for business model design, the realization of IT-driven business models, and the output.

Corporate strategic intentions drive business model design in five ways:

• Improving the efficiency of the supply chain, such as reducing supply chain uncertainty, reducing inventory and transaction costs, etc. This requires that in the design of the business model, sharing of supply chain information with partners, collaborative production, and flexible arrangement of supply chain transaction objects should be considered;
• Enhance market response capabilities, requiring business model design to collect, aggregate and share real-time demand and supply signals, work together to adapt to partners' supply chain plans and exceptions, and flexibly switch between unilateral and multilateral cooperation;
• When designing, developing and / or commercializing innovative products, business model design can combine knowledge-based resources and capabilities to shorten the cycle of concept products to customers. Therefore, it is necessary to integrate market collective wisdom, customer needs and cross-industry knowledge, and knowledge-intensive cooperation. Digital management;
• To develop market and customer relationships, business model design needs to be able to share product development, marketing, and personalization so that they are consistent with customer experience and expectations, while protecting the privacy of customers and suppliers;
• Complementary, business model designs can share product interfaces, support common IT standards, and protect the intellectual property rights of businesses and partners.

The driving factors of business model design include the following 6:

• Content (or products, information) that is traded with partners;
• The regulation of information, resources or products, including the compliant form of the transaction and the motivation to participate in the transaction;
• The connection structure of the parties involved in the transaction and their products or processes;
• Industry type, the industry to which the parties involved in the transaction belong;
• Geography, the geography of the parties involved in the transaction;
• Technology level, the technology level of all parties involved in the transaction.

In the IT-driven business model implementation , blockchain technology and existing IT capabilities jointly drive business model implementation. The traditional IT capability is network IT standardization, which ensures some standardized data exchanges and the establishment of large-scale partnerships, and acquires, mobilizes, and utilizes resources through different types of partners to improve efficiency, reduce costs, and gain scale. economic.

Blockchain technology corresponds to bilateral IT customization. This is a dual mechanism. By establishing smart contracts between enterprises, issuing tokens between enterprises, ensuring that both parties can share information and participate in cooperation in depth. Both parties of the cooperation can realize non-monetary "light settlement" through the blockchain.

According to the different themes of the business model, it can be divided into two categories: value creation mechanism and value acquisition mechanism . Novelty, efficiency, and complementarity are value creation mechanisms, and binding, locking, and imitation barriers are value acquisition mechanisms.

Novelty is the value generated by establishing new connections and new trading mechanisms for all parties. Efficiency is the value generated by optimizing transaction processes and increasing collaboration through technology. Complementarity is when an enterprise integrates the resources of multiple partners and produces direct or indirect network effects.

Bundle is a sales and pricing method that bundles two products for sale. The two products bundled for sale are coordinated and promote each other to achieve the effect of "1 + 1> 2". Lock-in is to prevent the loss of customers and partners to competitors. Barriers to imitation prevent companies from being imitated by competitors through multiple methods, such as stronger intellectual property protection.

The two types of capabilities of bilateral IT customization and network IT standardization are complementary, and they together affect the value creation and acquisition of business models.

The output is mainly based on market performance, which is the market's evaluation of the effectiveness of the business model of the company and has a feedback effect . Through feedback, enterprises are adjusted at two levels: implementation matching and IT-driven business model realization; strategic intent matching, and the company further examines strategic intent and adjusts the driving factors of business models. Through feedback, the business model is continuously optimized and upgraded.

The theoretical model of the above business model is the basis for deconstructing the entire digital economy. "Content" is content (or products, information) that is traded with partners; industry categories are divided into primary, secondary, and tertiary industries. Enterprises can combine their industry characteristics to examine whether blockchain technology can achieve value creation mechanisms (novelty, efficiency and complementarity) and value acquisition mechanisms (such as locking, bundling, and imitation barriers), and strategic intent matching and business models through market performance evaluation. Realization of the match, the realization of the digital economy era, the innovation of corporate business models.

In specific analysis, there are not many companies that have successfully achieved digital transformation. Based on the availability of relevant case data, the author conducts an analysis from two driving factors: "content" and "industry category" (see my recent work: "Blockchain and the physical industry: redefining the digital economy", People's Posts and Telecommunications Press (November 2019). Regarding supervision, transaction structure, regional environment and technological level, etc. will be considered in the next case study, and in-depth analysis will be carried out for specific enterprise cases.

Blockchain technology is highly concerned and closely related to its own technical characteristics. Blockchain provides new technical support for enterprises' IT capabilities, which has also led to changes in business models in the digital economy era.

The discussion of the application of the blockchain in the application scene has been the focus of academics and practitioners in recent years. Smart contracts supported by blockchain technology can alleviate information asymmetry, reduce transaction costs, transfer value to stakeholders, and create a new mechanism for a distributed autonomous organization. The transaction cost of distributed autonomous organizations based on blockchain technology is low. Compared with traditional enterprise organizations, it has the advantage of scale expansion. It is a new organization model in the digital economy era.

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