When it comes to the emergence of Web3 and its accompanying crypto and digital asset elements, the key question every company asks is: Is it an opportunity or is it a risk? Or is it just a distraction?
In the 1990s, when Web 1.0 began, many companies were hesitant to embrace it as anything more than email and static catalogue lookup. Yet Web1 quickly took hold, and in the 2000s, mobile-first Web 2.0 (Web2) began to be massively adopted. This prompted companies to again ask themselves if focusing on mobile would be an opportunity, a risk or a distraction. Along with Web2 came the dominance of social media and e-commerce. Again companies waited and asked themselves if it was an opportunity, a risk or a distraction. Looking at Facebook, Amazon, Google and others, we see now that clearly this was a huge opportunity.
We now have three major macrotrend data points: the original Web 1, then mobile followed by social media and e-commerce. The companies that were the early adopters of this new tech are today’s top-decile performers. The ones that were laggards became legacy companies and lost value .
The Advent of Web3
We are now at the precipice of the next macrotrend: Web 3.0, or Web3. There is no clear definition of what Web3 will be. Right now, it can be loosely defined as the next generation of internet services for sites and applications driven by artificial intelligence (AI) and machine-based learning, with the goal to provide a more intelligent and interconnected web experience.
Many people credit the gaming industry as a catalyst in Web3. There are approximately 8 billion people in the world, and about 2 billion people have some form of an online avatar. This is pretty remarkable. Today’s gaming industry is valued at $300B; well over 63% of gamers want more merchandise, and want their merchandise to be portable from one game to another. The gaming industry has introduced many people across multiple generations to the idea of a virtual reality and made people comfortable with concepts such as digital currency, virtual goods and interacting socially in a virtual environment.
This evolution of Web3 and its accompanying features (e.g., digital assets) is an important and complex topic. There are many parts of Web3, and today's corporate leaders need to have a comfortable, conversant, high-level understanding to determine which aspects of Web3 are a fit for their boards and organizations – whether this is the blockchain protocol which can be applied to many use cases; or digital assets such as Bitcoin, NFTs or stable coins; or whether it’s the future metaverse of the next generation of social media platforms, where you can own virtual real estate, attend virtual concerts and have control of your own private identity with the ability to monetize your own personal brand.
Web3 Will Influence Stakeholder Motivations
Whether this topic feels important to you personally or not, it is critical to understand that this is a very important and sticky topic for a large cohort of your potential customers and employees. Today, Millennials and Gen Z make up about 44% – nearly half – of the US population. If Millennials were born digital, then Gen Z was “born crypto” and the generation after them, commonly called Gen Alpha, will be "born metaverse." Web3 will be second-nature to them.
If we think about the velocity of change in the business world, it is increasing geometrically. If we look at Bitcoin, it reached the milestone of $1 trillion market cap in 12 years; it took Amazon 24 years to reach the same milestone. Meanwhile, 50% of public companies disappear within a decade.
These statistics and facts are a compelling set of data points that show us that Web3's digital asset macrotrend is not only a thing of the future, but already part of our present. Customers, employees and shareholders are beginning to expect the organizations they do business with and invest in to demonstrate facility with Web3 realities.
Of course, Web3 is still emerging and developing. As with the earlier macrotrends, we could not clearly predict all the use cases that would emerge and enable wide adoption. What we can learn and pattern match for Web3 is that it is happening and will continue to happen. We can all look back and clearly see that companies that adopted mobile first, e-commerce and social media engagement platforms became top decile performers in their industries.
Leaders Need to Keep Pace With Web3
As directors and leaders, it’s our job to make sure our companies are vibrant, competitive and contemporary. To do so requires remaining open-minded to new technologies and new ways of engaging with suppliers, customers, employees and investors. Yet with this approach comes added risks: new digital threats, new organizational vulnerabilities and so on. That's why it's imperative for directors to be fluent in Web3 to the extent that they can ask the right questions of the functional leaders tasked with monitoring, managing and auditing these new risks.
As we enter the latter half of 2022 facing a possible recession ,we will all go into annual planning and review cycles. We will of course focus on near-term priorities. However, it is important for the long-term health of organizations to have a plan to begin testing and, where appropriate, adopting the elements of Web3, crypto and digital assets. Given what we've seen with Web1 and Web2 before it, Web3 will most likely not be a distraction, but instead will present new opportunities for the companies best positioned to seize them, and it will present new risks for everyone. The organizations that lean into innovation and embrace technology, and make plans now for the disruptions that Web3 will undoubtedly bring, are the strongest in the long run.