Decentralize – the current buzzword, but what does it mean and why should you do it?
By: Thomas McMurrain
All to often companies are run as faceless organizations which boards and committees that often dodge responsibility or fire board members to only re-hire them at a later date.
The problem with these sorts of big-name companies is that there is often a loss of transparency and no real way for a consumer to comment or influence in its general direction. This gated approach is how we have stumbled along for hundreds of years, and some may say it is time for a change.
Traditionally companies have followed a hierarchical model, but lately, there seems to have been a shift towards flatter decentralized models. Decentralized organizations delegate decision-making to smaller teams, and the model is particularly popular amongst startups – although well-established companies have shown that the model works well.
Johnson & Johnson is one of the most famous companies that operate on a decentralized model, they have over 200 units that work independently to form the company. Decentralized models allow for companies to make crucial decisions more quickly and in a more cost-effective manner, and are based on each unit following core principles that the company abides by.
With change happening so quickly in the crypto market currently, following a decentralized model has big advantages in that it allows companies to adapt more quickly than others who follow a more traditional structure. Don Tapscott said “collaboration is important not just because it’s a better way to learn. The spirit of collaboration is penetrating every institution and all of our lives. So learning to collaborate is part of equipping yourself for effectiveness, problem-solving, innovation and life-long learning in an ever-changing networked economy.”
Decentralized companies promote collaboration and innovative problem-solving. It can be difficult to restructure an established company, so the ultimate time to implement decentralization is when you are setting up your company. There are increasing demands for decentralized cryptocurrency experts to come on board with traditional companies to assist them with the wider adoption of cryptocurrency.
Beyond physically decentralizing your company, there are options for tech companies, and particularly those operating on the blockchain to move away from centralized platforms. For apps, there are options to move away from the centralized models of Amazon or Apple’s app stores. Decentralized app store models are looking to provide better rewards for content producers, allowing them to attract the best talent. Status and Blockstack offer developers a 99-1 revenue split, as opposed to a 70-30 split that is offered by most more traditional app marketplaces.
Another element that centralizes companies is their data storage. Centralized data storage is cost-effective for companies such as Facebook, allowing them to run their services without charging an upfront fee to users. But users’ data that is stored centrally can be sold by companies, and used by advertisers to target specific users. Decentralized data storage puts users in control of their data and means companies can assure their clients that their data is securely stored and will not be sold to third parties or used to generate income from advertising.
By the young nature of most blockchain and cryptocurrency companies, a decentralized model tends to make more sense. Although certain elements of decentralizing a company can be costly, so it is important for entrepreneurs and business owners to weigh up the cost versus the benefit of implementing decentralization for their particular business model.
When it comes to established companies, it may be that there are elements of the business that will need to remain centralized, this can be for a number of reasons from investment structures to financial constraints, but there will often be elements that can be decentralized that will still increase the efficiency of how the company is run without having to introduce a total overhaul.