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Strategic Alliances and the Blockchain

Jay Biancamano

Jay Biancamano

A 25 year plus financial services veteran and managing director of Digital Assets and Blockchain in Capital Markets at State Street.
I had an interesting conversation late last week following a panel I was on where we discussed the Future of Financial Services. It was about….wait for it….Blockchain…

I can hear some of the sighs already, not another Blockchain article. I understand your reactions, I call it blockchain exhaustion. Unfortunately thats a sentiment of too many firms who fail to understand how this innovative technology will change the way we do business. Thats too bad because they should be excited about it. 

Blockchain, or as it should addressed Distributed Ledger Technology (DLT) represents the one of the best innovations of the last 20 years. I think some of the negative sentiment is based upon the belief that change in Capital Markets and Asset Management occurs slowly…..very slowly. Change is slow in Capital Markets for a number of reasons, from a draconian and constantly changing regulatory environment, through to competition and technology barriers.   My question back to her was “Are you part of any alliance or consortium?” her answer was “no”. I told her that it might be time for her firm to rethink that, and there’s no need to “go it alone”, because the way DLT will be successfully implemented is through cooperation, and thats why we see so many Strategic alliances being formed around it.

Implementation of DLT represents the biggest challenge to our industry as we speak. I do not think the estimation of a decade or more its something we should accept. The key will be continued cooperation and investment through Strategic Alliances and the like.  We have had some good starts, R3, Digital Asset Holdings, Circle, The Wall Street Blockchain alliance, et al just to name a few are backed by some of the best and leading edge firms in the industry.  There have been some set backs recently as different firms and backers have left or divested from some of these initiatives.  Some are even calling for the industry to take a breather and pull back on DLT.  That would be a mistake, the opportunity is too good to for us to slow down. 

I feel the Industry needs to accelerate it’s investment of both time and money. I think it needs to assertively push DLT initiatives to the forefront and look for adoption in 3-5 years, not 10. So what needs to happen? Participation needs to broaden, more firms, especially smaller firms need to participate, and the current DLT initiatives and strategic alliances built around DLT need to expedite their process.

This will be a Strategic Alliance driven process and revolution and every alliance and consortium needs to be proactive in following their vision. For these alliances to be successful, they must periodically discuss Six Questions I have used as part of some of the alliances I have been part of, all of which are critical:

Are we all on the same page?  Alignment, alignment, alignment. The BETTER strategic alliances allow all their participants to have a shared agenda meaning firms agree to the same milestones, timelines, technology, staff etc.  The BEST ones however ensure they have all that as well and SUPPORT and FUNDING from their firms to pursue the idea. If firm A has DLT as priority one, and firm B has DLT as priority five, guess what happens when its time for B to do their part….? 

Are we measuring success correctly?Measuring success cannot be a gray area, either you know what milestones you have achieved or you haven’t. All members of the consortium or alliance need to work towards a singular goal, and be prepared to identify whats working and whats not. This requires proactive engagement from the bottom on up. 

Are we open enough and do we have the right people?No strategic alliance is going to have EVERYONE, but the best ones have the critical ones. Part of the process is RECRUITING other firms to join, and all members should be selling the ‘dream’.  The smaller firms, especially the start ups are a critical piece of the DLT puzzle.

Are we conflicted?This is less about whether we have alternative investments in competing “alliances” but whether firms have this as an equal priority to other firms. Firms need to leave their competitive agenda at the door. Members can become alienated and quickly lose interest or worse yet sabotage the whole initiative by leaving at critical juncture. 

Are we communicating?You would be amazed at how many fall down at this simple task. No one likes those weekly update meetings, especially when you have nothing to update. This goes beyond communication to partners, partners are obligated to communicate to its own employees and management. 

Who’s in charge?This IS the most critical piece of the consortium.  The firms must be actively engaged and be accountable to each other. It requires leadership and it requires that members adhere to that leadership. Leadership makes members accountable. It recruits new members and unfortunately may need to dismiss members who are not doing their fair share. 

The best precedent for implementing DLT I think is how the FIX protocol became the standard.  Initially it started with only two firms, but I don’t think any of us could imagine Financial services today without FIX. My hope is we’ll be saying the same thing about DLT in 5 years. 

Jay Biancamano

Jay Biancamano

A 25 year plus financial services veteran and managing director of Digital Assets and Blockchain in Capital Markets at State Street.