LEGO BOX

Hi everyone,?

I’ve been thinking a lot about how to best communicate the value proposition of Web3.

I’ve met so many folk driving digital innovation at their companies, particularly at traditional brands, grappling with the question of how to “sell in” the concept to management. Hopefully with the right framework and language this can be a little easier to achieve.

By now, most people recognise the upside potential of the digital asset space. For the sceptics, I always start with the same two questions: 1. Do you believe the world is becoming more digital? And 2. Do you believe people like owning stuff? Most people will answer in the affirmative, in which case, the final follow-on question becomes: your personal biases aside, can you reasonably conclude that people will want to own more and more digital stuff in the future?

Provided you’ve crossed that chasm, the next question invariably becomes: “I see it, but why does it need to be on blockchain?”.

This is where it’s so easy to come unstuck.

Nobody cares about self-sovereignty, censorship resistance, immutability, democratisation of access. All these crypto ideals that make this space so interesting to the purists, myself included, resonate little in a corporate setting. This is the world of growth targets, reports, budget balancing, audience numbers, data capture. This is meat and potatoes territory.

It’s imperative you cut to the heart of why this tech is interesting. It has to be simple and relatable. People remember stories. And, when that precious window of opportunity comes to deliver your pitch, you best be ready.

So today, I’d like to propose a simple, memorable framework to talk about Web3: LEGO.

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I think this works because the fundamentals of what makes LEGO valuable and interesting are also what make Web3 valuable and interesting. Plus, everyone understands it.

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To start with, LEGO is composable. In and of themselves, the pieces aren’t particularly interesting. Plastic blocks of different sizes and colours – not very valuable. Yet, when you stack and combine them into structures they can become very valuable indeed. LEGO sets retail for scary sums. Families around the world visit Legoland in droves. Sure, the rides are part of the attraction, but it’s the giant LEGO installations that are the premium-commanding selling point. Then there are LEGO artists whose works sell for hundreds of thousands of dollars. Yes, I went deeper down the LEGO rabbit hole than one reasonably should.

Of course, layered on top of LEGO’s own brand value you can also infuse IP. How much more valuable do those LEGO pieces become that combine to form a Millennium Falcon? What about alongside the rest of the Star Wars franchise? Composability = value. And, save for imagination and capital, there are no limits to what you can build.

Next, LEGO is interoperable. Blocks follow a protocol of how they interlink with each other. A system of studs and cores, laid out according to a common standard, ensures that pieces interlock with that signature robustness. I can take pieces from different sets and they will work together. I can take my LEGO set halfway across the world and I’ll be able to collaborate with a collector there. This also holds true across time. I’d wager that my LEGO today will work just as well with sets produced in 50 years’ time, as they do with pieces produced 50 years ago. Another example: how much more valuable are your Mac, iPhone and Airpods to you given they seamlessly sync? How likely are you to leave the product suite? Anyone who has tried sharing a photo via Bluetooth between an Android phone and a PC knows there is no going back.

Which leads to idea three: LEGO has network effects. It’s the dominant player in its category. Come Christmas time, provided it’s not 100% Fortnite and YouTube at this point, what are you going to get your kids? They already have sets from previous years. They’ve built impressive stuff. They build with their friends. Maybe their collection has been compounded by hand-me-down sets from older siblings. With all this sunk value, are you realistically going to buy the competitor brand? What would be the opportunity cost? What levels of mastery could they otherwise reach? This is even before you consider all the third-party products and services built to service LEGO collectors that make the ecosystem even more valuable. To go back to Apple, it wasn’t the iPhone’s superior hardware that killed BlackBerry and Nokia, it was the App store and the amazing apps developed by third-party developers. By plugging into the dominant network you’re not only optimising for today but giving yourself the best odds of future-proofing your investment (gift) from obsolescence (the box in the garage).

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A couple more parallels (I invite you to grant me a bit of creative license here…):

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• LEGO doesn’t degrade. Step on one and you’ll know. Save for a fire or catastrophic event those pieces will be just as tough and functional in a couple hundred years.
• LEGO is fungible / non-fungible. There are the standard pieces, the basic blocks, that are generic and fungible with one another. Then you have the special edition and more complex elements that serve a more particular purpose and are rarer.

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Of course, there are many ways in which this analogy is oversimplified. LEGO is a centralised company. Their core product is plastic bricks, not digital assets. Only they have the right to produce it.

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But the underlying principle is this: building on open, shared tech (blockchain) is building from the LEGO Box. Building on closed, siloed, tech, is playing conkers, on your own, in the dark.

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• Blocks = your company’s blockchain-based product or service. Fundamental and interesting to a point, but of limited value in isolation.
• Studs and cores = the blockchain protocol(s). The rules of the road. Governs how the blocks link together, across time and space. The longer it exists and the more people use it, the greater the network effects.
• Models = Web3. Blocks interlocking to create more complex structures. This is where the real fun and creativity starts – and where the value is unlocked for all.

Let's now supplement the abstract with three tangible examples of brands that have unlocked kick-ass, win-win integrations by building on blockchain. I’ll introduce each and then contextualise it within the industry that I’m closest to: tennis and the fan experience.

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Ticketmaster x Avenged Sevenfold

I’ve written about this before. Ticketmaster introduced a “token-gated” checkout whereby holders of band Avenged Sevenfold’s NFT collection could connect their wallet and benefit from an exclusive pre-sale window for concert tickets. The band’s fanbase are rewarded with privileged access, and Ticketmaster benefits from an improved UX that is so often subject to sniping, botting, and a predatory secondary market of which they take no cut. It’s not hard to see how this translates to tennis: gating access to the most sought-after and oversubscribed games of the season would be one hell of a way to add more value to fans. Importantly, this is scalable. Ticketmaster can gate access to any event, to holders of any asset, provided it makes business sense, without needing anyone’s sign off. No CRM integration required, no contracts – just open tech standards allowing one brand to stack an experience atop another’s.

UpTop x Paypal, Visa, Mastercard

The major payment providers, unsurprisingly, have all integrated Web3 into their offerings. Stacking on top is one of my favourite integrations by Web3 loyalty shop, UpTop. They’ve developed a service whereby debit + credit cards can be linked to a crypto wallet, unlocking consumers discounts, cashback and offers by virtue of what assets they hold. For the consumer, these perks are accrued with no additional friction – simply tap or pay online as you always do. For the participating merchants, it’s a direct-to-consumer relationship with your greatest brand advocates, and DATA, without needing to build out a standalone loyalty programme. And for the payment providers, yet another reason for consumers to stick by your golden fee-generating goose.

In tennis this would be an absolute goldmine. We have seven different bodies that govern the sport. Thousands of commercial partners across 150 professional events – some major multinationals, some local brick and mortar businesses. Then there’s the player brand ecosystem – apparel brands, racket manufacturers, cars, banks, telcos. How are these companies speaking to tennis fans when they invest in tennis? How can rights holders reliably demonstrate ROI to these brands, beyond physical match-day sales, broadcast valuations, brand awareness studies, and a subjective evaluation of tennis’ brand “halo”. Consider instead the alternative: every dollar spent by a tennis fan can be tied back to them. Why? Because the ATP Tour Gold Card NFT they earned through engagement unlocks perks each time they spend. Whether purchasing a flight on Emirates, or a beer in the Fan Zone, or a Netflix subscription, fans take their profile and digital assets with them across these siloed retail experiences because it’s valuable and simple to do so. This is a very different world from multiple disconnected logins, or a world in which you’re relying on cookies to track user behaviour. As evidenced by every web experience where you hastily decline cookies – the web user of tomorrow is no longer willing to part with their data for nothing in return, or a vague notion of an “improved experience”. They are less and less likely to tolerate value extraction. Not recognising this paradigm shift is a misstep.

To go even a step further, consider the interoperability between brands that this would unlock. Let’s say we as the ATP Tour learn that Gold Card holders who spend on Emirates flights and visit multiple tournaments a year have a disproportionately high spend on Lacoste apparel – that’s a focused retargeting opportunity that would otherwise never have become apparent. Perhaps there are brands outside our partner portfolio that this applies to. What a sales pitch.

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Nike x EA Games

In summer last year, Nike announced integration of its digital assets into EA Sports video game titles. In short: take your digital Nike sneakers and “wear” them inside your favourite sports game. You don’t have to be a gamer to see how effortlessly cool this is – or to understand the value this adds to both the game publishers, the holders of these items, and Nike. But what’s most compelling here is the stacking we talked about earlier. Nike fans who purchased their digital sneakers did so with zero knowledge of the integrations that were to come. The value proposition at the time of purchase was sufficient to sell out the collection – but now the brand can continue stacking on value by virtue of being built on blockchain. Namely, Polygon – the blockchain benefitting from both Ethereum’s network effects and the network effects its own BD team have created by partnering with so many leading brands. Who wouldn’t want to be compatible with Nike, Starbucks, Reddit…? Which raises the next logical question – what’s next? And is the future value priced in? How valuable exactly is joining the ATP’s Web3 loyalty programme? I understand the perks today but would else could I reasonably expect to be coming down the pike? What’s the future value of my ATP status likely to be in the AO Artball community? In Wimbledon’s metaverse? What could it unlock in the NBA’s world? It’s a surprise and delight paradise.

In conclusion

Selling in new ideas at brands is hard. There’s inertia – particularly when old ways of doing things seem satisfactory today. It’s uncomfortable for anyone to look beyond their own mental models, recognise both the looming spectre of obsolescence and potential missed opportunity, and self-disrupt.

If, like me, you’re lucky to work for a company that’s willing to take the leap into Web3 and the risks that come with it, enjoy it. That’s a privileged position. And as I’ve come to learn, exceedingly rare.

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For those of you considering taking on the charge, a few more notes:

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• Accept that it will take time.
• Educate people. Offer a workshop, set people up with their first wallet. Guide them towards a-ha moments without looking for anything in return.
• Write. You’d be amazed the pockets of your org you’ll reach. You are on marketing mode, all the time, and your conviction will permeate.
• Understand that most people don’t care about the tech. Really. You’ve either got to find a way to prove direct value add to their role or department, and do it in language they understand, or move on. Same goes for your consumers.
• Tell stories.
• Be honest. There are periods where the state of this industry is a genuine embarrassment. Be mindful during down periods that people are getting rekt and that now might not be the best time to lead your firm into the fold. Always offer your fairest and most objective view of what’s going on rather than trying to sugar-coat or deflect because you’re “the Web3 person” and this is your territory to defend.
• Start simple. Don’t worry if your first Lego block is basic. It might just be the start of something mega. Get to minimum viable product as quickly and cheaply as you can, test against hypotheses, and either pivot or progress.
• Build with others (make great models!).

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I hope these notes are helpful to you.

I would also love to hear from you about your efforts to pitch Web3 internally. What worked, what didn’t? What did you learn that could be helpful to others?

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Have fun, and happy building.

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Mark

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