This article is second in a series that is investigating the success and failure of blockchain projects. A couple of articles of failed blockchain projects inspired me do a research study about management of successful blockchain projects, a quest to find out if there’s something we could all learn from the successful blockchain projects. This study was the first of its kind in the world. You can read the first part of the series about differences between blockchain projects and standard software development projects here.
The survey was sent out to approximately 150 people in companies that do exclusively blockchain development, as well as companies where creating blockchain applications is in one way or another, part of their strategy. Response rate to survey was over 20%, and multiple people contacted me and wanted to talk about the success of blockchain projects in person in addition to that. An overall impression was that the target group was truly interested in making their blockchain projects more successful.
Some statistics about the respondents:
- Over 60% of the respondents were from companies with 20 or less people
- About 38% were from companies that had been operational for over 5 years
- 69% of projects had a dedicated Project / Program Manager
- Almost 65% of projects followed Agile methodology
Success Self Rating
Companies selected for the survey were ones that had legitimate business and blockchain projects going on at the time of the survey, ICOs that had failed were not included. The companies were asked to do a self-assessment on their blockchain project’s overall success, including scope, schedule, budget and ROI of their project. Overall success rate for these companies was 75% or more for 42% of respondents.
When evaluating the initial project scope, schedule or budget success rate individually, and how companies performed against their plans,
- The project delivered over 75% of the scope / MVP for 38% of the respondents
- Project was delivered more or less in schedule for 73% of respondents
- Vast majority, 73% of the respondents said they had stayed within +-20% of the budget
There isn’t a project out there that wouldn’t have faced obstacles in staying within scope, schedule or budget. A poorly planned product and project can result in Return on Investment not being realized. But are blockchain project challenges the same as other software project challenges? It turns out that they are not. Let’s have a look.
1: Lack of People with Blockchain Experience
According to the respondents to my survey the single biggest challenge in blockchain projects is the lack of people with blockchain experience, with 35% of companies reporting this being their biggest issue. This issue reflected through all phases of the project, lack of expertise making it difficult to plan and execute, and ultimately, slowing projects down.
Blockchain technology has evolved so fast that the education providers understandably have not been able to keep up. Colleges and universities have been involved in some of the blockchain innovation and research, but it has taken some time for blockchain education to become main stream. Only within the last year or so, some colleges and universities have started to develop blockchain programs and offer blockchain classes. The true blockchain veterans out there right now are self-taught and have gone through years of experimenting and evolving through the early stages of blockchain. We’re yet to see the swarm of standard software development veterans moving over to blockchain and bringing their expertise with them.
2: Immaturity of Technology
Immaturity of new technology was identified as the second biggest challenge with 15% of respondents indicating this as their biggest challenge. Many of the platforms and solutions out on the market are only first or second releases of the software, and have roadmaps with significant plans far into the future. Anyone who has been in the software industry long enough is very aware the risks involved in early software releases, and blockchain is no different. If the feature or functionality you would need to make your product compelling to your customer is far out in the roadmap, all you can do is wait or come up with a workaround.
Immaturity of the technology comes up most notably with blockchain scalability, which is one of the biggest hurdles in blockchain adoption in large enterprises. Bitcoin or Ethereum level of transaction processing time cannot compete with high-volume transactional database performance, level of which is often required by enterprises, but 3rd generation blockchain solutions are already approaching that limit.
Lack of standards and lack of blockchain interoperability can also be counted towards blockchain immaturity. It can be risky to invest in technology without standards, as complying with standards can become very costly after the fact, or worst case scenario, it is impossible. Blockchain interoperability is still in its very early stages, and only once viable solutions are out there on the market and adopted by companies, full potential of blockchain can be achieved.
3: Understanding the Customer Needs
Tied together with immaturity of technology, 15%, was understanding the needs of the customer. Given the new possibilities that decentralized systems and economy bring, finding out the true customer needs can be tricky, especially if the customer is trying to do something that has never been done before. Involving customer in the project and getting their feedback early enough and throughout the project decrease the risk of project failure.
Part of understanding the needs of the customer is also understanding if the customer truly needs a blockchain solution for their problem. As Tim Swanson from Post Oak Labs said when I interviewed him: “Most of them don’t need to use a blockchain!” Part of every blockchain project should be due diligence whether blockchain is the right technology solution to the customer’s problem. Costly implementation of a nice tool that doesn’t solve the customer’s problem is like trying to put a square peg into a round hole.
4: Learning New Technology
Cryptography, consensus mechanisms, protocols, smart contracts, distributed ledgers… easy, right? Not quite so! Learning the new technology was identified as the biggest challenge for 12% of the respondents. Not only does your team need to learn how to design and develop on blockchain, but you might also need to be able to educate your customers on it if you’re working on a customer facing project.
A follow on question revealed that a significant amount of time is required until a team becomes efficient in designing and developing on the selected blockchain platform. It took 6 months to a year for 42% of the teams to become efficient, and more than a year for 15% of teams.
Learning time is often trials and errors, and only with careful planning and allocating enough time for learning, can costly errors be avoided.
5: Legal / Compliance Issues
Legal and compliance issues, you will not run into them in magnitudes in your standard software development project. Welcome to blockchain world, where legal and compliance issues are biggest challenges for 12% of respondents. Your cryptocurrencies, exchanges and Initial Coin Offerings (ICOs) need to be Know Your Customer (KYC) and Anti-Money Laundering (AML) compliant. Not to forget about being Securities and Exchange Commission (SEC) compliant with your ICOs.
Part 2 Conclusion
When starting a blockchain project, you will need to be prepared to a different set of challenges than you’d typically face in a software development project. Typical software development project challenges revolve around poor requirements definition, poor planning, team dynamics etc. Not to say that a blockchain project wouldn’t have those kinds of challenges, but as the technology is still so new, the issues around the newness get a bigger weight as there isn’t much experience how to handle them. As time goes by and more people get exposure and experience on blockchain projects, these issues go away, or get embedded in basic project management methodologies. Until then, hang in there! Next, we’ll investigate key success factors and lessons learned from successful blockchain projects.