For the last two decades, businesses have operated under the shadow of the Web 2.0 era, where a handful of giants like Google built unassailable tech fortresses. Now, as generative AI transforms every industry, leaders face an urgent question: are we watching the same scenario again, or is this time genuinely different? In the new article 鈥�,鈥� a team of researchers, including , co-Principal Investigator of the Platform Lab at the 性视界 Business School AI Institute and Glenn and Mary Jane Creamer Associate Professor of Business Administration at 性视界 Business School, explains how the GenAI market is more dynamic and 鈥渃ontested鈥� than the headlines suggest. By analyzing the economic fundamentals of AI platforms, tracking hundreds of acquisitions across the AI value chain, and surveying more than 300 business leaders about their actual AI adoption patterns, their research reveals a market that remains remarkably open, provided you know where the real leverage points lie.

Key Insight: GenAI isn鈥檛 Repeating Web 2.0鈥檚 Playbook

While many observers fear that GenAI could follow the same path of consolidation as Web 2.0, the researchers found a different story. Whereas platforms like Facebook relied on network effects (where an increase in users created greater value for all users), GenAI tools currently function as individual productivity and knowledge aids without forming connections between users. Data feedback loops also appear weaker. While models do learn from interaction, the authors note that the complexity of GenAI interactions makes it harder to engineer the kind of self-improving loop that helped search and social products pull away from rivals. They even flag a downside risk, 鈥渕odel collapse,鈥� where training on synthetic data can amplify errors and bias over time rather than improve quality. Finally, there鈥檚 pricing. Unlike many Web 2.0 services, GenAI consumes substantial compute and energy, which creates real costs and pushes providers toward tiered pricing. That matters competitively, because it reintroduces a familiar dynamic: entrants can attack on cost, quality, or both, rather than being boxed out by a dominant incumbent offering a free service.

Key Insight: Strategic Moves Across the AI Stack

The GenAI economy is best understood as a stack of five layers: chip manufacture, design, compute infrastructure, foundation models, and applications. While the application layer is exploding with roughly 1,600 active firms, the top of the stack remains highly concentrated. This has fueled a flurry of vertical integration. For instance, NVIDIA has expanded downstream from chip design into model orchestration through acquisitions like Run:AI, while cloud providers like Microsoft and Amazon are moving upstream into chip design and securing exclusive partnerships with model developers like OpenAI and Anthropic. However, this integration isn鈥檛 always a sign of impending monopoly. Cross-layer moves can actually increase competition by reducing dependencies. For example, NVIDIA partnering with emerging cloud providers like CoreWeave creates competition for AWS and Azure. 

Key Insight: A Still-Open Market

The researchers surveyed 323 business leaders across industries and geographies in May 2025. Nearly 90 percent report some GenAI use within their organizations, but what鈥檚 striking is how they鈥檙e using it. The vast majority are multihoming鈥攗sing multiple models such as ChatGPT, Claude, and Gemini, simultaneously. While this could be users taking advantage of greater capabilities for specific tasks within certain models, the authors also suggest a broader economic hypothesis: multihoming enables flexibility and thereby prevents potentially costly lock-in at an early stage of the GenAI transformation.

Bonus

Even if GenAI competition stays 鈥渃ontested,鈥� you can still end up locked in through messy, unmanaged adoption. For a look at why AI strategy is organization design strategy, check out 鈥�The People, Processes, and Politics of AI ROI.鈥�

Why This Matters

For business leaders and executives, this is a strategy and execution problem disguised as a technology trend. GenAI鈥檚 current economics suggest the market may stay contestable longer than Web 2.0 did, and the move is to treat the moment less like vendor selection and more like competition positioning. Design your organization to learn fast, build internal muscle, and avoid early lock-in while tools, pricing, and performance are still moving targets. 

References

[1] Andrea Asoni et al., 鈥淐ontested Ground: Early Competition and Market Dynamics in Generative AI,鈥� Management and Business Review, 5(4) (2025): 55, .

[2] Asoni et al., 鈥淐ontested Ground鈥�: 58.

[3] Asoni et al., 鈥淐ontested Ground鈥�: 61.

Meet the Authors

is an economist and Vice President of Charles River Associates.

is Glenn and Mary Jane Creamer Associate Professor of Business Administration at 性视界 Business School and co-Principal Investigatory of the Platform Lab at the HBS AI Institute.

is a Vice President in Charles River Associates鈥� European Competition Practice.

is a Vice President in Charles River Associates鈥� European Competition Practice.

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Key Insight: AI-Powered Proxies: A New Frontier in Auction Technology

Huang and his team developed a system that uses large language models (LLMs) as intermediaries between bidders and auctioneers. These AI proxies can communicate in natural language, making it easier for bidders to express complex preferences (elicitation) without getting bogged down in technical details. This approach addresses a long-standing challenge in combinatorial auctions, where participants bid on combinations of items (packages). Traditionally, these auctions require bidders to fully articulate their preferences 鈥� a task that can be cognitively demanding and time-consuming.

Key Insight: Accelerated Efficiency in Complex Markets

The study reveals that AI-powered proxies can dramatically speed up the auction process while maintaining or even improving efficiency. By inferring bidder preferences from natural language interactions, these systems can quickly arrive at near-optimal allocations without exhaustive questioning. In the researchers’ experiments, their AI proxy reached 75% efficiency in just two interactions with bidders, compared to around 10 interactions for traditional methods.

Key Insight: Bridging the Gap Between Theory and Practice

The team鈥檚 research addresses a critical disconnect between theoretical auction designs and practical implementation. While existing methods are mathematically sound, they often falter in real-world scenarios due to the cognitive burden placed on bidders. By introducing natural language processing and AI inference, this new approach makes complex auction mechanisms more accessible and user-friendly. The study demonstrated consistent performance across three diverse auction scenarios, including electronics, gourmet food items, and transportation equipment.

Key Insight: Robust and Adaptable AI Modeling

A key concern with AI systems is their reliability and consistency. Huang’s team rigorously tested their AI models, demonstrating that the preferences generated were coherent and aligned with economic principles. The researchers validated their results across multiple AI models, including GPT and Google’s Gemini, showing consistent performance and interpretation of bidder preferences.

Why This Matters

For business leaders and executives, this research opens up new possibilities in resource allocation, procurement, and sales. The ability to conduct complex auctions more efficiently and with less friction could lead to significant cost savings and better outcomes in various industries. By making these processes more intuitive and less burdensome, companies can engage in more sophisticated market mechanisms without requiring extensive training or expertise from their staff. As markets become increasingly complex and fast-paced, tools that can quickly and accurately capture and act on nuanced preferences will be invaluable for strategic decision-making and maintaining a competitive edge.

References

[1] David Huang, Francisco Marmolejo Coss铆o, Edwin Lock, and David Parkes, “Accelerated Preference Elicitation with LLM-Based Proxies”, arXiv preprint arXiv:2501.14625 (January 4, 2025): 1.

[2] Huang et al., “Accelerated Preference Elicitation with LLM-Based Proxies”, 9.

[3] Huang et al. “Accelerated Preference Elicitation with LLM-Based Proxies”, 9.

[4] Huang et al., “Accelerated Preference Elicitation with LLM-Based Proxies”, 9.

Meet the Authors

is a student at 性视界 University in the Department of Applied Mathematics.

is an Assistant Professor of Computer Science at Boston College. He is currently the Director of Partnerships at the EAAMO research initiative, a Postdoctoral Fellow at the 性视界 School of Engineering and Applied Sciences, and a Research Fellow at Input Output Global. He holds a DPhil in Computer Science from the University of Oxford, and a BA in Mathematics from 性视界 University.

is a postdoctoral researcher at the Department of Computer Science, Oxford University and an associate member at Nuffield College.

is a Professor of Computer Science and Dean of 性视界 John A. Paulson School of Engineering and Applied Sciences (SEAS) where he founded the EconCS research group. He is also a Faculty Co-Director at the Laboratory for Innovation Science (LISH) at 性视界. His current research interests are in market design, information and preference elicitation, modeling behavior, machine learning and economics, and computational social choice. Parkes has an MEng (first class) in Engineering and Computing Science from Oxford University and a PhD in Computer and Information Science from the University of Pennsylvania.

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Key Insights: Digital Ownership鈥擱edefining Control in the Digital World

Digital ownership is the foundational layer of the NFT Staircase, establishing that NFTs offer a verifiable form of ownership through blockchain technology. This functionality allows consumers to own and control digital assets on any platform, and transfer assets, for example, art collections and event tickets between platforms. This 鈥減sychological ownership鈥� gives owners the sense of control with digital assets that they could once have only with physical assets, and it creates a digital incentive to continue to engage with the brand.

Key Insights: Utility鈥擜dding Long-Term Value to NFTs

Expanding the functionality of NFTs beyond mere ownership can increase their value. Many tokens already come with built-in features, such as displaying an image, granting access to events, or enhancing gameplay in online games. And new functions can be added, for example, an online game NFT might provide access to game-related discussions or subscription access to a player publication. Additional utility functions can be enabled by the original creator of the NFT and by third parties on public blockchains. NFT holders can participate wherever they choose and brands can access networks of owners with similar interests.

Key Insights: Identity鈥擡stablishing a Digital Identity Through NFTs

NFTs give consumers a way to develop and share their digital identities鈥攖heir personalities, interests, affiliations, and achievements. Users can create profile picture NFTs, also known as picture-for-proof (PFP) NFTs, which can be used to verify digital identities or express imagined digital personas. Users can add nuance and history to their online identities with proof-of-attendance (POAP) NFTs, which celebrate events and achievements (like a 鈥渄igital 鈥業 voted鈥� sticker鈥�). This concept can potentially extend to academic qualifications and health care data.

Key Insights: Community鈥擟reating Shared Experiences for Brand Advocates

Community-building is a defining strength of NFTs. By design, NFTs create a network effect that connects holders who share common interests and experiences. This network effect can help brands build communities among NFT holders, fostering collaboration and enabling brands to connect with their audiences on a more personal level. This creates 鈥渟emi-permeable membranes鈥� where consumers can suggest new ideas that brands can explore.

Key Insights: Evolution鈥擝uilding Dynamic Digital Brand Ecosystems

The evolution stage of the NFT Staircase brings all prior elements鈥攐wnership, utility, identity, and community鈥攖ogether. These factors make up a comprehensive brand and community experience that promotes personal engagement, loyalty, and ongoing interactions that help brands develop.

Why This Matters

For business leaders, the NFT Staircase offers a framework for rethinking consumer engagement and loyalty through digital assets. By investing in NFT strategies, companies can establish enduring consumer relationships that go beyond typical consumer and brand interactions and create communities that actively engage with and contribute to their brands鈥� growth. Adopting this NFT approach can spur new ways to create value for companies, consumers, and communities alike.

References

[1] Scott Duke Kominers and Steve Kaczynski, 鈥淭he NFT Staircase: How Digital Ownership Benefits Brands and Consumers鈥�, a16zcrypto (February 21, 2024), .

[2] Kominers and Kaczynski, 鈥淭he NFT Staircase: How Digital Ownership Benefits Brands and Consumers鈥�, .

[3] Kominers and Kaczynski, 鈥淭he NFT Staircase: How Digital Ownership Benefits Brands and Consumers鈥�, .

[4] Kominers and Kaczynski, 鈥淭he NFT Staircase: How Digital Ownership Benefits Brands and Consumers鈥�, .

[5] Kominers and Kaczynski, 鈥淭he NFT Staircase: How Digital Ownership Benefits Brands and Consumers鈥�, .

Meet the Authors

Principal Investigator of the HBS AI Institute Crypto, Fintech and Web3 Lab, a Faculty Affiliate of the 性视界 Department of Economics and of the 性视界 Center of Mathematical Sciences and Applications. His first book is The Everything Token: How NFTs and Web3 Will Transform the Way We Buy, Sell, and Create.

 is a tech entrepreneur, consultant, and commentator who coauthored the first 性视界 Business Review article about NFTs with Professor Kominers. He and Kominers wrote The Everything Token, a book about how businesses can authentically use NFTs as a software solution for their business, with one of the world鈥檚 premier business publishers 鈥� Penguin Publishing.

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Key Insight: Digital Assets and the Future of Blockchain

Crypto applications are moving past the technical, security, and regulatory issues that characterized the early cryptocurrency market. Businesses are increasingly exploring blockchain applications beyond traditional cryptocurrencies, recognizing that non-fungible tokens (NFTs) and other digital asset functionality could increase consumer adoption. Ownership of NFTs (through digital wallets) means that individuals own and control their accounts and related data, versus accessing accounts and data on sites maintained and controlled by third parties. As Kaczynski and Kominers explain, the unique features of NFTs provide new benefits for consumers and opportunities for companies.

Key Insight: Enhancing Security, Identity, and Control Through Blockchain

A significant advantage of blockchain technology is its potential to improve flexibility and security across digital interactions. Blockchains create a publicly verifiable record of identity and ownership, making it nearly impossible to counterfeit digital assets, including NFTs. This feature is particularly valuable in contexts where security and identity verification are critical, such as event tickets, art, music, and credentialing. Control is also important, for example, individuals can use NFT accounts to manage their own personal healthcare data, and transfer it digitally among providers.

Key Insight: The Power of NFTs in Branding, Engagement, Community-Building, and Adoption

NFTs have emerged as a powerful tool for brands looking to build digital communities and foster a deeper sense of customer loyalty. Kaczynski and Kominers observe that brands like Starbucks, Nike, and Time magazine are experimenting with NFTs to strengthen brand attachment by giving customers a unique stake in the brand鈥檚 digital presence. By connecting users around shared interests, NFT tokens encourage brand loyalty and create opportunities for consumers to actively engage with their favorite brands鈥� communities through rewards programs and unique perks. 

Kaczynski and Kominers also emphasize that NFTs have evolved beyond speculative assets into functional tools integrated into daily consumer experiences. Digital assets like virtual event tickets, coffee loyalty cards, digital trading cards, and online course certifications provide consumers with tangible value, making blockchain technology more approachable and accessible. NFTs like this enable consumers to 鈥渆nter the blockchain ecosystem鈥� related to their identities and communities, rather than through abstract financial transactions of cryptocurrency.

Why This Matters

For business professionals and C-suite leaders, understanding the practical applications of blockchain beyond speculative cryptocurrencies is essential for navigating today鈥檚 digital transformation. Kaczynski and Kominers illustrate how NFTs can unlock new ways to engage with consumers, streamline operations, and safeguard consumers鈥� digital assets and identities. As businesses adapt to a rapidly evolving digital landscape, embracing these tools can help firms build loyalty, boost security, and stay relevant in an increasingly decentralized world. From a brand visibility perspective, this trend represents an opportunity for companies to cultivate 鈥渟uperfans鈥� who become organic promoters of their products, from virtual sneakers to concert tickets to HBS executive credentials.

References

[1] Steve Kaczynski and Scott Duke Kominers, 鈥淭he Rise of Consumer Crypto鈥�, Project Syndicate (February 2024):

[2] Kaczynski and Kominers, 鈥淭he Rise of Consumer Crypto鈥�:

[3] Kaczynski and Kominers, 鈥淭he Rise of Consumer Crypto鈥�:

Meet the Authors

is a tech entrepreneur, consultant, and commentator who coauthored the first 性视界 Business Review article about NFTs with Professor Kominers. He and Kominers wrote The Everything Token, a book about how businesses can authentically use NFTs as a software solution for their business, with one of the world鈥檚 premier business publishers – Penguin Publishing.

is a Professor of Business Administration in the Entrepreneurial Management Unit, Co-Principal Investigator of the HBS AI Institute Crypto, Fintech and Web3 Lab, a Faculty Affiliate of the 性视界 Department of Economics and of the 性视界 Center of Mathematical Sciences and Applications. His first book is The Everything Token: How NFTs and Web3 Will Transform the Way We Buy, Sell, and Create.

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Key Insight: Understanding NFT Royalties

NFT royalties refer to the payment creators earn from secondary sales of their work, enabled by smart contracts on a blockchain. Traditionally, creators only earn a one-time payment when they sell their creations. NFTs embed royalties into smart contracts, allowing creators to earn a percentage of the resale value each time their NFT is sold in the secondary market. A key factor in the appeal of NFTs is composability, which refers to the ability for NFTs and decentralized applications to interact seamlessly across different platforms. Although the composability of NFTs allow them to be traded and used in a variety of marketplaces and applications, it introduces challenges for enforcing royalties.

Key Insight: Blocklists vs Allowlists

Enforcing NFT royalties is inconsistent across platforms, with some marketplaces bypassing royalty payments altogether. This presents a challenge for creators and marketplaces, as they must navigate different approaches to enforcing royalties while maintaining the flexibility that make NFTs attractive. Two methods for addressing this issue are blocklists and allowlists:

• Blocklists offer enforcement by restricting non-compliant wallets or platforms from trading NFTs. However, 鈥渂ad actors鈥� can still get around blocklists by creating new royalty-circumventing marketplaces that are not on the blocklist. Additionally, blocklists can only stop royalty circumvention by placing marketplaces that circumvent royalties on a blocklist after they鈥檝e been discovered. 
• Allowlists ensure royalties are paid by restricting NFT trading to specific compliant platforms. However there are downsides to allowlists; allowlists can be restrictive and constrain composability, as they require creators to approve each application that wants to facilitate an NFT transfer, as well as which wallets can own an NFT. Additionally there are ways buyers can circumvent royalties even when using an approved marketplace such as making an agreement with a seller to purchase an NFT for $0 on the marketplace, but paying the seller in another application.

Key Insight: The Staking Model

One approach the authors propose to enforce royalties is using the staking model. This model requires marketplaces and other applications to stake assets to gain access to royalty-compliant platforms. This financial commitment helps ensure that royalty payments are upheld when NFTs are resold.

Although the staking model enables marketplaces to acquire allowlist membership without needing approval, the authors posed several open questions to take into consideration when applying the model: How would creators implement the arbitration of slashing? Who should get the slashed stake? What should be the size of the stake? And should stakes be aggregated across multiple NFTs?

Key Insight: The Right of Reclaim Mechanism

The authors also propose the right of reclaim as a mechanism to incentivize royalty payments without restricting composability. Under this framework, buyers of NFTs gain ownership of the asset but not full control of its title until the royalty is paid. If the royalty is not honored during resale, the last title holder has the right to reclaim the NFT. 

The right of reclaim encourages buyers to pay the title transfer fee (the new “royalty”) during sales to avoid losing the NFT. For businesses and creators, this mechanism offers a solution to the problem of enforcing royalties. However, for buyers, it introduces the risk of an owner reclaiming the title for their NFT.

Why This Matters

NFT royalties are not just for artists or collectors; they represent a shift in how both digital and physical assets can be monetized. C-suite executives in entertainment and media, gaming, sports, and even real estate industries must learn how to navigate digital marketplaces, as NFTs are transforming how property ownership is transferred and managed. Understanding how NFT marketplaces can overcome the challenges with enforcing royalties will be crucial for creating revenue streams with both physical and digital goods, as well as other intellectual properties.

References

[1] Michael Blau, Scott Duke Kominers, and Daren Matsuoka, 鈥淗ow NFT Royalties Work: Designs, Challenges, and New Ideas鈥�, a16z crypto (June 26, 2024), https://a16zcrypto.com/posts/article/how-nft-royalties-work/.

[2] Blau, Kominers, and Matsuoka, 鈥淗ow NFT Royalties Work: Designs, Challenges, and New Ideas鈥�, https://a16zcrypto.com/posts/article/how-nft-royalties-work/.

[3] Blau, Kominers, and Matsuoka, 鈥淗ow NFT Royalties Work: Designs, Challenges, and New Ideas鈥�,https://a16zcrypto.com/posts/article/how-nft-royalties-work/.

[4] Blau, Kominers, and Matsuoka, 鈥淗ow NFT Royalties Work: Designs, Challenges, and New Ideas鈥�, 鈥嬧�媓ttps://a16zcrypto.com/posts/article/how-nft-royalties-work/.

Meet the Authors

is a partner on the a16z crypto investment team. Prior to joining a16z crypto, Michael was an analyst in BlackRock鈥檚 Portfolio Analytics Group. He graduated Magna Cum Laude from Washington University in St. Louis with a finance and computer science degree. Michael is an NFT creator under the alias x0r and a magician with experience working for David Blaine and performing at The World Famous Magic Castle in LA.

is a Professor of Business Administration in the Entrepreneurial Management Unit, Co-Principal Investigator of the HBS AI Institute Crypto, Fintech and Web3 Lab, a Faculty Affiliate of the 性视界 Department of Economics and of the 性视界 Center of Mathematical Sciences and Applications. His first book is The Everything Token: How NFTs and Web3 Will Transform the Way We Buy, Sell, and Create.

is a partner on the crypto investment team at a16z, where he supports deal flow and portfolio companies by extracting data from public blockchains. Prior to a16z, Daren was a Data Scientist at SVB Capital where he developed and managed a proprietary data and analytics platform. Before that, he completed financial training programs at Morgan Stanley and State Street. Daren holds a B.S. in Economics and Computer Science from UC Davis.

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Key Insight: The Dual Pricing Dilemma

Loyalty programs can create a two-tier pricing system where companies benefit by enticing customers to join loyalty programs for discounts while increasing the prices of their base products. This practice can lead to inflated prices for those who choose not to participate, limiting consumer choice. According to Nichifor and Kominers, this dynamic not only impacts those outside the program but can also indirectly hurt loyal customers by making overall price competition less aggressive. For instance, a supermarket that offers discounts to loyalty members may charge higher prices for non-members, thus alienating a portion of its customer base.

Key Insight: Stifled Competition for Loyal Customers

Many loyalty programs do not disclose members’ statuses to competitors, creating a barrier to competitive pricing. Without knowing who the loyal customers are, competitors are limited in their ability to attract these consumers. As a result, firms tend to focus on maintaining higher base prices rather than engaging in price competition. A real-world example can be found in the airline industry, where frequent-flier status is often opaque to other carriers, allowing airlines to sustain elevated prices without fear of losing their best customers.

Key Insight: The Hidden Costs of Loyalty

While loyalty programs promise rewards, they often come with hidden costs that diminish their perceived value. Members may find themselves paying fees or losing accrued points if they do not redeem them in time. This situation creates a paradox where the initial allure of discounts and perks is overshadowed by the financial burden associated with maintaining loyalty. For example, many credit card rewards programs impose annual fees that can offset the benefits received, leaving consumers questioning the value of their loyalty.

Key Insight: The Case for Transparency

Transparency is key to fostering healthy competition. By making loyalty statuses visible, firms can compete more effectively for each other’s customers, which can lead to better pricing and service offerings. Australia鈥檚 Victorian government initiative in the retail electricity sector exemplifies this approach by allowing consumers to compare energy offers based on their consumption profiles. This openness enabled competitors to tailor offers directly to the customers of their rivals, enhancing competition and potentially leading to lower prices.

Key Insight: Innovative Solutions Through Technology

Emerging technologies like blockchain can revolutionize how loyalty programs operate. By recording loyalty statuses on decentralized ledgers, companies can easily identify competitors’ loyal customers and offer tailored incentives. This innovation increases competition and empowers consumers to switch brands with minimal friction. Startups and established firms alike are exploring blockchain applications to create a more competitive landscape, potentially reshaping customer engagement in the process.

Why This Matters

For C-suite executives and business professionals, understanding the dynamics of loyalty programs is crucial for strategic decision-making. While these programs can enhance customer retention and data collection, they can also inadvertently stifle competition and inflate prices. By advocating for transparency and exploring innovative solutions like blockchain, companies can create a more equitable marketplace. Embracing these insights will not only enhance customer satisfaction but also foster a competitive edge, ultimately leading to sustainable growth in an evolving business environment.

References

[1] Nichifor, Alexandru, and Scott Duke Kominers, “Loyalty programs may limit competition, and they could be pushing prices up for everyone” The Conversation (April 8, 2024).

[2] Nichifor and Kominers, “Loyalty programs may limit competition, and they could be pushing prices up for everyone”.

[3] Nichifor and Kominers, “Loyalty programs may limit competition, and they could be pushing prices up for everyone”.

[4] Nichifor and Kominers, “Loyalty programs may limit competition, and they could be pushing prices up for everyone”.

[5] Nichifor and Kominers, “Loyalty programs may limit competition, and they could be pushing prices up for everyone”.

Meet the Authors

is a Professor of Business Administration in the Entrepreneurial Management Unit; as well as a Faculty Affiliate of the 性视界 Department of Economics and the 性视界 Center of Mathematical Sciences and Applications; Co-Principal Investigator of Principal Investigator of the HBS AI Institute Crypto, Fintech, & Web3 Lab; and an a16z crypto Research Partner. He teaches the MBA elective courses 鈥淢aking Markets鈥� (M2) and 鈥淏uilding Web 3 Businesses鈥� (BW3B), along with a doctoral course on market design. He is an Editor of the Review of Economics and Statistics and serves on the Board of Editors of the Journal of Economic Literature.

is an Associate Professor in the Faculty of Business and Economics at the University of Melbourne (AU). Before joining the University of Melbourne in 2016 as a Senior Lecturer, he was a Lecturer at the University of St Andrews (UK). Nichifor obtained a PhD in Economics from the University of Maastricht (EU) in 2011, advised byBettina Klaus. Before that, he completed a Research Master (DEA) in Financial Markets and Derivative Products at Toulouse School of Economics (EU), advised by Jean-Charles Rochet.

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Web3, the next iteration of the internet, is revolutionizing traditional market structures by decentralizing control and emphasizing community participation. In 鈥溾��, , Professor at 性视界 Business School and Principal Investigator of the 性视界 Business School AI Institute Crypto, Fintech, & Web3 Lab, and , a Senior Researcher at the HBS AI Institute Crypto, Fintech, & Web3 Lab, reapply the Five Forces framework to web3, showing how competitive dynamics shift in a decentralized ecosystem. As businesses adapt to these changes, understanding the forces at play becomes critical to maintaining a competitive edge.

Key Insight: Redefining Barriers to Entry

The decentralization of web3 is lowering traditional barriers to market entry. Unlike traditional industries, where entering a market requires significant capital investment and infrastructure, web3 allows developers to build directly on existing protocols. This opens the door to innovation from small startups and individuals who can bypass traditional gatekeepers. With reduced entry costs, competition intensifies as new entrants challenge incumbents. As a result, companies in the web3 space need to continuously differentiate themselves to stay ahead.

Key Insight: The Threat of Substitutes and Composability

Composability in web3 presents a unique challenge: protocols and applications can be easily combined to create new, innovative solutions. This characteristic of web3 means that substitutes can arise rapidly, displacing established products with minimal friction. Developers can integrate existing protocols to create customized solutions, allowing for rapid adaptation to market demands. This ease of integration and adaptation drastically shortens the innovation cycle, pushing companies to stay on the cutting edge to avoid being outpaced by competitors.

Key Insight: Competitive Rivalry and Community Embeddedness

Unlike traditional industries, web3 introduces a new form of rivalry that stems from entire communities. Companies in web3 are often deeply embedded in the communities that support their protocols, and competitive advantage is increasingly tied to community engagement and loyalty. This makes competition more about the strength and cohesiveness of a community rather than product differentiation alone. To build a lasting competitive edge in web3, companies must invest in community development.

Why This Matters

For business professionals and executives, the shift to web3 represents both a challenge and an opportunity. The decentralized nature of web3 disrupts traditional competitive forces, requiring firms to rethink their strategies. Success in this new environment will depend on a company鈥檚 ability to build strong communities, foster collaboration, and maintain a relentless focus on innovation. As Scott Duke Kominers and Liang Wu argue, businesses must align with these new dynamics, recognizing that value creation is now a collective effort. Companies that can adapt to these changes will position themselves to thrive in a rapidly evolving digital economy.

References

Meet the Authors

is a Professor of Business Administration in the Entrepreneurial Management Unit; as well as a Faculty Affiliate of the 性视界 Department of Economics and the 性视界 Center of Mathematical Sciences and Applications; Co-Principal Investigator of the HBS AI Institute Crypto, Fintech, & Web3 Lab, and an a16z crypto Research Partner. He teaches the MBA elective courses 鈥淢aking Markets鈥� (M2) and 鈥淏uilding Web 3 Businesses鈥� (BW3B), along with a doctoral course on market design. He is an Editor of the Review of Economics and Statistics and serves on the Board of Editors of the Journal of Economic Literature. His first book is The Everything Token: How NFTs and Web3 Will Transform the Way We Buy, Sell, and Create.

is a Senior Researcher at the HBS AI Institute Crypto, Fintech, and Web3 Lab at 性视界 Business School. As a researcher, he writes case studies on leading Web3 and AI companies for the Building Web3 Businesses course in the HBS MBA program.

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In August 2018, the World Bank settled its first blockchain bond, raising $110 million AUD (roughly $81 million US) to do so. This story is a successful example of how to take on new technologies, learn from them, and iterate. However, chief technology officer and director of enterprise architecture and technology Lesly Goh still warns to be mindful of the hype around blockchain. In this talk, she explores what the future may hold for digital currency and its potential to address some of the toughest challenges in the world.

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Most apps fall short.

The reality is that working families across the country face a variety of pain points when trying to improve their financial lives. Many experience , for instance, that make it hard to build savings. Others may find themselves shut out by mainstream banking institutions 鈥� or crushed by debt. Too often, American households experience all of these challenges at the same time, compounding the problems.

To make a real impact on someone鈥檚 financial life, technology providers need to understand how all these pain points affect an individual’s goals and priorities 鈥� and their ability to reach them. Yet many financial apps take on only one issue at a time: perhaps budgeting or bill-paying, accessing payday checks, or credit score monitoring.

That’s finally starting to change, with many early online products now expanding to become broader financial service providers. Betterment, which started out as an online investing platform, has launched checking and savings accounts. SoFi has expanded well beyond its student loan refinancing business, and now offers mortgages, checking and savings, an investment platform, and insurance products. Acorns, which starting with micro-investing, now also provides retirement savings, checking and savings, and financial education resources.

It’s a good start. For working families with layered financial challenges, these 鈥渂undled鈥� solutions can provide a more integrated fix. For the companies, that’s going to create long-term customer relationships; for the families, it will make it easier to meet their existing financial goals and then stretch for new ones.

That鈥檚 why it鈥檚 critical that financial technology firms understand the real needs of American consumers 鈥� many of whom are indeed struggling to earn more money, withstand expense spikes, and save for the future.

As chief executives whose organizations have more than 30 years’ experience providing financial empowerment solutions, we know there are a few clear ways to create better financial tools for America’s working families.

Understand the complexity

When designing a product or tool, it鈥檚 critical to understand the interconnections and complexities of peoples’ lives. With volatile income, savings and debt, for instance, progress can be nonlinear: A recent SaverLife study of more than 11,000 users showed that despite a steady pattern of savings, clients still wound up making one withdrawal for every two deposits. A tool that forecasts savings without acknowledging intermittent withdrawals won鈥檛 deliver accurate projections. A bill pay service that fails to incorporate date flexibility will create headaches, not solutions, for users with uneven paychecks.

Steer clear of silos

Working families are often making trade-offs between time, money, and competing financial priorities. Technology designed to help working families must understand that paychecks are often not consistent and banking relationships may be fragmented or nonexistent, making it hard to pay bills on the same day each month or to automate contributions to savings. They need bundled services and partnerships between products that allow for flexibility.

Trust matters

Too many working families are weary of the financial services industry. According to the , one in four Americans are unbanked or underbanked, with 30% of unbanked saying they don鈥檛 trust banks. Trust is critical to a company winning over customers, not just for initial enrollment but for healthy, active product usage as well.

Design for real financial lives

Working families aren鈥檛 only making key decisions about money while at the bank or at home after work. They do it throughout the day 鈥� when purchasing lunch at work, buying school supplies, or paying to fix a flat tire. The right app shows up at the right places and moments; it is both relevant and actionable.

Know the upside

Well-designed, bundled tools can serve clients holistically. By doing so, they can help build trust among users, increasing adoption rates and stimulating active use. This kind of deep engagement, in turn, fosters healthier communities 鈥� and creates long-term customers with the ability to invest in their futures.

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