Leveraging Web3’s Unique Capabilities to Create Breakthrough Products

The emergence of Web3 is opening up new possibilities for product differentiation—from go-to-market strategy to building for communities. But what does it mean for product builders? And where are the pitfalls?

By Francis Labiran, Senior Product Manager at BCG Digital Ventures, and Stanley Ouzillou, Senior Product Manager at BCG Digital Ventures

The term Web3 was first coined in 2014, but it was in 2021 that the idea really started gaining popularity.

Since then, Web3 — which has been described by some as an alternative vision of the web — has exploded with possibilities by enabling users to own digital assets on a decentralized blockchain. This is something that could not be done previously without a third-party guaranteeing ownership.

The most successful Web3 applications include cryptocurrency exchanges (there is still a role for them despite recent news), decentralized finance (DeFi) applications, NFT marketplaces, and NFT collections. By making decentralization a reality from a technological standpoint, Web3 opens up a whole new world of possibilities for launching decentralized-based products across industries.

As we examine the current Web3 landscape through a product manager lens, what are the opportunities and challenges of launching a Web3 product? And how do we find product-market fit in this new Web3 world?

Why do we need Web3?

On the evening of October 4, 2021, the world shook as Facebook (now called Meta) and its subsidiaries became unavailable for six hours, causing widespread disruption to lives and businesses across the globe.

This example alone illustrates one of the many limitations of centralization. A central entity is like a diffuse force where the boundaries are hard to define — only when it is pushed to the point of failure does it show its limits.

Relying on centralized infrastructures creates single points of failure, unexpected downtimes, and an increasing threat of censorship.

However, now thanks to blockchain-based technologies, we live in an internet era where users have the ability to exchange and interact without any intermediaries in a “trustless” and self-governing environment, which doesn’t require a third party to guarantee the transaction.

But, in this Web3 world, how do companies find the right market for their products, gain traction, and what are the new rules of engagement?

Rewriting the go-to-market rules

In the traditional Web2 era, acquiring users and growing rely on a linear formula where investment in sales and marketing to generate leads, and retain customers, are the core foundations of a go-to-market (GTM) strategy.

While these traditional acquisition frameworks are still relevant, the introduction of tokens and new kinds of decentralized base structures allow us to rethink GTM approaches.

Rather than marketing spend to acquire new users, developers and growth marketer can use tokens to bring in early users and reward them for their contributions to the network/ application. Those early users then act as evangelists to bring more people into the network, thereby incentivizing customers to drive the growth of the user base. Having an engaged and high-quality community, paired with the right organizational governance, is key to long-term success.

Building with communities to differentiate

While Web1 was a monologue experience, with companies sharing information to web users, Web2 encouraged two-way conversation, in a read/write experience. Web3, meanwhile, is the iteration of the internet that can be likened to brands and consumers gathering around a whiteboard and co-creating the experience.

What we are seeing now is the emergence of Web3 as a method of product differentiation. In Web2 we saw industries go through evolutions where differentiation first happens through capabilities, then user experience, and then brand. Some companies are using Web3 to stand out from the competition, whether by taking a community-building approach or creating ongoing utility across the physical and digital worlds.

  • Starbucks has realized the potential Web3 has to help them stand out from the competition. Via Starbucks Odyssey, they allow members of their loyalty program to purchase NFTs with their credit cards to unlock “immersive coffee experiences” while earning loyalty points in the process.

When it comes to community building in Web3, Discord has become the go-to place, with a recent Vogue Business article dubbing it the “Soho House of Web3.0.” The opportunity to form a tight-knit and sometimes exclusive community can reap dividends for both parties: brands gain a direct channel to connect with an enthusiastic and engaged audience; and consumers can get closer to the brands they love, as well as priority access to upcoming “drops.”

  • Technologist Iddris Sandu took to Discord to build a community of early adopters that have bought into the mission of the company, serve as product evangelists, are an engaged group who have a high propensity to purchase, and are continuously sharing feedback. LNQ, the wearable chip-embedded garments that Sandu is creating via Spatial Labs, serve as physical assets with utility that extends into the metaverse. The LNQ Generation One chips allow members of the LNQ network to scan pieces of clothing to discover information regarding the clothing’s origins and current market value, in an attempt to create accountability in a world of fast fashion.
  • Earlier this year, Gucci Vault launched its Discord community, with the first 20,000 members gaining special privileges, (they onboarded 28,000+ members in the first two days alone) and in the process curated a community they can converse with, and co-create Web3-focused projects.

Web3 issues with adoption

Although Web3 provides opportunities for innovation, it is still in its infancy, and this lack of maturity means that there are obvious issues that limit the mainstream adoption of the product, including interoperability and user experience.

Within many Web3 use platforms, we are invited to acquire assets that enrich our experience, whether that be skin in games like Roblox or NFTs. However, this virtual asset acquisition can have limitations. Unlike the real world, where we can transport, for example, clothes wherever we go, in Web3, these assets tend to be tied to the platform in which they were obtained. This interoperability is a challenge that must be overcome if Web3 is to be seen as an attractive proposition to a wider audience.

The ability for different Web3 apps to communicate and share information seamlessly without the user leaving the decentralized space is crucial to users having a similar experience to Web2. Without this, we are taking a step backwards.

The key to mass adoption of products and services usually comes down to the user experience, i.e., how simple it is for people to access your product or service. Quite often, the innovator and early adopters of a product/service will forgive bad user experience due to the novelty of getting exclusive access.

The above rings true for the current state of Web3. If you have ever tried to buy cryptocurrency or an NFT, or to connect your Metamask wallet to an application, you will have no doubt experienced some undesirable friction that early adopters are coping with today.

Prioritizing user experience

Whether it’s challenges that come with connecting the wallet, or requiring a mobile phone as part of the setup of a VR device, it is clear that there is an opportunity to evolve the way we approach UX when building for Web3.

If we look at Starbucks Odyssey, it is clear that they are attempting to address the barrier to entry caused by cumbersome UX by allowing their customers to buy NFTs using their credit card, rather than have to set up a crypto wallet. This gesture to handhold their customers into the world of Web3 is an example of how we can ease users into the world of Web3, overcoming that initial adoption barrier in the process.

The concept of “UX2.0” — where the focus is on “personalization bubbles,” meaning the user experience is tailored to the individual, rather than creating user experience to serve certain segments — could be a reality in the near future.

We are likely to see the dawn of true hyper-personalization, where a user’s experience with a product or service can truly be driven by their preferences and context across physical and digital touchpoints. We are seeing a shift away from, “How do I design the best user experience for this product?” to allowing users to dictate how they experience the internet, and use their data to unlock experiences that are meaningful to them.

The future of Web3

Web3 is becoming an ever more prominent part of our world, and we will continue to see companies adopting it as a strategy, as well new companies being spun up, wholly focused on building for this new iteration of the internet. As product builders, it is imperative that we are thinking about how we can best prepare ourselves for this inevitability by continuing to ask ourselves key questions:

  • How do we shift our behaviors from building for users to building for communities?
  • What can we do in the short term to incorporate Web3 as a product differentiation strategy in established tech businesses?
  • What do the Web3 businesses that are going to change our world in the next five to ten years look like?
  • How do we best position ourselves to build them?

The reality is that Web3 won’t be applicable to all use cases. However, it is another tool that we can call upon when the opportune moment arises.

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BCG Digital Ventures - Part of BCG X

BCG Digital Ventures, part of BCG X, builds and scales innovative businesses with the world’s most influential companies.