How to Use Tokenization to Drive Growth: Small Steps of Giant Leaps

How to Use Tokenization to Drive Growth: Small Steps of Giant Leaps

Introduction:

Tokenization is a powerful tool that can fuel growth and innovation for businesses. By leveraging tokenization, companies can create new business models and improve their chances of success. In this article, we will explore seven lessons from successful companies that have effectively used tokenization to drive growth. Additionally, we will discuss the importance of small choices and consistency in achieving long-term success.

Lesson 1: Get clear on what business you are *really* in

To effectively utilize tokenization, it is crucial for founders to understand the core process that drives their bottom line. Oftentimes, the key process that generates profit may differ from what a company sells on the surface. For example, Marriott is not just in the hotel business but also in the real estate business, while Costco focuses on inventory management. By identifying the tried-and-true business model and combining it with tokenization, founders can create innovative solutions and increase their chances of success.

Lesson 2: Use tokenization to solve the cold-start problem

Tokenization can act as a "bridge loan" from users to get a project off the ground. However, it is important to ensure that the project is viable and solves a real user problem, with or without the token. Founders should consider how their project would work without a token and assess its potential for success. Progressive decentralization can also be a valuable approach to tokenization.

Lesson 3: Focus token incentives on relevant KPIs

Token incentives are a powerful tool, but they should be focused on key performance indicators (KPIs) that actually matter for growth and profitability. For example, app engagement is a crucial KPI that directly impacts growth. Founders need to identify the user actions that drive growth and profitability and align token incentives accordingly.

Lesson 4: Bring demand from outside the metaverse

Web3 projects that solely operate in the digital sphere often struggle to generate product demand and can become self-referencing ponzis. Founders should explore creative ways to bridge the real economy and the metaverse, leveraging the existing economic ecosystem to power product demand.

Lesson 5: Token utility is more important than limiting token supply

While limiting token supply can create scarcity, token utility is ultimately more important for driving user engagement and loyalty. By providing users with fundamental incentives to keep stacking tokens, even without the opportunity to sell, companies can foster long-term growth and adoption.

Lesson 6: Protect the project from crypto market cycles in the early stage

Secondary market token liquidity holds significant value for tokenization. However, founders should also consider how market volatility may affect their core business and take necessary precautions. Launching a token on exchanges from day one may not always be the best approach, and careful consideration should be given to the potential impact on the project's stability.

Lesson 7: Use staking to distribute value-added, not to solve token demand problems

Staking can be a valuable tool for increasing user engagement and loyalty. Sharing the benefits of project growth with users aligns with the web3 ethos. However, for staking yields to be sustainable, they should come from the business's profit rather than token emission. This ensures a stable and sustainable model for distributing value to stakeholders.

Conclusion:

Tokenization can be a powerful driver of growth and innovation for businesses. By understanding the core business model, solving real user problems, focusing on relevant KPIs, bridging the real economy and the metaverse, prioritizing token utility, protecting against market volatility, and using staking strategically, companies can effectively leverage tokenization to achieve long-term success. In addition to these lessons, it is important to recognize the significance of small choices and consistent actions in compounding results over time. By excelling at the small choices that lead to extraordinary outcomes, businesses can position themselves for future success and favorable circumstances.

Actionable Advice:

• 1. Clearly define your core business model and identify how tokenization can enhance it. Combine tried-and-true business models with tokenization to create innovative solutions.

• 2. Assess the viability of your project without relying solely on tokenization. Ensure that your project solves a real user problem and can be profitable independently.

• 3. Focus token incentives on key performance indicators (KPIs) that directly impact growth and profitability. Identify the user actions that matter most and align incentives accordingly.

By implementing these actionable advice, businesses can unlock the full potential of tokenization and drive sustainable growth and success.