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.