Diffusion of Innovations
//// Sander van Weert //// CO4 //// 2579804 //// 323640
//// Table of Content
/ Introduction / The Product - Intro / The Product - 2015 Hype Cycle / The Product - 2019 Hype Cycle / The Company - Bitwala / Roger’s Theory - Bitwala / Analyzing Greenhouse Group / Sources
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//// Introduction This paper is based around Everett Roger’s Theory : ‘Diffusion of Innovations’, and Gartner’s Hype Cycle theory. The research starts with a small introduction of the product, Cryptocurrencies, which was on Gartner’s 2015 Hype Cycle on the ‘trough of Disillusionment’ part. Which meant that the product was in an experimental phase and it would have a lot of ups and downs. In this paper you will read where it is now and what path the crypto has traveled in these four to five years. The Diffusion of Innovations Theory by Everett Roger will be applied to the German cryptotrader and traditional banking disruptive, Bitwala. The Berlin based company came up with a product that has the potentional to pressure traditional banks.
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//// The Product - Intro Cryptocurrencies is one of the products that was an innovative trigger regarding Gartner’s 2015 Hype cycle (Gardner, 2015). A crypto currency is a digital or virtual payment method. A currency has a limited amount of ‘coins’. They exist in a huge database which can’t be edited by anyone. The database is protected by a very hard to crack security code which makes sure the coins are verified and safe. Crypto is the first digital coin to succeed (Crypto Insiders, Z.J). It all started in 2009. A group of anonymous programmers came forward under the name ‘ Satoshi Nakamoto’. They introduced the famous and well-known Bitcoin. It was explained as a ‘peer to peer electronic cash system’. The system would be completely decentralized. This means that there wouldn’t be any servers or authority (like a bank) connected to the currency (Crypto Insiders, Z.J.). Usually a bank would regulate transactions and keep track of data and other bank related issues. With cryptocurrency, as said before, there is no central authority like a bank. With Bitcoin, the responsibility is with every member of the community. To make sure this works, Blockchain technology was invented. This is a decentralized logbook or register that keeps all data (transactions etc.) secure. This is fully transparent to the community. So, every crypto wallet is open to the users and every transaction is visible at all time (Crypto Insiders, Z.J.). Every transaction that takes place contains an address and the amount of money (public key) of the receiver and the sender. The transaction only has to be signed by the sender with his private key. Eventually, the transaction will be sent after verification, to the big crypto network. Which is secured with the blockchain technology (Crypto Insiders, Z.J.).
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The blockchain technology provides some kind of puzzle that verifies the transactions. Miners (users of the coin), pick up the transactions, solve the puzzle, create a verification stamp and spread the transaction throughout their network. Everyone in the network has to verify the transaction. When that’s done, the transaction is final. There is no way back. The miners get the transaction costs from the sender (Crypto Insiders, Z.J.). There are loads of crypto currencies. The most well-known ones are: the Bitcoin, Ripple, Ethereum, Dash and Litecoin (Crypto Insiders, Z.J.). Cryptocurrencies is a huge business. For example, one Bitcoin sells for almost $9000,- at the moment of writing. At his peak, the currency hit a record of almost $20.000,- per coin. The Bitcoin has been used as a real-life transaction for the first time in 2009 by an early adaptor of Bitcoin. This person bought two pizza’s at Papa John’s in Florida for 10,000 bitcoins. Just imagine the worth of the coin back then, compared to now. If this particular person saved his bitcoins at the peak point in 2017, he would have $200.000.000,(Edwards, J. 2019)! There is a downside to the cryptomarket, because of its decentralisation. The currency is often used for transactions on the black market or the dark web. A lot of criminal goods have been bought with crypto (Edwards, J. 2019).
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//// The Product - 2015 Hype Cycle In 2015 Crypto currency was on ‘Trough of Disillusionment’ – part of Gartner’s Hypecycle. With an expected plateau in two to five years. This means that the expectations of crypto as it was intented, fail to deliver. The producers of the product shake out or fail. The product can only keep on living when early adapters keep on investing and using the product (Gartner, Z.J.) Before 2015 the hype was huge. On 7 November 2010, the Bitcoin passed the 1-million-dollar mark. Which was a record. In 2013 the banks of Cyprus where nearly bankrupt. The banks decided to take people’s savings (every euro above €100.000, -) and invest it into stock shares. A lot of bank account holders started to invest into Bitcoin. Obviously, because they didn’t want their money to be invested by a nearly bankrupt bank. The worth of one Bitcoin got from $80,- to $260,- per coin (Westra, 2017)! The Chinese People’s Bank Acknowledged Bitcoin as a currency. They started to see a future for Crypto. People where free to invest into Bitcoin. The hype in China started to grow immensely. The Chinese craziness created a huge breaktrough for the Bitcoin, which became worth over $1250,(Westra, 2017). Just over two weeks, the same bank declared that Bitcoin won’t be acknowledged as an official currency to make all day payments. No more financial companies or any company in line with Bitcoin, isn’t allowed to trade with the digital currency anymore. This is a start of the strangling of the Chinese cryptomarket. A following of this matter, is that the Crypto lost loads of value (Westra, 2017).
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In 2014, Mt. Gox was declared Bankrupt. Mt. Gox was one of the biggest online exchanges of Crypto. On the 24th of February Mt. Gox officially closed their doors. The company kept on telling that they were a victim of hackers. This wasn’t exactly true. In fact, the company lost over 744.000 BTC (short for Bitcoin). Which is over 427 million dollars (Westra, 2017). From 2012 to 2014 there happened a lot regarding Bitcoin and other cryptocurrencies. From hacks, to bankruptcy, to world records. It was time to make up rules and restrictions for Bitcoin. It was a very unstable market with a lot of pros and cons. The market was unstable, and the technology was way to technical for the masses. The common people did saw Bitcoin as an opportunity to invest in. But it was too complicated. The cryptomarket requires a lot of knowledge and technical skills to take part in. This is why the Bitcoin stalled on ‘through of Disillusionment’ on Gartner’s Hype cycle, in 2015. On the other hand, Ethereum exploded in 2015, early 2016’s. It’s worth raised from 2,83$ tot 8,24$ in just over one year! This is a raise of more than 300%. Which is nothing in the years that where following. But, considering the minor attention of the people, this is huge (Banken, 2016).
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//// The product - 2019 Hype Cycle So, crypto was on the ‘trough of disillusionment’ part of the 2015’s Hype Cycle. This means that had an expected lifespan of two to five years. But, one of the terms was that the product stayed as it was intended. Cryptocurrencies where intended to compete with traditional banking. In those four years the product had some downfalls and went over the top. Cryptocurrencies are still here in 2020. They are broadly accessibly by people. Companies like Bitwala, help people invest their crypto and get actual tangible money out of it. It’s safe to say that the product didn’t fail. Because the product stayed as it was intended, to take on traditional banking. It had some setback and ups and downs. On the other hand, there are, in a range of 300.000 – 500.000, daily active crypto users. And over 100 million of crypto owners (Buy Bitcoin Worldwide, Z.J.). So, based on the previous stated facts and Bitwala’s product (the company that is being analyzed further in this report), crypto is on the Slope of Enlightenment’. More enterprises are understanding the value of crypto, as it has became a method of payment on a minor amount of websites. It has become a widly known product, which is still a bit hard to understand. But companies like Bitwala, have found a way to make crypto easier accesible. This company provided a technology that makes it possible to withdraw actual cash in the local currency, directly from your crypto account. So, third party products and innovations are created. But, traditional banks are still a bit hesitant. Since, the decentralisation technology can become a major competitor for banks around the world (Gartner, Z.J.).
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//// Company - Bitwala Bitwala was formed in 2013 in Berlin (Kreuzberg), by three friends ‘and a dog’. They saw a huge potentional everyday payments with Bitcoin. In 2015 they started to work on their crypto revolution. The company was bootstrapped, and they launched their first bank transaction with a new prepaid debit card. In 2016. They sat up a crowdfunding which raised about $800.000,-! In the same year they monetized a product that transfers over 75 million euros (Bitwala About, Z.J.). In 2018 the company had a major setback due a bankruptcy of one of their most valuable partners. The team was set back to the drawing board. In the same year they came up with a new banking system based on the blockchain technology. With an additional €4 million investment by renowned investors, Bitwala launched the first and biggest Crypto currency bank account. At this moment, they have over 43 employees and are still growing with new currencies, partners and features (Bitwala About, Z.J.). Bitwala claims to have built the world’s first bank that holds a regular bank account, bitcoin wallet and trading, all in one platform. They earn their money by keeping a 1% fee on all the transactions that are being made. One the large benefits of Bitwala is the debit card. You can change your Crypto into a ‘real life currency’ very easy. It also creates the possibility of spending your crypto on everyday payments, just as they always wanted from the start.
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//// Roger’s Theory - Bitwala A central model in the “Diffusion of Innovations” is Roger’s Innovation Theory (Rogers, E. 1962). In this model their are five stadia explained: 1. Innovators People who want to be the first to use a product; 2. Early adopters People who are interested in new products. This phase comes with an exponentional growth of sales; 3. Early Majority First large group of people who will buy the product. Product is picked up by the masses and becomes mature; 4. Late Majority The product became mature and a large part of the market knows the product. Sales will decrease during this period; 5. Laggars Last phase of the product. The product is about to fade out of the market. Last sales would be with a discount. Different terms for above phases are: Introduction, Growth, Maturity, Saturation, and Decline. Furthermore, Roger applies five more terms in his theory. Which are: 1. Relative advantage 2. Compatibility 3. Complexitiy 4. Observability 5. Trialability These phases and therms will be applied to Bitwala’s Innovation.
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Bitwala confirms that they have users in every country which is associated with the European Union. It is not clear how many users they have and they will not clear this up, at any point (Baltrustsaitas, 2020). So, It can not be said in which phase Bitwala is, based on the amount of users. Stating that the key product of Bitwala is the ability to withdraw cash from actual ATM’s all over the world. The company exists for quite a while. But the withdrawal of crypto as cash is pretty new, since the product has been launched in August 2019. Still, they seem to have quite some users, which could mean that the product is in the early adopters stage. Here’s why: They have a vast user base which is located troughout all of Europe and the ability to pin cash with crypto in over 30 million ATM’s, which means their product is also widely available. As they are still finding ways to make their product more innovative ein this relative new market, means that the product isn’t close to saturating. They still believe they can be a substitute for traditional banking. If they would be a real competitor based on facts and figures, the product would be more around the late majority phase. The Bitwala Bitcoin Banking was also announced in August of 2019. So, the product is quite new, obviously. Also, the technology and service Bitwala provides, is new and disruptive. So, the early adapters might feel special. They have knowledge and access to something that is new and an alternative to traditional banking. The abilitity to ‘withdraw’ your bitcoin for a flat fee is something that is very attractive to people who are interested in cryptobanking. Bitwala makes it very easy to become a client with their easy to use mobile app. The user experience makes the treshhold very low for new users or more specific, early adopters.
The innovation is also pretty compatable with the core values of Bitwala. Which are: Live the revolution, not another bank, adapt, mind your karma, the best idea wins and aim for the moon. This means that the company is very innovative and always going for personal and corporate development. They believe that what they are doing is definitely going to disrupt the traditional banking marketing. They are very compliant with their own product! The ability withdraw actual cash from your crypto wallet at 30 million atm’s, ads aditional value to the company and it perfectly fits its values. The product adds value to the company on personal and corporate levels. There is definitely a relative advantage. On the naked eye, the product doesn’t seem to be complex at all. You can sign up for a free account in just minutes via the website or their mobile app. You get a debet card to withdraw cash at ATM’s. Every aspect of the product seems easy to use and understandable. The product doesn’t look complex at all. In fact, with just a one minute scroll on Bitwala’s homepage, you know what they do and how you sign up for their services. It doesn’t look complex at all. As Bitwala has users from every country that is associated with the European Union, the product seems to work fine and their aren’t many issues. This is probably because the product isn’t complex at all. Risks isn’t forming a barrier, as the consumer decides the amount of risks he takes. The product isn’t very visible in it’s own way. The debet card looks like a traditional one. But, the decentralising finance marketing, Bitwala is operating in, is a market that is open for discussion and learning trajectories. So, the innovation is pretty visible.
Based on the six terms Roger applies for an innovative product, it’s very innovative. It’s new, easy to use, visible and it compliments the core values of Bitwala. The product has been launched in August of 2019, this means its relatively new. the decentralizing finance market is also quite new. Based on the research, the product is in the early adopters stage. Bitwala is groing company, which just made their service easy to use for the masses. The company’s anual estimated revenue is $3 million, which means they are already raising loads of money with their product. But it hasn’t been picked up by the masses. The product has a huge potentional, since cryptocurrencies are available worldwide. This is reach Bitwala can be able to use. Since they are very complient with their company values and the product is innovative. So, there is also no need to speed up the process of the innovation. Judging by the annual revenue, the adoption process is going pretty well.
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//// Analyzing Greenhouse Group Greenhouse Group is a innovative company based in Eindhoven, Amsterdam and Sittard. Greenhouse is a leading online - and tech marketing orientated company. They are an umbrella organisation for Blue Mango, Blossom, Fresh Fruit Digital, LemonPi and Pubnxt. Their core values are: Innovation, Dedication, and fun. These core values are carried out by their 500+ dedicated experts. They believe that consumer friendly marketing is a combination of data, technology, creativity, and media. I’ve visited this inspiring company in February and researched them on these particular questions: 1. How does this organization value innovative thinking/entrepeneurship? 2. How do they organize innovative thinking/ entrepreneurship? Who promotes innovation throughout the company? 3. How are these innovations applied to their daily projects/advice towards customers? 4.How does this knowledge relate to your own professional development? Read the findings here.
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Innovative thinking is highly encouraged in Greenhouse Group. It’s also in their core values. They say that their marketing is based on a combination of technology, data, media, and the most important one, creatiivty. Creativity leads to innovative thinking. Personal development/ innovation is also encouraged by the company, since every employee has a personal development plan. They even go further regarding the personal development. They prioritize this over corporate development. Since they believe that personal innovation leads to corporate innovation. So, they believe in this on a macro-scale, every employee has a part in this process. Innovation flows trough the company. The company is organized around the McKinsey Horizon Model (McKinzey, 2009). Horizon 1 is Greenhouse Group, 2 is Boom, 3 is Labs. In labs they keep an eye on innovation trends around the world. In Boom, they create concepts for these trends which often result in start-ups and products. And Greenhouse Group itself, creates campaigns for these companies and works for big clients like Vodafone and Kruidvat (Ploeg, 2020).
Because they work in task forces, different perspectives of products and concepts are being created. So, this results in a full body concept for a customer or an innovation. And because every employee is constantly developing, ideas are flowing, and the motivation stays high. In the end, Greenhouse confirmed what I already thought, working in task forces is much more effective than lineair working. Because, people tend to stimulate and encourage each other when working closely together. Working like this is more personal, which means that the employees are more open minded and eager to say what they have on their mind. What also helps, is that Greenhouse has everyexpertise in-house. If they need anything, a piece of code, ads campaigns or copywriting. They just ask a colleague.
In all three ‘horizons’ they have multidisciplinary teams that create the most innovative concepts. That’s the way they work. They believe that this is effective. When this works, recruitment and PR will folow. At the moment their are over 50 innovations running troughout the company.
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//// Sources Baltrusaitis, J. (2020, 6 maart). Bitwala CEO Interview: CBDCs Won’t Replace Bitcoin. Geraadpleegd op 10 april 2020, van https://learnbonds.com/news/bitwala-ceo-interview-cbdcs-won%E2%80%99t-replace-bitcoin/ banken.nl. (2016, 26 augustus). 4 grootbanken ontwikkelen samen eigen cryptocurrency. Geraadpleegd op 10 april 2020, van https://www.banken.nl/nieuws/8241/4-grootbanken-ontwikkelen-samen-eigen-cryptocurrency Bitwala. (z.d.-a). A bank account with integrated cryptocurrency trading - Bitwala. Geraadpleegd op 10 april 2020, van https://www.bitwala.com/ Bitwala. (z.d.-b). Learn more about Bitwala, the world’s first blockchain bank - Bitwala. Geraadpleegd op 10 april 2020, van https://www.bitwala.com/about/ Buy Bitcoin Worldwide. (z.d.). How Many People Use & Own Bitcoins? (2020). Geraadpleegd op 10 april 2020, van https://www.buybitcoinworldwide.com/how-many-bitcoin-users/ Enduring Ideas: The three horizons of growth. (2009, 1 december). Geraadpleegd op 10 april 2020, van https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideasthe-three-horizons-of-growth Gartner Hype Cycle. (z.d.). Hype Cycle Research Methodology. Geraadpleegd op 10 april 2020, van https:// www.gartner.com/en/research/methodologies/gartner-hype-cycle Hype Cycle Research Methodology. (z.d.). Geraadpleegd op 10 april 2020, van https://www.gartner.com/en/ research/methodologies/gartner-hype-cycle Rogers, E. M. (2003). Diffusion of Innovations, 5th Edition. Amsterdam, Nederland: Amsterdam University Press. Silicon channels. (2019, 15 november). 10 European cryptocurrency startups that aim to change future of fintech. Geraadpleegd op 10 april 2020, van https://siliconcanals.com/news/european-cryptocurrency-startups-2019/ Wat zijn Cryptocurrencies? ». (2020, 25 februari). Geraadpleegd op 10 april 2020, van https://www.crypto-insiders.nl/academy/wat-zijn-cryptocurrencies/ Westra, D. (2017, 12 september). Home Blog Crypto trading De historische koers van Bitcoin (BTC) De historische koers van Bitcoin (BTC). Geraadpleegd op 10 april 2020, van https://allesovercrypto.nl/blog/tijdlijn-bitcoin
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