Conclusion
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On 25 February 2000, General Motors, Ford, and DaimlerChrysler announced their intention to form a combined business-to-business Internet marketplace, where vendors and purchasers in the US automotive industry could all transact business with each other simultaneously.
Renault and Nissan soon joined, as did the software providers Oracle, SAP, and Commerce One. The name ‘Covisint’ was created to express their aspirations for the marketplace (‘co’ stands for cooperation and communication, ‘vis’ for visibility and visions, and ‘int’ for Internet and international).[1221] Construction of the Internet marketplace began as soon as the Federal Trade Commission issued a no-action ruling on its antitrust dimensions.[1222]12.74
The collaborators’ original vision was nothing if not breath-taking: General Motors speculated that, as soon as 2001, vehicle production time could be cut from forty-five to ten days and costs cut by 6% once the combined $300 billion dollar spent by all five manufacturers with their 30,000 suppliers could be channelled through the Internet marketplace.[1223] The fundamental flaws in the strategy surfaced almost immediately. Scarcely a year later, a Gartner analyst described the ensuing mess in the following terms:[1224]
Laying out the relationships in Covisint is like reading a soap opera script. It’s full of intrigue, love triangles, affairs, fights, and more publicity stunts than a Hollywood premiere ... SAP, Oracle, and Commerce One partnering will be like three angry pit bulls tearing each other apart in a fenced yard. Everyone wants to stop and help, but at the same time they’re caught up in morbid curiosity.
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In 2005, Thomas Stallkamp, former president of Chrysler Corp, offered an even bleaker assessment: ‘Covisint was a horrible idea.
Nobody thought it through. Data exchanges are fine, but Covisint and the way it was done was an absolute failure—it never got off the ground.’[1225]12.76
Even after its spectacular and very public collapse only a couple of years after its founding, however, Covisint never closed its doors. Within a few years, it had successfully transformed itself into a provider of secure collaboration technologies for both public and private sector users. It was acquired by Compuware in 2004, and after shelving plans for an initial public offering in 2008, it was eventually spun off in 2013 as a cloud computing company. It quickly staked a claim to being an ‘Internet of Things’/connected car service provider, which then led to its being acquired for more than $100 million in 2017 by OpenText, a technology services company offering integrated cloud, ‘Internet of Things’, and supply chain optimisation services.
12.77 Covisints experience is common for many start-up companies: after making a splash by promising to do one thing, they must reinvent themselves, after it becomes clear that their original plan is not feasible. Covisints experience is uncommon only in the intensity of the global scrutiny it received from its inception until its original strategy flamed out spectacularly on the world stage, as well as for its success in repeatedly reinventing itself in the two short decades of its existence.
12.78 Once John Carreyou exposed the scale of the fraud at Theranos, financial market commentators abruptly shifted from praising Theranos to asking how so many smart people could have been so wrong:[1226]
The Theranos scandal clearly illustrates the risk of market failure in markets for highly innovative products and services: over nearly a decade, sophisticated investors gave $900 million in start-up funding to a company without noticing that the company had never been able to develop a successful commercial product.
class=21 style='margin-left:18.0pt;text-indent:-18.0pt'>12.79 Elizabeth Holmes' ability to inspire the confidence of sophisticated investors and to manage the image Theranos presented to the public no doubt contributed quite a bit to Theranos' success. In that regard, Elizabeth Holmes successfully crafted a ‘David and Goliath' narrative about breaking through barriers erected by an entrenched oligopoly that both the public and quite a few investors found difficult to resist. Many blockchain pilots are being marketed in a similar manner. Such narratives are likely to appeal to business leaders who, like Theranos investors, know little about the technology that is ostensibly driving the success of the venture. They are less likely to appeal to business leaders who are comfortable with the measured pace, shared control, and inherent uncertainty characteristic of the discipline of process improvement.12.80 Most blockchain pilots undertaken within financial market segments, such as trade finance, will probably be allowed to fade into obscurity, far from the glare of the world media spotlight, because they began their lives with much less fanfare than Covisint. If the teams of software developers and business analysts working on those projects persevere with the same tenacity as the management of Covisint, they may also be able to survive long enough to participate in the successful launch of a new business, albeit not the same one that they originally set out to create.
12.81 In his autobiography, Henry Ford wrote, ‘[f]ailure is only the opportunity to begin again, this time more intelligently'.[1227] If the irrational exuberance characteristic of most blockchain pilot projects can eventually be redirected towards more productive uses, then lessons learned from those pilot projects could contribute to the success of the much larger effort now underway to transform trade finance within the emerging digital global trade system.