vice chairman, ceo and board services
This Week in Leadership (June 14 - June 20)
Why remote workers are quitting their jobs en masse. Plus, the five questions all CEOs want answered during job interviews.
There was no paperwork to sign. No transaction documentation to be notarized. No supplier agreements or real estate deeds to file away. All of the contracts needed to complete the multibillion-dollar corporate merger were transferred digitally using so-called non-fungible tokens, or NFTs.
NFTs, basically digital certificates verifying the authenticity and ownership of virtual or physical assets, have been around since 2015. But after the auction house Christie’s sold an original piece of digital art for $70 million last week, NFTs are all the rage among business leaders, says Alan Guarino, vice chairman of Korn Ferry’s Board and CEO Services practice. “Corporate leaders are starting to see the tokens’ potential to monetize intellectual property,” he says. “It opens up whole new avenues of innovation for corporate and consumer transactions globally.”
Though they’re sometimes confused with bitcoins or other digital currencies, NFTs aren’t a form of payment. Rather, they are digital records that assign value to an asset that can be bought, sold, or traded by validating its originality. The token tracks an asset’s movement over blockchain, triggering payment once it is transferred from one owner to another. For instance, an NFT can permanently link a photographer to an original picture, thereby providing both an avenue to collect royalties on its use and a way to identify reproductions that aren’t legitimate.
So far, celebrities, athletes, musicians, artists, and other creators have primarily used NFTs as a way to generate revenue from songs, videos, or even social media posts. The National Basketball Association, for example, uses NFTs to sell original highlight packages created specifically for digital use. But NFTs are starting to seep into more traditional corporate industries like real estate and financial services, says Deepali Vyas, a Korn Ferry senior client partner and global cohead of the firm’s Fintech practice. She says asset managers and banks are incorporating NFTs into their trading and investment portfolios, for instance.
Moreover, Vyas says the potential for NFTs to be used by fashion designers and luxury retailers to fight fakes, property owners to transfer deeds in real estate transactions, and even bankers and lawyers to eliminate paperwork in M&A and IPO deals is only just beginning. On a grander scale, NFTs’ ability to optimize supply chain processes—using tokens to order inventory and instantly transferring them to trigger payment upon delivery—could literally equate to billions of dollars in the form of new revenue and reduced costs for businesses across industries. “If it becomes the new normal, NFTs could alleviate all kinds of supply chain stress by creating a more efficient, lower-risk, frictionless transaction environment,” Vyas says.
The sheer volume of applications for NFTs is part of the reason why, akin to the soaring prices for bitcoins, they are starting to explode in value. The NFT market grew by 300% last year to more than $250 million, according to the NFT Report 2020. It’s poised to swell even more in 2021—about $100 million worth of NFTs were sold in a 30-day span already this year.
Skeptics say the digital tool might just be experiencing a bubble and firm leaders will be too distracted emerging from the pandemic to jump on. What’s more, security concerns may emerge about the authenticity around NFTs. But Guarino says unlike digital currencies, where user accounts are frequently targeted by hackers for mining, NFTs are less volatile and more secure. The authentication element makes NFTs easier to track and therefore provides more protection against theft or hacking. “That’s part of what makes NFTs so attractive to leaders as a viable digital option which can trade seamlessly as corporate transactions on the blockchain,” Guarino says.