Decentralized autonomous organizations, or DAOs, are critical to the decentralized, self-governing, community-spirited aspects of the new internet, Web3. Defined by the absence of a centralized authority, where decision-making is concentrated, DAOs inspire and reward customers with an equal voice on the platform.
More akin to cooperatives than the traditional corporate structure, these fluid, democratic organizations are unlike anything the internet’s seen before. The implications go beyond the corporate structure. For brands and businesses, DAOs are a core aspect of customer success – redefining everything from governance to decision-making.
Here’s how.
What is a Decentralized Autonomous Organization (DAO)?
A decentralized autonomous organization, or DAO, is a community-owned, blockchain-managed organization that functions without a centralized authority. DAOs usually involve a collection of like-minded individuals working together towards a common goal.
That goal could be software development, content creation, public funding, or, in one unusual case, purchasing 40 acres of land in Wyoming. This ownership model’s flexibility, diversity, and adaptability are a key part of the attraction.
DAOs use the blockchain as a secure and transparent ledger of the organization’s activity. Everything from the organization’s rules to its transactions is stored with 100% security; changing this chronicle requires the approval of the collective.
Without a CEO or even a CFO, there’s no guiding authority. That’s the point. Rather the community works by individuals proposing ideas and enacting the collective decision – everyone has an equal voice. And with 100% transparency, thanks to the blockchain, all the rules and actions are there for all members to see. No confusion. No fraud. No subterfuge.
DAOs and Web3 Governance
Almost every structure in human history thrived because it had an organizing authority – someone to tell everyone what to do. Think governments, corporations, guilds, and armies. Except: the whole point of Web3 is to hand back control to the user.
So, how does Web3 governance work when no one’s in control?
It’s not as bizarre as it sounds. Consider the road system. No one is in charge of which car goes where. And yet, most of the time, everyone gets where they need to be, and the system works without any governing authority. Such decentralized systems work because everyone follows a common set of rules – for DAOs, these rules are enshrined in the blockchain.
DAOs are the building blocks of Web3 governance – a democratized, trustless, and communal system. Rather than serving the corporation, the system serves its users, its community, and its shareholders: the customers.
Unlike traditional corporations, where decisions are handed down from the boardroom, DAOs thrive on collective decision-making, encouraging members to propose, discuss, and vote on everything from strategic direction to day-to-day operations. This consensus-oriented approach ensures customer participation, amplifying their voice in the system and fostering a sense of ownership.
How DAOs Redefine Customer Success
Customer success was a concept pioneered by the SaaS (software-as-a-service) industry. Confronted with the conundrum of customer churn, they took customer service a step further. To build customer loyalty, these companies proactively measured how their services impacted customer outcomes. The logic is that customers would keep using the service if they saw tangible benefits.
The concept has spread since. Now DAOs are redefining the traditional customer success model, taking it beyond mere service and support and introducing governance, ownership, and active participation.
Here’s how:
- Community Ownership. Gone are the days of passive consumption. DAOs promote active ownership revolutionizing how customers interact with an organization. With “skin in the game,” customers aren’t just users; they’re active stakeholders.
- Democratic Decision-Making. Harnessing the power of a consensus-based model, every member has an equal voice. They can propose, debate, and vote on decisions, ensuring a Web3 product or service evolves to meet their needs.
- Trust and Transparency. Americans’ trust in tech companies hit a new low in 2022, with just 54% of people saying they trust tech giants to do the right thing – down 19 points since 2019. DAOs are the remedy to the situation. The incorruptibility of the blockchain combined with democratic power guarantees a level of trust and accountability currently unknown in tech. If trust is the bedrock of every customer transaction, then this is a monumental step toward customer success.
- Peer-to-Peer Interactions. The power of the community is on full display in DAOs. Given the right incentive structure, this collection of individuals can move metaphorical mountains. That’s if the system allows for adequate peer-to-peer interaction. Get it right, and the customer will feel a strong pull towards community and collaboration, further enhancing customer satisfaction.
- Rapid Innovation. Companies are always eager to get customer feedback. Now, DAOs allow customers to build, enhance, and edit the service directly. It’s an entirely new level of user participation that means Web3 projects progress rapidly compared to their Web 2.0 counterparts. That’s the power of collective collaboration.
DAOs – A New Paradigm For Customer Success
Large-scale decentralized organization is an entirely new phenomenon for most people. It’s going to take some adjustment. Nonetheless, this new paradigm has the power to transform governance, decision-making, and user participation in Web3 projects.
To recap, here are some tips for leveraging DAOs to turn passive consumers into active participants in your organization:
- Reward Active Participation: Provide incentives for active participation. Tokenized rewards or shares of the profits can be powerful motivators and help cultivate a sense of ownership among customers.
- Transparent Communication: Capitalize on the inherent transparency of DAOs. Regular, transparent updates can enhance trust and show customers their voice matters.
- Encourage Peer Collaboration: DAOs thrive on collaboration. Create platforms for customers to interact, share ideas, and help each other. This sense of community can strengthen loyalty.
- Harness Customer Innovation: Allow customers to propose, test, and implement new features or improvements. This can accelerate innovation and ensure your products or services remain relevant.
- Iterate and Adapt: The DAO structure departs from traditional business models. Be ready to iterate and adapt based on feedback and the evolving landscape of Web3.
Combined, DAOs and Web3 can create a new kind of organization – a truly decentralized, customer-centric enterprise ready to meet tomorrow’s challenges today.
Ready to leverage the power of DAOs for unrivaled customer success in Web3? Schedule a consultation with PathSage’s experts today and unlock your business’s true potential. Let’s transform your organization together!
Written by Irene Patrikios Clark,
Web3 Customer Success Specialist.
Sources:
https://www.investopedia.com/tech/what-dao/
https://hbr.org/2022/05/what-a-dao-can-and-cant-do
https://www.forbes.com/sites/cathyhackl/2021/06/01/what-are-daos-and-why-you-should-pay-attention/
https://www.nytimes.com/interactive/2022/03/18/technology/what-are-daos.html
https://blogs.idc.com/2023/04/12/how-important-is-web3-and-decentralization-to-industry-ecosystems/