Decentralization, Blockchain, Artificial Intelligence (AI): Challenges and Opportunities
kHUB post date: September 2025
Originally published: July 22, 2025 (PDMA JPIM • Vol. 42, Issue 5 • September 2025)
Read time: 35 minutes
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New technologies like blockchain allow firms to decentralize core functions, forcing managers to reconsider the trade-off between closed, proprietary control and open strategies that involve external contributors. While proponents often advocate for full decentralization, we argue this view overlooks important economic trade-offs. We propose that the better strategy is selective decentralization: a disciplined approach to choosing where to centralize for efficiency and where to decentralize for innovation. We propose a three-level framework—Infrastructure, Decision-Making, and Operational Control—to guide this choice, helping managers analyze the specific costs and benefits at each layer. We apply this framework to the strategic adoption of Artificial Intelligence (AI), where the technology's powerful pull toward centralization provides a stark test case. Our analysis shows that an “open source AI” strategy—decentralizing operations to foster innovation while keeping infrastructure centralized for efficiency—is more pragmatic than full decentralization. Selective decentralization therefore emerges as a key managerial capability for capturing blockchain's benefits without sacrificing scale efficiencies.
Practitioner Points:
- The rise of new technologies like blockchain forces managers to reconsider a classic strategic choice: whether to keep their business model closed and proprietary, or open it up to outside collaborators. While the view of many proponents is to “decentralize everything,” this is often a strategic mistake. The smartest approach is selective decentralization: choosing precisely where to be open and where to maintain control.
- To guide this choice, this article provides a simple three-level framework. It helps managers analyze their firm's technical infrastructure, strategic decision-making, and day-to-day operations as separate areas for decision-making.
- This framework provides a clear playbook for today's biggest technological challenge: adopting Artificial Intelligence (AI). Our research shows the most effective strategy is to keep your core infrastructure and strategic decisions centralized for efficiency and stability, while selectively opening up your operations to external collaborators. This strategy allows your firm to unlock new growth and build a deeper competitive moat than a closed model.
- Ultimately, this article highlights that selective decentralization is no longer a niche technical choice but a critical managerial capability for building an innovative and resilient company in today's technological landscape.