3IPK: Blockchain Solutions for Aerospace and Sustainability Tracing
3IPK Founders Maria Capova and Juraj Zamecnik enjoy a camel break during their in-residence participation at the Gothams-HUB71 Global Aerospace & Defense Accelerator in Abu Dhabi in October 2020.
At the end of 2020, the European Space Agency awarded its first blockchain software contract in a competitive bid to a Bratislava, Slovakia based startup named 3IPK. 3IPK is now applying quality control and sustainability tracing of supply chains to a broader range of verticals.
CEO Maria Capova and COO Juraj Zmecnik, shared with me their founders’ journey and vision for their company.
What is 3IPK’s core value proposition?
“3IPK’s core value proposition is to deliver functional solutions across the supply chain in highly regulated environments.
We address the transactional costs that arise at the business interfaces within the supply chain with blockchain. These transactional costs are due to the fact that the partners cannot fully trust each other.”
As of today, 3IPK does more than this. It now leverages its solutions to stimulate and report social and environmental impact accountability. This article will first focus on the transactional and efficiency aspects of its core business, then address its sustainability reporting solution.
How does 3IPK impact the supply chain?
“3IPK leverages the basic properties of blockchain such as immutability and transparency to increase trust between parties, lower transactions costs, and increase efficiency.
Our business is based on two pillars: enabling efficiency of process and promoting a culture of transparency which allows for a culture of safety and accountability in highly regulated environments.”
What qualifies 3IPK to do this?
COO Juraj is an aerospace engineer who has worked for many years at Airbus in various engineering and management positions.
“I have worked with deep supply chains. Today, aircraft manufacturers are more integrators than designers. I have seen deep inefficiencies on the supply level due to the need to work with so many tiers of the supply chain.
What happens is that different supply chain levels have to double verify data because the counterparties cannot fully trust each other. They have the customer view and the supplier view on something that should be an objective truth on data. An example is whether a delivery was approved or actually delivered.
Across the supply chain, participating companies employ large levels of overhead (project managers, procurement managers, and other resources), which do not directly contribute to the manufacturing of the product. The objective of 3IPK’s use of blockchain is to reduce these overhead costs.”
Juraj met 3IPK’s third cofounder, Matej Michalko- one of the pioneers of blockchain technology in Europe and founding CEO of Decent- at the 0100 Ventures pan-European venture capital conference in Bratislava run by Juraj’s brother Marek Zamecnik. Juraj immediately saw the potential of blockchain for large companies. In the Summer of 2018, Juraj Zamecnik, Matej Michalko, and Maria Capova combined their industry, technological, and management execution skill sets to form 3IPK. 3IPK targeted aerospace as their first sector because of Juraj’s insight, experience, and network. Aerospace is a tightly knit community with high barriers of entry for new participants.
“We developed a solution for highly regulated environments. The same issue is applicable to other sectors such as food (origin of ingredients and sustainability activities tracking), fashion (child labor, ethical and responsible sourcing, safety, and fair pay, etc.), and others denoting recycled materials and packaging.”
How does Blockchain ensure quality and safety?
“Blockchain solutions enable the transparency needed to document measurements of quality and safety across deep supply chains crisscrossing the globe.
Our objective is to demonstrate practically that the blockchain solution can deliver safer products and reduce costs through process efficiencies. We are aiming to make the work easier for people through automation, digitization, and transparency.
The qualification tests of aircraft equipment are performed at the lowest level of the supply chain, certified labs. These results are used for the certification of the whole aircraft.
The culture of concealment is at the root cause of several well-publicized air disasters. Blockchain has the ability of improving the culture of safety because of the immutability of the blockchain.”
How does 3IPK address the challenge of validating ESG goals?
“Blockchain is a good solution for proof of goals such as ESG. Everyone has an ESG corporate officer. Some companies go even deeper in the supply chain. How do you distinguish self-declaratory statements from how it could be measured? In a corporate world, you can always get the report that you need.
Currently compliance is based on statements rather than actual proofs. These could be altered up the corporate ladder or supply chain. With blockchain, you can do data analytics on data recorded at origin, not the corporate office. The lower level is very important to keep the integrity and transparency of the process.
The bottom level information and data is immutably recorded in the blockchain. A phone call from the upper level cannot override the original data. Modification from the bottom level will show any changes and the reasons for those changes.”
The ability to validate ESG goals has created a valuable marketing and efficiency of compliance opportunity for users of this technology.
How did you arrive at your solution? What was your journey to validate the opportunity?
“I [Juraj] was the initial validator of the idea because I would have been the user benefiting from the functionality at the position I was in at Airbus.”
3IPK stated that their invitation to Abu Dhabi to participate in the Gothams-HUB71 Global Aerospace & Defense Accelerator was a validation for their core business model. The trip occurred just before the second Covid-19 lockdown wave. The team valued the programming, the mentoring, and the connections to potential clients.
How did you derive your MVP?
“We have never written code or created a product for which we did not have a customer. We built inexpensive demonstrators that showed user features and writing into the blockchain database. From the user perspective, it is the experience.
We proposed the solution to possible customers based on what the demonstrator could do. One was for the European Space Agency as part of their tendering process. We were successful and have been writing code for it.”
When did you decide to cross into another sector? What is your strategy for sector expansion?
“Our strategy for launching into other sectors is to use the time in the highest barrier to entry industries (for which they solely hire industry experts) to develop efficiencies to compete in market segments where the barrier to entry is much lower.
Three years ago, we were not thinking about solutions for the food industry. The idea came from our customer, Lyra Chocolate (a Slovakia based premium chocolatier). We realized that we could use what we developed [for the complex challenges of aerospace] in a less complex way related to transparency and complexity of origin. It is not an easy answer for many products. In time we realized that there were many brands aside from food that stated using all natural ingredients and other claims without tracing it.
It took two months from our first conversation with the CEO of Lyra Chocolate to put a solution into operation.”
How is your solution different from Lyra’s existing system?
“Primarily automation for more efficient processes. For audit purposes if something goes bad, they can now do it more easily with our digital solution. This feature did not exist before. Now it can be traced how ingredients are sourced. There was no QR code before. It is a new feature to connect the company with its own customers.
They are buying a physical product but in a digital way with the ability to discover information that they could not easily access before.”
How will you capture other non-aerospace opportunities?
“We have recently created Gratitude, a brand owned by 3IPK for blockchain-based traceability applied to the food, fashion, cosmetics, and other industries. We are using the same systems for the aerospace industry but realized the need for dedicated marketing and communications to reach customers in these industries.”
The Gratitude website was launched yesterday (April 27, 2021). Its purpose is to engage and enable customers to be transparent about the social and environmental impact of their supply chains with 3IPKs blockchain solutions. This approach allows the goods producers to become storytellers about the origin, community, artisans, and sustainable practices behind their finished products.
According to the website, “Consumers will assume that businesses hiding their talent chains have much to hide. Gratitude moves you away from bad associations.”
Could you elaborate on your business model?
There are three revenue streams for 3IPK: Fixed price solutions, the savings percentage on efficiencies gained, and the software subscription.
“We charge a fixed price for a proof of concept solution that involves doing a value stream map with and without 3IPK. Mapping the value stream(s) reveals the overhead costs we target to minimize. 3IPK negotiates the capture of 5% of the delta, the cost savings of implementing our software solution, as part of its fees. The third revenue stream is the recurring subscription fee for our software service.”
Let’s take a look under the hood. How does your solution work? Do you develop the blockchain solution from scratch or does your solution rest on another platform?
“3IPK’s solutions are typically blockchain agnostic. 3IPK develops the application layer sitting on top of the blockchain backbone (which may include a multitude of blockchains). For example, we generally use the blockchain called DCore for high-speed transactions. We also develop solutions based on Hyperledger to take advantage of its suitability in corporate environments.
We sometimes use redundant blockchain systems originating from two independent sources in order to comply with the system redundancy requirements of our customers.
This versatility and the ability to use the best properties of multiple blockchains gives us a competitive edge over our competitors who are, for various reasons, bound to a single blockchain backbone.”
Let’s talk a bit more about the competition and your partnership with IBM.
“Solving the problem from the business perspective is the key differentiator from our competition. The competitors focus on partial solutions, such as logistics traceability. It boils down to if you really believe that this is a game changing technology.
We can penetrate big corporates much easier than corporate competitors because of our agility and lower cost advantage.”
3IPK has chosen to partner with IBM, which is attracted to 3IPK’s solution that can enable the traceability, immutability, and security of data within its own sphere of influence. IBM is connected to a large network of enterprise customers and additional partners. IBM’s cloud services, supercomputing power, and huge IT support framework presents a useful integration opportunity to access early enterprise customers.
How has the pandemic affected your business?
“We are most excited for it to be over. Aerospace has been hit for sure. Food and other goods markets have been hit as well because they were less inclined to dive into innovation activities. Local companies in particular were not sure of survival so they couldn’t concentrate on much else.
We had curfew the whole day, except for going to work unless one could work from home. No one could go more than one thousand meters with their dog.”
What are the three most important things that you would like investors to know about you?
“Team. We have a combination of deep blockchain and aerospace experience. Validation. We got the first blockchain related project awarded by the European Space Agency. Versatility. Our solution can be applied to many industry verticals, especially towards ESG goals.”
3IPKs ability to provide sustainability tracing will bring attention to integrators whose supply chains have a positive impact on people and the planet. This is an exciting additional focus for 3IPK.
Joy Fairbanks evaluates early stage startups, advises founders, and creates programming for startup accelerators globally. She writes about startup success at FairbanksVentureAdvisors.com.
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