Blockchain is still in its infancy according to the experts. It is still a nascent technology and the truth is that there are many other newbie technologies out there. But the hype around blockchain these days is simply spectacular to say the least. While there are naysayers who say that it is simply a solution without a problem, there are many more who believe that Blockchain is going to solve world hunger and all other ills of mankind. The truth is surely somewhere in the middle and you better pay attention – after all, who wants to fall behind in today’s digital world where one strategic mistake can cost you your organisation’s survival and that too very quickly? While lots have been written on the technical aspects of blockchain and economics of digital currencies, this article attempts to offer a perspective in relation to Blockchain’s links with organisational strategy and the way to integrate it so that implementation can result in true benefits.
What is Blockchain?
According to hyperledger.org, “A blockchain is a peer to peer distributed ledger forged by consensus, combined with a system for smart contracts and other assistive technologies”
It is actually a specific type of distributed ledger in which groups of transactions are bundled together ( called blocks), time-stamped, and linked to each other using cryptographic hashes forming a long chain of blocks. In a sense, it is a data model with additional programmable features riding on a network of “nodes”. Bitcoin is perhaps the most famous example of a blockchain where trust on people and intermediaries (central banks) is replaced merely by trust on the algorithm and the network.
It is meant to be a far cry from traditional databases and currently, there are many types, mechanisms, and protocols as you would expect from a rapidly emerging technology. But essentially, almost all blockchains offer the following benefits: a) end users control digital assets b) no need to trust third parties c) censorship resistance d) hack resistance (immutability of data) e) efficiency and f) transparency. Blockchain can be of value wherever a verified trusted transaction or data is required without needing an intermediary.
What is Strategy?
Almost everyone has their own understanding of the word strategy. For the purpose of this article, let us just say that Strategy is what you do to reduce your dependence on luck – it is the guidance you give to take your organisation from where it is today to where you want it to be tomorrow. Strategy can be complex, but fundamentally, it is about making the most of your company’s capabilities to develop a sustainable competitive advantage while managing the risks to acceptable levels.
Who needs a blockchain based strategy?
A Blockchain strategy should be about how to integrate this new technology within a company’s fabric in order to be able to deploy current capabilities of the organisation in a better way or to create new capabilities that will further its competitive advantages. According to the experts, this technology is here to stay and ignoring it can only mean taking on unnecessary strategic risks.
There are a number of current use cases of Blockchain especially in asset trading, settlements, product tracking across the supply chain, working capital management, digital identity, record keeping etc. Secure, tamper-proof data and transactions that can be more efficiently recorded, stored, and distributed without central control clearly offers benefits that were not available with other traditional technologies. A world where “data is the new oil” makes the business case only stronger. But it is not just the intrinsic value of blockchain that is at a premium. Apps built on Blockchain that solve real problems can generate additional benefits and enhance Blockchain’s derivative value. However, it is important to avoid the “shiny new object syndrome” and chase after Blockchain as a panacea for all ills or to try and implement it in the traditional manner of executing a database technology project. For Blockchain to fulfill any of its transformational promise, it needs to be carefully assessed in relation to the strategic context of an organisation and also in relation to the other key technologies and approaches that can catalyse its benefits. In other words, a holistic Blockchain based strategy needs to be developed first. It should not be seen and implemented in relative isolation.
Blockchain being such a foundational technology, with use cases only limited by imagination rather than functionality, it is true that a wide variety of organisations across multiple industries and sectors can actually benefit from it. Blockchain based strategies are in early stages of development and implementation in various areas – healthcare, capital markets, payments and remittances, government, shipping and transport, telecommunications, energy, nonprofits, etc. So regardless of whether you are an established business with committed structures and technologies worried about how to ensure survival against digital disruption or you are a brand new startup looking to leapfrog legacy centralised architectures and go straight to your customers to satisfy unmet needs faster, better, cheaper, you do need to think about Blockchain. Thinking about it in a strategic way is your best bet to success and now is the time to get ahead of the curve.
Key aspects of developing a Blockchain based strategy
In the author’s view, such a strategy can be best conceived as a framework that can be used as a ready reckoner when it comes to thinking about Blockchain holistically. Undoubtedly it is a complex process with many moving parts that need to be considered, but at its core, a simple framework could guide its development.
Firstly it is important to understand the technology itself and how it relates to other technology trends like IOT, Social Media, AI, Analytics, etc. The graphic is somewhat self-explanatory but it is worth noting that Blockchain is only a link in the chain. It can be enhanced or limited by the other technologies that go alongside it. For example, if data quality is a problem, Blockchain will not solve it on its own although one could argue it will have a positive impact on that too. Also, the point in having Blockchain either because of its intrinsic values or because of the decentralised Apps that can be built on top is to ultimately enable better decisions and actions that lead to better customer experience and/or operational efficiency.
This means that we really need to look at it holistically before going about implementing it. Once again, the following graphic helps in considering the relevant aspects.
There is no point in implementing blockchain for its own sake. One must start with real problems and not with the solution first. So, a context analysis is a no-brainer. Where is your organisation it its strategic journey – do you even need Blockchain right now? Are there benefits to be had from disintermediation, end-user control of data, real-time auditable transaction trace, etc. ? How far will you go – will you have monetisation models based on tokens that will directly impact your business model? Will you become a part of an open, permissionless, public Blockchain? The questions need to be asked and the answers will come but only after reviewing each of the following: Market trends, Current situation, Competitive stance, Ecosystem, Regulation, Infrastructure, and Integration.
To get started, initiate the process by building basic awareness amongst the A-team. Follow it up with a Visioning workshop and subsequently more workshops to discover use cases. Validate them individually and prioritise them over different time-frames; assess and select the right Blockchain platform/ technology stack; decide the staffing model to conduct a low risk “Proof-of-Concept”; experiment using lean startup and agile ways of working as the learning curve will be steep; and measure closely for effectiveness and impact on KRIs. Change processes and organisation structures as required. Determine the best organisational model ( “Centre of Excellence” is an option); reward the teams; and focus on scaling up ( Blockchain-as-a-service could be an option in the near future too) – integrating and industrialising/institutionalising the transformation will be key. Finally, document lessons learned and inform/adjust the enterprise-wide Blockchain strategy as a core component of the overall strategy/digital strategy. Good luck!
If you like the post, please don’t forget to like, comment, and share!
Disclaimer: The thoughts contained in this post are purely my own and does not in any way represent the official point of view of any organisation I am associated with