Blockchain is being spoken of reverently – and irreverently – by business pundits, and backed by media and industry leaders as a potential cure for all financial threats/hurdles across the globe.
A blockchain has been promoted extensively as the latest ‘must-have’ technology for financial and related institutions. However, because of its historical connection to the cryptocurrency, Bitcoin, it has been sceptically scrutinised for use in business transactions due to the assumption that they are one and the same. The good news, however, is that the needed separation of the currency from the technology has evolved. A late 2015 report titled state of bitcoin and blockchain, by Skry (formerly Coinalytics) indicates that the focus has shifted gradually away from bitcoin towards the blockchain, clearly separating the two technologies.
A blockchain technology can be applied to a wide array of businesses, markets and verticals, from logistics to retail, and even government agencies. As per industry news reports, the UK is currently investigating how a blockchain can improve the transparency and accuracy of its own transacting and reporting (source: CoinDesk). Any entity that transacts, and makes or receives payments, can potentially use a blockchain. But, can it work for you? While it has the potential to change the way we conduct business on a global scale for the better, is it the best solution for every problem? And really, what is a blockchain?
Blockchain is a “how”, not a “what”
A blockchain acts as a decentralised automated ledger that records and verifies digital events and transactions, and stores them in a secure global network. It is, in a nutshell, a globally accessed, but secure, database that acts like an electronic filing cabinet. It makes use of something called a ‘trust protocol’, which means that all information recorded and stored by a blockchain is done by consensus. It is, perhaps, better to view a blockchain as a “how” rather than a “what”, so that we can understand how a blockchain can be applied to address business problems, and where it makes the most financial sense.
Blockchain holds a vast amount of promise and can – and will – make a positive impact on all business transactions, but its possibilities are still being explored and researched within and beyond the realm of finance. In the meantime though, a blockchain is being heavily invested in on the premise that it will cure multiple business processing and transactional problems, among many others. It has already been successful in various arenas, but while researchers and think-tanks can dream up any number of possible problems for a blockchain to solve, it may not necessarily be the solution for all of them. There are some business issues that can be resolved as easily – and possibly far more quickly – by re-engineering processes or using a number of application-specific tools already on the market.
So how do I know if a blockchain will solve my business issue?
The best way to know if a blockchain can answer your business’s specific needs is for your business to approach its problems from the bottom up. Instead of taking a blockchain technology and trying to match it to a problem, the sensible approach would be to take the problem and see what potential solutions will fix it — whether that is a blockchain or a different solution. It is also important to acknowledge that a blockchain can be applied to any number of businesses and industries, not only financial services.
Start from approaching the problem – and the solution – cohesively, and with a small, trusted group of people across all departments. The first step is to identify the problems and challenge them, testing them to clarify the causes and effects. Buy-in from multiple departments, not just the obvious ones, can ensure that the problem is properly examined and no perspective is overlooked. It is possible that one department may have a solution that another may not have thought of.
In order to properly assess a blockchain as a potential solution and, in fact, to look at all possible solutions, it is advisable to consult with a trusted partner who has knowledge and experience with cutting edge technologies, and who can challenge your thinking. By engaging an advisory and technology partner to assess the business and its problems, it can ensure that all its issues have been objectively addressed from all angles, and that the solutions are realistic and in line with budgets.
Once the problem has been identified and potential solutions have been raised, business cases can be compiled and applied. It is only then possible that blockchain could be the answer.
Blockchain as a global solution
However, it is important to incorporate innovation. Expanding the boundaries of the current state could be instrumental in identifying new opportunities. It is also vital to conduct “ideathons” that promote creativity through non-linear activities that don’t just replace existing processes, but create new processes.
Another element that has evolved is any concern or confusion over the use of, or regulation of “how” a blockchain technology should not be a barrier to adoption. Regulation will apply to the “what” – to the actual transaction type being undertaken. Using a blockchain requires that shift in mind-set. On a small scale, even within a single organisation, a blockchain can be applied with relative ease, yet whether just internal use is best can be debated – but it is a good start. A blockchain should be effective on a global scale, cross-industry and cross-entity, which it is positioned to do, and that is where global standards and interoperability will come into play, not regulation. This points to the importance of collaborative consortiums that work together to create the global standards necessary for the world to effectively participate.
On the local front, we are seeing huge interest in blockchain technology, particularly within financial services, insurance, telecoms and other large enterprises. Yet as with any technology that hasn’t yet gained traction or momentum in South Africa, local businesses tend to wait for general acceptance and success stories. This may take a few more years.
Mary Ann Francis is the Executive Business Advisor and Practice Partner at Wipro Limited.