Tales of riches related to Bitcoin speculation have taken the media by storm last year, simultaneously helping blockchain discussions move from virtual water coolers to boardrooms.
Yet our conversations with business decision-makers show that most executives today are unfamiliar with blockchain technologies, their key benefits, risks and potential applications. This is reflected in the data: a survey of over 200 board level executives has found that more than 40% of non-IT/data senior executives admit to not fully understanding blockchain technology. As a result, they can make decisions based on half-truths, misinformation, and groupthink biases. In our experience, this usually results in one of two extremes:
- Inaction. Based on the belief that blockchain technologies are a fad, usually caused by their amalgamation with Bitcoin. We find this bias to be most prevalent among baby boomers: the Bank of Canada found that awareness of Bitcoin was lower among older age groups. It is important to know your own potential bias and self-correct, don’t let the train leave the station without you.
- Blind adoption. On the other end of the spectrum, some companies embrace blockchain technologies with little thought, often as a speculative or desperate move. Slap the word “blockchain” on a company’s name to make it cool and investor-friendly again. A lot of those companies are advised by business consultants lacking technical depth and resources.
To avoid pitfalls, some prevalent assumptions must be addressed, as it’s important to understand what blockchain is not. Do not equate cryptocurrencies (Bitcoin and its siblings) with blockchain technologies as they extend well beyond Bitcoin. It is also not a marketing term for cloud solutions, big data, machine learning or AI, although these technologies can benefit and complement one another. It’s not a cure-all that can magically inject new life into a static organization. It can help reinvigorate a business, but only when truly embraced as part of a change in DNA and business model.
What is Blockchain Technology?
Think of blockchain as a shared, distributed database, with permanent entries and some programmatic methods to automate simple operations. It is the broker, and surprise, it is neutral! On a blockchain, everyone has ONE version of the truth. What this means is that the blockchain is best suited for applications with many parties holding different interests, that would not trust a centralized application or a broker—both of which can be co-opted or corrupted. Being distributed and participative, blockchain is more reliable, inclusive, and less proprietary.
Blockchain: The More the Merrier
Benefits grow exponentially by the square of the participants. For a blockchain to function, several parties must first decide to join forces and agree on a set of rules, the initial design and consensus mechanism. This is only possible if all parties see a path to some common ground. Think of it as foreign trade. The first participant to open their border takes a risk, but that risk is rewarded when other participants follow suit. Those remaining outside of the network weaken. Blockchains are also starting to become interconnected, creating end-to-end solutions that are so much more than the sum of its parts. For instance, an asset tracking blockchain, a payment blockchain and an identity validation blockchain can be integrated together in a relatively plug-and-play fashion using connecting blockchains like that of Nuco/Aion.
Thinking Strategically About Blockchain
We have assembled our top five recommendations to make your blockchain initiative work:
- Build a network, not just a single node. Blockchain technologies are best thought of as the creation of entire ecosystems – and even economies (when they involve payments and asset transfers). You will be more successful with your blockchain initiative by acting as a trusting and trustworthy catalyst.
- Think big but start small. There is no doubt that blockchain technologies will revolutionize entire industries. That said, simpler use-cases and proof-of-concepts are key for adoption by various participants in your initiative, and to build up joint core capabilities in that domain.
- Understand that the technology is rapidly evolving. Just like the internet on a dial-up modem was a lot slower than today’s broadband internet, blockchain technologies may not scale yet for a large-volume application today. That said, new protocols are rapidly emerging, such as proof-of-stake (displacing expensive proof-of-work mining) and Segwit for the initiated.
- Blockchain is a team sport, don’t go it alone. The very nature of blockchain technologies is one of collaboration, leading to further specialization by key participants. It also is a fast-changing, shape-shifting, complicated space that requires keeping a permanent eye on the technology. It’s not a game that can be won alone, so partner up.
- Focus on the user experience and address a real pain point. Apple and Microsoft became what they are today because they created a superior computer experience, not because they built the most trailblazing mouse trap.
There is a great amount of value yet to be unlocked in core businesses around the world through the implementation of blockchain technologies. 2018 is going to be an exciting year!
About the Author
Greg Boutin, COO at Blanc Labs, leads our Blockchain Solutions practice, ensuring those address real-world pain points. He relies on a team of digital natives as well as experienced thought leaders to combine the big picture with rapid solutioning and development.