Does use of Blockchain make sense for ‘Your’ Business?
Blockchain has been a buzzword widely discussed within the public and enterprise business environment in the past years. While blockchain has potential to become the ubiquitous new standard of information and asset exchange, it is in its early stage similar to what internet was in the nineties. Arguably blockchain may be able to solve a few problems created by the internet such as security and lack of trust.
The concept of peer to peer information and asset exchange is one of the core values of blockchain. This core value has been prevalent arguably from the start of time. Trade in earlier centuries was peer to peer which became more concentrated and centralized to manage and regulate efficiently. While interest in blockchain started as small grade community, many noticeable businesses are flocking to understand, test and verify if value can be added to their ecosystem with the use of blockchains. This value includes automation and process improvement for organisational functions which have been in production for decades.
Blockchain provides value to businesses on a case to case basis and there is no one size fits all solution. This is based on a multitude of factors including requirements for transparency, privacy, integrity, auditability, redundancy and security.
When starting to explore Blockchain for business use it is important to understand that Blockchain does not provide value unless underpinned by a convincing use case or business model.
Blockchain allows businesses to store a particular state of data. While centralized databases also store state of data, blockhain does it in a distributed manner. From a business strategy perspective use of a blockchain makes sense for businesses if there are multiple parties required to access the distributed database such as in the case of supply chain management. A further step to analyse is whether interacting parties are internal parties to the organisation such as employees, external parties such as suppliers or a mix of both. There are different types of blockchains – private, public, permissioned. The use of a particular blockchain depends on trust, security, anonymity, auditability, latency, throughput and consensus requirements by the business.
Traditional Businesses have legacy infrastructure and processes which are a burden to these businesses in comparison to startups in blockchain space which have no legacy concerns. However, not exploring a blockchain strategy for traditional businesses is a fallacy which will potentially make many businesses redundant in the next decade. A similar mistake was made by Nokia to stick with Symbian OS. Nokia paid a heavy price and witnessed loss of market dominance to single digit market share. Therefore businesses must think out of the box rather than implement blockchain in existing business models. A way to achieve this is through formation of a blockchain unit looking at both the legacy and non-legacy aspect. Another comparatively passive way is to join a business focused or technology focused consortium such as R3. Starting small and addressing a small but high value impact problem by a business in the shape of a proof of concept is the very first step.
Prior to considering blockchain adoption businesses must be able to understand that the shift in processes and functions with the adoption of blockchain will have implications on tax, regulatory, cyber and governance.
Businesses should take a considered approach to explore their blockchain strategy. Afterall blockchain is a facilitator of the enterprise business models rather than just a solution for distributed ledgers.
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