If the 19th century was the era of the Industrial Revolution, the 21st century will go down in history for the being the era of the Digital Revolution. Over the past few decades, technology has continued to evolve into being not just an enabler for industries to speed up production and distribution of goods and services, but also into empowering consumers to access these goods and services in a more convenient manner.
In the present day, the term technology is an inescapable one – it has an impact on almost every industry and on almost every aspect of one’s life. Irrespective of the Industry, digital transformation is no longer a choice for businesses – it is essential to survival.
Digital transformation has evolved from adopting computers in the workplace, to building and maintaining a presence online, implementing e-commerce capabilities to allow consumers to purchase products online, adopting social media to engage with consumers, and more.
The proliferation of the internet and increasing accessibility to get online using smartphones have fueled the urgent need for digital transformation. In many ways, the cloud has been a big driver for this digital transformation at an enterprise level – its technology has made it possible for businesses and consumers based anywhere in the world to interact with each other in the virtual dimension with ease.
After the cloud, blockchain could be the next big platform to drive enterprise digital transformation. Blockchain technology emerged a few years ago as part of the Bitcoin revolution, fueling the cryptocurrency movement and making the Bitcoin a legitimate success due to the possibility of undertaking fast and secure transactions. Of late, however, blockchain has broken away from Bitcoin and is coming into its own identity as a promising technology that can transform the enterprise in several ways.
What is the Blockchain?
Simply put, blockchain is a distributed ledger technology, and uses a self-sustaining, peer-to-peer database technology to record and manage transactions in a decentralized manner. Verification of data within a blockchain is undertaken through the use of complex algorithms and consensus among multiple systems, making it almost completely tamper-proof.
Data in the blockchain is transferred or stored using a series of blocks, each of which have a cryptographic hash protecting its contents. Any update or transaction on the data within the blockchain creates a new record in the form of another block, which is added to the existing blockchain. Since it is impossible to tamper with each block or record, data stored in or transferred via a blockchain cannot be altered, mishandled or deleted without a trace.
Blockchain is in itself an entirely digital concept, and as a result, lends itself easily to an enterprise’s digital transformation strategy. As a technology, blockchain offers an automatic way to securely record a set of transactions with complete end-to-end verifiability. Any block/transaction within a blockchain is cryptographically secure, immutable or impossible to modify or tamper, and due to its decentralized nature, is accessible to and can be verified by all parties within the network. As a result, in addition to improved security, a blockchain also offers greater transparency in conducting transactions.
Applications for blockchain
At a very high level, blockchain technology can be used wherever there is any form of trading – where there is an exchange of value taking place, where trust is highly essential, and where stakeholders require protection from identity theft.
So far, the banking and financial services industry has been at the forefront of exploring and adopting the use of blockchain to perform secure transactions of capital. The decentralized and cryptographically secure nature of blockchain makes it possible for financial institutions to conduct transactions in a more transparent, faster and more secure manner. With the help of the blockchain, they can eliminate the centralized, trusted intermediary to route transactions to each other, thereby bringing down the costs and time taken to perform each financial transaction.
However, blockchain technology has found several uses outside the banking industry as well. The insurance industry is one such example, which is exploring the use of the distributed ledger technology to drive digital trust, and simplify the overall process of insurance. Blockchain can be used to create smart contracts between policyholders and insurers, offer peer-to-peer insurance which can drive down the cost of premiums, verify and process claims faster, and even create more specific insurance products based on consumer needs.
In the healthcare sector as well, blockchain technology can be used to provide higher security of electronically stored patient records. Since records stored and transferred in a blockchain provide a high degree of confidentiality, it could offer a huge boost to the process of moving to an electronic form of managing healthcare records. In industries like healthcare, where security is one of the biggest challenges holding back the process of digital transformation, blockchain offers a most promising solution.
Blockchain can also enable a significant digital transformation of a supply chain, making it a game changer in the manufacturing industry. The distributed ledger technology can make it possible for retailers and consumers to engage in a more digital and secure manner with each other. The decentralized nature of the blockchain can be used to drive greater transparency in each transaction within the supply chain – right from procurement of raw materials to shipping and finally, sale, of finished products. Each transaction can be recorded in a blockchain in a timely, cost effective manner, reducing the possibility of human error or fraud and offering consumers the ability to track provenance with complete traceability across any complex supply chain.
Blockchain can also be used in other industries where secure information needs to be stored in a digital format. Digital assets, confidential electronic records, sensitive and proprietary information of an enterprise can be moved into the blockchain to offer completely transparent and secure access.
How to get started with a blockchain initiative within the organization
Although blockchain as a technology holds much promise in helping enterprises on their digital transformation journey, it is still relatively new and its use cases are only just getting discovered with each passing day.
Any senior executive looking to harness the potential of blockchain within an enterprise should look at a few pointers to get started:
1. Study up on the blockchain and get management to explore its use within the business
Before getting started on a blockchain initiative, it is imperative to get an in-depth understanding of what the technology is, how it works, and what it can be used for. There are several resources online, from analysts as well as emerging startups in the blockchain space to help you learn more about the technology and its various use cases. Learning up on the technology can help you identify broad areas within your organization where you can use blockchain to improve efficiency.
This would also help you put forth a well-researched and sound business proposal to the C-suite within your organization to secure their green light on the initiative. Be sure to elaborate on the business impact of the technology, how much time and money it would cost to get started, and an estimate on its ROI for the business.
2. Form a working group to find where blockchain fits within the overall business context
Once you secure executive buy-in, your next step is to identify a core team to work on the initiative. Put together a small team of professionals from various functions to bring in varying perspectives – both from a technological as well as a business standpoint. Engage external experts to form a well-rounded and well-informed team.
This team can then obtain feedback from various departments within the organization on how to use blockchain to improve their business. This information can be used to create customized use cases for blockchain specific to each stream.
After discovering all possible use cases where the blockchain can potentially be used, the working group will have to evaluate whether its implementation can have a sizeable impact in these areas or not. This process of aligning blockchain with your overall business strategy will help you identify the areas where it can generate maximum value for the organization.
3. Prioritize the discovered opportunities and form a roadmap to test the feasibility of implementation
While looking for use cases to deploy the blockchain, it is possible to get overwhelmed and find too many opportunities within the business. However, as a starting point, it is best to focus on those areas where the implementation of blockchain technology offers maximum return for minimum risk. The low hanging fruit offers the easiest way to convince both the IT teams as well as the executive leadership about the importance of blockchain for the digital transformation of your organization.
Once you have identified the most viable use cases, create a roadmap that details how to adopt the blockchain into these processes – the teams it would affect, the costs involved, the time it would take for ramping up, etc. Set up a lab-like test environment where you can deploy the blockchain on a small scale, work out the kinks in the system, and get comfortable with its use, before rolling it out on a larger scale.
4. Launch and develop prototypes for the use cases
Use the experimental environment to discover the various ways blockchain can be used in each of the prioritized areas. This is the stage that will require you to invest in bringing in technology and expertise to enable the use of blockchain within the enterprise.
Develop prototypes of the products based on each of the prioritized use cases, test them out exhaustively to identify any problem areas that could impede the success of the initiative, and fix them in this stage. Any success your working group observes in these prototypes can then be packaged into a deliverable to push for the adoption of this technology across the entire industry. Identify key metrics that can quantify the success of the initiative to communicate or present your findings better.
Collaborate with industry experts to create solutions which will benefit not just your own organization, but others in the similar line of business as well. Forming a consortia consisting of other players from the industry can help you build a stronger case for the blockchain with regulators, gaining their acceptance and standardizing its implementation.
5. Evaluate prototypes and pick the ones most promising for mainstream deployment
Once prototypes are developed and tested rigorously by the team, select the winners that can be adopted on an enterprise-wide level. Identify the appropriate executive who will oversee the rollout of the initiative and be the point of contact for any queries or concerns. In a phased manner, roll out the blockchain applications within the organization, train and support all the stakeholders impacted, and monitor the progress of the adoption of this technology and its results.
Any transformation to a business workflow or process can be time consuming, but in order to realize maximum ROI, it is essential to onboard all stakeholders properly in using the technology effectively.
Considerations for mainstream deployment of blockchain
As the technology is still in its early days, in the current state, use cases exploring the potential of blockchain are isolated and limited. Implementations of the blockchain are mostly standalone and not integrated into the overall IT landscape. Such disconnected and distributed use cases usually lack the oversight of the IT department, do not tie in with the overall strategy of an organization, and, as a result, can only offer limited ROI.
Formulating an enterprise-wide strategy for harnessing the potential of the blockchain requires buy-in from the senior leadership as well as the IT function. While this may take more time, in the long run, it will enable a more comprehensive and integrated implementation of the technology within the organization. Enterprises considering adoption of blockchain technology need to gain a high-level perspective on how it can impact the overall digital transformation strategy and enable the entire organization to realize more long-term and sustainable benefits.
In addition, enterprises must go beyond exploring the use of blockchain on an intra-organizational level, to also formulate an inter-organizational strategy for this technology. Partnering with other enterprises within its value chain and beyond, within the industry to create a consortium or network can help with the discovery of much larger scale transformative use cases for blockchain technology.
This will provide enterprises a more collaborative ecosystem to utilize the blockchain as a platform for real-time processing and leverage global value chains to realize greater efficiencies while heading down the path of digital transformation.
Where is it a good fit?
This holds true not only at an intra-institution level, but also on an inter-institution level.
Widening the scope of adopting blockchain technology from within the enterprise to within an industry as a whole can offer a robust infrastructure which can undertake distributed transactions in a secure, fast and transparent manner. As a result, blockchain is well suited to drive greater collaboration among stakeholders and push for a larger scale digital transformation.
Enterprises need to further explore the use of private permissioned blockchain, which not only offer the ease of use and speed of the technology, but also allow for optimization based on specific uses. Unlike public blockchains, private permissioned blockchains can operate within consortia of entities or organizations, offering more decentralization, but with the added benefit of allowing users to be vetted before being included. Permissioned blockchains can also be adapted to conform with existing regulations and business processes, and can be updated to keep up with changing norms in the industry or space.
Private permissioned blockchains offer more security and control to the enterprise – making them less challenging as a technology to adopt or implement while straightforwardly complying with regulations. To maximize the benefit of implementing a private permissioned blockchain, the need of the hour is to move beyond exploring uses of blockchain within a single function or single business unit and to look for opportunities that offer higher collaboration across an organization and beyond. This a middle path -between fully centralized and fully decentralized - allow semi-trusting parties to securely share information among themselves and interact directly with one another without the need for a coordinating intermediary.
Floyd DCosta, Co-Founder of Block Armour (opens in new tab)
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