The rise of Bitcoin and cryptocurrencies dominated the news agenda and captured imaginations in the latter half of 2017, as the value of the market soared. With this came renewed interest in blockchain technology, which first gained popularity in the finance industry during the emergence of cryptocurrencies. However, blockchain is more than cryptocurrency and the fact this technology has grown from one of the most conservative industries could potentially hamstring its development. In the world of finance, where consumer trust is key, the risks of implementing blockchain beyond cryptocurrency is just too high. Despite the potential and hype surrounding cryptocurrencies, financial services organisations have started to distance themselves from blockchain technology due to the lack of compelling business use cases and cost.
To really unlock blockchain’s full potential, risks will need to be taken and failure accepted on the journey. This requires a different way of thinking and an innovative and agile approach. Rather than pigeonholing the technology to only apply to financial transactions, business leaders can exploit the inherent characteristics of blockchain to their advantage. This includes the security conferred from the inability of any of the content to be altered once it has been validated and stored in a block, as well as the decentralised processing that facilitates collaboration and transparency.
Blockchain technology can extend beyond organisations to include partners, customers and supply chains, offering transparency and more opportunities for collaboration. The distributed ledger means that a single version of the document is used and can help ensure that everyone can see activity. Equal access is enjoyed by each party, so that there is a reduced chance of data being hidden or manipulated, as no one party has full control over the database. This will be a highly valuable system for many industries, not just finance.
The manufacturing industry is in a prime position to utilise blockchain technology to transform business models and processes. The digital transformation of this industry has historically lagged other sectors, but manufacturers are starting to realise the benefits that digitisation brings in terms of efficiency, productivity and agility. They are leveraging the data collected from devices and machinery to yield critical insights into current processes and production to make significant improvements and savings. This ultimately helps manufacturers provide a better service to customers and partners, allowing them to pull ahead of their competitors. The emergence of the ‘Outcome Economy’, will need manufacturers to shift from building products and parts with a volume focus, to creating valuable outcomes, and will rely on an ecosystem of partners and will really change business models across the industry. Blockchain could be an answer to facilitating this shift.
Incorporating blockchain technology will add another dimension to the ongoing digital transformation, as it will support efforts to break down internal siloes and aid collaboration across companies. In the future, manufacturers will move to a business model that allows them to improve their own cost effectiveness and agility. This is where blockchain can enable expensive machinery to become pay-per-use on the completion of value added work, therefore organisations can adapt quickly by avoiding the initial investment and large capital expense. The equipment providers will earn additional revenues through continuous use in the factories they have equipment deployed.
Connected and driverless cars offer the opportunity for the automotive industry to implement new technology, such as artificial intelligence (AI) and machine learning. However, security concerns over the potential hacking of connected cars have been detrimental to continued development. And, the more connected a car is, the greater the attack surface area.
Many of these concerns can be addressed by using blockchain. As there is no way to manipulate or alter data in a blockchain once it has been stored and a layer of encryption is added to each transaction, this natural security makes it almost impossible for malicious actors to hack(2). However, this encryption does not come without challenges. Time is the limiting factor, so careful consideration is needed for real-world applications. Where speed isn’t a crucial factor, such as for car insurance premiums, car sharing services or information about the vehicle’s condition and service information, are ideal candidates for blockchain.
This information needs to be kept secure and protected from manipulation, but not adversely affected by lengthy encryption times. In contrast, for autonomous vehicles communicating with infrastructure and other vehicles the information must be transmitted and verified in real-time so blockchain technology may not be suitable here.
Intellectual Property (IP) theft is another concern that can potentially be addressed by implementing blockchain technology. Any business that relies on the transfer of information across an internet connection is vulnerable to interception, manipulation or theft of their intellectual property. With a plausible future of micro-factories in close proximity to customers (enabled by 3D printing), a significant shift in supply chain thinking would be necessary, due to the removal historic barriers to part production.
The 3D printing industry is an example of where IP theft is a real concern. 3D model files with designs are normally transferred to vendors and their printing machines via traditional means. To counteract theft of information, additive manufacturing blockchain systems create an automatic audit trail which enables users to track the appropriate use of the 3D model, the materials used in the process and finally the product serial number to certify its incorporation into the product it was designed for.
Processes used in human resources could also benefit from incorporating this technology. It can be used to improve the efficiency and effectiveness of many stages of the recruitment process. From identity verification to matching the right skills from one applicant to the right role within the company where these skills are most needed, blockchain can be used to streamline the process to yield the most favourable result. Blockchain CVs, for example, are already in development and used to verify and assess recruits. Furthermore, data analytics can be applied to the relevant content to give useful insights to make the role matching process smoother and successful in the long term.
As industry landscapes change, it’s time to rethink blockchain and how it can be used to transform sectors that are rarely associated with the technology, allowing organisations to improve the quality of their transactions. It will thrive in areas where risks are lower and offer an additional layer of security to processes where this is a top concern. Also, since the ledger is decentralised, maintenance does not fall to one party and so associated costs are reduced. As the sharing economy continues to evolve, consumers will take it one step further. For example, in the automotive industry, they will use blockchain to lease a car, or access additional features like the entertainment system, parking and other value-added features. In business, VAT administration, pay roll or even fraud prevention and cyber security will all be impacted.
However, before organisations embrace blockchain, significant work needs to be done with the technology itself before widespread adoption is realised. The time and cost investment involved in the initial set up can be prohibitive to some businesses and greatly outweigh the associated benefits. Also, there must be a concurrent cultural shift within an organisation to ensure an endorsement by end users. By ensuring continuous quality is weaved into the very start of a project– from requirements validation through to business as usual – this level of risk can be reduced, and as the technology is being continually improved, business leaders should consider how this technology will make a positive difference to their organisation.
Colin Bull, Principal Consultant of Manufacturing and Product Development at SQS
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