Blockchain is moving beyond early adopters and into a broader range of companies. It has the potential to disrupt traditional practices, especially in the areas of procurement and supply chain. And it can reduce operational and cost inefficiencies and spark new revenue streams.
Blockchain is a technology every business should be looking at. But it has also been over-hyped. As with big data and Hadoop before it, believing you can implement blockchain overnight — and without a legitimate business need — will lead to failures, embarrassment, and scuttled budgets.
A blow-it-all-up and start over with blockchain approach is destined to fail. A better way to test and build blockchain capability is through a series of small, controlled explosions with a specific timeline. By taking a measured approach to blockchain, you can test the technology within the parameters of existing processes and systems to augment or improve select areas of your business. If you can’t prove blockchain is useful and cost-effective in 12 weeks or less, kill the project and start anew.
One step at a time
Success does not require a vast, radical overhaul of existing technologies by using blockchain as a rip and replace technique. On the contrary, when blockchain strategies are deployed like controlled explosions – small projects with a limited blast radius – teams will better manage risk, learn and experiment, and evolve to the ultimate goal: enterprise-wide scale with real business impact.
Start with one vertical or functional area, ideally with a well-defined project that can be completed in 12 weeks. Blockchain, like any emerging technology, requires significant process redesign, culture change, and collaboration, so a smaller experiment will yield the insights needed to successfully adapt to larger, wide-ranging projects.
Based on several blockchain experiments I’ve seen across industries, such as industrial manufacturing, healthcare, and telecoms, 12 weeks provides a sufficient window to build, test, and measure a proof of concept while, importantly, preventing overinvestment in an unsuccessful project. In some cases, you may even want to shorten this window to 10 weeks. A defined timeline energizes blockchain teams to make quick assessments and adjustments, prove a positive ROI, and ensure the blockchain being built can eventually be transitioned to production grade deployment. Simply put, if they cannot overcome the complexities of a small-scale blockchain project within a fiscal quarter, achieving enterprise-wide scale will be a challenging feat.
These experiments can take place in any of the three primary areas of the company: the front office (such as sales or customer management), the middle office (such as operational areas of procurement and supply chain), and the back office (corporate finance, accounting, HR.)
A well-defined project, piloted within the confines of a proven enterprise resource planning (ERP) framework, will have the best chance of reaping business value.
For example, drug recalls and fraudulence is a big problem that can be deadly – so the U.S. Food & Drug Association unveiled a new Drug Supply Chain Security Act (DCCSA) to help combat this issue and drive more visibility across the pharmaceutical supply chain. Blockchain is actively being used as a solution to help companies comply with this new act – a step that could help save lives.
Fraud is also widespread in the high-end goods market on items such as art, jewelry, antiques, and luxury fashion and is being addressed with blockchain. With increased traceability over product origins and ownership, companies are eliminating forgery. In the future, blockchain will equip brands with greater knowledge of a product’s history.
Finally, blockchain is being used to help with the sudden and unpredictable changes in tariffs and taxes. The enhanced visibility into the movement of goods across borders allows companies to streamline their tax payments – a move that will reap significant benefits.
With the cryptocurrency-driven hype around blockchain declining, it’s time to consider this technology in a more realistic context. By defining the parameters of when and how to leverage blockchain to solve a business challenge, companies will appreciate its value — in transforming processes, introducing operational efficiencies, realizing cost savings, and creating new revenue streams.
Arun Ghosh is US Blockchain Leader at professional services firm KPMG.