Even if you’re working in an industry outside of the financial services sector, it’s more than likely you’ve come across blockchain, the cryptographic technology that underlies bitcoin, and you’re exploring its strategic significance for your business.
According to The Economist, “blockchain has applications well beyond cash and currency. It offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned. It is a way of making and preserving truths.”
One of the interesting things with blockchain technology, in particular, is that some fairly staggering claims have been made. Analysts such as Gartner have likened the “the implications of the blockchain for the economy to be comparable to those of the Internet for information.” And a recent article from McKinsey talks about “how blockchains could change the world.”
“For the first time in the history of the world we can reimagine how the world transacts without relying on an intermediary,” said Nic Cary, cofounder of Blockchain.info.
Unlike some other emerging technologies, however, opinions are quite divided about blockchain. While some analysts are touting its disruptive potential, others are warning that it may be a digital distraction and are advising proceeding with caution. Constellation Research, for example, recently wrote that “almost everything you read is wrong” and pointed out some of the more over-hyped industry scenarios that verge on solving world hunger.
“We’re all used to hype, and we can forgive genuine enthusiasm for shiny new technologies, but many of the claims being made for blockchain are just beyond the pale,” said Steve Wilson of Constellation Research.
Separating fact from fiction
When deluged with so much information, and stark differences in opinion, it’s worth looking at the facts and formulating a go-forward approach that is appropriate for blockchain’s relative maturity in the market and your organizations appetite for risk.
Firstly, it’s important to consider that many large players are already onboard. Venture capitalists, startups, large industry and tech players and industry associations and consortia are all making their presence known.
According to KPMG and CB Insight’s “The Pulse of Fintech, 2015 in Review,” blockchain (as well as bitcoin activity) has spiked since 2013, with 74 deals and $474 million in investment activity in 2015 alone.
Major players such as IBM, Microsoft, major banks and stock exchanges have all entered the fray. Additionally, industry associations and consortia such as R3CEV and the Linux Foundation have been making major announcements and are focusing on creating enterprise-grade blockchain ecosystems, such as the Corda platform for the financial services sector and the Hyperledger Project for additional sectors.
The range of industry and application scenarios is impressive as well. Startups are preparing to disrupt business and IT markets including cloud storage, smart contracts, social networking, anti-counterfeiting, governance, digital identity, supply chain, art and ownership, prediction markets and the IoT to name just a few. Venture Radar provides a good overview of some of the top blockchain startups disrupting non-financial markets.
Of course, as you’d expect with any emerging technology, there are still many business and technical issues to be resolved.
Preparing for digital disruption
With blockchain being such a potentially disruptive technology across a wide swath of industries and scenarios, it’s important to consider what we can learn from prior examples.
If we remember what happened with the Web, back in the mid-to-late 90’s, it came completely out of the blue to change how we conduct business, all in the space of just a few short years. It, too, had many technical issues which needed to be resolved. At the time there were concerns with the user interface, performance, scalability, reliability and security (among others things).
In contrast, wireless technology arguably took more than a decade to mature and needed innovations in smartphone and application usability to finally gain true market traction. The market grew slowly and tended to be characterized by a large number of niche enterprise applications, such as field force automation and supply chain applications, before we finally saw mainstream consumer adoption.
So regardless of whether you’re bullish or bearish on blockchain, here are four recommendations to help you stay on top of developments as the market matures and be prepared to proceed when the time is right for your organization:
Ensure blockchain is one of your strategic focus areas in terms of market research related to emerging technology
With so much market attention and activity, blockchain is worthy of inclusion in your list of strategic focus areas along with other emerging areas such as IoT and intelligent automation. Keep it on your radar and monitor customer and partner interest as well as exploring how it may align with and support your digital business strategy.
Recognize blockchain’s current maturity and trajectory and act accordingly
As emerging technologies are adopted in the enterprise, much like surfing, there’s generally three waves you can catch along the way. A particular trend in pioneer or early adopter status needs to be handled quite differently than when it has progressed into the early majority, or even the late majority. The kinds of benefits you can expect to obtain are quite different as well.
With blockchain in the first “emerging wave” there’s strong potential for business model transformation for pioneers who are willing to take the risk. If your organization is more conservative, you can wait for the second “differentiating wave” to extract competitive advantage as an early adopter, or the third “business value wave” to extract proven business value as part of the early majority.
Monitor emerging industry and application scenarios and look for industry parallels
If your appetite is more as an early adopter or as an early majority player than as a pioneer, you can monitor the emerging case studies and success stories and use them to think about corresponding scenarios for your business and your potential timing of entry. You may also see things happening in other industries that you can re-purpose into your own industry.
Be sure to track the momentum of the industry consortia -- including industry ecosystems -- as well as the momentum of individual players and technology providers. This will help you track the emerging scenarios and test beds and see which altchains (alternative blockchains) are becoming prevalent for different purposes.
Use as-a-service offerings for rapid pilots and proof-of-concepts
With the maturing tools, services and infrastructure available from technology providers in the form of blockchain-as-a-service offered via the cloud, you can take a lean approach to pilots and proof-of-concepts and validate your envisioned business models without having to build out expensive infrastructure.
For each pilot or proof-of-concept, be sure to lay out your business and technical objectives up front. Are you testing a specific business scenario with a close customer, or testing technical feasibility, or both? These kinds of pilots can also help you ascertain which altchain may be most suitable for your needs.
With blockchain, the real risk is turning a blind eye and not having a plan. If you make it a strategic focus area, monitor the emerging industry and application scenarios, determine when you want to dive in, and take an as-a-service approach to pilots and proof-of-concepts, you’ll be in good shape to strike when the timing is right.
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