Blockchain has become a buzzword as evocative as the phrase “artificial intelligence.” Every marketer throws out blockchain as the hottest technology, but the reality is, it’s often used more like a keyword over a real-time, actionable technology tool. But that could soon change. There are signs that the commercialization of the tool is on the horizon. Just like the Internet, when blockchain finally normalizes, it has the potential to transform every industry. Is this the year of the blockchain?
Blockchain: understanding the indelible record
Blockchain is set to transform business transactions. We’re not talking about bitcoin, although blockchain serves as the foundation for digital currency. Instead, blockchain is a digital science based on the idea of democratized data in a virtually impenetrable financial record across a distributed network. Here’s how it works.
Blockchain is a data structure that records transactions on a decentralized peer-to-peer network. Imagine these structures as a chain of activities. Each link and the chain itself are indelible because the transactions are recorded not by a single authority, but by a network of entities. That’s what makes blockchain so impenetrable; the entire network must agree that the digital transaction is valid before it is recorded as a link in the blockchain. Once these transactions are recorded, it is very difficult to alter them.
Imagine wiring money to a friend. You would use a bank or another third party. Those parties usually charge a fee. You are vulnerable to hackers if that third party isn’t secure. Instead of using a bank, with blockchain there is no third party, no extra fee, and no worry about security. The blockchain transaction is deliberately decentralized and public so that no single entity owns the record. The data is encrypted via a unique private key for each blockchain link. If a hacker or even a single entity on the network tries to alter the transaction, the electronic encryption code will not match the next link in the chain. This flagging system is what stymies hackers — and keeps organizations that hold your data honest.
This is all done electronically, of course, and at digital speeds (with a little latency thrown in). Although blockchain has turned into the latest tech buzzword, the reality is, it has the potential to change transactional interactions forever.
Blockchain applications, 2020
For the enterprise organization, it’s safest to list blockchain as “maturing;” however, there are signs that the technology is now established as a potential business game changer. Forbes boldly says, “Everyone in the enterprise world already has a blockchain strategy. If they don’t have one now, they risk the chance of staying behind or simply missing an opportunity.”
There are signs that blockchain is normalizing to the point of becoming an “as-a-service” model. Some market leaders already offer cloud services geared around blockchain, including:
- Microsoft Azure
- Amazon Web service
- IBM Cloud
- Oracle Blockchain
Over the past two years, we’ve seen blockchain-as-a-service startups that may lack the scalability of cloud providers but make up for it in sheer innovation.
Enterprise organizations may be discussing blockchain technology and the implications for their business model, but most are unable to conceive how blockchain will impact their daily established operations. How can large organizations make use of this interesting and disruptive transactional technology? The answer lies in how you tackle any large business model; you eat the elephant in the room just one bite at a time.
Should your company prepare for blockchain technology?
Change management around blockchain is particularly difficult because the tool has the power to potentially impact core, entrenched business functions that lie at the heart of the established enterprise bureaucracy. However, companies that manage digital assets and transactions must develop strategies to deal with competitor encroachment. According to Blockchain at Berkeley, most major Fortune 500 companies are at least conducting research and development (R&D) and investing in blockchain — if they haven’t already applied for a patent. This includes:
- American Express
- BNY Mellon
- Jaguar Land Rover
- Western Union
Financial services organizations are the closest to implementing full-on blockchain. Most, if not all, major credit card organizations and banks have blockchain initiatives pending.
So, should your company develop strategies around blockchain technology? If you haven’t, you’ve already fallen behind.
Embracing technologies that are as potentially disruptive to existing business models as blockchain is never easy. The Windsor Group Sourcing Advisory exists to help organizations digitally transform. Our teams can provide ongoing management support through the lifecycle of your blockchain adoption. Consider a partnership with our team for organizational strategy and implementation to improve your bottom line.