Internet of Business says
Professional services company PwC has published a new report on worldwide blockchain adoption, which finds that 84 percent of organisations are experimenting with the technology – as reported separately by Internet of Business.
But how should business and technology leaders manage new blockchain programmes to ensure the best chance of success? And how can organisations build cross-industry collaboration?
1. Build a platform for others
First, decision-makers should look at creating blockchains as platforms for industry-wide collaboration, says PwC. However, building a blockchain becomes more complex when third parties participate, warns the report.
“Companies are exploring how they might use internal digital tokens to represent cash or other assets, with the aim of streamlining their movement between business units,” it says.
“Instead of time-consuming (and costly) bank transfers, currency conversions, and multiple emails about each transaction, a tokenised transfer can be conducted in near real time via smart contracts and allow users to track each transaction’s progress.
“A company creating a blockchain for itself will undoubtedly confront challenges related to internal buy-in, data harmonisation, and scale. Still, this company can set and enforce the rules of the blockchain, just as it does with its ERP today.
But generally speaking, you don’t realise the greatest return on investment in blockchain if you’re building it just for yourself.
“Blockchain’s benefits are best realised when different industry participants come together to create a shared platform. Of course, when you start inviting third parties to engage, you can’t write the rules yourself.”
Taking the first steps
For organisations looking to take their first steps into exploring blockchain, the PwC report identifies four further areas to consider when developing either internal or industry-wide platforms.
2. Make the business case
“Creating and implementing a blockchain is not your traditional IT build. There’s no point in re-creating the old world, but with a blockchain at its core,” says the report.
“The danger in not recognising this paradigm shift from the outset is that you end up reasserting existing roles, processes, and business models. Instead, you need a commitment to a strategy that is suitably transformed from where you are today. And that starts with the business case.”
To stand the greatest chance of success, commit to new ways of working, advises PwC.
Decision-makers should also frame both the problem and solution in order to support the project with a clear strategy. They should ask questions such as: What is the issue you are addressing? How will blockchain help? And, how might this same issue be affecting others in your industry?
Once these questions have been answered, start small then scale out, staying focused on the long-term value, says PwC.
3. Build a partner ecosystem
“A single organisation can benefit by more effectively managing enterprise-wide activities,” says the report. “But blockchain’s value multiplies when more players – even an entire industry – participate. Blockchain requires the creation of new industry ecosystems, in which participants must work together.”
However, bringing together a group of stakeholders to agree, collectively, on a set of standards to define the business model is perhaps the biggest challenge in blockchain, says PwC.
“Participants have to decide the rules for participation, how to ensure that costs and benefits are fairly shared, what risk and control framework can be used to address the shared architecture, and what governance mechanisms are in place – including continuous auditing and validation, to ensure that the blockchain functions as designed.”
As a result, leaders should focus on a “cooperative few”, urges the report. “Start with smaller ecosystems with a tradition of cooperating on matters of industry-wide importance. It’s also possible to build a blockchain that starts with just a few stakeholders but is ready to expand.”
Next, broaden your network, work across the value chain, and conduct a competitive analysis: Are competitors or new entrants already planning on using blockchain? Is there a potential for partnership? And will you have to participate in their blockchain in order to continue doing business?
4. Determine the rules of engagement
Next, participants in a blockchain ecosystem need to decide what the operating standards will be, and what various users will be able to see and/or do, explains the report.
“The design begins with the strategic business model, which includes making decisions about whether the blockchain will be permissionless, and thus available to everyone, or be permissioned [granting different levels of access].
“Permissions determine participants’ roles and how they will engage with the blockchain, which can vary from entering information or transactions, to only viewing information processed on the blockchain,” continues the report.
“The choice of model isn’t automatic; organisations will decide based on design and use case considerations. They will also need to consider the type of network to establish.
“For example, a private or closed-network, permissionless blockchain might be used to facilitate an internal (company-wide) cryptocurrency. And a public, or open-network blockchain may be used as shared infrastructure to support either a permissioned or permissionless model between organisations.”
Confront risks early, consider the privacy implications, and invest in data and processes, adds PwC.
5. Confront regulatory uncertainty
A well-designed blockchain validates data and eliminates the need for a central authority, such as a bank, clearing house or government, to approve and process transactions, says PwC.
However, “cutting out that central authority may reduce costs and delays, but it also removes the institutions important in ensuring market stability, combating fraud, and more,” warns the report.
There are indications that regulators will eventually step in when it comes to blockchain, but that shouldn’t be a brake on progress.
This is why leaders need to shape the trusted tech discussion themselves, says PwC. “The risks of blockchain, and how to trust it, are part of a growing public discussion of responsible innovation and trust in technology.
Engage with regulators and industry groups to help shape emerging policies and best practices. Besides directly regulating the technology itself, laws around data use and protection can fundamentally change how your blockchain operates. It is vital to engage with regulators to help shape how the environment evolves.”
Use existing regulations as a guide, suggests the report. Current rules still apply, but perhaps in different ways. “By and large, we expect existing regulation to extend to new business models and applications. If you remain agile, you’ll be able to adapt and remain compliant,” says PwC.
Summing up the report, the company’s blockchain leader, Steve Davies, said: “Creating and implementing blockchain to maximise its potential is not an IT project. It’s a transformation of business models, roles, and processes. It needs a clear business case and an ecosystem to support it; with rules, standards and flexibility to deal with regulatory change built in.
“The benefits can be compelling – if organisations understand what their end game is in using the technology, and match that to their design.”
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