When most people see the word blockchain they think immediately of bitcoin and other cryptocurrencies. The phenomenon certainly warrants attention: Research by Accenture and the Australian Digital Commerce Association found that in 2017 more than 300,000 people traded over AU$3.9 billion in cryptocurrencies.
But the impact of the underlying blockchain (or distributed ledger) technology stands to be transformative across a much broader range of functions and sectors than just payments and transactions. In fact, it stands to restructure whole commercial ecosystems and business models. Companies therefore face a fork in the road: They can either get ahead of these changes and use the technology to capitalise on new opportunities and unlock hidden value, or risk obsolescence by sticking their heads in the sand and hoping disruption gives them a miss.
At its core, blockchain is a new type of database system that maintains and records data in a way that allows multiple stakeholders to share access to the same information with confidence. It is already being employed in areas as diverse as establishing secure digital identities, tracking and tracing things like diamonds, pharmaceuticals, and livestock, helping NGOs deliver children’s meals effectively, as well as in range of more mundane payments-related applications.
Cherry-picking interesting examples perhaps doesn’t capture the extent to which the technology can transform commercial ecosystems. For instance, my colleague Jonathan Smith has written about how blockchain stands to revamp the oil and gas sector in Australia, with the potential to unlock value and reform processes in everything from logistics and supply chain tracking to asset quality monitoring, procurement, and joint ventures/M&A.
Another good example is how blockchain has vastly simplified the complicated ecosystem of airline loyalty programs. Asia Miles, Cathay Pacific’s customer loyalty scheme, recently rolled out a blockchain-backed system to provide Asia Miles partners with a single data source when managing account activity—giving Asia Miles, its partners and members a near real-time ability to manage rewards, and massively cutting down the time needed to onboard new partners.
One more example in Australian financial services is the launch by the ASX of the world-first application of blockchain in settling and clearing equity trades.
What unites these blockchain use cases is the fact that they will affect a range of companies that haven’t been part of the discussion around the implementation of the technology, but nonetheless are deeply embedded in (and often reliant on) the commercial networks that are being disrupted. The proactive among them will be prepared and ready to pivot to seize new opportunities; the defensive will find themselves at risk of obsolescence.
So what should companies do to ensure they are in the first group rather than the second? Training is one important factor, since a significant barrier to seeing the potential of blockchain is the present knowledge gap and lack of technical skills.
If you consider who really needs to understand the potential impact of the technology on business models, it’s not primarily the tech savvy elite or coders. It’s the C-suite, entrepreneurs and even investors who will ensure companies are prepared to make the most of the technology. Educating stakeholders through initiatives like this online short course—offered by RMIT Online in partnership with Accenture and Stone & Chalk—are one means of ensuring decision-makers at your company are prepared for the impact.
With greater understanding of the possibilities, decision-makers will be in a better position to champion strategic initiatives that allow modest investments in proofs of concept that stand the best chance of developing into new applications, products and services. As a starting point, financial services providers should consider which existing infrastructure can be replaced; create working groups to evaluate the benefits of implementation; identify high-priority processes for reform; create plans for testing prototypes; and carefully evaluate the regulatory implications of using blockchain. Part of each step, naturally, is the need to evaluate partners and platforms that will together constitute and define the new commercial ecosystems where the use of blockchain will be most effective.
As yet, it’s fair to say most blockchain initiatives are at a nascent stage. Change might not be rapid in many industries—but when it comes, the commercial ecosystem may well be transformed more or less overnight. It therefore pays to be prepared.