Out the gate
Optimistically, Australian blockchain startups have been fast out of the gate, with three taking out the grand prize at the world’s largest blockchain summit in June.
No one wants to miss out on what could be the most-disruptive technology to hit the business landscape in a decade.
Part of the allure of blockchain is the enormous potential of distributed ledgers—as blockchain for enterprise is commonly known—to improve the security, transparency and efficiency of transactions. This applies not just in currencies but over a wide range of marketplaces, including the long, complex supply chains and transactions which for many businesses stretch across the globe.
Today, an auto parts dealer in Sydney might wait weeks for a global manufacturer to remit payment as that payment winds its way from the manufacturer’s accounting department to its local bank to the bank’s central office and then into a correspondent bank.
The process involves multiple ledgers, different routing numbers and lots and lots of hands until the payment finally works its way into the auto dealer’s accounts receivable. Distributed ledgers allow such transactions to be completed within minutes with complete transparency on all sides.
As importantly, the most-advanced industry applications harness the power of ‘hyper-ledgers’ not reliant on anonymous trading and virtual currencies. Instead they provide a permissioned network with known identities which allow companies, suppliers and partners to keep common records in an all-but-unhackable environment.
But not all blockchain technologies are created equal and the opportunities will differ across countries. In developing economies, blockchain’s unchangeable record could bring much-needed trust to transactions.
In an economy like Australia’s, advancements will instead hinge upon enabling new business models, innovation and reducing the cost and risk of transactions.
Progress will also depend on the preparedness of the workforce – amplifying the importance of digital literacy and ensuring IT professionals understand the other sectors in which blockchains can operate including accounting, fraud control, law and banking and finance.
Organisations may also invest heavily to find, as with the dot-com boom, for every promising avenue, there can be dead ends too. Without a concrete understanding of the desired outcomes and the different elements and parties who must come together to make them happen, institutions may fail to get the returns they were hoping for.
Getting it right
To get the most from one’s blockchain investment, organisations need to get a few things right at the outset.
- While it’s often desirable to define an ambitious strategy of a moon shot, it’s usually better to pick a humble starting point then scale from there.
- A good use case should be practical, top-line oriented and have senior leadership backing. If it’s too discrete, the investment will benefit only a narrow slice of the business.
- Not all blockchain platforms are suitable for the same purposes. Some are appropriate for high value, point-to-point transactions and others for high volume transactions. Some are built on open-source platforms, others on proprietary languages which may have a limited developer base. Engage your IT team, outside experts as needed, and your end-users to clarify needs and identify the most suitable technologies to address them.
- Involve your key suppliers and customers. One of the most-exciting aspects of permissioned ledger environments is the network effects they create: the more participants, the more value. In developing that ecosystem, it’s again best to start small. Often a pilot run in partnership with a trusted supplier can provide proof of concept, inculcate new ways of working, and shine a light on legal and process changes which need to be considered.
- Recognise blockchains are dynamic. The technologies are still advancing and so, too, the applications. Teams need to go into the project with an open mindset and be prepared to adapt, refine and collaborate—and just as importantly, measure and report results.
Company leadership plays a strong role in setting the tone—giving teams permission to experiment and allowing them to fail fast so they may succeed faster.
Distributed ledgers have the potential to radically reshape the transaction environment, speeding results in complex, multi-party environments with unmatched security and transparency.
By approaching their blockchain investments in a calibrated fashion organisations can shorten their learning curve and sharply increase the probability of success.
Mark Ebeling is CTO Blockchain and Financial Services, IBM