Feature Story

Blockchain, from Promise to Payoff

Blockchain could change everything from financial services to supply chains. But where do business leaders begin?

Blockchain, the technology writer Don Tapscott exclaimed, is “the biggest innovation in computer science in a generation.”

Which got him thinking about dinner at McDonald’s.

“It’s infinitely more secure than the kind of computing platforms that we have today,” Tapscott told a Cisco Customer Strategy Forum last year, “It’s a highly processed outcome. Like a Chicken McNugget. The hacker would have to turn that Chicken McNugget back into a chicken. Somebody may be able to do that someday, but for now it’s done.”

It’s that immutability that gives blockchain — the platform behind cryptocurrencies such as Bitcoin — the potential to disrupt everything from banking and supply chains to machine learning and legal contracts.

Pretty much any place where information or value is exchanged — and where middle layers of verification add friction — blockchain could play a major role. By creating an encrypted ledger of transactions, confirmed across vast numbers of computers all in consensus, blockchain ensures trust.

As Oliver Bussmann, of Bussman Advisory, argued, blockchain will have as “significant an impact as we saw 20 years ago with the Internet.”

But, he asked, “how do we make it impactful, and break through?”

To that end, Bussman joined Tapscott via telepresence to explain his firm’s “innovation framework” for exploring, applying and implementing blockchain. Srinivasan Sriram, founder and CEO of Skuchain, also shared pioneering solutions for one specific use case: supply chains.

The goal was to establish the great potential of blockchain, while offering some practical advice on using it to solve real-world problems.

A Matter of Trust

Tapscott began by explaining the tremendous value in blockchain’s power to secure and verify.

“For the first time in human history,” he said, “people can trust one another. They can transact and do business and manage assets peer to peer.”

Bitcoin, he clarified, represents but one form of value exchanged on a blockchain. Blockchain’s real strength is in accommodating virtually any unit of value that can be digitized.

“What if there were not just an Internet of information,” Tapscott asked, “but an Internet of value? Where anything of value, from money to music to votes to art to intellectual property to energy, could be protected, stored, transacted, moved, and managed in a highly secure and private way?”

What would blockchain replace? Tapscott likened some of today’s financial transactions to a convoluted, “Rube Goldberg” contraption.

“You tap your card or screen in Starbucks,” he said, “and it goes through seven or eight companies, each using their own system — some of them being 1970s mainframes — and then three days later a settlement occurs. Imagine if the banks were to move towards a blockchain infrastructure. There would be no three-day settlement period.”

Take humans out of the equation, and the need for blockchain becomes even more acute.

“The Internet of Things is going to need a ledger,” Tapcott stressed, “because when that light bulb buys some power from the distributing micro-grid, we’re going to need a ledger for these trillions of transactions to occur.”

Global Supply Chains, Seamless and Simplified

As Tapscott explained, the great strength of blockchain is that it works with virtually any unit that can be digitized. Bitcoin is but one; others could be kilowatt hours, machine-to-machine data, smart contracts, etc.

Still another is a stock keeping unit, or SKU, along a supply chain.

“We leverage the blockchain to track SKUs the way you track money,” Srinivasan Sriram, Founder and CEO of Skuchain, speaking in San Jose, explained to the group.

The goal, he said, is to streamline transactions and gain much better visibility into the entire supply chain journey — with real-time tracking and financial flexibility — from raw materials to finished product.

“In today’s supply chain,” he said, “there are a lot of financial complications. The people in the middle of the chain have a high cost of capital.”

But trade finance is greatly simplified along a blockchain-enabled supply chain, Sriram continued. While also enabling the automated release of funds, triggered by real-time events at any stage of the journey.

“The blockchain brings multi-signature capability,” he said, “wrapped in a smart contract. So we can ensure that any changes are made only with the financiers’ participation.”

Sriram stressed that as sophisticated as the tracking systems for the likes of DHL and UPS have become, that is still only for packages. On a blockchain, you can track raw materials, parts, virtually anything.

“You could look at an airplane and track all of its raw materials and parts all the way through the supply chain,” he said. That includes across ships, rail, air, and multiple ERP systems.

A Framework for Blockchain Innovation

How should leadership teams strategize and implement blockchain solutions?

Joining from Istanbul, Oliver Bussmann of Bussmann Advisory offered an innovation framework for companies exploring blockchain and its many potential use cases.

To start, business leaders need to zero in those use cases that align with their business strategy.

“Agree on the focus areas,” he said, “and have a small team scanning the market. Find out what’s available from a capability and technology perspective, and leverage internal and external advice.”

Another critical piece of the blockchain puzzle? “It’s all about collaboration in the ecosystem,” Bussmann answered. “Collaboration in networks, starting in industry networks, and then much more in cross-industry collaboration through consortia.”

A key reason for collaboration, he added, is that technologies are blending together. “In our experience,” he said, “there isn’t only one use case to watch. We see a conversion of these emerging technologies. Especially leveraging smart contracts and distributed ledger, with the Internet of Things.”

That will demand new talents. “These are skills and expertise that in many companies it’s hard to find,” Bussmann added.

Financial services, for example, will need to align with the Internet of Things.

“We are going through a next computing phase called edge computing,” said Bussmann, “with all the processing power at the edge. Financial services will be embedded, along with other technologies like machine learning and robotics.”

But business leaders can’t just focus on technology.

“Blockchain’s not a technology play,” he said. “It’s about what kind of business based on the strategy can we utilize, and what is the impact at the end.”

Beyond that, Bussman advised, “use those business model changes as a funding gate to provide a competitive way to budget those ideas.” And, just as important, to secure buy-in from top executives.

In the end, Bussman reminded, blockchain is not a 100-percent mature technology.

“Out of three or four blockchain processes,” Bussmann warned, “maybe one or two will be successful. There’s still a learning curve on this technology, on the business models. So you need to manage risk taking.”

Managing that risk will take careful strategy — and leadership.

“This disruption is big,” Bussmann concluded. “How you do this is important, and it’s not just a playground. It needs orchestration, it needs leadership.”