Let’s face it, things don’t always work out as expected. Take the Internet, which was originally held up as a shining beacon of enlightenment fostering an open exchange of ideas. Research today finds social media sites like Facebook are circumscribing our lives within ever-narrowing circles as we cleave closest to like-minded folks.
Unforeseen consequences aren’t always dreadful. IT departments once viewed cloud computing as dangerously unsecure, nowhere near up to the challenge of hosting mission critical business applications. Not so, says IDC research, predicting that by 2020 cloud-based computing will deliver the greatest levels of IT security through encryption, threat analytics, compliance, and … wait for it … blockchain.
As people blindly follow this latest market-wide obsession, conversations about blockchain are already taking a surprising turn. I’ve been talking with Torsten Zube, blockchain lead at SAP Innovation Center Network, who shared what’s going on behind the scenes at many organizations.
“Usually, as technologists, we need to convince customers to use new technologies. However, in some cases with blockchain, our team sometimes has to convince customers that they don’t have a business case for blockchain,” said Torsten. “Some people are following the hype or their manager’s instructions to find a blockchain case without careful reasoning about why it might be important to their company or not.”
It won’t be long before blockchain hype morphs into disillusionment, but it’s worth noting how cooler heads are beginning to craft and test real-world use cases with the greatest potential. Here are several ways to consider blockchain’s real potential based on what we know today.
- Match scenarios to blockchain’s greatest strengths: It’s an ultra-secure, distributed ledger of records accessible to anyone on the chain that’s been given a digital key. That makes blockchain ideally suited for business processes in complex industry processes involving many untrusted parties taking part in reading and writing a multitude of transactions, decisions, and documents.
- Don’t pin all your hopes on blockchain: Blockchain won’t be a competitive differentiator. It’s an eventual commodity function that will be embedded in every organization’s processes where it’s needed most. The differentiation will be in how companies use blockchain for competitive advantage.
- Watch the early adopters: Just about every industry is looking at blockchain use cases, with proofs of concepts (POCs) and trials likely emerging later this year. Pay attention to these outcomes while exploring those most relevant to your industry. Learn a lesson from the state of Vermont, which regrouped after backing away from a decision two years ago to place property records on a blockchain, at the time deeming it too expensive. The governor recently signed a bill mandating an impact study on blockchain’s opportunities and risks for the state. Lesson learned: do your homework first.
- Be realistic. Nothing is hack-proof, so be prepared with contingencies to mitigate risks. For example, blockchain probably won’t eradicate the counterfeit luxury handbag market. But it could help companies more easily track and trace the provenance of many goods, delivering significantly greater control to business and consumers. That’s the promise of a partnership between the SAP Ariba network and Everledger to track provenance for the diamond industry.
- Prepare for disruption: Industries like finance and banking, insurance, aviation, transportation, and retail are among the areas with the highest likelihood of disruption from blockchain, at least in the near term. But that doesn’t mean there aren’t plenty of opportunities to put blockchain to work in places like industrial manufacturing. That’s one area where first-mover advantage is up for grabs.
Blockchain’s fundamental promise is to bring order to chaos. If it lives up to its billing, blockchain can help businesses unify disparate flows of payment, physical goods, and information. Companies could track, predict, and manage inventory down to the item level, using IoT, machine learning, and predictive analytics to make split-second decisions and transactions that transform industries. Blockchain could work out well for those organizations that resist the hype.
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