International Trade And The Intelligent Enterprise: Part 1

Frances Gartzke

Part 1 in a 2-part series. Read Part 2.

After a decade-long recession, the World Trade Organization (WTO) estimates international trade growth of 2.4% in 2017 to over US$15 trillion. This growth presents an opportunity for international trade participants to invest in digital transformation for a quick return on investment and a platform to drive continued growth.

Digital transformation will connect people, things, and businesses in new ways to create intelligent enterprises. Intelligent enterprises will drive new operating models, changing the paradigm from business partnerships to collaborative ecosystems. These ecosystems will rely on digital technologies to enable new inter-enterprise collaboration models seamlessly transacting across the participating businesses. A key component for future digital collaboration is blockchain.

In contrast to traditional business partnerships where every company keeps its own set of records and information, blockchain provides the single source of the truth to all ecosystem participants. Therefore, blockchain has the potential to be the foundation for a new type of collaborative business scenario that establishes trust and transparency and validates multi-party process execution; all key traits necessary in the realm of international trade. As such, it is important to understand blockchain as a catalyst for evolution and not just a technology innovation.

In the future, blockchain will be the core transactional system to maintain distributed execution of transactions between companies and a cross-enterprise system of record. It will provide an immutable, shared source of the truth for many partners – for example, companies, financial institutions, and regulatory authorities. The key characteristics that make blockchain so exciting but also disruptive for intelligent enterprises and inter-enterprise collaboration are:

  • Blockchain is a distributed ledger technology truly decentralizing and democratizing business processes. No authority is needed to confirm the correctness of the chain, as its veracity is confirmed by each participant’s systems.
  • Information is recorded and continuously replicated to a peer-to-peer network of participants’ systems, meaning that each member maintains its own copy of the information. Because of this redundancy, no single point of failure exists. Therefore, documents or information cannot be lost or disappear.
  • Each participant in the blockchain has real-time access to the shared data and documentation. To add or update information, all participants automatically validate every update collectively to establish the new “truth.”
  • Approved transactions are entered into the ledger as a collection of blocks and stored in a chronological chain as a reliable record of ownership. The chronological chain is established by adding a digital fingerprint to each block that includes a date and time stamp. Any attempt to change a block would be apparent as an interruption of the chronological chain because the new digital fingerprint would never match the old one.

Blockchain has the potential to significantly disrupt the international trade industry where processes have not changed in centuries. Since traders stopped traveling to foreign lands to trade directly, intermediaries have been providing trade financing, transportation, and regulatory services, driving up complexity and cost.

Part 2 will explore the details driving the value proposition for blockchain in the international trade ecosystem.

In the meantime, read our multi-part series on how blockchain is entering the realm of the possible.

Frances Gartzke

About Frances Gartzke

Frances Gartzke is an advisor with SAP, working with our most innovative customers to create business value through digital transformation.