When Torsten Zube was named the head of blockchain innovation at SAP, he was sitting in the kitchen of his Munich home having breakfast with his wife.
When he told her the good news, he said he was shocked by her two reactions.
“She told me she knew what blockchain was because it was all the buzz – and then she wanted to know if we were going to be rich,” Zube told a crowd listening to a panel discussion at the 2018 SAP Global Partner Summit in Orlando.
There are two ironies, really, in Zube’s wife’s reactions.
First, other than its association with Bitcoin and other cryptocurrencies as a way to verify transactions, blockchain is not exactly sexy enough to have a “buzz.”
Second, there is no way to know if blockchain will make anybody rich because it has not progressed far enough for anybody to know if it will be a widely accepted technology.
That’s not to say that the panel – which included Zube, moderator Sathya Narasimhan, PriceWaterhouse Cooper’s Kris Kersey, WiPro’s Muneeb Shah, and IBM’s Aleksandar Debelic – did not have an optimistic view of blockchain becoming a widely adopted, disruptive technology. But they all recognize and understand the challenges it faces to get to that point in seven to 10 years.
If you think of a house, think of blockchain as the plumbing and electrical systems; it is the sort of unseen, underappreciated element without which the house could not operate.
“Blockchain is part of the solution, but it is never going to be the entire solution,” Shah said. “It never will be. It is something like 25%. But I like to think of the human body. The heart takes up far less than 25% of the human body, but without it, the body will not function. That’s how to think of blockchain.”
Zube said the auto industry offers an example of the way he envisions blockchain ultimately functioning. If a car is ordered, he said, blockchain technology will order the parts; reserve the time on the assembly line; and pay for the parts along the way. This eliminates or drastically reduces the need for human hours to be spent on those functions while also keeping an open, accurate record of those transactions.
“It will dramatically alter the way we do business in the future,” Zube predicted.
Kersey gave an example of a large, physical asset that has a long lifespan, like a locomotive, an airplane, or a jet engine. Blockchain can track and verify those assets’ purchase, repair, and parts replacement, attesting to the lineage of those particular parts.
“It’s like Carfax on steroids,” Kersey said.
The pharmaceutical industry is another that could see positive disruption. When pharmacies return drugs to wholesalers, blockchain technology will allow validation, through code scanning, that the drugs are the original drugs that were distributed and have not been tampered with.
The challenges for blockchain are plentiful. Primarily, no one company is equipped to develop blockchain on its own. There has to be organized co-innovation, like one established between SAP and IBM, but even that coordination has challenges vis a vis intellectual property rights and regulatory issues across different countries.
Beyond that, though, is customers’ willingness to adopt blockchain technology as a regular part of their business practice rather than becoming an add-on only for clairvoyant leaders.
Which means Zube’s wife has to wait to get the second part of her question answered.
“There is still a lot of hype out there about blockchain,” Debelic said, “but there is something huge behind the hype.”