Technology and Consulting Services firm IBM defines Blockchain as a “shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.” The first major innovation using Blockchain technology was the digital currency Bitcoin, however, since then, the world has discovered that its underlying technology has many other applications. Blockchain has received much attention, particularly in recent years.
According to a report from IDC, worldwide spending on Blockchain initiatives is expected to reach 1.5 billion in 2018 alone.
IBM advises that the benefits of Blockchain for business are consensus, provenance, immutability, and finality. When organizations implement Blockchain, they realize benefits including reduced cost and risk, saved time, and increased trust between members of the business network.
What does this mean?
The short version is that blockchain is a form of data and digital money transfer that is almost impossible to hack — a form of digital-era triple-entry bookkeeping.
To date, the biggest concern around the digital transfer of sensitive information or money has been security. Blockchain promises to remove that concern.
As The Economist puts it, this makes blockchain “an apparently mundane process that has the potential to transform how people and businesses co-operate.”
How blockchain works: distributed checks and balances
If an attacker only has to hack one computer or device to get at your data, their job is pretty easy. But what if they have to get into millions?
Blockchain is a database and a network. It allows both data and value to be transferred via a distributed system that runs, records and compares multiple copies of secure, encrypted transactions in near real-time on multiple computers.
No single machine contains all the information needed to extract information and value from a transaction, and the only way to convince the system to believe a false transfer is to gain control of more than half the devices in the network.
What this means is that the more devices that are running blockchain software, the more secure it becomes.
: Streamlining cross-border business
Because of the ease of transfer of information, and the automated tracking of every transaction, blockchain can simplify and partially automate elements of accounting and compliance, making it easier to do business with new global customers and enabling elements of the audit process to be completed with even greater accuracy. Auditors will therefore be able to focus attention on non-automated elements of the audit. Considering blockchain’s origins as the underlying technology of the virtual currency bitcoin, it is also likely to facilitate new systems of foreign exchange via virtual currencies that can further reduce the cost of cross-border business.
: Encouraging adoption of the IoT (Internet of things)
The rise of the IoT is set to bring a new era of devices and networks that blend the physical and digital worlds. At the heart of this new transformation is the near real-time collection, transmission and analysis of data.
Blockchain enables you to take the generated data and transmit it securely and in real-time, in a way that was previously very expensive. You can receive micro payments in exchange — all in near real-time.”
This means that anyone — from the largest organizations to individuals — can become data providers and receive payment in exchange. This should encourage the adoption of more IoT devices, as smart devices no longer become simply expensive new gadgets, but potential ways to earn money.
: Changing what business you are in
With blockchain enabling secure IoT data transfer and payments, multiple new opportunities present themselves to the canny businessperson.
It means you may no longer be in the business you think you’re in.
This in turn should vastly increase the amount of available data on every aspect of life and business — which with the right analysis will facilitate whole new ways of working and thinking, enabling the development of new strategies and new business models.
Business leaders should not solely look at this technology as a way to improve current processes, but more as a way to pivot their business models.
Inevitably there are some risks with such an easy, secure system of transferring data and money. One of these is taking its simplicity for granted.
As with many new technologies, regulators are still working out their approach to IoT data and payment transfers. For example, how should cross-border payments be taxed when they are automatically and near-instantaneously routed through potentially thousands of machines in dozens of countries? Proper structuring, from both a regulatory and tax perspective, is necessary to ensure that you are minimizing any potential exposure.
Meanwhile, there remains the question of who will reap the most benefit from this emerging super network of monetizable data transfers. Is it the people who generate the data — or the people who run the networks?
For existing major players in financial and information services, blockchain’s internet-based software origins could also pose a threat. If your business is traditionally offline, leaders in the online space could have an inherent advantage in this new digital transaction market due to their more established digital networks, business models and customer bases. With blockchain, social networks have the potential to transform into money transfer networks. Could this then remove a need for banks?
Dealing with disruption
As with so many digital breakthroughs, it is this potential disruption of existing businesses and business models that is the biggest threat from blockchain.
Information is power, and blockchain has the potential to vastly increase the amount of information available. New players are likely to find ways to analyze that information to identify whole new ways of working, just as has already happened with existing digital technology. Current industry leaders could see their dominant positions challenged. As with any new system of automation, some business services, jobs and career paths could also become obsolete — while new ones could be created.
Whether you are a multinational, a small business or an individual, blockchain gives you the opportunity to take part in an ecosystem of data transfer and payment that we haven’t had access to before.
This is why business leaders should not solely look at this technology as a way to improve current processes, but more as a way to pivot their business models. How will blockchain enable them to do business in areas they have not previously explored, to assess and respond to their customers’ needs, and to find the right partners to help them adapt and thrive?
At DVC Consultants we utilise our proprietary process L.O.A.F (Leadership and Organisation in Anarchic Flux) to help our clients make sense of the disruptive technologies facing their sectors and industries and provide some of these answers. Blockchain can greatly improve many business processes, but organizations must focus on its power to generate new business models.
DVC Consultants is a market leader in transformative consulting. It creates and consults to disruptor, disrupted and challenger brands.
It is clear that brands and their owning companies have no room for complacency, and need constantly to evolve, or risk becoming extinct.
DVC Consultants has therefore developed LOAF (Leadership and Organisation in Anarchic Flux) as a proprietary consulting process for supporting our clients in being disruptors and challengers, rather than being on the receiving end of companies more innovative.
Challenger and Disruptor brands succeed because they emerge from developments not properly observed by market incumbents.
LOAF works because it builds on DVC’s expertise and experience in an eclectic and wide range of sectors and disciplines, including branding, economics, politics, government affairs consultancy and new technologies.