Article by Forbes: Joe McKendrick
A couple years back, blockchain (or distributed ledger technology, DLT) was the hot ticket. Lately, attention to it has receded to the background. Is there business value to be found in blockchain?
“Yes, but” say the authors of a recent analysis out of the World Economic Forum (WEF) and Accenture Research. “When done right, blockchain is all about rethinking business models, rethinking relationships between companies and between companies and customers, and is, at its heart, a strategic change effort,” the authors, Sheila Warren of WEF and David Treat of Accenture, point out. “Through this alignment, organizations can understand whether blockchain is worth the investment for their specific circumstances and make strategic decisions on whether they should or should not invest in the technology – keeping in mind that blockchain is just one option for organizations looking to digitize.”
The WEF and Accenture report is based on a survey of 550 executives, along with an analysis of 79 blockchain projects. A challenge with blockchain is the unrealistic expectations that have developed around it, Warren and Treat observe. “Survey respondents on average expected a 24% return on investment on their early blockchain projects, but realized only a 10% return. On top of that, 42% of respondents expected a noticeable or significant brand improvement from simply announcing a blockchain project, with that total jumping to 87% upon delivering a blockchain project.”
It’s still difficult to connect blockchain to the business. Prior to embarking on a blockchain project, 59% of respondents stated they had no confidence that the project would deliver a positive return on investment – and only 38% of those who have implemented the technology developed a business case prior to investing, Warren and Treat state. Many executives had doubts as to whether the technology was production-ready – “limitations on blockchain technology” and “scalability issues” were selected as the biggest challenges in adopting blockchain.
Scaling blockchain from proof of concept to production is another stumbling block the authors state. “Moving to production requires stakeholder buy-in and can be a real challenge.” That’s because blockchain needs to be a team effort. “In order to ensure that proof of concepts, standards and solutions are adopted at industry scale, organizations must get better at working together to create an environment of shared values and partner up to solve additional obstacles.”
Complex legacy systems and technical debt also get in the way of blockchain. At least 87% of executives “acknowledged that it is far more challenging to undertake the implementation of a blockchain solution as part of an existing digital transformation – especially when a substantial amount of capital has already been spent on a legacy technology. Alternative digital solutions may offer faster returns and be more strategic in the short term, but organizations should evaluate whether blockchain provides additional benefits in the longer term.”
Warren and Treat make the following recommendations to bring blockchain into the business. To veterans of previous enterprise technology deployments – such as cloud or big data analytics – much of this will probably sound familiar:
Take time to understand the technology: “Think through the ways in which blockchain may affect a given industry,” the authors state. “Creative thinking must drive the consideration of greater impacts. Each organization should have a senior leader responsible for understanding and tracking what is happening with the technology and within industries.”
Set realistic expectations: “Success is dependent upon more than simply plugging in the technology or spinning up a blockchain node,” Warren and Treat advise, stating that everyone across the organization needs to get involved in the effort.
Align to strategic priorities: Develop a use case that zeros in on the problem or opportunity blockchain is addressing.
Evaluate blockchain’s value relative to other technologies: “Blockchain is not a substitute for digitization and should not be treated as such. For many use-cases, other technologies will be lower cost, lower risk, and implemented more quickly.”
Think beyond your individual organization: “The decentralized nature of blockchain makes a transformation from an isolated approach to end-to-end value-chain integration within fragmented and complex environments.”