Blockchain talk down — Don’t get shaved!
A text by McKinsey is currently making its way through the media. The statement is crisp, e.g. “McKinsey comes out as highly pessimistic about blockchain”.
It is noticeable that the pitch has changed in a relatively short time. In articles here and here the strategic importance was emphasized. Now this doesn’t seem to apply anymore, the authors explain to us why the blockchain business doesn’t fly: “Blockchain’s Occam problem”.
If you want to understand this, and to avoid making mistakes in your assessment on blockchain technology, you should keep two things in mind
First, the excitement levels that we see in McKinsey’s blockchain articles follows pretty much the hype cycle of market research institute Gardner that’s in use for years. It is about the medial presentation of technology topics following a certain pattern: Starting from a technical innovation, a media hype emerges that leads to the peak of exaggerated expectations. From there, however, it goes almost as quickly down into the trough of disillusionment. Only from here a technology in this model reaches a plateau of productivity via the slope of enlightenment.
In the case of blockchain, McKinsey has surfed quite exactly on this wave and now finds himself behind the summit among the disappointed.
The article probably also takes up the frustration of McKinsey’s corporate customers, who had completely exaggerated expectations in the hype and sometimes wanted to build up inappropriate use cases.
Second, besides the media dynamics, there are at least two fundamental misunderstandings concerning the blockchain technology:
It is a misunderstanding to lament that the technology is not yet mature. It is not (fortunately!) and it is not a secret, and it has not been in recent years. If you look at the speed at which technology is still developing and how the weak points are being dealt with, it becomes clear that we will see a lot more here. The technology is currently really practicable only in clearly confined spaces. The very prominent example is the largest “cryptocurrency”, Bitcoin. It is not yet a currency because it is practically useless as a means of payment. A whole series of so-called Altcoins, i.e. “derivatives” of e.g. Bitcoin, have started attempts to overcome this. With Bitcoin Lightning, a technology is now available that makes payments “on top of” the blockchain possible with very similar mechanisms as “on” the blockchain, but: very fast and very inexpensive.
It is furthermore a misunderstanding to think that blockchains are one of the many technical product or process innovations. Thus, the paper argues along this line and consequentially uses the product life cycle model. However, Distributed Ledger Technology (DLT), the more general term for blockchain, is rather a basic innovation. It can change the cooperation between different companies and institutions, as a glance at the transaction cost theory shows: Organizations emerge in order to control trust and complexity better — aka cheaper — than would be possible, for example, through market exchange. However, distributed ledgers change transaction costs here, e.g. by dramatically increasing trust in shared information. So here we are talking about make-or-buy decisions or changes in business ecosystems. Such adaptations require much more complex changes than the introduction of a new product.
So the article quoted above is a text on the end of a hype.
You are better advised to keep calm and keep an eye on the many developments. The phase-out of the hype now gives the opportunity to use the experience gained for the next generation of applications without having to worry about high expectations. And then those who have now been tempted by such articles to turn away from the technology will be amazed at the solutions it has to offer.
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