What to consider when setting up a Blockchain initative?
Recommendations from the blockchain challenge team
What to consider when setting up a Blockchain initiative?
The current disruptive technologies’ cycle includes a series of trends that we decided to adopt, follow, or to dismiss. Internet of Things, Artificial Intelligence or Big Data provide a myriad of solutions to our problems. There is, however, one solution that can address many problems, but its understanding may not come easy to all and, thus, its leveraging may be a little challenging: Blockchain.
One common fear when a new technology is being adopted and/or even turned into a cult that “somehow you must follow”, is missing out on it. To avoid such situation, trusted sources and advisors on this (or any other) technology is truly helpful. Nevertheless, in terms of Blockchain technology, it can be difficult to identify valid sources. Then, how can you tell mice from men and spot a true source of knowledge of Blockchain technology?
Trusted advisors, individuals and companies, should be able to demonstrate that there is an adequate context in which to implement Blockchain technology so its impact can be easily identified as well as to have fully mapped out the specific Blockchain based technology that the use case or solution will leverage from.
Blockchain, not a one-size-fits-all solution
Regardless of all the promises that Blockchain enthusiasts want to be true, there are some checkpoints to be taken into account when analyzing the possible use or adoption of Blockchain technology:
1.- Its application provides a new perspective and an innovative solution which no other technology has been able to previously offer.
2.- It contributes to be an alternative solution to another known technology, which may involve higher complexity and risk, compared to a more mature technology.
3.- Blockchain technology, in fact, turns out to be a (or even the) suitable solution to address a specific problem.
Most of the factors listed below are common to any new technologies. However, the fact that Blockchain technology involves solutions such as cryptocurrency and distributed ledger capabilities, derives into an inherent addition of risks to use cases.
The following is a classification of the two main streams of risk factors present in the adoption of Blockchain technology:
- External Factors: These are non-related to the solution per se, as they are present in environment in which the solution is encapsulated. For example, if a Blockchain project includes access to existing financial products and services, it needs to be aligned with the existing ecosystem which it most likely be very dynamic and changing.
- Internal Factors: These are inherent to the organizations involved and to its activities in terms of business and technical readiness to adopt a Blockchain solution.
Some factors might even cross boundaries:
- Regulatory Factors: To avoid any risk related to the need of a change or an update of a specific regulation, it is advisable to vouch for a use case that will not require, at least in the short term, for a change in the normativity.
- Technology Capability: The maturity level (or lack of it) of Blockchain technology may have consequences in the ability to integrate and implement it. For example, because of the scarcity of Blockchain experts, the level of understanding of the technology may vary, affecting the capabilities of different team members as well as the working culture of it.
- Business and Functional Capabilities: Information Technology (IT) Related Business Capability might no longer be, by itself, a perfect fit to match Blockchain initiatives’ functional goals. Thus, complementary capabilities may be required, such as security. In fact, some public blockchains implementations already present scalability problems (e.g. Bitcoin) as well as high transaction costs.
- Sustainability Capabilities: This is related to the capability of an organization or company to implement a Blockchain solution — as any other solution — through its life cycle (Create-Deliver-Maintain-Update-Decommission), to be able to scale it, as well as to define and update the related business model.
- Risk Management Capability: The ability of the participating organizations to mitigate, transfer or to accept a risk. For some organizations, this is a business-as-usual practice, whilst others might even consider this a fundamental part of the Blockchain initiative.
- Ability to Measure Impact: You might be able to measure the effective impact if you are dealing with an encapsulated environment. Otherwise, it may be really challenging to infer the impact of the ecosystem within an experiment and its hypothesis, and with a control and treatment group to compare, for instance, efficiencies for resources and costs.
Launching a Blockchain Project:
Setting up the project:
- Get people on board, recruit trustable experts to educate your business and technical decision makers.
- Shortlist the use cases and its technologies that will be followed, as well as the current experiments run by academics or industry (if possible, those use cases executed by any competitor).
- If the project execution is not immediate, observation of other less complex, encapsulated solutions and their implementation is recommended. Those will proof cases and hypotheses. A lot of experimentation is going on and use cases will be filtered to get to the impactful ones based on Blockchain
During project execution:
- Define if the organization wants to be an early adopter (to leverage the first mover advantage, but at the same time embracing the risk and pain), or a follower.
- Identify the problems that are aimed to be addressed. Some of them might be information asymmetry, lack transparency, fragmented information that cause cost increase, process inefficiencies, informal or illegal behavior.
- Define success based on your business case. Note that if your project or initiative is executed on a shorter cycle than the adoption process or business cycles, or you define boundaries, you will need to infer the wider impact on the entire ecosystem.
After the project execution:
- Organize a “lessons learned” activity with the project teams and stakeholders.
- Share the best practices (technical, business, environmental) for this type of initiatives.
- Look for more use cases to follow or to further test.
Today, most of the organizations testing Blockchain are also sharing the outcomes and progress, not keeping them from the public knowledge. The reason for this is that the promise of Blockchain, for both cryptocurrencies and the use of the technology as a ledger, among¡ others, aims to cross boundaries, with trust and transparency. If the rest of the ecosystem — even the competition, is not ready to join, the adoption moves at the pace of the slowest party. Take, for example, smart contracts that support the legal use cases when the parties involved do not agree to use these agreements. In other words, a supply chain in which one of its steps use physical documentation is a clear illustration of the latter. And there are many similar examples for Government, Energy, Food, Retail, Finance, Insurance, and Healthcare.
A version of this article was published as How to Adopt Enterprise Blockchain Without Falling Victim to the Hype for NearShore Americas portal on Jan 16th, 2018