How to approach a blockchain Pilot and challenges (1 of 2)
This paper is about how to take the first steps through a blockchain Pilot, the challenges you will face, and the errors you will probably make.
Part #1 — Firs steps to implementing a pilot
From 2016/2017 enterprises have begun conducting pilot projects using blockchain, and more of them are expected in 2019. At the same time, also medium and small organizations are following the trend with less complex projects, but experiencing similar challenges when they try to approach a blockchain pilot. Pilots are used to mapping the possibilities and implications of blockchain, test the assumptions done in a PoC (Proof of Concept), find sponsorship for the implementation of the project.
The aim of this paper is to suggest how to approach blockchain technology and how to do it concretely in order to evaluate whether blockchain is the right choice for your business.
The paper is divided into 2 parts:
· Part #1 — First steps to implementing a pilot
· Part #2 — List of critical aspects to take into account when dealing with blockchain, and common errors while implementing a pilot
Who is wondering whether blockchain is the right decision, need a guide on how to start a pilot and wants to be updated about the challenges will face.
First steps to implementing a pilot
Business networks typically come together at marketplaces where the participants, such as producers, consumers, suppliers, partners, market makers/enablers, and other stakeholders own, control, and exercise their rights, privileges, and entitlements on objects of value known as assets.
How many participants have your network and where are geographically distributed? be aware of the dimensions of the network you will need to build after the pilot. List the stakeholders involved in the use cases (sponsor, 3rd parties, internal teams) and the potential participants in your network. Involve them in the process right from the beginning.
- Is your sponsor on board?
- If the other participants within your ecosystem don’t have the issue you want to fix with blockchain, maybe blockchain is not the right solution technically speaking.
- Write a business case document. Define your business requirements. List what are your goals. What opportunity are you trying to capture?
- From the business case break down the use cases.
- Evaluate if blockchain technology brings significant added value. List the reasons why blockchain should be the best solution and double check them against the checklist here.
- Adopt a business first approach rather than a technology-first approach. Solve specific business requirements first, over the technology.
- Start a prototype focus on real business need. Use an agile approach, small wins better than no win. Start with a smaller scale business need in order to do not have a concern on the technical side, for volume, but can be able to scale over time with larger volume. Keep complexity low, to begin with, and gradually build on top of success. If you try to take too much from the start you are going to have a hard time.
- Assess your risks first. Different types of platforms are suited for different types of requirements. Be clear which tread off you are willing to accept, and what are the consequences of those thread offs.
- Use blockchain not to store the information but as an attestation of facts.
- Sell the solution to the employees who benefit most from it, to whom have that specific problem. Validate your ideas and approach across the industry, not in isolation. Talking to the industry you want to sell.
- Consult an internal or external expert in different verticals. The chance of success is if you involve your internal security, risk and compliance/legal responsible right from the start, and consult him/her when is needed during the project as well.
- Consider a SaaS solution all-inclusive that provide easy access to blockchain already set up and flexible for pilots. Initially, the blockchain solution needs to be SaaS-based (or BaaS, Blockchain as a Service) in order to build knowledge and shift later to on-premises infrastructure after acquiring the right skill to implement your own infrastructure.
- Governance and System Architecture
- As a starting point, consider to build up a network with less than 10 participants since is going to be a lot easier than more than 10 participants. More participants higher complexity.
- Start defining the governance: lay down the governing principles for the end to end system.
- Gather the technical requirements (permission level, scalability, integration).
- Gather non-technical requirements (data flow, business processes, regulations, roles).
- The primary concern of governance should be around access control for the network and establishing a code of conduct for members. Be clear on who can participate and what happens if they misbehave.
- Create a lightweight governance model, make a simple code of conduct, no legal agreement, no consortium participation, no value or contractual exchange. Avoid barrier to entry like asking for a fee (CAPEX cost), but make the cost of the network transactions based like pay as you go (especially if the number of transactions usage of participants is different).
- The framework required for the governance is highly dependent on the use cases and services provided by the technology. The governance model will determine your technology architecture and software choices.
- Choose technology partners (operations, marketing) with appropriate domain expertise and that can assist you in developing a governance model.
- Design a network where all the participants can have success at all level of participation — if success is biased, adoption will not reach critical mass. You need to make interesting for any type of role is participating in the network.
- How you will achieve the required network effect? Centralized administration to begin — no wait for legal collaboration framework to be established among participant. Can be a gradual shift from centralized to a network managed by a participant that at the beginning don’t know how to deal with.
- If your target is horizontal market rather then a vertical industry, use the industry with a concentration of market leaders, or where there is already an industry association.
- If there is already an association in your industry, is better to go bottom up and to collaborate with them, rather than start from scratch.