OPINION: Can blockchain fit into your strategy? These are the vital questions to ask
Words by Jacob Elkhishin, Principal of Risk Advisory Services at RSM Australia
While blockchain technology was developed almost a decade ago, there remains a significant gap between the initial hype about its promise to revolutionise business and the tardiness with which it has been embraced globally.
Blockchain could be regarded as a slow burner due to many regulatory, compliance and political hurdles, but it is rightfully regarded as the most important technological breakthrough in 30 years.
Blockchain is being lauded as the second generation of the internet. But while the internet was all about the ‘democratisation of information’, blockchain is first and foremost about value. What makes blockchain a potential game-changer for doing business, both locally and within a global economy, is its ability to recognise, store and transfer value like never before. A lot of its power lies in it being decentralised and its ability to not require trust.
The important thing for businesses to realise as blockchain technology becomes more and more prominent, is that digital disruption is likely to come from outside your own industry. No longer is the competition limited to other businesses within the same industry.
For example, it was Uber that disrupted the taxi industry and it was Airbnb that disrupted the hospitality industry. So it’s worth considering how your business could be disrupted using blockchain technology.
For those looking to make the move into blockchain technology and harness what it has to offer, there are many questions to ask along that journey.
Developing a strategy
The first step? Push past the hype and assess what the implications are of blockchain on your business model and governance. In doing so you should explore the potential new business opportunities and processes presented in a distributed and decentralised ledger system.
A mistake people often make is looking at blockchain in terms of current business problems, instead of how it can be used to restructure or reengineer the supply chain or value chain for their business. So it’s worth considering this technology and how it can impact on your business from multiple angles.
Another common mistake that boards can make is only reviewing Distributed Ledger Technology (DLT) in isolation. Once the strategy has been built, the next stage of developing this includes assessing DLT as part of your overall digital strategy in how you are responding to the challenges of digital disruption. This will likely involve numerous technologies working together to deliver an outcome.
Of course, it is important to ensure the proposed solution will improve the process, while reducing costs and not sacrificing margins. At this point, we recommend carefully reviewing any competitors’ actions in preparing for blockchain. Alliances should also be considered in the development of standards to ensure consistency, especially in this early stage
Also, be sure to avoid the ‘peanut butter’ approach of applying the same strategy across all business lines. While in some instances a similar solution may be appropriate and replicable, it’s important to ensure each problem is clearly defined before seeking solutions.
Conducting a risk assessment
Another important step is to conduct a thorough risk assessment.
This involves asking many questions, which will vary from business to business. Some questions might include: Should you launch an internal or external blockchain project? Do you need to cater for compliance requirements? Is scalability in the design of the blockchain required? Is integration with existing enterprise based systems required and how will this occur?
Other questions might include: Does the IT unit have the necessary skills to undertake the blockchain project? Should you join a consortium, partner with a vendor or go it alone? Will you need to provide access to third parties such as regulators and will they need full access or read-only access?
There are a lot of risks and details to weigh up, especially when moving into a fast evolving technology space such as blockchain. Can you migrate platforms as the technology evolves? How will you protect your IP within the company?
And of course, two key questions that need to be answered as part of a full risk assessment are whether or not an investment into blockchain is needed at all (what is the incremental business value from the blockchain project?) and whether or not blockchain is the best solution for the problems that need addressing.
Seek out the right advice
There’s a lot to consider and understand in making the move into blockchain technology, from understanding any tax implications and applicable laws to sourcing the right talent and advice - plus so much more.
One of my biggest pieces of advice would be to always be prepared to challenge and adapt your strategy. Accept the technology is fast evolving and subject to rapid changes - a proof of concept with a limited lifespan may be the best strategic approach in an environment which has a lack of regulatory standards. (Alliances should also be considered in the development of standards to ensure consistency, especially in this early stage.)
And lastly, be sure to seek advice. By asking the right questions, the right people can help you understand the current state of the technology, weigh up the risks and opportunities, and develop strategic initiatives and operational priorities to set you up for success.
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