Blockchain - Implications for strategy and change

Posted 9 July 2018 12:00 AM by Katya Linossi, Managing Director and Co-founder @ ClearPeople

I recently met with a friend for lunch before she jetted off to her next destination (Berlin) as a panel member of a blockchain event. We spent some of our time discussing that there is a lot of hype about blockchain but not as much take-up as many predicted. It appears that companies interested in this technology have issues adopting it.

There are many reasons for organisations to delay their investment in blockchain. Firstly, most organisations are cautious about disrupting their current profitable business model. Many larger organisations have a massive infrastructure that would be costly to replace and at the same time they need to keep pace with global regulations and a constantly shifting landscape. Therefore, it is hard to justify diverting resources to something that appears to be less critical.

Having worked with a number of organisations across multiple sectors, I can also conclude that the culture of many organisations is a barrier, where many of these institutions are less agile and risk averse. It also does not help that blockchain technology is still immature and there is a sense of mistrust and confusion surrounding it. 

A week after my lunch time rendezvous, I saw an article from McKinsey entitled “Blockchain beyond the hype: What is the strategic business value?” which made me realise we were not the only ones contemplating this question and so this prompted me to write this blog. 

At ClearPeople, we help our clients exactly with this type of dilemma – whether it be blockchain, artificial intelligence, cloud platforms or other technologies. We have developed a framework that helps organisations embrace new digital technology from strategy to adoption. This framework is not only built on years of experience with clients in different sectors, excellent models and tools that we have picked up over the years, but also from best practice from working in partnership with some of our clients who are leaders in their field.

Currently the main focus of blockchain’s strategic value is to drive operational efficiencies. This differs to other technologies such as Artificial Intelligence where organisations are using this to gain a competitive advantage. 

One method of understanding the value of blockchain, is to use Michael Porter’s generic strategies.

Michael Porter

By reviewing these generic strategies – cost-leadership (cheapest), focus (specialised service in a niche market) or differentiation (unique desirable products or services) or perhaps a combination of these, one can determine whether blockchain has an impact on supporting or enhancing your strategy. 

For example, new entrants are more likely to use blockchain to disrupt pricing models and so are likely to pursue the strategy of cost leadership. Since there can only be one cost leader, most organisation are more like to pursue focus or differentiation as a strategy. 

McKinsey sets out four simple strategies that an organisation can pursue in terms of blockchain strategy.  

Blockchain strategy
I recently suggested to a client who is looking to improve their supply chain that by understanding the principles of blockchain, it may provide insight or ideas as to how you could apply this using current proven technologies or processes until blockchain technology is more mature. A good example of this is health records in Estonia which are still in databases that are not stored on blockchain but blockchain is used to identify, connect, and monitor these health records as well as who can access and alter them. Even though the performance might be suboptimal to traditional databases, this will change once the technology matures. 

To summarise, even though blockchain technology is still in its infancy, I believe there is a lot of value in understanding the principles of this technology - how it may or may not impact your current strategy but also how it can enhance the strategic value of your organisation. 

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