We Are Underestimating Blockchain’s Value, Despite the Hype

Just when I thought blockchain hype was hitting the over-saturation mark, I had a conversation with Joe Fox, senior vice president of Business Development and Strategy at SAP Ariba.

My take now is that those companies cynically dismissing the buzz risk getting caught unawares by substantive disruption. Here are the high points of our conversation.

Be Patient and Prepared

The widespread emergence of blockchain will take some time because it’s a fundamental platform technology that will be embedded in various use cases – most of which are not yet defined. That doesn’t mean there’s nothing to do.

“IT organizations need to establish experiments with blockchain now to build their team and technical expertise, and keep a super-close eye on the business strategy side for potential blockchain-based disruptions in their industry,” said Fox. “IT needs to come up with blockchain ideas as the business team establishes the opportunities and threats. Don’t get caught by surprise by not understanding blockchain’s impact to your industry.”

Fox also advised companies to rely on strategy and consulting partners who can share valuable expertise, especially in these early days. Focus on bringing additional value for customers.

“For example, our strategy around blockchain is to enhance our existing solutions with targeted chain capabilities, create brand new chain-based capabilities on the platform, and expand our B2B collaboration by allowing SAP Ariba members to collaborate with non-network members,” he said.

He outlined four primary ways blockchain can disrupt industries.

Automation, Collaboration on Steroids

Blockchain-enabled industries like insurance will gain unprecedented automation and collaboration capabilities to better manage risk and fraud, and operate more efficiently.

“Insurance firms will have greater trust in the authenticity of goods, as well as far more granularity into when it was shipped, where it traveled and what happened to it along the journey,” said Fox. “Insurers would be able to create risk profiles targeted to current stages of transit in real-time. The truck that picks up a million-dollar server from a vendor, and brings it to the shipping dock for overseas transport is less risky and may not require as much insurance. Maybe the risk increases when the server is traveling on the ship, and once delivered, the insurance costs decrease.”

#Blockchain cynics may sneer, but the real leaders are taking action now

Validating Provenance Benefits Major Industries

Energy, retail, aviation and pharmaceuticals are among the complex industries that could benefit from blockchain’s ability to track and trace the billions of component parts, raw materials and food products traveling across inbound supply chains.

“With established provenance, the real goods can’t be swapped out for fakes, which does happen,” said Fox. “If components that arrive at an energy plant aren’t the authentic ones certified for that heavily regulated industry, that’s a major risk. The same applies to food, where retailers need to verify that items were grown from a certain location, harvested in a sustainable way, and shipped at a certain temperature the entire route. The dirty secret is that it’s been impossible for many of these industries to have trustworthy verification of their goods, and the stakes are high.”

Preventing fraudulent goods from entering the supply chains protects the brand while ensuring consumer safety. “Amazon is offering refunds to customers who purchased potentially counterfeit solar eclipse glasses, but blockchain validation might have prevented it from happening at all,” said Fox. “On the recall side, blockchain could help companies immediately contact consumers that purchased fraudulent, unsafe products.”

The Growing Role of Banks

Fox sees banks operating from the side instead of in the middle, and increasingly responsible for creating trust and validating identity.

“Bitcoin likely won’t enter into B2B transactions because it’s a fluctuating asset, not a currency, and companies don’t traditionally pay each other that way. True currencies will be on the blockchain, requiring banks to validate and move the physical money, and settle transactions. Institutions that move fastest to create chain-based banking will win,” he said. “Banks will figure out new ways to generate revenue such as charging for currency conversion or providing interest on money that’s in the chain.”

Know Your Supplier’s Supplier (KYSS)

Blockchain could help buyers make sure their suppliers aren’t using child labor, and are complying with safety and anti-corruption regulations. Information validated on the chain increases trust and lowers risk. Fox told me that SAP Ariba is partnering with Global Risk Management Solutions and Made in a Free World, and will use blockchain to validate suppliers, supporting not only good business, but competitive advantage.

“Similar to provenance, blockchain will allow third parties to post information to the chain about the authenticity of a company and its practices,” he said. “Blockchain is an opportunity to show what a high-quality company you are in a way that doesn’t exist right now.”

Blockchain’s cynics may sneer, but the real leaders are taking action now.

Follow me: @smgaler