J for Joker- when is blockchain getting serious?
We stand on the brink of the fourth industrial revolution. Businesses are increasingly looking to raise efficiencies, optimise processes and outperform the competition with the help of innovative technological tools. However, it is often difficult to understand all the implications of a novel solution and how it could contribute to a company’s success in practice. This is especially true for blockchain.
The false rumours and promises originating from the blockchain hype in 2018 have often positioned the technology as the disruptor of all industries and solution to any problem.
Despite the promising capabilities, blockchain is not an almighty joker technology.
Therefore, it is imperative to examine how blockchain technology can fit into your specific business case before rushing to implement it.
Let us share with you a smart guide, based on the Blockchain Value Framework of the World Economic Forum, to decide whether you can take blockchain from use case to business case.
The Blockchain Value Framework
The blockchain value driver framework aims to help organisations identify the value of blockchain technology in their specific use cases and build a corresponding business case. It is based on a global survey of 550 individuals across 13 industries, dozens of interviews with public sector leaders and private sector chief executive officers, and an analysis of 79 blockchain projects. The projects were evaluated across three main value dimensions: 1) Improving productivity and quality; 2) Increasing transparency among parties; and 3) Reinventing products and processes.
The framework helps to connect your specific business needs to the values blockchain can deliver. Starting with evaluating your pain points and opportunities you will be able to identify solutions, picture how the technology fits in your case and match value drivers. Value drivers range from automation and increased trust to data sharing. These can be connected to tangible business benefits, such as cost reduction or increased revenues or intangible advantages as enhanced privacy or better collaboration. These value drivers will be the base of considering what blockchain brings to your business.
Some of the value drivers can also be achieved through other technologies. Hence, it is important to consider blockchain’s added value and cost in the specific model.
Below you will find a step by step guide through the blockchain value framework.
Guide to evaluating whether your business needs blockchain
- Understand the pain points and opportunities of your current business
Start with evaluating your current pain points and where you could create additional gain for your business. Review all your internal and external processes and identify areas of improvement.
This step will ensure that you focus on what matters most for your organisation, without distractions around possible solutions and available technological tools.
- Prioritise your pain points and opportunities
In the next step prioritise your pain points and opportunities and how much do these affect your business. Rank them according to the impact a potential solution could have on your business success.
- Group these needs in benefit categories
To identify whether blockchain could represent a solution to your problems you will need to categorise your needs to the following four groups.
- Improving productivity and quality: pain points and opportunities which are connected to making an existing procedure more efficient or better performing
- Increasing transparency among participants: points related to communication and information sharing
- Reinventing products and processes: all of the opportunities which could elevate your business model by redesigning a current procedure or adding a new one
- Other benefits: If your pain points or benefits do not fit into the above categories add them here. These needs might require a different solution than blockchain.
- Match blockchain capabilities to your needs
Turn your attention to the above pictured value framework. The three categories include a list of capabilities, often working in conjunction, which can help to solve business needs within that area. Evaluate which capabilities can solve your specific problem to which extent. This is the step where you connect your business needs to blockchain capabilities, and validate that blockchain can truly add value to your business.
Keep in mind the previously indicated business priorities, and aim to solve the most aching problems and high-impact opportunities.
- Identify where value will be created
Once you have selected the most efficient applications of blockchain to your business case you will need to define the areas of value creation. Link your business needs and opportunities to the value drivers, and the components of your business it will affect. Aim to connect these value drivers to tangible business benefits such as cost savings or increased revenues.
- Understand the pain points and opportunities of your current business
Example: Freight bill audit and pay
As described in the Blockchain Value Framework: Billions of dollars a year are invoiced to organisations for freight moves by truck, train, aircraft and ship. The freight bill audit and pay (FBA&P) process involves matching invoices against the services rendered prior to payment remittance. The shipping process starts with negotiating shipping rates, completing the purchase order, tracking the shipment, calculating and auditing the invoice, and finally paying the carrier. Along this process, there are numerous pain points and potential areas for discrepancies, each of which increases the risk of mismanaging or incorrectly paying an invoice.
|Pain points/areas of opportunity||Priority
|Possible solution||Benefit category||Enabling capability||Value driver|
|Difficulty in managing missing and changing rates, which leads to downstream invoicing problems||8||Having a single shared source of previously agreed upon information can ensure everyone is aligned on the rates and corresponding terms and conditions||Increasing transparency among participants||Holistic view||Transparency|
|Lack of visibility in goods movement and shipment location||7||Being able to track the shipment in real-time provides all parties with increased confidence in their goods and the ability to quickly react to any unexpected disruptions||Improving productivity and quality||Full traceability||Track and trace|
|Inaccurate rates or calculations being used for the invoice, often caused by lack of visibility or confusion on metrics such as number of miles travelled, time to complete the trip etc.||7||Primary organisation would no longer need to trust the accuracy of the shippers’ data or calculations, such as the number of miles travelled or time to complete the trip, as this data can be automatically gathered and shared with all parties on the blockchain||Increasing transparency among participants||Holistic view||Data sharing|
|Use of third-party auditors that are costly and lengthen the process||6||Using smart contracts and blockchain technology, the level of effort to audit invoices is greatly reduced. Many activities, such as reconciliation, are eliminated through having a single shared document, while others are automated through smart contracts calculating invoices based on agreed-upon rates and tracking data.
Machine learning technology could also help automate processes, although it does not provide a single source of truth.
|Improving productivity and quality||Automation||Auditability|
Innovation, outside of basic R+D, should always happen with a goal in mind. This is why it is important to identify first the business opportunities before starting to think of the technological solution. It will ensure that the technological tool matches our situation and will deliver maximum value to our organization. The blockchain value framework helps to map our organization, identify needs and connect it with blockchain’s capabilities.
If you want to know more about how blockchain can match your business needs get in touch.