Is blockchain a suitable solution for a particular business need? If it’s suitable in a business sense, is it technically viable? Should you build a blockchain solution, or be ready to integrate with a blockchain network built elsewhere in your ecosystem of partners and providers?
Blockchain has real potential to solve thorny business problems, particularly in cases where it can streamline processes across organizations and enable parties to transact more efficiently. Think of financial processes like trade settlement in commodities, or complex operations processes like supply chain management in Manufacturing.
But sometimes scenarios that look like opportunities for blockchain solutions don’t turn out to be a fit. The evaluation process needs a set of formal criteria that considers both suitability and viability.
To determine business suitability, start with these high-level questions:
- Do multiple parties across different companies share data in a business process?
- Do multiple parties need to both read and update data?
- Is there a need to verify data and transactions between parties?
- Can outside intermediaries be removed to allow parties to transact directly with one another?
- Are there asset transfers between parties that need to be tracked?
Once these general qualifiers are covered, additional questions can help to validate the business case and ROI:
- Does blockchain help to relieve specific pain points in the current state process, or does blockchain add new value?
- Are there clear benefits and incentives for members to participate in the blockchain? Can the ROI for all parties be quantified?
- Is Blockchain the best technical solution, or could other technologies be used to accomplish the same business objectives?
If a number of these questions are a “no,” then blockchain may not be a fit. There are also cases where blockchain may be technically viable but would be overkill for business needs. For example, if your goal is to simply integrate data across companies and there is not a requirement for transaction signing and verification, then conventional technologies would serve the need.
If the answers are “yes,” the next steps are to dive deeper into requirements planning and to assess additional key areas. Is there direction and readiness for blockchain in the target industry? What competitor offerings are available or in development? Is the solution technically viable with current distributed ledger technologies? Each of these aspects points toward additional layers of exploration.
Build or Integrate?
After addressing business needs, explore how the transformation will look and identify the advantages of building versus preparing to integrate with a system another party builds. Will your company be the founder of a blockchain solution, or will you be a member in a wider blockchain network of industry partners? If you do build it, how can you ensure it’s built with the right standards?
Many companies are exploring these questions and evaluating blockchain for potential benefits to optimize processes and save cost, or to create services that will generate new revenue. Companies engaged in blockchain discovery are aware that in some cases the solutions will come from the largest drivers in the market. Think Walmart or FedEx building solutions that their partners and suppliers will use. Large companies are engaged in a growing number of blockchain consortia globally in industries like Financial Services, Insurance, and Transport. The growth of these groups demonstrates the need for companies, even competitors, to work together to advance enterprise standards and interoperability in order to maximize the shared benefits from blockchain solutions.
After you have vetted the solution from a business and market perspective, then look at it with a technical lens. You need to ensure your solution fits with current blockchain platforms and emerging capabilities. Know that any blockchain solution you roll out now is necessarily a first-release solution. It will change over time as the technology evolves.
Here are some of the key technical questions to consider when assessing solution viability:
- What are the transaction and contract privacy needs for the solution?
- What is the governance model for changes to the blockchain network and smart contracts? How will changes be approved and managed?
- What are the transaction performance and latency specifications?
- What is the best consensus protocol for the solution?
Based on the answers, you can assess and qualify which distributed ledger technology platforms are an option, and what areas of customization or extension may be required to achieve the required capabilities. For example, the proof of work consensus algorithm and mining used in public cryptocurrency blockchains are generally not a fit in private, permissioned blockchain for business scenarios. Prominent, open source platforms like Ethereum have extended versions (such as Quorum and Parity) that implement Proof of Authority consensus along with other enterprise features. Once technical viability is validated, it’s important to design solutions in a flexible way so that they can port forward as there are changes to the base platform.
Where to Start
Transformation with blockchain often involves a phased approach that starts with augmenting current business processes and then builds toward more decentralized models over time. ROI may be incremental as the solution evolves. In order to define a build strategy with clear scope and success criteria, it is key to first engage in discovery to determine blockchain suitability, understand ROI, and assess technical viability.
At Concurrency, we’re helping clients on the path toward blockchain solutions in several industries including Manufacturing, Energy, and Healthcare. If you’d like to discuss our framework for helping you establish suitability and viability, let us know.