Blockchain is often hailed as one of the most transformative technologies on the horizon, but many firms feel resistant to a tool that is unproven, cost-prohibitive, and above all, threatens traditional revenue sources.
To help firms make informed strategic decisions about this technology, the Mack Institute introduces a new white paper laying out a road map and key questions for blockchain adoption. We offer managers insight on considering whether their organization needs blockchain right now, how it might impact their existing business, and strategic choices for implementation.
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Blockchain’s potential benefits span industries, and many companies today are actively considering adopting it to explore its transformative potential. How should firms approach such a promising but risky new technology?
The technology is often confused with Bitcoin, but its applications extend far beyond cryptocurrencies. Blockchain can pave the way to a reconfigured world in which banks, insurers, utilities, retail firms, media companies, hospitals, and law firms all communicate with one another effortlessly. In a world with widespread blockchain adoption, business models would change drastically: Utility firms would arrive on maintenance calls because customers’ smart home systems had triggered service delivery and already contacted the insurer and bank for payments. Retailers shipping products from remote villages across continents would clear border security and customs checkpoints in seconds, tracking the process every step of the way. Pharmaceutical companies would more easily trace drug ingredients to their source, vastly reducing the incidence of the counterfeit medicines that plague today’s supply chain.
Using blockchain, media streaming firms could track content usage with precision. Even little-known artists would receive royalties accurately and instantly. Copyrights of all types of art could be traced and intellectual property rights enforced globally.
Software service firms would have access to customers’ digital identities, enabling a holistic view of their service needs. Hospitals, too, would have a secure and comprehensive view of patients’ health, medication, and lifestyle, just as banks would of customers’ financial affairs. Each firm, regardless of its size, would be able to capture a holistic picture of customer needs and customize its services at an individual level.
Hospitals could deliver precision treatments since smart wearables would monitor patient health and communicate necessary stats to doctors. Pharmaceutical companies could develop more drugs for orphan diseases because they’d have access to sufficient patient samples from across the world upon which to perform research.
Banks would not only make payments across international borders in seconds, but also automatically file taxes and manage customers’ wealth. They’d communicate with foreign banks and provide visibility into necessary documentation and sources of funds, making financial transactions globally accessible.
Energy distribution would change with peer-to-peer energy exchanges and smart grids that widen revenue streams. Governments could make financial inclusion a reality and manage welfare programs effectively with tamper-proof digital identities. Increased transparency in government services, welfare payments, and voting could substantially decrease opportunities for corruption.
Overall, blockchain enthusiasts envision a seamless world of digitized transactions. The technology’s anticipated business value ($3 trillion by 2030) and projected annual cost savings ($2-6 billion) make it one of the most potentially transformative technologies on the horizon.
Despite these exciting possibilities, it is not always obvious whether a particular company should adopt blockchain, or when and how it should go about it. Technology-driven companies do often succeed at outpacing competitors, but the right firm capabilities and market timing are critical for success. Therefore, managers should exercise caution before committing. It is crucial to carefully analyze the firm’s need for blockchain, its anticipated value, and the firm’s capabilities before investing in the technology.