Don’t let blockchain hype become your excuse for inertia – blockchain supply chain can ensure trust

I’m a great advocate for the potential of blockchain. I’m heavily involved in exploring and developing applications for blockchain supply chain. We’ve launched early deployments of blockchain on our platform to offer early payment to suppliers, and we’re working with the technology to improve transparency and traceability across supply chains.

We have always believed that the future of supply chains live and die by its digitisation. The World Economic Forum says blockchain can “restore trust in global trade” by ensuring records can’t be duplicated, manipulated or faked, and by increasing visibility in the supply chain. I share that view – up to a point.

Blockchain and privacy: Can a form of distributed ledger solve the problem of privacy? imageBlockchain and privacy: Can a form of distributed ledger solve the problem of privacy?

We have a privacy problem. GDPR is an attempt to deal with this, but it is battling a seemingly inexorable force. To many, both users and data processors, the GDPR solution feels like wading through treacle. It is especially a problem for users, many of whom end up just clicking ‘yes’ or ‘accept’ rather than being forced to read privacy policies and decide which advertisers they are willing to give permission to.

I believe blockchain has the potential to become a powerful mechanism for ensuring trust among distributed parties. The emerging technology however, doesn’t come equipped with governing mechanisms to completely ensure that the transaction data that is answered is input in a honest and correct fashion. While taking a step back, I can understand the potential impact this technology can have on the supply chain, but trying to look beyond the hype, we need to be realistic about how to scale adoption and volume and not get carried away by technology alone.

There are a number of fundamental challenges which need to be addressed before blockchain can even begin to have the impact many are touting:

  • Adoption: Participants in the supply chain need incentives to join. Forty years of digitization and standardization efforts show that this has not been enough to move B2B digitisation forward in any remarkable fashion. As recent challenges for industry players like IBM and Maersk indicate, blockchain supply chain alliances will not create value for participants unless the governance and economic models entail a widespread and inclusive ecosystem. To offer real incentives to participants, we need to be thinking of blockchain ecosystems as networks of buyers, sellers, banks and logistics providers that each contribute to a shared value-add.
  • Openness: Players in the supply chain need incentives to join. But until all constituents are connected in an open, digitized network, this will remain a niche play for a handful of large trading partners. We need to build the network of buyers, sellers, banks and logistics providers, then deliver blockchain capabilities on top.
  • Governance: While blockchains provide a secure record of transactions entered, blockchain supply chain alone cannot verify the information entered is truthful and correct. In supply chains, where businesses seek to guarantee the provenance of goods, there needs to be protocols and governance in place to ensure accountability and mutual verification of the information entered by each participant.

In theory blockchain provides a shared view into transaction without unveiling certain, sensitive data of buyers and sellers. However, blockchain alone isn’t enough. Any effective blockchain supply chain solution must be able to provide access to everyone in the network and offer sufficient value in return, so that all parties have incentive to join.

A guide to blockchain-as-a-service (BaaS) imageA guide to blockchain-as-a-service (BaaS) for CTOs and IT leaders

As servitisation business models continue to grow in popularity, it’s only natural that we are now seeing as-a-service offerings emerge for blockchain applications. Blockchain-as-a-service (BaaS) has established a strong market presence and is promising enterprises a way to utilise the much-hyped technology

Blockchain’s ability to guarantee trust is often confused with the fact that it will safeguard and verify all transaction data that is input. What we really need is a system that can generate a ‘digital twin’ for goods moving through the blockchain supply chain, but without proper governance, digitisation and connectivity, blockchain all on its own cannot support the global supply chain.

Will blockchain fundamentally rewire our increasingly digital and interconnected global economy? Yes. I have no doubt about that. But the technology still has a long way to go before it’s ready to fully support global supply chains. If my experience has taught me anything, it’s that the nature of innovation and technological advancement takes time, deep foundational change never happens overnight.

I’m OK with that – but expectations that blockchain is some kind of cure-all will just delay and complicate the journey. If you think blockchain supply chain is the answer to your problems today, then you’re probably not starting with the right questions.

The real revolution today is not blockchain, it is the digitisation of relationships. However, the lack of digitisation and connectivity in the supply chain today remain the key barricades for the adoption of emerging technologies like blockchain and artificial intelligence. The fact is that a lot of the use cases that today are being published for blockchain can either be addressed with current technologies, depends on efforts that are 95% based on current technologies.

Applications of blockchain; it won’t be foreign & intimidating anymore imageApplications of blockchain; it won’t be foreign & intimidating anymore

Applications of blockchain are emerging, it is becoming so much more than a means for creating a cryptocurrency

In all the excitement and hype over blockchain we sometimes forget to look around and ask what established patterns and business models are out there that can help us understand how to really understand the potential of Blockchain.

Too often we make the mistake of starting with the technology. What businesses are really attracted to is the idea of openness, transparency and share of value across a digitally connected network. If we can start by breaking down the confines that buyers and sellers are operating in, we will unlock a more digital and transparent future, driven by the value unlocked by breaking down those confines.

The blockchain revolution: Change, barriers and the future landscape imageThe blockchain revolution: Change, barriers and the future landscape

Blockchain, the technology on the tip of everyone’s tongue, is explained by Dave Locke, Field CTO at World Wide Technology

Once companies become connected digital businesses, as the technology and the ecosystem around blockchain continue to mature, companies will be more prepared to take advantage of what blockchain will soon have to offer.


Gert Sylvest, is GM of Frontiers, the digital innovation arm at Tradeshift .

Avatar photo

Michael Baxter

.

Related Topics