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How Blockchain Solutions will Impact the Business Environment?
Sunil Kumar, AI and Blockchain Leader for C&P and IP, IBM
As rightly labelled, Blockchain is a team sport and as much as it needs the support of adoption by all the players in the business value chain namely suppliers, customers, regulators and business partners. Irrespective of whether blockchain solutions are implemented to address a specific pain point or for exploiting a new opportunity, benefits can be realized by every stakeholder in the entire business environment.
Figure: Impact of Blockchain solution on the business environment
Much more than a technology to automate business transactions, blockchain solutions enable a new model for trust by establishing new types of transactional relationships between businesses via smart contracts, certifications and digital compliance.
The high cost of doing business coupled with increased customer expectations has driven businesses to reduce costs, almost to the point of sacrificing their future. A step change is now needed to enable sustainable growth and blockchain adoption could deliver that winning strategy for businesses.
In large capital projects involving numerous suppliers, better transparency and upfront agreement using blockchain smart contracts has the potential to produce back office efficiencies and working capital benefits of up to 3 percent of capital project spend.
Supply chain and trade finance processes involve numerous manual processes, time consuming reconciliations and inflexibilities which can be streamlined using blockchain, realizing a 20 percent reduction in back office costs while capturing the provenance of products/equipments/materials with drastic reduction in supply chain delays, incidents of fraud and better product value realization.
Global trade digitalization platforms using blockchain can enable the entire ecosystem of manufacturers, shipping lines, freight forwarders, port and terminal operators and customs authorities to benefit from single real time end to end visibility of supply chain in a secure manner along with reduced time and costs due to automation.
Within the customer facing business environments, companies can improve customer loyalty and margins by managing the issuance and usage of loyalty points and target the most profitable customers in a more effective and efficient manner.
Blockchain solutions enable a new model for trust by establishing new types of transactional relationships between businesses via smart contracts, certifications and digital compliance
Communications and data transfer between remote business offices, manufacturing units, warehouses and corporate offices continue to face increased cyber risks and delays which can be eliminated by blockchain cryptographic techniques which makes it highly secure, immutable and tamper proof as well as auditable.
Additionally, blockchain has the capability to eliminate inefficiencies by removing time and costs associated with intermediaries, thus improving business performance and enabling new business models for businesses; e.g. reducing the need for brokers that charge a fee connecting manufacturers and consumers or integrating decentralized energy sources directly into high availability balancing markets.
Impact on Business environment increases with network size of blockchain
Blockchain solutions enable businesses gain better efficiencies in specific manual intensive business process and the value increases as these solutions are deployed across inter company operations. Highest impact is achieved as these blockchain solutions are deployed to enable new market models and re-invent the industry functions. Hence to realise the full potential of blockchain solutions to the business environment, organizations need to think big but start small.
Figure: Impact of Blockchain solution based on network size
Practical benefits of blockchain adoption achieved by select businesses
• Reduce the cash cycle time from days to almost instantaneous.
• Make transactions more efficient by lowering overhead and reducing the number of costly intermediaries.
• Increase transaction visibility to make tampering, fraud and cybercrime much more difficult.
• Increase the level of trust in transactions by using shared processes and record keeping.
Some client blockchain adoption examples
• we.trade a consortium of twelve European banks is using blockchain to create a transparent, secure and simplified trading environment for businesses and banks.
• TradeLens, an open and neutral industry solution underpinned by blockchain is applying blockchain to the world's global supply chain to promote more efficient and secure global trade, bringing together various parties to support information sharing and transparency, and spur industry-wide innovation.
• Food Trust Blockchain Solution is digitalizing food supply chain in an immutable manner to enable traceability, improve efficiency and reduce risks.
In summary, blockchain solutions have the potential to generate substantial benefits for businesses and their entire business environment by enabling them all to become more productive and capture new revenue streams faster.
Businesses need to understand how best to extract value for their business environment from blockchain solutions and develop an adoption strategy to take advantage of the many benefits considering their impact on every stakeholder and the new business possibilities it opens.