Given its wide range of potential applications and required changes in infrastructure-level processes, blockchain is considered by some to be more disruptive than the advent of the commercial Internet. The degree of change, some believe, could exceed those required by retailers that joined the e-commerce revolution in the late 1990s.
As a result, retailers need to move quickly to gain experience with blockchain technology and understand how it will impact their organizations. The Internet’s commercial coming of age is instructive. Rather than explore this new sales channel, many retailers decided to wait until it was clear whether online shopping would be accepted by consumers. By the time the competitive threat from online merchants went from pipe dream to blatant reality, many retailers found themselves at a disadvantage to born-digital competitors that had captured first-mover advantages.
With blockchain, early adopters will influence the development of networks and consortia, including the choice of participants and governance rules. By road-testing potential applications, early adopters can develop and test pilot applications quickly, while assessing their internal readiness to support blockchain solutions.
Retailers that move quickly to test blockchain will gain a better understanding of potential use cases, develop an appreciation of their costs and benefits, identify their internal strengths and weaknesses, and begin planning with their supply chain partners. The result will extend beyond early operational efficiency gains and reduced costs to accelerated time-to-value from full-scale adoption of pilot projects that prove successful and deliver competitive differentiation (i.e., quality improvements that drive strategic advantage from a reputational perspective).
While nearly all respondents said blockchain will be important to their company’s success, only a minority said they have taken steps to prepare for its adoption. A total of 39% of respondents said their organization has identified the functional areas and business processes that could be impacted by blockchain, and an additional 55% said they are currently in the process of making this assessment.
Today, blockchain involves more theory than practice. Retailers need to make it real, identifying concrete business problems that the technology can address and tangible benefits it will generate. For each use case, the organization should:
- Specify the actions needed for implementation.
- Assess the resources required, create a process map and develop an implementation guide.
- Determine KPIs that can be used to evaluate success. The KPIs will not only allow the organization to assess performance but can also help to communicate value to senior management.
Developing an Effective Blockchain Strategy
Retailers need to develop a cohesive blockchain strategy rather than taking on projects in a piecemeal fashion. Strategy considerations include:
- Blockchain projects should be driven by cross-functional teams with a business sponsor. Ensure the blockchain project addresses specific business problems or opportunities. Rather than emanating from IT, the initiative should involve business stakeholders from the outset.
- Set clear goals. Assess whether blockchain technology is well suited to the business issue being addressed and clearly specify which objectives will be achieved.
- Don’t wait until costs and benefits are clear. Learning will be iterative, and costs and benefits may only become defined more clearly as the project progresses. In addition, many reasons to move forward are strategic in nature and cannot be quantified at the outset.
- Stay flexible. Recognize that blockchain is still in the early stages of development; innovation will continue, and the infrastructure will evolve.
- Explore a variety of platforms, including both permissioned and permissionless. For each use case, choose a platform based on how well it is tailored to the business need, and not the one with the most buzz.
- Gain experience collaborating with other players across the value chain. Don’t underestimate the importance – and challenge – of managing people to create an effective culture of collaboration. Work with industry partners on blockchain projects and assess the obstacles in working successfully with external organizations.
- Focus on blockchain projects with real-world potential. The risk of doing nothing is greater than the risk of doing the wrong thing.
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