There is little to doubt on the potential of blockchain technology. Everyone agrees that this open-distributed ledger mechanism can revolutionize the businesses across the sectors. Having said that, we are yet to witness the use cases of blockchain technology which have scaled beyond their pilot phase and achieved the desired level of expansion. Most of the organizations that have started with the blockchain project are finding it difficult to scale the application of this technology to leverage its profit-generating potential.
Logistics and Financial Services Industry
Consider the most widely use cases of blockchain technology whether, in the supply chain, or real estate, none of the organizations has gone for enterprise-wide adoption of technology until now. Yes, there is an exception regarding the financial industry where blockchain Technology has resulted in many innovative customer solutions but saves for that, no other industry seems to be benefitted much from the blockchain. This is also aptly visible from the projected investment on the blockchain technology in the coming years.
According to IDC, the spending forecast on the internet of things (IoT) in 2019 is estimated to be around $745 billion which translate into an increase of 15.4% compared to $646 billion spent in 2018. The investment in blockchain technology, on the other hand, is expected to reach $11.7 billion in 2022 from its estimated level of $1.5 billion in 2018. One can easily compare the investments and easily deduce the little share of spending on blockchain which indicates that the IoT industry itself is not very bullish on spending on blockchain technology.
In a recent blog post by the consultants Matt Higgison, Marie-Claude Nadeau, and Kaushik Rajgopal, McKinsey & Company, it was observed that despite all the headlines and huge investments in the blockchain, there is little proof on the ground about the scalable use of the technology. This lack of evidence on the practical grounds is something that is hampering the sentiments of blockchain adoption. The Trio noted that the practical usage of blockchain technology had been manifested in three specific areas so far:
Niche application: Blockchain has proved very significant in a few use cases like in the financial industry and logistics, and that makes it a niche application suitable only for some particular purposes. For instance, take the logistics where the blockchain is used to track the status of the asset and its ownership and proved to be immensely beneficial. Similarly, in the case of financial services, blockchain is helping in carrying out cross-border transactions efficiently and with little cost involved in the process.
Modernization value: Blockchain has also manifested its significance in the processes, departments, divisions, or the entire industry where the current setup is not able to meet the changing customer expectations and preferences. Take, for example, the financial services industry where although the existing processes are doing all right in terms of delivering the services, they fail to cater to rising expectations of the customers. The conventional processes adopted by the industry have left room for unnecessary delays, numerous errors, and difficulty in settlements of the cross-border payments. No Surprise, blockchain technology has quickly made deep inroads into the sector owing to its characteristics like high accountability, security, and ability to streamline transactions without any unnecessary fuss. In fact, the use of blockchain technology has kick-started the modernization process for the entire financial space and is now considered as an engine for fueling the next phase of growth in the industry.
Reputational Tool: The Trio consultant also noted that many companies are undertaking blockchain projects to enhance their reputation among the investors and customers. Adoption of this new technology will add to their innovation credentials and hence, the companies find it beneficial to invest in the blockchain projects. The proof in this regard is the numerous press releases and uncountable headlines announcing the adoption of blockchain appearing all across the media month after month.
From the cases mentioned above, it becomes quite clear that blockchain has the potential to succeed in specialized areas compared to instances where it is being used to tom-tom about company’s reputation and innovative credentials. According to the consultants, for a blockchain technology to be successful, an organization must start with a clear-cut definition of the problem and its business case, target the return on investment (ROI), and must commit to adopting blockchain technology in an enterprise-wide manner. It is also important to take a plunge into blockchain only when there is no other alternative technology which can provide a satisfactory solution. It’s exactly why the blockchain has witnessed so much success in the financial services industry compared to any other industry. Further, the adoption of blockchain must prove beneficial to the entire value chain – because only then the blockchain’s adoption can scale enough to provide good ROI. In sum, blockchain has the potential but the company’s need to be judicious while selecting the projects for its implementation.