Because companies struggle to scale their blockchain projects

The benefits of Blockchain have been proven, but companies have difficulty implementing. Source: Shutterstock

NOBODY doubts that the blockchain has great potential. However, no company was able to fully exploit the power of the blockchain to scale ambitious projects beyond the pilot phase.

Regardless of the real estate sector, supply chain or even human resources, there are some cases of use of blockchain on the market, but so far no one has seen the adoption at company level.

With the exception of the financial services space, there are almost no blockchain solutions that are effectively distributed to consumers – and this is reflected in technology spending forecasts.

According to IDC, IoT spending is expected to reach $ 745 billion in 2019, an increase of 15.4% over the $ 646 billion spent in 2018. World blockchain spending, on the other hand, it was expected to reach $ 1.5 billion in 2018, and grow rapidly to reach US $ 11.7 billion in 2022.

Obviously, the comparison is not as for example, but it is indicative of how much (or little) is actually spent on the technology.

"The bottom line is that, despite billions of dollars in investment, and nearly as many titles, evidence for practical and scalable use for blockchains is subtle on the ground," said a recently published blogpost by McKinsey & Co Consultants Matt Higginson, Marie-Claude Nadeau and Kausik Rajgopal.

According to the McKinsey trio, the practical value of the blockchain is mainly found in three specific areas:

# 1 | Niche applications

In some cases of use, blockchain is the most suitable solution, and it is exactly where they are best suited.

For example, take the logistics or the financial services industry. The first is where blockchain makes it possible to monitor the ownership and status of resources, and in the second case, the blockchain breaks down the barriers to cross-border financial transactions.

In the most successful use cases, blockchain is not one of the solutions. It is usually the only feasible solution.

# 2 | Value of modernization

The projects and use cases that result from the blockchain are those that help drive the modernization of a particular department, division or process within a company or an entire industry.

Take the commercial finance space, for example. Although existing processes work well, they fail to meet the expectations of modern customers. Traditional processes create space for significant delays, errors and make settlements rather painful.

However, the use of blockchain not only streamlines the whole process but introduces a new level of accountability and transparency that would not otherwise be possible.

This drives the modernization engine for the entire commercial finance sector, which is why technology is perceived as valuable, although it is hard to say that technology alone could fuel modernization.

# 3 | Reputation value

Often, companies pursue blockchain projects only because they want to demonstrate to their shareholders that they can innovate.

This is what we have seen quite a bit of the past year with several dozens of companies sending out press releases and making news every month, announcing and sharing the progress of their new projects.

"Probably blockchains focused on customer loyalty, IoT networking and voting fall into this category, and in this context, the claims to be" blockchain enabled "are empty," McKinsey's consultants claim in their blog.

How to succeed with the blockchain?

From the three types of projects mentioned above, it is quite obvious that niche applications are more likely to succeed than those driven solely by the need to overcome the reputation of the company.

According to the McKinsey trio, for companies to succeed with blockchain projects, they must start with a problem, create a clear business case and target ROI, and accept a mandate and commit to an adoption path (at company level).

The key is to make companies dive head-to-head in blockchains when no other technology can provide a solution. That's why blockchain has actually seen quite a bit of progress in the financial services industry over any other.

In addition, for companies to effectively downsize their blockchain project to gain critical mass, they need to make sure that their business case is able to influence those in their value chain – blockchain, after all, is only useful when it is downsized to a big (r) network.

At the end of the day, the blockchain has potential, but companies interested in taking advantage of it must explore the right types of projects.

Soumik Roy
| @soumikroy

Soumik Roy is a specialist in economics and technology. Help small and medium-sized business owners understand what is most important for their company's growth and success.

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