Ignorance is not bliss – boards need to know about blockchain
Senior management, executives and non-executive directors (NEDs) on company boards need to learn about blockchain or their businesses face missing out on the technological advances, improved systems and cost savings blockchain offers.
Some sectors – for instance media, telecoms and healthcare (in the US) – have embraced blockchain technology more than others, realising the competitive advantage gained by doing so. But many other sectors, financial services being one example, have yet to deploy blockchain at any great pace.
One of the stumbling blocks is a divergence in opinion at boardroom level as to the essential nature of blockchain technology to future business success. According to a recent Gartner survey in 2018, 77% of CIOs said their company had no interest in blockchain technology.
But if incorporating blockchain into a business model is fundamental not only to a company’s future prospect but its’ very survival, what do boards need to know and who is going to tell them?
In terms of what boards need to know, a starting point is to understand what blockchain is and what it can and cannot do.
One of the key benefits of blockchain technology is that a company can use it to monitor and track products as they pass through a supply chain. As merchandise passes from one entity to another, a digital token is exchanged between the parties and an indelible record is kept. Supply chains can be monitored in real-time by all participants, providing a reliable check on fraud and mismanagement.
Essentially, as goods are passed from one firm to another, the data held by both companies will be identical, as they’re using the same blockchain.
Blockchain in action
Provenance is a software company specialising in blockchain technology one of its clients is the food retailer Co-op. The food industry has seen a rise in false claims, leaving shoppers confused and supply chains at risk. Food may have been farmed using ‘slave labour’, waste management practices may be poor or safety and environmental standards may be being neglected.
Provenance’s role in working with Co-op is to empower customers with the information they need to make confident decisions on what they buy, how it is produced and where it has come from. With interactive labels that link physical goods to their digital journeys, brands can convert marketing and product claims into data-powered information to trust.
Businesses can easily store and view verified claims on the blockchain. Provenance is using public blockchains – Bitcoin and Ethereum – to present transparent and secure data to consumers,not just end consumers but consumers along the chain. This overcomes the traditional and flawed practice of information kept in separate silos.
In this instance, Co-op food and digital teams were able to track the journey of fresh produce from source to shelf in real-time. At every point in the journey, data was gathered about supplier and their locations, as well as the environmental and social impact of each business.
Provenance linked together data from the farm, factory (packaging and labelling), Co-op depot and retail branches, building a digital history that store colleagues, the food team, and shoppers could all access.
Using sell-by dates as unique batch IDs, it was possible to match each product correctly to its corresponding journey. For a company intent on building brand loyalty and retaining the trust of consumers, blockchain can play a key role.
Beating the counterfeiters
Those who fail to adopt blockchain early into their business model – especially those in the high-end consumer fashion world – could lose competitive advantage. This is because blockchain can also foil counterfeiting because it provides greater traceability allowing companies to ensure products are both authentic and safe.
As reported on Open Ledger earlier this month, the Global Brand Counterfeiting Report 2018 estimates losses of global online counterfeiting of $323bn with luxury brands alone accounting for losses of $33.3bn. Thankfully blockchain can ensure that consumers who want the ‘real thing’ get what they pay for.
Not only are customers satisfied but manufacturers and retailers are able to combat the huge losses to fake producers who are unable to verify the quality and origin of their goods. The online claim of ‘brand new with tags’ will count for nothing if there is no evidence of a link to the bona fide manufacturer and their supply chain.
Getting the message across
Whether it is supply chain clarity and efficiency, faster and safer payment or guarantees of product authenticity, the tangible benefits of blockchain still need to be spelled out to many companies.
Regulatory hurdles and a lack of business understanding mean that the benefits of blockchain innovations can be slow to benefit the wider economy.
As Roxanne Morison, CBI Digital & Innovation Principal Policy Adviser told Open Ledger, the more companies see what each other are spending and dedicating to blockchain; the greater the momentum there will be for it to become a necessity rather than an option.
“Blockchain is rapidly moving from the innovation fringes to the business mainstream,” she says. “Over the next five years, it holds the number two spot as the technology set to impact businesses across all sectors.”
Morison points out that from construction to retail, businesses are looking at how blockchain can help solve age old problems with sharing information. However, she suggests that while sectors may be supportive of blockchain in general, individual businesses may be reticent about taking the first step. Constructive dialogue between businesses, networks and industry bodies may well prove the key.
“While businesses expect blockchain will impact their sector, individual firms are less ready to take it up. Improving awareness, building business networks and creating a supportive regulatory environment will be crucial to the UK leading the way in blockchain technologies.”
Too slow, too late?
While regulators may only just be getting their heads around what blockchain means, going forward adoption could bring about positive change. For instance, blockchain could provide a way of cost-effectively generating and sharing data with regulators while alleviating the weight of ‘report exhaustion’ many organizations and companies are currently confronted with.
Those companies and organisations that are quicker to adopt blockchain may find themselves in the ascendency in stark contrast to those who hold fire. And the landscape may change rapidly too. Technologies such as the cloud were seen as niche a few years ago; now they have matured to underpin much of business infrastructure. The same potential is there for blockchain.
Blockchain needs to get into the boardroom. It needs a seat at the table.