Organizational Challenges with Blockchain Technology

By Deborah Dobson posted 02-27-2018 10:04

  

I believe that blockchain technology will have a significant impact on virtually every industry soon. While not the silver bullet to solve every problem (no technology is), it is important for leaders in organizations to begin to understand what this emerging technology is beyond what it is most thought of - cryptocurrency. The blockchain ecosystem is evolving at a very fast pace with different use cases emerging in many industries and government entities.

  • Healthcare: The Illinois Blockchain initiative has launched several pilots including a birth registration pilot to develop secure identity solutions. Also, a pilot to develop blockchain health provider credentialing solutions.
  • Supply Chain: Walmart and IBM have partnered to pilot a blockchain solution to bring safer food to consumers. Provides real-time traceability throughout the supply chain.
  • Higher Education: MIT offered graduates the option to receive tamper-free digital diplomas leveraging blockchain technology in 2017. Students can quickly access their digital diploma, and employers are able to easily verify the authenticity.

In this post, I'll present the key challenges for organizations, along with questions leaders should be asking to better understand if blockchain is the best technology solution to solve the organizations goals or solve a particular problem.

Awareness and Understanding

One of the biggest challenges is a lack of awareness of blockchain technology, especially outside of the financial sector, and an understanding of how it works. Leaders must educate themselves about the technology or risk being left behind. Key questions leaders should ask:

  • Is anyone in my industry exploring blockchain use cases? Pilot programs?
  • Are there any blockchain thought leaders in my industry?
  • Whom do I turn to in my organization to explain blockchains?
  • How do we increase the level of understanding at all levels within my organization?
  • Is blockchain right for my organization? And if so, how are we thinking about applying it and what would this mean organizationally and culturally?
  • With whom do I interact within my organization to collaborate and deliver?

Culture

A blockchain represents a total shift away from the traditional way of doing things even from those industries that have already seen significant transformation from digital technologies. It places trust and authority in a decentralized network rather than a powerful central institution.

When implementing a new technology, 80 percent involves changing business processes with the other 20 percent being the actual technology implementation. Blockchain is no different. Key questions leaders should ask:

  • What are the business processes that would most benefit from blockchain?
  • Who in the organization would most be affected by blockchain implementations and are they supportive?
  • Which areas of our business are likely to be most disrupted?
  • Have we thought about the potential impact on our strategy, organizational structure, business processes, governance, talent and legacy systems.

Cost and Efficiency

The speed and effectiveness with which blockchain networks can execute peer-to-peer transactions comes at a high aggregate cost, which is greater for some types of blockchain than others. This inefficiency arises because each node performs the same tasks as every other node on its own copy of the data to be the first to find a solution. For the Bitcoin network which uses proof-of-work approach in lieu of trusting participants in the network, the total running costs associated with validating and sharing transactions on the public ledger are estimated to be as much as $600 million a year and rising. Key questions leaders should ask:

  • Is there a business case for implementing a blockchain? How do we make it pay off for the organization?
  • Are there bottlenecks in the processes we are replacing with blockchain?
  • What are the main drivers of cost in a blockchain implementation?

Regulations and Governance

With the New Year, a number of bills have been introduced in state House and Senates. The problem with most emerging technologies is that regulations have struggled to keep up with emerging technologies.

Regulators in all industries will have to understand the technology and its impact on the business and consumers in their sector. Key questions leaders should ask:

  • How do current regulations impact our application of blockchain?
  • Where are regulations lacking?
  • What will a regulator want to know about our application?
  • How do we work with the regulator to bring our application to market?
  • What else might we have to do alongside the existing rules to keep regulators happy?

Security and Privacy

With the tremendous increase in the number of data breaches in 2017, security and privacy has become something that organizations are very concerned about. While some argue that while no technology is completely secure, no one has yet managed to break the encryption and decentralized architecture of a blockchain. There were some data breaches in 2017, but most were related to security issues with the programming code or scams. Key questions leaders should ask:

  • How are we applying security to our application and how is access controlled?
  • Who has access to the ledger and how is access controlled?
  • Are there any potentials with issues in the code that the developers have programmed?
  • How well has the code been tested?
  • How are updates to the software or application agreed and made?
  • Have we thought about what our customers think about our application beforehand?
  • How are we engaging with our customers?

Conclusion

Blockchain technology has the potential to transform many industries including government. But, it is important, as with any technology implementation, to ask the right questions to determine if the technology is the right fit for solving the problem. Not every technology is. It is critical that leaders become familiar with the technology and various use cases to be able to determine if the technology is one the organization should invest in and be able to articulate to others in the firm that it is the solution to solve a problem. While a leader does not need to become a technical expert in blockchain technology, having a good understanding of the issues the technology can or cannot solve is an important part of determining if it is a fit for their organization, and to be able to advocate for leveraging it.


#FutureandEmergingTechnologies
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