Category

Blockchain

How GICs are Unblocking Blockchain Value | Sherpas in Blue Shirts

By | Blockchain, Blog, Shared Services/Global In-house Centers

At a NASSCOM-hosted event earlier this year, I moderated a roundtable discussion on “Blockchain: Looking beyond the hype” among executives from 20+ GICs. The discussion quickly elevated from the “what” to the “how and how not” to do blockchain initiatives.

Here are some of the key take-aways from the session, in part sparked by discussions on some of our blockchain research.

Blockchain is Inching Closer to Prime Time

Blockchain has crossed the chasm: With the definitive number of live deployments and successful PoCs, we believe that the early adopters will be able to demonstrate early results by year’s end. Because timelines for technology evolution have compressed, we also expect a wave of fast followers will invest in this space.

GICs are Taking the Lead

GICs’ innovation can transform them into Global Capability Centers (GCCs): GICs are leading blockchain initiatives, from education, evaluation, use-case design, and PoCs to live deployments. They are also externalizing the technology solutions to create newer business and revenue models, and driving blockchain adoption at speed and scale. And their R&D investments are extending beyond live blockchain deployments to patent filings to retain competitive advantage.

Building a business case: GICs are researching every possible use of blockchain in their industry. We are seeing GICs helping enterprises across a variety of use cases in insurance, capital markets, banking, supply chain, education, and technology – and one leading financial services GIC prioritized four use cases from a long list of more than 40. A framework, like the one we recently published, will help firms prioritize business use cases that are ripe for blockchain adoption.

GICs and the ecosystem: Blockchain adoption requires significant orchestration among governments, regulators, technology vendors, enterprises, startups, and customers to create a win-win environment for all. GICs are not just consortium and forum participants; they are highly active contributors to the advancement of blockchain technology maturity.

Talent is not a huge roadblock: Leading adopters have started by building a core blockchain team that invests its time in understanding the ecosystem, undergoing training, and exploring multiple use cases. Lead steers we’ve spoken with stated that re-skilling efforts to build a blockchain developer pool have not been the uphill battle that leading blockchain consulting firms hypothesized. They’ve approached re-skilling by driving blockchain awareness to a broader group in the firm, and then identifying a pool of talent with adjacent skills, e.g., Angular JS developers to be trained on solidity, for the first wave of training. More developers join these teams as they scale up. Enterprises are conducting a series of hackathons to tap into the talent pool – both in the GICs and the extended ecosystem – and provide on the job training opportunities.

On the Technology Front

Evolution of the enterprise blockchain technology stack: Enterprises are taking a fundamentally different approach than the public or cryptocurrency related initiatives in building their blockchain technology stacks. Blockchain-as-a-service vendors have helped manage the complexities of the blockchain stack for early trials and pilot stage activities. However, early stage trials that did not plan for the blockchain technology stack for the live deployment phase have found it difficult to scale up their pilots. Node-level identity and access management, interoperability, quality assurance for smart contracts, and current scalability limitations of existing blockchain consensus mechanisms and transaction validation protocols are some of the key challenges highlighted by early adopters.

Sidechains are a key feature of the enterprise blockchain tech stack, not limited to cryptocurrencies: Several enterprises are solving the data privacy issues by creating both off-chain and side-chain applications that can then write final-hash on the blockchain network. This unique approach can accelerate blockchain adoption for specific use cases. However, interoperability on different blockchain platforms is a key challenge.

With all this, there should be little doubt that GICs are quickly evolving into global capability centers that further the digital transformation agenda for the enterprise.

As we continue studying enterprises’ and GICs’ blockchain journeys, we’d love to hear about yours. Please share it with me on [email protected].

And please participate in our ongoing GIC Digital Maturity Pinnacle Model™ survey to learn more about successful GICs’ digital journeys and see how your GIC compares.

Bitcoin is to Blockchain What A5 was to GSM – A Parallel from Digital History | Sherpas in Blue Shirts

By | Blockchain, Blog

The mobile communications industry provides a historical example of how it solved a real problem with cryptography, overcame complexity, and transformed a market once viewed as a niche into something the world takes for granted. Blockchain has a way to go.

Blockchain is no longer just Bitcoin. Medical records, claims handling, fraud checking, supply chain management, national identity records and personnel background checks: all need to access data from multiple sources between multiple entities, in a secure, efficient way.

But all technology adoptions face challenges. An article by Iansiti and Lakhani in the February 2017 edition of Harvard Business Review presented that complexity and novelty are the two principal challenges. Complexity is defined as “the number and diversity of parties that need to work together to produce value with the technology.” Successful adoption requires a huge effort of co-ordination. The more parties involved in the technology ecosystem, the longer it takes.

Novelty translates as “is this a solution looking for a problem?” In other words, does the technology solve a real problem, or one that’s manufactured to accommodate the technology? The ecosystem needs to understand the problem and recognize the solution.

With that stage-setting, let’s take a look at an historical precedent that shows how a complicated technology that required multi-party cooperation and adherence to a common standard overcame complexity and addressed novelty to make the long journey from concept to successful adoption.

GSM: Global System for Mobile Communications, nee Groupe Speciale Mobile

In February 1987, the European Conference of Postal and Telecommunications Administrations (CEPT)published the first draft of a specification for mobile telephony, GSM, which had been conceived in 1982. At that time, mobile radio was a well-established, if niche, expensive, and technologically imperfect phenomenon. CEPT recognized that business people needed to use a phone connected to a public telephone network while on the move, and sought to improve its use in several ways.

Because phone call privacy was critically important to business users, CEPT specified a stream-cipher technique called the A5 algorithm (“A5”) at the February 1987 meeting. When the first GSM networks were launched commercially four years later, users simply understood that with a GSM phone, it was impossible for anybody with a $50 Tandy scanner to listen in on their phone calls. Cryptography had found a receptive marketplace, and the prevailing term “digital” sold the idea that conversations on the move were private and secure.

Because successive organizations that promoted GSM lined up a pool of telecom operators willing to buy, technology manufacturers organized themselves into consortia to share the risk, and invested heavily in turning GSM into physical equipment in just four years. National regulators then set the conditions for the licensing of competitive carrier models. With these moves, GSM had overcome complexity in its ecosystem “to produce value with the technology.”

Five years after its commercial launch in Finland in November 1991, GSM with A5 had been adopted by 200 carriers in 100 countries. Just under half of the world’s mobile phone subscribers were connected to a GSM network by 1996. By the end of 2008, when Bitcoin was creeping onto the world stage, an evolved set of standards based on GSM had become a de facto global standard for mobile.

Users of most of the world’s five billion active mobile phones don’t know or care why A5 was specified, that it can now be processed in real time by security services, or that it has been routinely hacked by cryptographers since the late 1990s. But in recognizing that a solution was required for an easily understood problem – air-interface privacy – CEPT had kick-started a market, assisted by cryptography, with scale and application way beyond the problem which the technology originally solved.

But, even with a highly orchestrated ecosystem, it had taken 26 years.

Back to Blockchain

Blockchain technology has arrived, and proofs of concept and enterprise-specific applications abound. IBM and Maersk will establish a joint venture to develop a trade platform for the global shipping industry. Australia’s stock exchange, ASX, is deploying blockchain to replace its existing registry, settlement, and clearing system. Nation states following Estonia’s lead are considering using blockchain to build their entire e-government infrastructures.

Blockchain as a broad technology will certainly end up as a solution to thousands of parochial problems. But the back to the future lesson from GSM and A5 is that for Blockchain to emerge as a transformative solution on a global scale, it needs a single big ecosystem (banks?) to identify a single problem (interbank settlement?) and to adopt a single standardized approach (Ethereum? Ripple? Iroha? Corda?  Quorum? Sawtooth? Et al?). That ecosystem must have convinced regulators at worst that the approach will be compliant, and at best that the approach is mandatory. It must then agree timelines for implementation and adoption, and stick to them.

Will it take 26 years? I guess we’ll all have to shine up our crystal balls.

To learn about our practical five-point framework for understanding business processes that are best suited to blockchain adoption, please see our November 2017 viewpoint, “Unblocking Blockchain Adoption“.

Blockchain: Making the Global Supply Chain Healthier | Sherpas in Blue Shirts

By | Blockchain, Blog

In 2015, Denver-based Chipotle Mexican Grill suffered a major crisis with an E. coli outbreak that left 55 customers ill. Sales plummeted, news stories and investigations shattered its reputation, and the restaurant chain’s share price dropped 42 percent, to a three-year low, where it has languished ever since. Why couldn’t Chipotle prevent or contain it? What triggered it?

The answer lies in an ever-present scenario companies face – dependence across multiple vendors and lack of transparency and accountability across complex supply chains. A radical solution, using blockchain technology, is rapidly emerging, and is being explored by a slew of startups and corporations.

Blockchain allows supply chain managers to attach digital tokens – a unique, negotiable form of digital asset – to intermediate goods as they progress along the production, shipping, and delivery phases among different supply chain players. This gives businesses far greater flexibility to find markets and price risks, by capturing the value invested in the process at any point along the chain.

Blockchain in Action

One example of blockchain in action is Walmart working with IBM and Beijing’s Tsinghua University to follow the movement of pork in China. Another is BHP Billiton, a mining giant, using the technology to track mineral analysis conducted by outside vendors. Everledger, a dynamic startup, has already uploaded unique data on more than a million individual diamonds to a blockchain ledger system, thus developing quality assurances and helping jewelry market associations comply with regulations barring “blood diamond” products.

“Smart contracts,” an application based on blockchain technology – buoyed by advances in chip and sensor technology – is an especially powerful option providing traceability and automation benefits. These contracts can grant different vendors special, cryptographic, and encrypted permissions, can be automatically executed by an autonomous system, and provide visibility on each other’s activity to all members of a supply chain community.

Smart contract definition

This kind of provable, transparent credentialing will be especially important for additive manufacturing, which is central to the dynamic, on-demand production model of the burning Industry 4.0 movement. For instance, operations and maintenance crew in an aircraft carrier need to have absolute confidence that the software file they downloaded to 3D print a new part is safe and not hacked. One of the most compelling arguments for blockchain is that it can help eradicate the trust problem in supply chains, without which the sophisticated, decentralized, IoT–driven economy many are projecting might be impossible.

Obstacles to Overcome

While the need for efficiency improvement and information aggregation suggest blockchain technology could deliver vast supply chain savings for companies everywhere, there are formidable obstacles to overcome first, such as:

  • Development and governance of the technology is a big concern, with two imperatives – global supply chains anchoring to a public blockchain (that no entity controls) to encourage free access and open innovation, and private or closed ledgers to protect companies’ market share and profits. This conflict leads to a couple of challenges:
    • Achieving global economic capacity for the most significant public blockchains, digital currency and smart contract platforms becomes constrained by divisions in open-source communities, making it difficult to agree on protocol upgrades
    • There needs to be interoperability across private and public blockchains, and this will require standards and agreements
  • There exists a complex array of regulations, maritime law, and commercial codes that govern rights of ownership and possession along the world’s shipping routes and their multiple jurisdictions. It will be extremely difficult to marry this old-world body of law, and the human-led institutions that manage it, with the digitally defined, dematerialized, automated, and denationalized nature of blockchains and smart contracts.

Despite these challenges, positive steps are being taken. For example, Hong Kong recently formed a Belt and Road blockchain consortium that seeks to bring a structure and order along with ICANN (Internet Corporation for Assigned Names and Numbers), an international, private sector–led global administrator and adjudicator.

While it might be too early to say that blockchain entirely solves the global supply chains issues, we believe any system that promises to enhance transparency and control for businesses and their customers, while also countering inter-commercial trading frictions, is worth exploring.

An increasing number of investors, businesses, academics, and even governments are starting to view blockchain technology as a much-needed platform…are you with them?

What Matters Most for Success In Using An Incubator For Blockchain Or Other Innovative Technology? | Sherpas in Blue Shirts

By | Blockchain, Blog

Is innovation to improve competitive positioning at the top of your company’s agenda? A common approach is to look at the technologies leading companies use to transform their business, then set up an incubator or innovation lab (either internally or externally in a service provider’s business) and provide funding to experiment with the technology. I’ve observed incubators and innovation labs for almost 10 years. Unfortunately, very few of them resulted in meaningful changes to competitive positioning of the company. Let’s look at what you need to bake into your strategy at the outset so you can capture the greatest value from an incubator or innovation lab.

Proponents argue that it’s a cost-effective way to gain clarity on the risks and challenges around implementing a new technology, and they see it as an opportunity to gain greater understanding of the possibilities of new technologies. It’s also a way to identify myths vs. facts around an emerging technology. Certainly, these are wise steps in a business where new technologies have to win the battle for attention among other priorities. But they largely fail to succeed.

 

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