Blockchain for Business: A How-to Guide to Defining Your Organization’s Strategy
Blockchain development isn’t a solo act.
Having the right proof of concept (POC) for your blockchain initiatives won’t do you a bit of good without stakeholder buy-in and engagement. And for that matter, having everyone on board and sharing their insights won’t matter if your POC is — well, lame.
Picking the right proof of concept will set the stage for your blockchain initiatives, but that’s just the start. You need input and support from the board, compliance, others in leadership and, of course, your tech team.
The message you need to convey to them is this: It’s all about the business strategy. Ignore the hype, both good and bad, and focus on blockchain and how it can enhance business value.
Your POC helps deliver that message, and it’s a great way to gather them all around the table.
POC: Does it Solve a Problem?
You’ve probably already embarked on your proof of concept (POC). Ideally, it meets technical requirements and solves a business problem.
Does that sound obvious to you? Good! But keep in mind that many, many POCs start with blockchain capabilities and then try to force a business case onto it.
Companies should not ramp up a blockchain application simply for the sake of doing so. Instead, they must take the time to understand the very real advantages offered by the technology, determine the true business value and have an outcome in mind before taking the next step. Validate the concept, then move forward.
Why You Need Stakeholders Involved
Maybe you and the CEO — and perhaps your tech team — are ready to roll with the POC. But slow down. You need to bring your internal stakeholders up to speed.
Based on its experience with financial services firms and blockchain technology, the consulting firm Cognizant offers this warning:
“When business stakeholders are not involved in blockchain projects from the get-go, implementation can be delayed, and buy-in can suffer. While a proof of concept or pilot shows how the technology works, a more important goal is learning whether a blockchain solution is optimal for the business problem, as well as how its implementation will change the organization and its strategy. Firms drastically underestimate the substantial challenges of managing the changes that blockchain will require, with only 6 percent of respondents [to a Cognizant survey] citing culture and change management as a top barrier to blockchain adoption.”
You need to be prepared to explain the strategic role of blockchain development in general and your POC in particular.
Explain Why Blockchain Matters
At some point during this process, you’ll need to make the case for blockchain itself, and you’ll need to convince skeptics, both informed and uninformed. You may encounter objections that have nothing to do with blockchain’s feasibility and everything to do with fear. You’ll also encounter well-informed trepidation.
Here’s the message for both groups: This isn’t just another IT project. It’s not a new and improved internet or database. Blockchain represents a new way of doing business. It’s poised to transform every business environment, and change is happening quickly — more quickly than many expected.
If you need to convince your colleagues and board of one thing, it’s this: Now is the time to prepare. Appeal to their fear of missing out.
Consider a Blockchain Champion
One way to cultivate support across departments is to develop a cross-functional team with a business sponsor to drive the strategy, counsels Cognizant.
William Mougayar, former business reengineering czar at Hewlett-Packard and author of The Business Blockchain, takes it one step further in a piece for CoinDesk. He calls for a blockchain “czar.”
“The blockchain czar is responsible for removing obstacles within your organization, facilitating education, curating and sharing best practices, and overseeing the progress of various implementations across the organization. This job is a tough one, because it involves finding and obliterating old processes, instead of just automating or streamlining what is currently being done.”
Even if you don’t go for a full-on czar, your organization might benefit from a blockchain champion, especially one who isn’t coming from the IT side of the company.
Start with the Obvious: Your Tech Team
Clearly, you can’t move forward without your top tech and engineering people on board. They are the ones who will execute your vision. You need them to build something scalable, make the right tech stack choices and, perhaps most importantly, help you choose the right team: internal staff, vendors or a combination of the two.
We don’t need to spend much time explaining why their involvement is critical. But they can help you identify and address some of the challenges you may have missed, including
- the lack of an existing roadmap for how to move forward.
- the lack of in-house blockchain expertise and the difficulty in finding blockchain developers.
- lack of bandwidth — your team is probably already overworked.
- the possibility that tech stack choices made today will create technical debt in the future.
Working with them to address these and other issues paves the way.
But developing a blockchain strategy shouldn’t be seen as a technical issue, driven by IT. If your blockchain project is designed to address business problems or opportunities, then shouldn’t everyone be involved from the outset?
Your Compliance/Legal Team
Involving legal early can ensure things are set up properly. They can help you keep track of the changing regulatory and legal environment, but they may be unwilling to take on what they see as more risk.
They understand the uncertainty brought about by a lack of standards for how to maintain security and compliance. The regulatory climate is evolving, with regulators around the world still figuring out how to deal with blockchain.
They will be more acutely aware of the pitfalls than the potential. That’s a good thing: They know mismanaging a blockchain project could compromise company and customer data and lead to fines.
And there’s one more thing to keep in mind. Blockchain’s decentralization of transactions runs counter to decades, perhaps centuries, of regulatory and compliance guidance. As Gartner points out, “Much of the legal basis for identity, trust, smart contracts and other components are undefined in a blockchain context. Established laws still need to be revised and amended to accommodate blockchain use cases, and financial reporting is still unclear.”
Moreover, because blockchain enables jurisdictions to be crossed and intermingled, legal questions can arise, complicating operating frameworks and enforcement.
Think of it this way: It’s a changing landscape, and the landscape is a minefield. Your legal and compliance teams are best equipped to help you navigate it, so bring them in early.
Your Tax Team
Tax department leaders absolutely should be involved in the early stages of this planning, counsels David Deputy of Vertex, a tax data-management company. Tax jurisdictions have traditionally used the geographical location of key decision-makers to help determine where an organization has a tax liability. Blockchain technology allows business decisions to be made without humans, such as in the case of smart contracts. That could create a tax liability for your company where it currently has none, Deputy explains. It’s all very much in the air.
In addition, blockchain could ultimately change how taxes are assessed and collected.
“The function of corporate tax departments would be largely replaced by blockchain’s certain, and secure, real-time transaction ledger and related software. Mistakes and fraud could, in theory, be eliminated. Or, so goes the logic,” BNA explains. “The opportunity for complete automation here and complete revolution of the corporate tax function is significant.”
No one really knows precisely how taxation issues will play out, but your tax department probably knows better than you do. Bring them in and solicit their input.
There are, of course, practical reasons you need your board’s support for your POC. But you aren’t seeking mere approval: You need input.
Also, many regulatory issues remain to be settled. As a result, “boards will have to make strategic bets on blockchain in a climate of uncertainty,” David Furlonger, a Gartner Fellow, warns in a piece for Enterprise Innovation. To make smart bets, they need to be on the inside, not passive observers.
Moreover, they can be invaluable partners, providing strategic guidance and insights to shape your vision and its ultimate execution. Their peers in other companies may be on the same journey, and you can learn from those experiences.
Recruit Leaders from Other Departments — and the C-suite
Leaders in non-tech departments may worry that other priorities — their priorities — will suffer if focus shifts to blockchain development. But they need to be involved nonetheless. Their departments may not be touched by your POC, but eventually, it’s likely blockchain will change the ways in which their department works. You need that insight at the outset, as you’re refining your organization’s blockchain strategy.
Blockchain development is moving quickly, and first movers will have the advantage. You can’t be a first mover if your organization sees this as merely a tech project. You need the unique business insights your board and departmental leadership can bring. All that said, I do have a warning: Control expectations. An uninformed blockchain enthusiast can hurt your efforts more than an informed skeptic. You want honest insights and input from across the organization.
Keep At It
Bringing everyone to the table is hard. Getting consensus is harder. Consider this: Technology managers and senior executives can’t even agree on cybersecurity, according to a BAE Systems report. So imagine how much harder blockchain will be — at least everyone agrees on the importance of cybersecurity!