For all the hype, blockchain has yet to go mainstream in the enterprise. That may well change this year as the technology’s reputation for trusted transactions continues to grow among IT leaders.
For example, every stakeholder in a blockchain-supported supply-chain network receives a copy of the existing authenticated ledger. If an event impacts the supply chain, every party can be assured that what the digital ledger says happened actually happened.
Despite blockchain’s potential, only 1 percent of CIOs are adopting the technology within their organizations, and only 8 percent are in short-term planning or active experimentation with blockchain, according to Gartner’s 2018 CIO Survey. Moreover, 77 percent of CIOs surveyed said their organization has no interest in the technology and/or no action planned to investigate or develop it.
“The reason you’re not seeing more adoption is the classic risk-reward [scenario],” said Peter Nichol, managing director of digital strategy firm OROCA Innovations, on a panel at the MIT Sloan CIO Symposium last month. “As a CIO you have to pitch this to your board, you have to sell this to your team, and to your counterparts. And it’s a tough business case because you have to not only explain what you’re trying to do, but explain the technology.”
Even so, Gartner says CIOs would be wise to get on the blockchain bandwagon and begin testing the technology to see what’s possible and mull potential business cases.
Here is a look at how some organizations are looking to leverage blockchain for business.
Blockchain for ensuring human rights
The United Nations is exploring two significant blockchain tracks: identity verification and supply chain trust, said Atefeh Riazi, the international organization’s CIO, during the MIT Sloan CIO Symposium panel.
Riazi said that roughly 1.2 billion women worldwide don’t have an official identity, including a name or date of birth, which makes them easy targets for human trafficking. And in some countries, underage children are doing work they shouldn’t be doing as minors. In addition to upholding child labor laws, blockchain might also curb incidents in which minors accused of a crime are tried as adults because they cannot prove their age.
Using a blockchain application to verify human identity, the UN could make it easier for authorities to identify people, preventing exploitation and crimes against women and children.
Riazi is also exploring how the UN can use blockchain to prove the provenance of medicines it ships worldwide. This will help prove that people are getting the proper pharmaceuticals for their illnesses. “Supply chain is one of the key areas we look at when it comes to app of blockchain,” Riazi said.
Ultimately, Riazi sees blockchain as one of the most disruptive technologies CIOs can tap. “This disruption is real, because why do we need Uber when we can do peer-to-peer [payments]? Why do we need a bank when I can transfer money directly?” Riazi says. “It is the future and it’s here, and some companies and industries may not like it but hopefully they will reinvent themselves.”
Smart contracts for financial services
At Boston Private, a wealth management firm for high net-worth clients, CDO and CIO Prasanna Gopalakrishnan is testing blockchain for smart contracts to make financial transactions more efficient — and trusted. The firm controls the blockchain node, dictating permissions for brokerage houses, clients and other parties in the system.
Currently, currency exchanges handled by lenders and brokerage houses are rigorous and paper-intensive. A blockchain app that enables smart contracts can help alleviate some of these paper-trail burdens associated with credit-line approvals, ultimately quickening contract processing, Gopalakrishnan said at the MIT Sloan CIO Symposium.
While such a scenario makes sense for financial services, Gopalakrishnan advised CIOs to offer the business a practical use case that adds value before putting it in front of their C-suite peers.
“You have to get the buy-in from business partners, and clearly articulate and understand the business problems you’re trying to solve, which will connect the dots to the business outcomes and the value it aims to bring,” Gopalakrishnan said. “Think from the shoes of everybody in the ecosystem and make sure there is value.”
A blockchain for tracking grain
Of the many blockchain use cases OROCA’s Nichol tracks is how Australian companies CBH Group and AgriDigital are using blockchain for supply chain traceability in grain production.
In the test, a farmer stored an oats delivery token to represent ownership over the grain. The farmer sold the digital title, including information about grain volume and other attributes, a week later via the blockchain. The pilot also tracked the provenance of organic oats from the farm through the supply chain.
“What’s cool about this is they had specific use case that allowed them to build capabilities to prove that it works,” said Nichol, who is a former technology head for Connecticut’s healthcare insurance exchange.
To that end, Nichol stressed the importance of defining a specific business case for blockchain; blockchain for blockchain’s sake isn’t of much value. “The internet doesn’t solve anything; it doesn’t tie your shoes,” Nichol says. “Blockchain won’t do a lot of things.”
Nichol recommends CIOs come up with an ontology of how blockchain might be used in, for example, registering assets and tracking their provenance.
Blockchain for logistics
United Parcel Service has a team dedicated to exploring blockchain’s impact on chain of custody in the supply chain, says Linda Weakland, director of enterprise architecture and innovation at UPS. Weakland sees great potential for blockchain in automating the myriad manual processes that comprise customs brokerage. Such a system could help UPS “modernize the whole practice and clear goods much quicker than we do.” Blockchain would also improve transaction accuracy and reduce costs for physical assets, such as shipping containers.
But to unlock blockchain’s potential, it must be adopted across the entire supply chain. To that end, UPS in November joined the Blockchain in Trucking Alliance (BiTA), which is developing blockchain standards for the freight industry. Weakland says such standards could help UPS and its partners share data across blockchains, which is currently difficult to do. “With BiTA we’re going to be able to get more standards to make the blockchain more useful than it is today,” Weakland says.
UPS sees blockchain as an integral part of its evolving Smart Logistics Network, which also includes other emerging technologies such as internet of things, robotics, artificial intelligence and machine learning. UPS CIO Juan Perez, to whom Weakland reports, is applying these technologies across the rest of UPS business as part of the Advanced Technology Group he created shortly after his promotion in 2016. “[Perez] challenges us to be on the edge and really take a look at technology that will make a difference,” Weakland says.
Ripe for disruption
While blockchain could revolutionize financial services in several ways, applications of digital ledger technologies get more narrow farther afield. This is especially true in the food industry, where Driscoll’s is known for selling strawberries, blueberries, raspberries and blackberries in WalMart, Stop & Shop, Whole Foods and other supermarket retailers worldwide.
Driscoll’s, along with more than a dozen food producers, is working with IBM to use blockchain to help prove the provenance of tainted food, which Driscoll’s CIO Tom Cullen says could eliminate finger-pointing. Because blockchain can chronicle every data point in a supply chain, it provides a virtual forensic scientist’s paradise of information about the products it’s tracking. “What we’re interested in is that the origination of the fruit and any certification once it starts in the supply chain,” Cullen says.
Driscoll’s currently uses Bluetooth-enabled GPS sensors to monitor the temperature of fruit in shipping coolers. So, for example, if a truck driver in Mexico inadvertently cooks the fruit because the temperature in his truck gets too warm, Driscoll’s will know about it. But that won’t help Driscoll’s track a particular batch of crops in the event of a food-borne illness outbreak. Here blockchain could help. By logging barcodes from pallets and clamshell containers, a blockchain could be used to trace fruit to a specific harvest, Cullen says, enabling Driscoll’s to pinpoint exactly where the fruit originated.
“It’s immutable and can’t be changed, so as you track through the supply chain you can trust the data,” Cullen says. He adds that blockchain, along with machine learning and advanced analytics to help improve genetic marking, are cornerstone aspects of Driscoll’s digital initiatives in 2018.
Hedging blockchain bets
Blockchain poses almost as many challenges as opportunities for financial service companies such as TD Ameritrade, where CIO Sankaran has allocated a dedicated team to explore how to use hyperledger technologies. Sankaran believes blockchain will shrink windows for asset clearance, automating in minutes or seconds what use to take days. Trading files across a multitude of partners will also become much crisper and cleaner, reducing manual, paper-based processes.
TD Ameritrade’s first main test case is facilitating money transfers between its brokerage service and its TD Bank affiliate in near real time. “It’s a template to continue to work with other institutions to do money movement and account setup much more quickly,” Sankaran says. Other potential enterprise uses for blockchain include information sharing between clients; proxy voting, which typically requires a lot of paper; and replacing credit cards in micropayments. Ultimately, financial settlement is going to be the most interesting use case over time, Sankaran says, reducing time and transaction fees that have bedeviled the industry.
The online broker is testing several hyperledger technologies, including Ethereum, R3 Corda and JP Morgan’s Quorum. “It really has to be an enterprise-grade platform to manage security, privileges, and it must scale and perform well,” Sankaran says.
Even so, Sankaran must hedge his bets against the uncertainty around hyperledger technologies, which have a Wild West aura akin to the early days of emerging technology distributions such as Linux, he says. “The problem is picking an underlying platform knowing that you may need to throw it out because it doesn’t provide the most value,” Sankaran says, adding that he is closely watching what vendors TD Ameritrade aligns with are doing in the space.
Sankaran anticipates significant consolidation, with larger players acquiring blockchain distributions, forcing tidal shifts in the industry. And he says he’s proceeding with full awareness that “we may have to change horses at some point in time.”
“I think in 2018 and 2019, blockchain will cross the chasm and move from experimental use case to mainstream in financial services and other industries,” Sankaran says. “Blockchain is one of those things where it’s going to be more of a competitive advantage over time.”
Don’t sleep on blockchain
While it is still early, CIOs who ignore blockchain do so at the peril of digital disruption.
“It’s important to start now, otherwise you’re going to get left behind if you don’t,” Gopalakrishnan said. “We’d better get on the bandwagon, embrace it and disrupt with it.”
— from www.cio.com