David Schatsky, managing director of technology and business trends at accounting and consulting firm Deloitte, has a bird’s-eye view of how industries are approaching blockchain.
Deloitte’s 2018 Global Blockchain Survey plumbed the thinking of more than 1,000 executives around the world who consider themselves knowledgeable about the technology. Thirty-four percent said their organizations already have blockchain projects “in production,” while another 41 percent predict deployment of an application in the next year. Nearly 40 percent of respondents expect their organizations to spend $5 million or more on blockchain technology in the next year.
Financial services firms are shifting from pilots to enterprise projects, while telecom, media, consumer product and manufacturing companies are entering the experimental phase. Schatsky tells ThirtyK of the challenges organizations face in implementing blockchain technology, and how adoption is an awful lot like a home renovation project.
ThirtyK: The Deloitte survey was all about the “compelling business case” for blockchain. Seventy-four percent of respondents said their organizations believe there is a compelling case. What is that business case?
When it comes to blockchain, until businesses understand the benefit and agree it’s a priority, it’s not a priority.
Schatsky: Lots of companies are looking at blockchain as a way of reinventing their processes. It’s a way to re-architect.
ThirtyK: They view blockchain as a chance for a clean slate?
Schatsky: More like a home renovation. That comes to mind because I’m in the middle of a bathroom renovation right now.
ThirtyK: That’s actually a pretty good analogy. When you do a home renovation project, you never know what you are getting into until you open the walls. Usually you find out you have to replace rotting wood, old wiring, bad plumbing. Isn’t that what companies often find when they try to tie new technology to legacy systems?
Schatsky: It is a good analogy. We asked folks what the largest barriers were, and the second most commonly cited barrier was replacing or adapting to legacy systems. (The survey found that the No. 1 perceived barrier is regulatory issues.) Blockchain represents a different way of doing things, and integrating new technology into legacy systems is always challenging because it touches off a ripple effect through the organization of how you integrate with existing operations. It’s very “brass tacks.” There aren’t existing connectors.
For instance, supply chain is a popular area for blockchain and in logistics there are lots of players. There are logistics providers [and] intermediaries, and the existing processes are manual, even paper-based. The appeal of reinventing is that you can streamline all that, but that’s also the challenge.
ThirtyK: Financial technology is further along with adoption than most. What lessons have fintech companies learned that can inform consumer, manufacturing and other industries as they wade into their blockchain projects?
Schatsky: Blockchain is led by technology [departments] within companies, and tech thinks it will be cool, but that’s not necessarily the way to get the business excited. We feel that the business has to be in it from the get-go and be in the driver’s seat.
The classic business question is, “What is the problem you’re solving for?” The value depends on your perspective. [A blockchain project] might be of value to IT, but until business understands the benefit and agrees that it’s a priority, it’s not a priority.
ThirtyK: What are some of the hidden barriers to adopting blockchain across the enterprise?
Schatsky: Some companies have a small team that understands blockchain, and that isn’t the same team that runs the [IT] system. They can be challenged to get a grip on the existing processes and reconceive them. Blockchain is an intrinsically networked technology, and there can be organizational and political work to align the different parties.
ThirtyK: So companies need to lead with the holistic business case to get everybody on board with IT’s cool new project, which, this time, is blockchain?
Schatsky: Yes, the business cases come in estimating cost savings, and in, say, pharma, the opportunity to reduce counterfeit medicine by tracking control through the supply chain. In other industries, such as food, it’s greater assurance around the origin of a product as it moves through the supply chain to be sure it’s authentic and safe.
ThirtyK.com: At what point will blockchain be a competitive advantage for winning and keeping customers or clients?
Schatsky: It’s hard to say. From a consumer viewpoint, we could be a decade or more away from daily impact. With that said, businesses would could see material impact within a couple years. At the current point of blockchain adoption, it’s safe to say that the felt impact is several years in the future. Though companies are doing something, we aren’t seeing compelling experiences yet that are powered by blockchain. But once you see those experiences, the equation will change quickly. Some companies have the appetite to experiment and they do so because they see that the tipping point will come unexpectedly.