By Paul Brody, EY
It’s quite typical for enterprises to start blockchain pilots and proof-of-concept programs, but the survival rate of these projects is often low and there’s a reason for that most of the time: the projects are not used to solve a real problem. Over and over again, I see clients wanting to replicate a capability they have today in another system on a blockchain as a way of proving the technology.
The result? Many unambitious proof-of-concept activities that contribute little to the bottom line. While the projects rarely fail – blockchains are in fact a well-proven technology – they never proceed to production because they are not actually needed. To create successful uptake with blockchains, I think it’s critical to solve new problems.
Solving a business problem using blockchain technology means that if the solution works, you have a compelling reason to proceed from proof-of-concept to production and, usually, a business case to do so as well. With those two items in hand, concerns about the future architecture of blockchains and the best way to form a consortium matter much less. You create value now and adapt if things change later.
As part of my role at EY, we’ve developed a five-point test to help clients understand if the application of blockchain to a new problem is likely to be successful and add value. Here are the five critical components of determining if blockchain technology will address your business problem:
- First on the list is the need for multiple parties to work together. Blockchains are fundamentally multi-party collaboration systems.
- It’s also critical to establish trust between the parties on key facts. Even between long-time suppliers and customers, there is always tension about the content of agreements.
- It’s important to have a detailed transactional record of activity. If everyone agreed on everything, you wouldn’t need a blockchain to verify who did what, and when they did it.
- You should ask yourself if you’re managing a finite and valuable asset. A notable strength of blockchains is making sure that assets cannot be duplicated and that everyone in the network receives the same information at the same time.
- Finally, another key consideration: does the network of partners benefit from increased transparency across the ecosystem? Essentially, with both points four and five, you’re determining if you’re actually leveraging blockchain’s key value add.
If you can answer yes to at least three of the above questions, it’s a pretty solid indicator that not only is a blockchain a good potential fit, it may in fact be the best possible way to solve the business problem you’re facing.
As EY’s global leader for blockchain technology and innovation, Paul Brody is responsible for driving EY’s initiatives and investments in blockchain technology across the organization’s Consulting, Audit and Tax business lines. He has extensive experience working with leading global companies and startups alike on launching blockchain platforms and applying blockchain technology to non-financial services applications.