Bringing people together early is the key to success for distributed ledger technologies

You may have already seen the recently released debut episode of HFS Unfiltered, which focused heavily on distributed ledger technologies (DLT) and featured industry veterans Mariana Gomez de la Villa (DLT Program Director at ING) and Rohit Amberker (Director of Finance, Microsoft) alongside our very own Chief Research Officer, Saurabh Gupta. One leading discussion topic was about the struggles many enterprises have getting their blockchain project beyond the proof-of-concept stage and into production. Our research proves that this is a very real problem; very few engagements make it to the production stage, but the number of those that do is creeping up (see Exhibit 1). Mariana’s and Rohit’s experience with their in-production blockchain initiatives means they are more than qualified to offer advice to struggling enterprises. Luckily, Saurabh was on hand to extract all of their knowledge, which we outline below.

Exhibit 1: Despite continuing POC fatigue, in 2019, there was a significant increase in credible “in-production” enterprise blockchain solutions.

Sample: 4,200 blockchain engagements across 12 service providers (Accenture, Cognizant, DXC, EY, IBM, Infosys, KPMG, LTI, Mphasis, NTT DATA, TCS, and Wipro

Source: HFS Research, 2020

People often think of the blockchain adoption challenge as a technology problem—that couldn’t be further from the truth; it’s a people problem

At HFS, we have endless conversations with the greatest service providers and, more importantly, their clients to understand in-depth the state of the market and any roadblocks enterprise may be facing. One consistently emerging theme is that the challenge to implementing blockchain is not actually the technology; it’s the mindset of people—Mariana’s and Rohit’s initiatives are testaments to that. Rohit confirmed that in our podcast when he explained

“It’s the mindset. People think that they are losing control. It’s a simple mindset—it’s the biggest, biggest blocker for us.”

Rohit Amberker, Director of Finance, Microsoft

To put it simply, people fear what they do not understand, and distributed ledger technologies have the burden of being incredibly complex. More often than not, executives fail to convince key stakeholders that blockchain is a viable option for them. We have discussed this countless times at HFS, and you may have heard Saurabh call blockchain a “team sport” throughout our research—it’s something enterprises must solve to drive their blockchain engagements to the production environment.

Involving key stakeholders early in the blockchain pilot will help achieve buy-in across the entire ecosystem; driving projects into production

We all know that blockchain is built around an ecosystem of parties seeking a mutual benefit, which means it’s not simply a plug-and-play technology. Stakeholder buy-in is an essential step to success, and it is where one of the biggest adoption roadblocks lies. We’ve already discussed how enterprises and executives alike are wary of distributed ledger technologies, often unable to understand them or their benefit but concerned about its decentralized nature. It’s this concern that makes ecosystem buy-in a distant dream for many, but there is hope. Mariana explains how she achieved success:

“We did a pilot with Louis Dreyfus to complete the first full agricultural commodity transaction using a blockchain platform. We tried to include everybody from the agricultural ecosystem, from the trading companies to the customs officers. This meant every person that was involved was able to see those efficiencies and those gains.”

Mariana Gomez de la Villa, DLT Programme Director, ING

Mariana realized that ecosystem players were more interested in the potential efficiency gains of distributed ledger technologies rather than the technology. By involving key stakeholders early in the exploration stage, ING could demonstrate promptly the benefit blockchain could bring to both their organization and the other ecosystem players, such as the agricultural firms. It makes perfect sense; piloting a blockchain in your silo may prove that the technology is viable, but it does little to generate excitement among stakeholders, hindering the ecosystem further down the line.

Don’t be overambitious with your project; many people talk about distributed ledgers replacing ERP, but that may prove too much of a challenge

Enterprise leaders are always on the lookout for the next big thing that can completely transform their business operations and provide that drastic efficiency gain they need to dominate their chosen market. And it’s the same story for distributed ledger technologies, which are frequently hailed as the death of ERP, so, naturally, it became a key discussion point in our podcast. It seemed all of our participants were on the same page, as Saurabh explained that while blockchain is for numerous organizations, ERP is for one single organization, meaning they will coexist. He went on to prove this, explaining that both Oracle and SAP are investing in blockchain to augment their offerings. Rohit clearly agreed:

“Distributed ledgers will not replace ERP. We see it as more of a subledger—your ERP cannot have trillions of transactions sitting within them, but our blockchain can.”

Rohit Amberker, Director of Finance, Microsoft

So, any enterprises looking to replace their ERP with a blockchain are likely barking up the wrong tree and can expect their blockchain initiative to never make it beyond the proof-of-concept stage. Executives must instead look to apply distributed ledger technologies to achieve a series of small wins, introducing efficiency to small processes, driving incremental change, and eventually evolving into successful projects like Microsoft’s Xbox royalty program.

The Bottom Line: Taking any blockchain engagement into the production environment is challenging; keeping it real and winning stakeholders over early are two key pillars for success.

If you’ve read this far, it’s likely that you’re either considering or already investing in distributed ledger technologies, which more than likely means you’re struggling to reach the production environment. This episode of HFS Unfiltered firmly supported all of our previous research, confirming that driving your blockchain initiative into production requires a realistic goal and small wins plus a shift in the mindset of both your organization and the wider ecosystem stakeholders.