Keep blockchain investments real to get beyond a successful but useless POC

Musings from EY’s 2020 Virtual Blockchain Summit

Blockchain promises “creative destruction” through disintermediation, but that is a long-term vision; only 6% of executives we surveyed are leveraging blockchain to remove the need for intermediaries (see Exhibit 1). Enterprise clients are investing in blockchain solutions to get real business impact: Without a tangible return on investment (ROI), blockchain engagements get stuck at the proof of concept (POC) or pilot stage. No-nonsense, real business cases are a must-have to drive blockchain beyond the POC-fatigue that we are witnessing today. The correlation coefficient[1] between blockchain project satisfaction and compelling business case, stakeholder alignment, and desired outcome is high (0.7-0.8). Consequently, the focus for enterprise adoption should be business optimization with a tangible ROI.

[1] The correlation coefficient is a statistical measure that calculates the strength of the relationship between the relative movements of two variables. The values range between -1.0 and 1.0. A correlation of -1.0 shows a perfect negative correlation, while a correlation of 1.0 shows a perfect positive correlation.

We dive into the stories and thoughts of enterprise leaders at EY’s 2020 Blockchain Summit, which show how you can convince your C-suite of blockchain’s worth.

Exhibit 1: The blockchain value proposition for enterprises

Sample: 318 senior executives (including 111 C-level executives) who are closely associated with their organizations’ blockchain initiatives

Source: HFS Research, 2019

Proving blockchain’s short-term business value is key to convincing any CFO and securing long-term financial commitment

Blockchain leaders at global healthcare giant Merck, alongside EY, proved the technology’s value to their own company (crucially to the CFO) by focusing on blockchain’s ability to immediately help customers improve inventory management and product distribution; they integrated previously distributed, disconnected ERP systems that now talk to each other. To further help with enterprises’ comfort levels in investing in blockchain, one exec views public blockchain solutions as the answer:

“In the consumer marketplace, transparency will become a license to operate, rather than a competitive advantage. We need public platforms: private ones cost more and don’t disclose much upfront—so where do you invest? Public platforms are open and transparent systems you can assess and make better investment decisions.”

 —Rodrigo Santibanez, Director Key Account Relationships and Consumer Affairs, Merck

The right blockchain partners can limit any up-front investment and bring a level of security instead of scaring off the C-suite

The Norwegian Fashion Hub’s (NFH’s) core motivation for adopting blockchain with EY is finding a system to showcase its small-medium enterprise (SME) clients’ sustainability by measuring it and providing transparency to consumers who, day-by-day, are becoming more educated about what’s acceptable (in terms of carbon emissions, resource consumption, or ethical supply chain and business practices) and aware of which businesses they want to support. Transparency is now also essential for policymakers, who demand that fashion brands verify any new sustainable claims, given that the industry has been widely branded as unethical, polluting, wasting water… you get the picture.

NFH aims to be the first mover in validating brands’ sustainability as demand for transparency skyrockets; in partnership with EY, adopting blockchain becomes financially manageable, technologically proven, and a safer bet for NFH’s clients’ C-suites:

“For the brands NFH collaborates with, our industry knowhow in combination with EY’s technology, experience, and scale means that investment is lighter on each brand.”

 —Elin Katherine Saunes, Manager, NFH

Blockchain’s ability to open up new business models is widely underestimated as a means of proving its value

Corteva, a provider of agricultural technology, is adopting blockchain with EY to expand its initial product launches to farmers. The global approval process can take years for new agricultural technology, with farmers’ access often limited due to the difficulty of ensuring that, throughout the ensuing supply chain, only approved tech is linked to the product’s final destination. Historically, ensuring this compliance has been a manual, “boots on the ground” task for Corteva—which is where blockchain comes in. With total, automated traceability throughout supply chains, Corteva can offer technology to more customers, generate more revenue, and generate it earlier:

“Corteva has to make sure technology doesn’t get into channels it’s not approved for—which can limit deployment. The motivation [for blockchain] here is to move forward and have confidence in wider deployment from [when a technology is approved].”

 —Shannon Peterson, Product Line Leader, Corteva

Blockchain is not just about process efficiencies or traceability to please consumers—it can also unlock new revenue opportunities, which many enterprise leaders don’t realize.

“Blockchain creating new business models is massively underappreciated.”

 —Chen Zur, EY US Blockchain Practice Leader

So, how do you sell blockchain to your C-suite? Probably with your provider’s and partners’ help

Despite many believing the future rests on the shoulders of public blockchains, most current applications remain private and permissioned, with no interoperability. Many food traceability platforms exist (see our separate report) centered on private consortiums involving, among others, EY-competitors Accenture and IBM. While these consortiums may merge, standardize, or move onto public blockchains in the future, they’re still based on middlemen. But these middlemen have the skills and experience to help your own enterprise’s blockchain adoption.

To convince your C-suite that blockchain deserves long-term financial commitment, you’ll need a provider, or network of partners, with proven use cases and the storylines to match.

The Bottom Line: Blockchain is not the panacea for everything, and we need to choose the use cases that match enthusiasm with commitment.

Many enterprise leaders still fail to realize that blockchain has moved beyond being an experimental technology; it has proven business value in many cases (although obviously, it can’t solve everything—so don’t blame us if you try to make it!). With the right partners, providing the right technology and services (be it service providers like EY, or networks academic, private, and public organizations), your enterprise will soon see the value in moving first and match that enthusiasm with commitment. This is best summarized at the EY summit by the founder of the MediLedger project, which we recently covered in full:

“Blockchain is happening while others aren’t paying attention—the ROI is real, and it’s now.”

—Susanne Somerville, CEO, Chronicled