The corner office is embracing blockchain. As it matures beyond a murky cryptocurrency system that only startups dared to chase, the secure data management technology is becoming a real-world solution for business giants.
Apple, China Construction Bank Corp., Royal Dutch Shell and Toyota Motor Corp. are among the slew of organizations looking to move the needle by launching blockchain projects. In August, one of Japan’s largest insurance companies, Tokio Marine and Nichido Fire Insurance, completed a nine-month pilot project that put paperwork for marine cargo insurance claims on a blockchain. The joint venture with NTT Data will help deliver faster insurance payouts by collecting and sharing information promptly and accurately.
Financial services companies are just the tip of the blockchain iceberg. Other sectors—everything from food and energy to transportation and education—are increasingly launching blockchain initiatives in an attempt to solve many of the data transparency issues that plague IT operations. The appeal is obvious: the opportunity to create a permanent, immutable history of any transaction on a decentralized network that cannot be tampered with. In all, 84 percent of organizations have at least some involvement in blockchain technology, according to a 2018 survey from PwC. Nearly 4 in 10 companies surveyed by Deloitte plan to invest US$5 million or more in blockchain projects this year. By 2030, Gartner forecasts that blockchain will generate an annual business value of more than US$3 trillion.
Source: PwC
But bringing blockchain into the portfolio also propels large organizations into unfamiliar territory, introducing new challenges for project teams long before coding begins. Talent gaps, risk-filled platform decisions and reluctant support from sponsors and other key stakeholders can stand in the way of teams’ ability to deliver blockchain projects with measurable long-term benefits.
“Blockchain is still a new technology, so these projects face a lot of challenges,“ says Nitin Sood, PMP, director of blockchain development at Highmark Global, Mississauga, Ontario, Canada. Highmark helps organizations build blockchain platforms for medical technology applications.
PHOTO BY MICHELLE GIBSON
—Nitin Sood, PMP, Highmark Global, Mississauga, Ontario, Canada
BUILDING BLOCKS
Translating blockchain’s potential into meaningful business results isn’t easy. Only 15 percent of early blockchain projects have gone live, according to PwC. And 92 percent of blockchain projects deployed already have failed, with an average life span of 14 months, according to China Academy of Information and Communications Technology. But such problems are typical in an emerging project environment, Mr. Sood says. Many blockchain projects by startup companies were trying to hitch a ride on the bitcoin trend or roll out a new form of token to cash in on the global cryptocurrency craze. “The projects don’t fail because of the technology; they fail because there is no business case,“ he says. “They aren’t solving a problem or adding value; they are just trying to make money.”
What Is Blockchain?
| It’s a peer-to-peer network of ledgers that encrypt and store blocks of data. | |
| The data can be viewed and verified by anyone in the network. | |
| The ledger’s chain of blocks is extended every time data is added. | |
| Everyone on the network can see when someone tries to alter a piece of data. This eliminates the risk of secret data manipulation. | |
| Data is exchanged automatically, which streamlines operations and prevents the risk of fraud or errors. |
Business-driven blockchain projects by large companies have a far better chance of success, because they’re aimed at delivering tangible benefits, says Rahul Golash, chief blockchain architect, Ledgerium, Southbank, Australia. Ledgerium develops blockchain solutions for the accounting and audit industry. And success starts with knowing when—and when not—to make this technology a cornerstone of a new initiative. “Not every business problem can be solved by blockchain,“ he says. “Finding the right business case for blockchain is the top challenge for every enterprise in this space. Then, you need to understand what it does and how to implement it to make it work.”
—Rahul Golash, Ledgerium, Southbank, Australia
Educating stakeholders is an essential first step at organizations with big blockchain aspirations. Project managers are tasked with creating presentations that help sponsors and other key stakeholders understand how blockchain works and how it can deliver benefits for the organization. Despite the constant blockchain chatter and appetite for big investments in this space, many business leaders and stakeholders still don’t fully understand what it is and how it works, says Marcelo Creimer, internet of things and blockchain project manager, Ezly Tecnologia, Sao Paulo, Brazil.
“I start every presentation explaining that blockchain is not the same as bitcoin,“ Mr. Creimer says. After he shows how blockchain can be used to track financial transactions and manage data across a supply chain, business leaders start to get excited about the potential to reduce the risk of fraud while accelerating the ability for network participants to exchange and audit decentralized data, he says. Illustrating the business case for a new and novel technology requires persistence and clarity.
“Some people confuse it with a standard database solution, so I highlight the differences between them,“ Mr. Creimer says. He typically focuses on the benefits of data immutability, shared governance and high security. “These are items that can take the business case to a blockchain solution.”
CASE BY CASE
With a limited pool of blockchain project success stories in the marketplace, plus the lingering skepticism about cryptocurrencies and their link to blockchain, winning over key stakeholders remains challenging. “The most difficult part is overcoming the cultural barriers and getting people to understand that they will need to change the way they work,“ Mr. Creimer says.
—Marcelo Creimer, Ezly Tecnologia, Sao Paulo, Brazil
Some organizations use sheer force. For example, in September 2018 Walmart launched a project that will require all suppliers of leafy green vegetables to store traceability data in a blockchain application developed by IBM. Walmart plans to cease business with suppliers who don’t comply by September 2019. The company’s goal is to use blockchain to rapidly pinpoint the source of a foodborne contamination and support targeted recalls that can prevent mass illness outbreaks. The solution is intended to reduce losses related to food recalls. The project launched just one month before a massive romaine lettuce recall in the United States left 59 people ill in 15 states and cleared lettuce from all grocery shelves for days.
“Walmart can make this work because they are such a big player on the market. Their individual suppliers have limited negotiating power, and Walmart can make suppliers comply,“ says Jaana Simula, PMP, co-founder, Enterprise Blockchain Solutions, Dallas, Texas, USA. She has worked on projects to provide architecture and ledger development for organizations launching blockchain projects.
In other cases, organizations and their teams must take a more nuanced approach, such as using software developers as third-party negotiators to bring together disparate—or even competing—stakeholders. One example is U.K. fintech company Finastra, which completed a six-month blockchain project in April 2018 to create an online marketplace for syndicated loans. Seven competing banks use the platform. It delivers real-time credit agreement, creates transparency around accrual balances and provides detailed transaction data to lenders. “Finastra holds the role of integrator on this project, bringing all the banks together,“ Ms. Simula says.
When large companies aren’t able to persuade stakeholders to get on board, they often start small on blockchain efforts. For that tactic to work, teams must prioritize addressing any trust or knowledge gaps at the front end of the project. Mr. Golash recommends project managers start with pilot projects that address one small part of the supply chain or customer base to demonstrate viability. If the pilot project proves the benefits of blockchain for data security and ease of use, teams can turn that success into a buy-in tool for stakeholders in the next step in the supply chain.
From the outset, teams must create a plan that considers how they will engage stakeholders—and be open to new partnerships to alleviate trust issues, Ms. Simula says. “You may even need to start a new joint venture to manage the roles and responsibilities that come with these projects,“ she says. “The sooner you think that through the better.”
LINK OR SWIM
In the past year, some of the world’s largest public and private organizations have launched massive blockchain projects. These initiatives underscore the need for de ep pockets and absolute supply chain control to successfully scale the technology.
Investment Strategy
In August 2018, the Commonwealth Bank of Australia (CBA) partnered with the World Bank on a two-year, AU$110 million project to issue bonds exclusively through a private blockchain platform. The goal is to streamline processes for raising capital and trading securities while making it easier for regulators to track and monitor these transactions. Developed by CBA’s blockchain innovation hub, the project delivers the first global bond to be created and managed via blockchain.
Automated Audit
In July 2018, Deloitte, EY, PwC and KPMG partnered with 20 Taiwanese banks to launch a blockchain-based pilot project for financial audits. The goal is to automate and streamline the external confirmation process while accelerating audit tasks and reducing overhead. In the previous system, financial audits required someone to manually obtain and verify every piece of transaction data, which took roughly two weeks. blockchain will allow auditors to complete the same task in less than a day. The sponsors hope to expand the project to 1,400 publicly listed companies in China later this year.
Cut and Clarity
De Beers launched a diamond-tracking pilot project in January 2018 and within the first five months was able to trace 100 high-value diamonds through its supply chain. The system is designed to create a permanent digital record for every diamond registered on the platform so the company can prove the origin of each diamond and show that it was ethically mined.
Ship Shape
IBM and Maersk last year completed a joint venture to create a blockchain-based system that establishes a more secure and efficient process for global trade transactions. It creates a single-shared and real-time view of transactions for shippers, shipping lines, freight forwarders, port and terminal operators, customs authorities and inland transportation. Within the first year, the platform traced 154 million shipping events in ports around the world. To date, nearly 100 organizations have agreed to use the platform.
EVALUATING UNKNOWNS
Pairing a project to a particular blockchain technology platform is a make-or-break decision. Although blockchain is universal, the underlying platform on which data is stored and shared is not, and project teams have dozens of such platforms from which to choose. With a wide range of new platforms competing for business, project teams have to carefully analyze which platform is best aligned with a project’s needs, says Ms. Simula. Project managers also have to mitigate risks by filtering out platforms that could go out of business or become obsolete as blockchain needs evolve, she says.
“There are significant differences between all of the platforms, and it’s important to remember that not all of them will survive,“ Ms. Simula says. “There can be many unknowns because the technology has not been around long enough for project teams to fully understand the potential and limitations of it.”
Project managers needn’t go it alone: Developers can assess which platforms can offer the ideal blockchain template. That includes analyzing platform factors such as what coding language it supports, whether it’s scalable to accommodate future project expansion, how much technical support the platform operator will provide and how it validates information in the ledgers. When his company began development of a blockchain platform for MedTech, Mr. Sood and his team spent two weeks evaluating 10 platforms. They eventually chose an open-source platform that supports Java, is scalable and has flexibility. “Many platforms are still evolving, but the one we chose is used by a lot of enterprises,“ he says.
Educating developers on how to use the technology is an effective way to mitigate platform-decision risks, Ms. Simula says. Platform vetting should also include talking with other companies that have used the platform. She recommends analyzing the financial status of the platform operator as well as the quality of the platform code—factors that teams commonly evaluate during any technology selection.
US$3 trillion Annual business value that will be generated by blockchain by 2030
Source: Gartner
NEXT MOVERS
Interest in blockchain keeps increasing, but executives at many organizations say they’re just starting the journey.
Source: PwC, 2018
“In my projects, I keep a shared record of open questions and unsure impacts, review them regularly with the team and tackle them as soon as possible,“ Ms. Simula says. “Big-risk items should be addressed early on in the project to allow for a potential pivot or corrective action.”
—Jaana Simula, PMP, Enterprise Blockchain Solutions, Dallas, Texas, USA
EYE FOR TALENT
Organizations must infuse project teams with blockchain-ready talent. New hires, internal training and external technical specialists are all part of building knowledgeable teams. Although developing blockchain talent requires no more time or resources than other software development projects, project managers can accelerate the pace.
Mr. Sood and his co-developer attended a boot camp to learn the basics of blockchain development, and they shared that knowledge with other team members. They also seek out other blockchain experts through online meeting groups that help them gather and share good practices. “That’s how this talent ecosystem is evolving,“ he says. “Having people to talk to helps us build confidence and problem-solve.”
PHOTO BY MICHELLE GIBSON
—Nitin Sood, PMP
Mr. Creimer’s program marries training with mentoring. He created a training lab for new hires that includes hands-on activities and time to read documentation about various blockchain platforms. Before they can join a blockchain project, new hires also must pass the vendor certification exam. The combined training activities help team members identify risks and deal with them proactively, he says. For example, on a current supply chain system development, the project architect created a design using different channels for competitor companies, to ensure data privacy.
“Finding blockchain resources is a huge challenge,“ Mr. Creimer says. “But if you train a few people internally and they are good, they can train others.”
GETTY IMAGES
CASE STUDY
FROM HOOK TO COOK
WWF casts a wide net in developing a new way to trace tuna.
The world eats a lot of tuna. The global market is expected to reach US$13.75 billion by 2023, with a compound annual growth rate of 3.2 percent. Having a transparent supply chain is critical to the integrity of the industry—but that’s easier said than done. Despite industry efforts to control the tuna trade, problems persist, from unreported and unrelated fishing to fleet operators and processors using slave labor.
To help close gaps in the system, World Wildlife Fund (WWF) is scaling blockchain technology to track tuna from when it’s caught around the Pacific Islands until it’s served on a plate. The latest phase of a pilot program launched in 2016 is creating a standardized blockchain process that traces tuna for the export market in New Zealand. That phase was scheduled for completion in April, and the team will look next to expand the technology among fishing fleets. But at every phase, getting a complex chain of stakeholders on board has become quite a fishing expedition, says Bubba Cook, Western and Central Pacific tuna program manager, WWF, Wellington, New Zealand.
Although WWF and project partner ConsenSys, a blockchain specialist, developed a prototype by July 2017, they still needed to find a tuna fishing operator for a pilot project. The operator had to be large enough to ensure the team could collect measurable data but small enough to be able to quickly adapt operations. So Mr. Cook turned to Sea Quest Fiji, which has eight vessels and exports tuna to the United States, Japan and other markets. Mr. Cook had an existing relationship with Sea Quest CEO Brett Haywood, and he knew Mr. Haywood would be open to solutions that would help him prove the origin of the company’s tuna. Mr. Haywood agreed to put the technology on his boats.
“That was critical. You need someone who is willing and motivated to participate in this kind of project because they get the potential impact to their business,“ Mr. Cook says.
LURE OF TECHNOLOGY
The next challenge was importing the technology needed for Sea Quest’s boats. The Pacific Islands levy significant fees on imported electronics, and the necessary sensors couldn’t be developed locally. “It’s a standard challenge for any IT project in Fiji,“ Mr. Cook says. To reduce those costs, project representatives met with local agencies to present the project plan and showcased how it would benefit Fiji’s economy. The engagement helped convince those agencies to waive fees.
PHOTO COURTESY OF WWF
Tags and captured data allow the team to trace each tuna throughout the supply chain.
Getting fishing crews in Fiji to properly attach a radio-frequency identification tag to fish immediately after they’re caught required the team to conduct training sessions. The team taught local fishermen how to attach the reusable tag to each tuna and to use a mobile app to record basic information on each fish, which is stored in the blockchain. The tags and captured data would allow Mr. Cook’s team to trace each tuna throughout the supply chain. By January 2018, the team was able to trace every Sea Quest tuna sold locally from end to end as part of the pilot. “We ran a number of trials in the domestic market and proved we could capture all of the relevant data in the blockchain,“ Mr. Cook says.
With each successful phase, Mr. Cook has become more confident that blockchain innovations will transform traceability efforts and demonstrate how a single project champion can bring an entire global industry together toward achieving a single goal. To attract funding and build buy-in for the future, project partners created a video to illustrate the entire blockchain journey of a single tuna. The partners also published one of the first reports to provide relevant cost to the technology.
“Blockchain is not a magical tool, but it is a useful tool,“ he says. “When you make the supply chain transparent, the good guys benefit because they are already doing the right thing, and the bad guys can no longer get around the rules.“ PM
—Bubba Cook, WWF, Wellington, New Zealand