When you go for a swim, do you dive right in or do you test the waters, standing by and letting others jump first? With blockchain, we have witnessed a similar pattern: certain industries and organizations have rapidly embraced the technology, while others have waited on the sideline to watch the results play out before implementing on their own. Over the last two years, the Institute for Business Value (IBV) studied blockchain adoption across 8 industries in 18 different countries, interviewing over 1,600 CxO’s to better understand these industry-specific journeys.
Taking the leap
Many of the industries that we surveyed, including banking, financial markets, healthcare, government and electronics, have optimistic early adopters, with 15 percent expecting to be in production by 2018. These first movers tackled the well-known industry issues, worked through the growing pains of the new technology, and removed many of the barriers for second-wave industries. The later adopters, such as consumer, life sciences and transportation, have been more cautious in diving into blockchain. These industries are imbibing the lessons learned and moving on a slower path to implementation, although more than 60 percent still expect to reach commercialization by 2020.
For many, blockchain has become synonymous with disruption. Despite the common belief that that first wave industries are jumping in to disrupt their competition, many of these organizations are actually investing in the technology to remove pervasive industry-wide frictions and optimize existing processes.
Financial markets and healthcare organizations, for example, are motivated to work with blockchain to overcome regulatory challenges and mitigate cost of compliance in order to grow faster. Instead of investing to disrupt competitors, these organizations may actually be investing to work better together. Within the financial services industry, LedgerConnect is a distributed ledger technology platform enabling financial institutions to deploy, share, and consume services on a single distributed ledger network. The blockchain consortium, founded by CLS Group and IBM, has active participation from Barclays, JPMorgan Chase, Goldman Sachs and Bank of China. Although these banks would traditionally be considered competitors, they now are working together to realize operational efficiencies and cost savings across asset classes.
Within industries such as transportation and life sciences, organizations are not looking to expand their ecosystems, but rather are aiming to optimize their existing networks and improve operational processes. Global supply chains, for example, are clogged with inefficiencies, heavily reliant on complex paper-based systems, and poorly connected. Several of the improvements enabled by blockchain networks such as TradeLens, therefore, will be truly transformational. The ability to completely trust blockchain-verified shipment status and tracking data, a key investment area in the transportation industry, is nothing short of game-changing.
Blasting through barriers
As with any new technology, the barriers to implementation will evolve as the technology itself matures, and early adopters are cognizant that their blockchain solutions must adapt to new changes and challenges as they arise. Nevertheless, these first-wave industries have seemingly resolved many of the initial barriers and doubts for second wave industries.
Regulatory constraints and immature technology, for example, were identified among the top three barriers in all eight surveyed industries, regardless of how quickly the industry moved to implement. However, as we saw before, blockchain is increasingly being used to overcome regulatory challenges rather than create new ones, and the technology has become more robust as more players work with it. Executive buy-in and lack of a clear ROI also appeared as a top barrier among first wave industries, but those industries now have more initiatives being driven top-down by C-suite executives who have been able to clearly see the value.
Insufficient skills have recently been identified as a new top concern among second wave industries, which may be a consequence of waiting to implement while the early adopters got their hands dirty in the technology. Companies in these industries certainly must seek people with the skills needed to build and sustain the new processes, but as blockchain becomes woven into enterprise architecture and more firms work with it, they themselves will better understand the technology and be able to harness its full potential.
As the first-wave industries evolve through their blockchain journeys towards full scale commercialization, we continue to draw insights from their progress to share with our readers with the hope that second-wave industries will take advantage of the lessons learned.
Find out more in depth cross-industry blockchain insights from the IBM Institute for Business Value, and stay tuned for the second post of this cross-industry series, where we will discuss early adopter organizations using blockchain to tackle business frictions and spur innovation.
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