While blockchain-empowered solutions have made countless headlines over the last several years, the Boston Consulting Group reports that adoption has proven slower than expected.
BCG suggests the technology has presented stakeholders with a troubling paradox. In Transportation and Logistics, adoption is slowed by the same issues the blockchain and its tamper-proof ledger are meant to address. They write, "By increasing transparency, these distributed ledgers can mitigate the mistrust that often exists among the industry's transacting parties." Unfortunately, they continue, "this same mistrust makes it hard to bring together the industry's diverse participants into a common blockchain ecosystem."
The Blockchain Paradox: Enthusiasm and Uncertainty
When it comes to blockchain, enthusiasm and expectations far outstrip action. The results of BCG's recent survey underline this fact. 88% of the Transportation and Logistics executives surveyed fully expect to see the blockchain bring about industry-wide disruption. Nearly 60% expect this disruption to occur within the next five years.
Respondents are far less bullish, however, when it comes to their own capabilities. Citing poor coordination, understanding, and preparedness, 74% of executives rate their company's blockchain initiatives as superficial at best. Worse still, many of the executives in this group have yet to explore the technology at all.
Though practical applications are still limited, investors continue to pursue them aggressively. BCG found that venture capitalists have contributed around $300 million to blockchain startups over the last five years. The sheer volume of investments, they write, "suggests that new solutions will reach the market in the next one to three years." What remains uncertain is whether or not organizations will adopt them.
More than perhaps any industry, T&L stands to realize considerable benefits if it can resolve this paradox and commit to blockchain adoption. It is an industry, BCG remarks, that is "rife with sources of friction." Contending with numerous suppliers, disparate hand-offs, and evolving regulations, stakeholders are continually faced with time-consuming and costly processes.
BCG identifies a number of common T&L pain points that blockchain could soon address. Among these are inefficient data management, limited traceability, and needlessly complex reverse logistics processes.
A number of leading organizations have already started to make progress. BCG points to De Beers whose Tracr platform is bringing much-needed visibility to the controversial diamond supply chain. Marking each stone with a digital fingerprint, the platform provides stakeholders at each stage with information related to origin, quality, and transaction history. The solution will ultimately ensure the consumer that their jewelry was ethically and responsibly sourced.
What Can You Do?
Widespread adoption of blockchain solutions will require peers and competitors alike to align on a common value proposition and eliminate the sense of distrust that often characterizes the T&L industry. BCG expects the formation of this "industry-wide ecosystem" will take some time, but they encourage all businesses to begin considering how they can take part.
They outline a four-step plan for organizations looking to distinguish themselves as participants in the growing blockchain ecosystem:
1. Learn About the Technology
Before making any definitive moves, it's essential that organizations educate themselves on the potential benefits and drawbacks of blockchain. Throughout this process, BCG reminds Procurement to carefully consider how new tools might compare to their traditional resources.
2. Identify Opportunities
While recognizing that blockchain is not a cure-all, organizations should begin to take stock of their pain points and consider how a new solution could help address them. With these findings, they can prioritize the most relevant use cases and build an impactful business case. Then, the company should draw up a clear, strategic roadmap for adopting blockchain. BCG suggests this map should take into consideration "the company's market positioning and capability gaps, the maturity of the existing ecosystem, and regulatory barriers."
3. Conduct Pilot Tests
Before launching full-scale blockchain initiatives, organizations need to confirm the feasibility of their applications. Selecting an agile and decisive team to conduct pilot tests will help expedite the process.
Once they've validated their proofs of concept, organizations should introduce plans to implement blockchain at scale. The process won't be easy. It will require participation in an evolving ecosystem or efforts to create a new ecosystem altogether. BCG writes, "this includes collaborating to develop governance protocols to maintain and evolve blockchain standards and architecture." And that's just the beginning.
Organizations who wait too long risk leaving themselves on the outside looking in. While the future of blockchain adoption is uncertain, consumer expectations are very, very clear. They demand visibility into the supply chain and a guarantee that the products they purchase are ethically sourced and processed. The blockchain has shown it can provide both, but first businesses must work together to address its central paradox.