Blockchain ecosystem business models: Adapt or get out of the way
One consequence of new technology is that it breaks down barriers and fundamentally changes the competitive landscape. Today, we see blockchain spawning a new business imperative in the ecosystem business model. In this new model, it is possible to tightly integrate and disintegrate a symbiotic community focused on specific business outcomes—whether the participants are customers, partners, or even competitors—and do so customer by customer (and even transaction by transaction).
The ability to do this in a hybrid operating model from edge to cloud—to change it at will and do it rapidly and repeatedly with full visibility throughout the ecosystem—is aimed right at the basic business process of vertically integrated global enterprises.
In 1937, Ronald Coase published an article titled “The Nature of the Firm.” In it, he offered an economic explanation of the factors companies consider when deciding whether to produce something themselves versus obtaining it from the market. Over the decades since its publication, technology has exerted growing influence on these decisions.
Now, we have blockchain technology enabling groups of companies, individuals, and others to quickly form into a consortium, on a global scale, with a shared version of the truth based on a common set of facts.
From the managed healthcare point of view
How does this change the “nature of the firm?” Let me share a conversation I had over drinks with an innovator who also happens to be a medical doctor.
This doctor works for one of the largest American integrated managed care consortium. It has well over 11 million health plan members, 200,000 employees, and more than $70 billion in revenue operating over a vast geography. The whole approach is preventative care addressing questions like: How do you provide care across the life span of 11 million-plus members over a vast region? What services should you deliver yourself? What should you obtain from the market? How do you build this consortium, and at what cost?
From an IT perspective, the managed care consortium has placed its bets. To date, it’s invested tens of billions of dollars in systems of record, systems of engagement, normalized data systems, supply chain, ERP, and other integration systems. When you contemplate barriers to entry, it doesn’t get much more formidable than this: a huge monolith of integrated systems all designed to create a shared truth enabling lifetime care and market domination!
But after I explained the blockchain-based business model, my doctor friend immediately grasped the possibilities for improving his business model. His thinking is this: It takes a lot of time and money to integrate providers (and there are many!) into the consortium’s huge IT infrastructure. If a managed care consortium can rapidly and inexpensively integrate partners, competitors, partners, and patients into an ecosystem business model, it has an advantage. The organization can bring to market new providers and services faster and cheaper.
Looking across industries with an eye toward the supply chain ecosystem
This change is evident across multiple industries. Supply chain is one of the most popular blockchain use cases. Imagine the advantage vendors have if their supply chain ecosystem can quickly add new suppliers, customers, and vendors. Take that flexibility and add real-time visibility throughout the chain plus a trade finance system to lubricate the whole process and you have a competitive advantage, lower costs, tighter integration, and happier customers.
This is not only exciting to people who focus on the business aspects of blockchain but is also getting closer to being doable with every new supply chain proof of concept. In financial services, for example, the value of blockchain and its ability to disrupt existing business models has been recognized for years. This industry leads in blockchain investment, with billions of dollars spent globally by some estimates. Venture capitalists and banks have allocated 40 percent of all financial technology investments into blockchain startups.
When it comes to blockchain, the future is unpredictable—and exciting
Now for the standard disclaimer: Blockchain technology is still in its infancy. No one knows if the current set of blockchain platforms used for almost 80 percent of all proof-of-concept deployments (Ethereum, Hyperledger, and r3 Corda) will be the go-to platforms in the future or whether something new will come along. This uncertainty—along with the fact that regulatory requirements are still being defined and there isn’t a library of production-grade, ready-to-deploy blockchain apps out there—makes the future as unpredictable as it is exciting.
We were taught back in business school that technology strategy follows business strategy, and that is still true. What’s also true is technology has never moved so quickly or exerted such an influence over how businesses compete. I wasn’t around when the telephone replaced the telegraph, but as CIO of a global strategic consulting firm in the early 1990s, I certainly was there when this new thing called “the web” was born. Back then, being a globally integrated enterprise leveraging global sourcing was unique and unproven. Now, with the Internet, it’s the de facto model for every startup you encounter.
Today, 25 years later, the most exciting blockchain work is around consortia and how it can change the way we compete and do business. Things evolve. We see a lot of energy in blockchain. New consortia are forming, failing, and reforming. Blockchain technology is coming faster than ever, and business models need to break down and reform as part of business as usual.
Blockchain business models: Lessons for leaders
- Blockchain will impact supply chain management at a fundamental level.
- The technology will change the way large enterprise environments integrate new features and capabilities.
- Adoption of these changes will translate to a competitive business advantage.
This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.