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The top three reasons why an enterprise blockchain project fails

August 16, 2020

In the business world, the blockchain has gone from being an experimental toy to being one of the top five strategic priorities. As a technology that can improve security and coordination within and between companies, it is now viewed as an important route to digitization, especially in an increasingly data-driven business world.

However, Although large investments have been made in blockchain projects by companies in the past three years, the harsh reality is that the vast majority of them have not yet passed the proof of concept. In fact, only 5% goes into production, and according to global research and consulting firm Gartner 90% of them need to be replaced within two years to stay competitive. This means that there is enormous potential for wasted resources.

Initially, blockchain was not the right solution

Although the blockchain craze has waned significantly since 2017, there are still misconceptions in the corporate world about what the technology can do. As a result Many companies are still trying to use blockchain for use cases that are better suited to traditional databases. Therefore, it is worth finding out what the blockchain is for.

The top three reasons why an enterprise blockchain project failsThe top three reasons why an enterprise blockchain project fails

Solution: Trust the evidence “when the blockchain has a chance”.

If and only if the answer to the next four questions is “yes”, there is potential to move forward.::

one. Can multiple parties benefit from data sharing and process coordination across your value stream?

If not, it will be too difficult to gain acceptance along the value chainespecially since technical and governance barriers often have to be overcome.

two. Are these parties currently facing an obstacle to coordination, such as an inability to trust each other?

If not, you can just use a traditional database. The simplest check for a confidence gap is to ask, “Are we reconciling data shared by another party with our own data?” If so, there is a lack of trust.

3. Is an intermediary’s services difficult to obtain, is the data in question too sensitive to entrust to an intermediary, or is an intermediary more expensive than the proposed blockchain solution?

If not, participants are likely to be better off with a broker who can “build trust”. efficient between the parties.

Four. Do the parties have good quality and accurate data and can they agree on rules for the structure of this data?

Otherwise it is difficult to derive a value from the decentralized storage of this data.. In an application in the supply chain in which participants want to react to temperature data from shipping containers, this data must, for example, be available to all participants in an incorruptible way and be seamlessly structured. that can easily be used.

Incentives are not in a row

Blockchain technology in the business context – where legitimate networks dominate – is often viewed as completely different from blockchain technology, where permissionless networks with strong incentive systems are the norm. Corporate blockchain initiatives often ignore the power of incentives to align the actions of different parts of a value chain.

Continuation of the supply chain use case, For a blockchain solution to be effective for businesses, you need to create a sufficiently large consortium of members, ideally with participants from all links in the value chain. A supply chain network that integrates nodes from source to consumer provides the universal visibility required to unlock improvements such as real-time tracking, just-in-time manufacturing, and supply chain resilience. That is the goal, and if it is achieved there can be enormous added value for all participants.

However, Some participants are likely to need incentives to attract them to the network, especially at an early stage. For example, while a beef vendor can immediately see the benefits of the consortium, an individual rancher or the packing house may not. When the retailer knows exactly where the beef comes from and what conditions it is traveling in, they can bill discerning consumers a premium and be incredibly more efficient when contaminated products have to be recalled. However, to the individual farmer, the benefits of joining the consortium may be less obvious, especially when additional burdens are involved, e.g. B. the installation of sensors in the farm as a trusted data source.

Solution: Take advantage of blockchain technology yourself to integrate network incentives.

A business consortium that can properly integrate incentives will grow organically, releasing the promised benefits for all participants. In our beef supply chain example, one solution is to leverage the advanced data collection capabilities of the blockchain-backed consortium to offer tempting funding rates to ranchers who agree to join the network. For example, with data on confirmed deliveries, beef quality and adherence to sustainable practices in the chain, these farmers will be sufficiently connected to funders in downstream markets. These funders, who can now meet their reporting and auditing obligations and effectively manage risk, can offer ranchers loans at more competitive rates than would otherwise have been possible, thereby attracting ranchers to the network.

Couldn’t maintain a strong consortium

In a business context, the strength of the blockchain network is a great measure of the consortium’s strength. In most cases the consortium is the network. If it fails, the project is dead. On the other hand, Strong consortia create stronger consortia because as they grow they create a force of gravity that attracts even more members and the effects of the network become visible.

However, At this early stage in the corporate blockchain adoption curve, many consortia remain relatively weak. As a result It is common for companies to join multiple consortia working in the same sector to hedge against risk: If a consortium fails, the company also has another option. This reality can make the consortium members inconsistent. You can leave consortia when the first signs of trouble appear, as we saw with the departure of prominent members of the Libra consortium – including PayPal, eBay, Mastercard, Stripe, and Visa – when it became clear that regulators were lobbying against the proposed network would make cryptocurrency and payments.

Solution: Embrace inclusive government from the start.

While this solution may not be in the DNA of most companies – consortia founding members must limit their power and control from the start – it is central to the spirit of decentralization and a major source of their power. Good governance combined with effective incentives can overwhelm the growth of these networks. By trusting that a broad and inclusive group of consortium members, thanks to the power of democracy, is acting in the best interests of all, companies can improve consortia resilience and increase their chances of long-term success.

The main principles for effective governance of blockchain consortia in a business context are as follows:

one. 1. Transparency and shared values

The consortium must establish clear rules for the exercise of power. Processes and data standards for the consortium should be defined jointly and to offer maximum scope and acceptance, It is best to rely on widely used protocols like Hyperledger, Corda, or Ethereum.

two. Enough voice for everyone involved

While it is okay for initiating members to participate in the legal entity that defines the consortium, It is important to give voice to non-consortium stakeholders who are likely to join in greater numbers as the network grows. This can be done through Establish a local council to be consulted on key issues such as product development and protocol changes in accordance with government regulations.

3. Legal clarity

Even if Blockchain consortia must maintain an integrative governance structure that is consistent with their shared values‘The truth is that A legal entity must also be established in order for the project to comply with relevant laws, such as in connection with data protection. While data is stored decentrally in the network, for example, applications within the platform must naturally embed data protection. In this model, the legal person can take their place as data controller to ensure compliance with data protection laws.

Take advantage of the low-code revolution

Just like low-code platforms like Mendix and OutSystems have taken over app development, The future of blockchain development, especially in a business context, is also low-code.

As blockchain engineers’ salaries grow in line with the demand for their skills, It is more important than ever for companies to use cost-saving tools. Current middleware solutions for creating blockchain solutions for businesses can turn any developer into a blockchain developer. This gives companies and consortia they are part of the ability to experiment with technology more efficiently and iterate use case concepts much faster. The best of these platforms go one step further, providing tools for rapid integration with legacy systems, comprehensive developer environments, and system management gates to support the post-proof-of-concept and lifecycle management phases of the applications.

This article is a roundup of a larger report that can be found here.

The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Matthew van niekerk is co-founder and CEO of SettleMint – a low-code platform for corporate blockchain development – and Databroker, a decentralized data market. He holds a BA with Honors from the University of Western Ontario in Canada and an International Master of Business Administration from the Vlerick School of Business in Belgium. Matthew has been with Fintech Innovation since 2006.

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