From buzzword to boardroom: Blockchain as a new way to boost profits
ILLUSTRATION BY RUTH MACAPAGAL
As a “global management guru,” as Bloomberg has called me, I see every day how many of our clients, even the multibillion-dollar conglomerates, are still unclear about what blockchain is and how it works.
Why should you care? Because blockchain technology can streamline processes, reduce intermediaries, save costs and increase transparency.
Blockchain was first introduced in 2008 as part of the cryptocurrency bitcoin. However, its potential applications have since expanded beyond the world of cryptocurrency. Blockchain has evolved to have a much broader impact on business transactions and how we conduct business in industries ranging from finance to health care, exploring its potential.
Blockchain in simple terms
Imagine a notebook that many people own copies of. Whenever someone writes a new page in their notebook, everyone else’s notebook automatically gets updated with that page. This ensures that everyone has the same information at all times.
Once a page is written and added, it can’t be changed or removed. Before a new page is added, most notebook owners have to agree that the content of the page is correct.
This notebook is like a “blockchain.” Each page represents a “block” of data and the entire laptop is the chain of these blocks. It’s a system where information is stored in a way that’s transparent, unchangeable and verified by everyone who owns a copy.
This “notebook” is a digital ledger and the agreement between owners is done through complex math and computer processes. But the essence is about building trust and verifying information in a decentralized manner.
Practical applications
The potential applications of blockchain technology are vast and diverse. In finance, blockchain has the potential to revolutionize the way we conduct transactions, from cross-border payments to securities trading. By eliminating intermediaries and reducing transaction times, blockchain can increase the efficiency of financial transactions and reduce costs.
Blockchain technology also has the potential to transform the supply chain industry. By creating a permanent record of each transaction in the supply chain, blockchain can increase transparency and reduce the potential for fraud. This can enhance trust between suppliers and buyers, and increase efficiency in the supply chain.
In the health-care industry, blockchain has the potential to revolutionize the way medical records are stored and shared. By creating a secure and transparent database of patient records, health-care providers can reduce the potential for errors and increase the accuracy of diagnoses.
Practical examples
Let us look at some practical examples of how companies have incorporated or are experimenting with blockchain technology to increase efficiency and reduce costs:
1. Banking and payments: Blockchain can facilitate direct international transactions, cutting down intermediaries, reducing costs and speeding up the process. Ripple (XRP) provides a real-time gross settlement system, currency exchange and remittance network. Major banks like Santander and American Express have partnered with Ripple to facilitate faster cross-border payments using its blockchain-based technology.
2. Food safety: Traditionally, it has been hard to trace the source of contamination in case of food-borne diseases. Blockchain provides a solution. In collaboration with IBM’s blockchain-based Food Trust, Walmart tracks its lettuce and spinach supply from farms to stores to ensure faster recalls and improve food safety. In the case of an outbreak or contamination, it becomes easier to identify the source and remove contaminated products.
3. Supply chain: Maersk, the shipping giant, partnered with IBM to develop TradeLens, a blockchain-based shipping and supply chain management company. This helps in the real-time tracking of shipments and reduces paperwork.
4. Authentication and provenance: De Beers uses blockchain to trace the journey of diamonds from mines to consumers, ensuring authenticity and ethical sourcing.
5. Music and entertainment: Spotify acquired blockchain startup Mediachain to leverage its technology to match songs with their creators and licensors, ensuring that artists are paid fairly.
6. Real estate: Startup Ubiquity offers a software-as-a-service blockchain platform, allowing for easy record-keeping and tracking of real estate transactions, reducing fraud and increasing transparency.
7. Automobile: BMW tested blockchain to track and verify the origin and ethical sourcing of cobalt, a key component used in electric car batteries.
8. Agriculture: Bext360 provides coffee farmers with a blockchain solution to trace beans from “tree to cup,” ensuring fair payment and traceability.
9. Airlines: Lufthansa has partnered with software firm SAP to create a blockchain competition to find practical uses for blockchain in the airline industry, including loyalty programs and supply chain optimization.
10. Energy: Brooklyn Microgrid is a project in New York where neighbors can buy and sell solar energy using a blockchain platform, effectively bypassing major energy companies.
11. Insurance: AXA, the insurance giant, has a product called “Fizzy,” a blockchain-based automatic compensation tool for flight delays.
12. Retail: Alibaba uses blockchain to counteract food fraud and ensure the provenance and authenticity of imported goods in its marketplace.
13. Health care: The MediLedger project brings together leading pharmaceutical companies to ensure the authenticity of drugs, reduce counterfeit medicine and improve patient safety.
14. Journalism: Civil, a blockchain platform, aims to provide a decentralized model for journalism where readers can fund journalists directly, ensuring authenticity and reducing dependence on ad revenue.
15. Loyalty and rewards: Loyalty points are usually limited to specific companies or platforms.
Universal loyalty points based on blockchain can be used across various services and platforms. Startups like Loyyal are reinventing how loyalty is created and rewarded using blockchain.
Conclusion
These are just a few companies and industries actively incorporating blockchain technologies into their operations to increase efficiency, reduce costs and tackle other industry-specific challenges.
These examples show that blockchain technology can streamline processes, reduce intermediaries, save costs and increase transparency across various sectors, from finance to health care to entertainment.
As blockchain technology evolves and matures, businesses need to understand its potential impact and explore its applications in their industries. With its potential to increase efficiency and reduce costs, blockchain is poised to become a significant force in the future of business transactions. INQ
Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries: www.TomOliverGroup.com or email [email protected].
