February 2018 Business SCAN
Described by the Economist as “the trust machine”, blockchains have evolved into a variety of models that can be applied to different business problems, such as provide supply chain transparency and dramatically improve the sharing of information, whilst allowing a visible assurance of authenticity. It looks like, with the right mix of leadership, collaboration and sound governance, we can yield significant benefits from blockchain.
What is Blockchain?
Cryptocurrencies such as Bitcoin are certainly having their moment in the sun but there are many other uses for the underlying technology, the “blockchain”.
Blockchain is being embraced by logistic companies to improve efficiency and security in the supply chain. Companies like Maersk and IBM are already testing the technology.
What is the blockchain? According to Dr. Phil Godsiff, University of Surrey Business School, blockchain is just a digital ledger. Very simply described, it is a means to record events that have taken place, but what is new is that its design provides considerable advantages over other ways of recording transactions. The details of every transaction are stored cryptographically on the blockchain, a stream of linked data available online.
The entire blockchain is decentralised, with all those using it creating copies of the blockchain record. This one-version-but-many-copies approach removes the need for a centralised authority, such as a bank or legal body, which also provides protection from a single central point of failure. The blockchain is open and public, and practically impossible to alter a record once the block representing the transaction has been added.
Blockchains offer at least three key advantages: Security, transparency and automation.
- Security: The security comes from two features of blockchain. First, the data is stored in discrete chunks, or “blocks”. As each block is created, it must securely link to the previous block in the database, making a “chain” of blocks and preventing anyone from modifying previously stored data. Picture the scenario where a person takes a package to the post office. This person can’t go into the database file and delete the word “Processing” and type in the word “Shipped” in its place. Rather, the person adds data saying the date and time the package was dropped off at the post office. This way, everyone can track the package in real time, but also keep an eye on how long each step takes and help to identify where any problems occur.
- Transparency: Blockchain transparency results from the fact that its data is stored in encrypted form but is otherwise available to participants. Coupled with its security features, a blockchain supply chain database would let any entity involved in a shipment, for example, track the order’s progress with confidence that the data is accurate.
- Automation: Blockchain can help automate data flows between supply chains. This is because blockchain systems are digital records, hence they can contain software code set to perform specific functions when certain data is stored in the system. They are unalterable instructions, hence, they can automate some processes, like issuing a payment upon delivery. These are often called “smart contracts”. This adds another layer of security too, because the blockchain itself can keep an eye on how long each step takes for every item and then alert human supervisors if something takes too long, for example, a sign of a production breakdown or even a signal that someone might be tampering with the goods.
Sources: Shackelford, S. (2018) Guarding against the possible Spectre in every machine, The Conversation, Jan 22; Godsiff, P. (2016) Blockchain could challenge the accepted ways we shape and manage society, The Conversation, Jan 26; Albright, B. (2017) Blockchain: The Future of logistics? Aftermarket Business World: Nov 1, 2017
Consider if blockchain is relevant for your organisation and how it would impact your processes, such as customer service, supply chain, etc.
Other Recent Hot Topics
Discuss topics like this in detail with industry leaders.Learn More
Techniques Referenced in this Hot Topic
Build capability with the latest management and leadership techniquesLearn more
This KnowledgeBrief Hot Topic is part of our monthly Business SCAN publication
Stay ahead in business with the latest ideas, innovations and research, in brief – filtered from the finest sources globally.