Blockchain and Digital Transformation Go Hand in Hand
New technologies are revolutionizing business from every direction. Digital transformation isn’t a technology trend; it’s a customer experience trend. In short, businesses are evolving because customer expectations are evolving. Either we are revolutionizing experiences through our own innovation, or we are using data to iterate and innovate along with what the customers want. In some cases, we are doing both. However, new technologies like blockchain and AI are certainly setting the course for digital transformation at the speed of customer experience.
Created as the technology architecture for Bitcoin in 2008, blockchain solves some of the immediate issues of digital economies. The security, data preservation, and networking capabilities of blockchain can circumvent traditional cybersecurity barriers and enable the information sharing requirements of contemporary business. Due to the regulatory, processing, and connection efficiencies available with blockchain, Santander Bank estimates $20 billion a year in savings from using the technology. But while blockchain can streamline the processing of fees, payments, and costly intermediaries, as well as the network exclusions inherent in financial systems, the applications for the technology are capable of larger cultural and political shifts. All forms pf commerce and anything of value is set to be changed by blockchain, allowing consumers the protection they require in a new economy.
The role of the individual and consumer is shifting already in the digital marketplace. With the support of machine learning, connected devices, and analytics, consumers are more connected, with fewer barriers, than ever before. The risks for these types of interactions are impossible to overcome without the beneficial structure of blockchain to address and mitigate the threats. Allowing this level of intimacy without the traditional risks is one reason blockchain is the key to widespread digital transformation.
Addressing the Threats to Digital Transformation
As I mentioned in Companies Killing It in the Digital Transformation, even though market leaders like StubHub, JetBlue, and Dominoes are making the most of digital opportunities, only 18 percent of businesses consider their own strategies “very effective.” While some of this hesitation is a barrier of perception, without the infrastructure of blockchain technology to enable efficient networking it may be impossible for some enterprises to fully capitalize on digital opportunities.
For example, the Internet of Things (IoT) already represents 6.4 billion devices in use worldwide, with 25.5 million new things connected every day. But the security risks to privacy, and easy access for hackers, are growing along with the adoption of this technology. As stated in Blockchain 101: How This Next Big Service Will Change The Future, blockchain picks up where cloud technology leaves off by creating highly secure venues for information sharing— far better than the cloud alone. In order for the full potential of the IoT to be realized, blockchain needs to be the underlying architecture.
The same holds true for all cloud and machine learning applications. HIPAA laws, regulatory issues, licensing, data validation, and security risks are barriers for digital adoption. Only with blockchain as a base can healthcare, finance, commerce, and digital economies realize the potential of digital transformation. Consumers and businesses alike balk at adoption with the current downside of this level of access.
Blockchain as Integration: Beyond the Consumer
The appeal of Blockchain technology for financial services industry applications comes from the security, efficiencies, and data validity inherent in the technology. Blockchain can leverage efficiencies beyond contracts and financial calculations and will enable more efficient relationships in automation and industrial applications as well.
As Shelly Kramer describes in How Blockchain and Bitcoin Tech Will Fuel the Industrial IoT, Machine to Machine Communication (M2M) that uses blockchain technology can operate autonomously with the full support of historical data. Using the example of smart devices connected to oil lines, “with the data stored from past years, blockchain technology could automatically adjust or reroute oil flowing through the line based on weather patterns or the current need for the oil.” Understanding the ability of blockchain architecture to support and integrate cloud, M2M, and IoT applications reveals seemingly endless industrial, commercial, and consumer-driven possibilities. While blockchain is essential to support these digital tools, its role as integrator brings additional benefits for innovation.
Setting the Scale of Blockchain
Setting the scale and potential impact of blockchain technology requires a look at some of the fundamental vehicles that enabled the start of today’s second wave of digital transformation. Harvard Business Review draws a very real parallel between email technology (through TCP/IP) and blockchain as the next market disruptor. Just as networking, communications, culture and business were fundamentally altered with TCP/IP, blockchain is set to move beyond technology and change our basic architecture of connecting.
Many businesses, governments, and thought leaders are just starting to recognize the broad impact of the technology, beyond blockchain’s necessity as a vehicle for enabling digital transformation. In The Truth About Blockchain, Marco Lansiti and Karim R. Lakhani state that blockchain “has the potential to become the system of record for all transactions. If that happens, the economy will once again undergo a radical shift, as new, blockchain-based sources of influence and control emerge.” Regardless of the scope of the shift, the need for the underlying architecture of blockchain shows the possible magnitude of this technology as the new standard for networking and data validation in the years to come.
This article was first published on Forbes.