Our traditional business model as we known is at a crossroads considering the emergence of the Internet of Things (IoT), artificial intelligence and blockchain. We live in an era of disruption, and we need to redefine our business models.
We need to accept that almost every sector — from banking and utilities to entertainment and agriculture — can expect to experience major business model disruption as blockchain technologies take hold.
Because blockchain technology originated as the core mechanism of the bitcoin digital currency, there is a widespread belief that its potential is greatest in – or even limited to — the financial sector, but a different reality is unfolding.
Blockchain extends to the core of commercial activity, of wealth creation, and goes to the heart of innovation and what makes an economy work. It raises the prospect of changing the fundamental structure of the corporation, of how we orchestrate capability in society, innovate to create goods and services, and engage with the rest of the world. There are far-reaching business models already emerging that are creating ripples on our traditional models, far from the known Internet we use today.
Musicians will be able to reclaim much of the value they cede to record companies by offering their music directly to fans, movie-makers and broadcasters; individual investors will be able to deal directly with companies they hold shares in rather than go through stock markets; and the exclusive use of cars will start to dwindle as such assets are shared over peer-to-peer networks, just to name a few potential applications.
Further, in five to 10 years, the financial services industry will be unrecognizable.
Banks have a simple business model: they move value, they store value, they lend value, they exchange value, they account for value, they attest to value. Every one of those could be disrupted profoundly by this technology.
Blockchain has made the whole financial services industry sit up and pay attention. But it’s not just the threat – there’s a bigger opportunity if you look closely enough.
Japan’s Mizuho Bank together with technology company Fujitsu have conducted an operational trial focused on cross-border securities transaction settlements, which would ensure it is practically impossible for anyone to tamper with transaction histories, as well as shortening the processing time for cross-border securities transactions from the current three days to same-day settlement.
Such distributed disruption moves will have a liberating effect on consumers and small businesses. A customer tapping his or her card in a small retail store would find a blockchain-based settlement would be instant rather than taking several days to occur, as the process simply invokes a change in the blockchain distributed ledger.
One-third of the revenue of accounting companies is derived from audits. But with blockchains, you not only have double-entry accounting — credit and debit — but automatically make a third entry in the blockchain, a time-stamped record of every transaction that has occurred. So rather than an expensive annual audit, it could be instant and real-time. That would in turn free up the resources of forward-thinking accounting companies to invest in more high-end, value-added activities.
As we take stock of the global landscape, we can see every industry, in every major economy, is starting to see big disruptions occur.
The concept of hyper ledger, as we sometimes call blockchain, can provide answers to issues of transparency and so much more. Nevertheless, as with all technology, we need to be wary of how we design the solutions. We will have unequivocal risks, as with the introduction of virtually any technology, but the implementation of blockchain can revolutionize business activities for enterprises across many industries. Designing a blockchain solution with the right controls in place can easily transform many of the models we have come to accept.
Editor’s note: For more ISACA resources regarding blockchain – including a new research report, tech brief and e-learning course – visit www.isaca.org/blockchain.