Blockchain won’t wait for you to be ready for it, which means it’s time to brush up on your knowledge and understanding right here, right now!
Blockchain technology will not only impact procurement and procurement professionals but is expected to be more pervasive in our business and personal lives than the internet itself. To put the enormity of impact on procurement and procurement professionals in perspective picture yourself twenty years ago trying to explain how the Internet is going to change things. Where would you even begin?
Like the Internet the Blockchain is a network. In the case of Blockchain comprised of decentralized “ ledgers”, many are referring to it as Internet 2 or more commonly the Internet of Value or Internet of Trust.
The most important thing to understand is that Blockchain addresses many of the most critical problems we’ve encountered doing business on the internet.
1) Security: Practically speaking the Blockchain is unhackable.
2) Transactions are verified by network participants (consensus), eliminating the need for third-party intermediaries’ (banks) costly, time-consuming and predominantly manual settlement processes. In addition to slowing down our supply chains banks alone have estimated these processes are costing them more than $20 billion annually.
3) Eliminating high transaction processing costs for high volume/low margin retailers who accept credit cards could significantly add to their bottom line.
4) Once transactions are verified they are secure and immutable. (unchangeable)
5) The immutability of the Blockchain means that supply chain provenance can be assured. This is particularly important for conflict minerals, pharmaceuticals, food and many other supply categories where provable chain of custody is critical.
6) Payments can be made directly from buying entity to selling entity “ledgers” by-passing intermediaries (banks, brokerage, clearing houses, title companies, etc.)
7) Payments can be automatically triggered based on the codified terms of “ Smart Contracts” stored in transaction blocks.
8) Blockchain capabilities will change, if not eliminate the role of accounts payable and accounts receivable departments.
9) Blockchain enables the concept of micro-units and micro-payments. It is estimated that approximately one -third of the world’s economic opportunity exists for products and services such as energy or digital rights where backend settlement costs currently constrain those markets.
10) It is also estimated that 25 per cent of the global population does not participate in the global economy because they have no bank accounts and/or credit cards. Without these tools they cannot participate in the Internet economy. The primary reason they do not have these economic tools is because they cannot prove their identities. Immutability of the Blockchain can enable these people.
What do I need to understand?
The capabilities I’ve outlined just scratch the surface on how Blockchain impact all of us. Aside from the aforementioned, as a procurement professional are several important things to understand.
1) Blockchain is a much wider and more pervasive concept than Advanced Cognitive Systems, Big Data, Predictive Analytics, Robotics, 3-D Printing or even the Internet of Things. In fact these technologies will become infinitely more practical and secure because of Blockchain.
2) Do not think of Blockchain and BitCoin, FinTech or Crypto Currencies as synonymous. They are not.
3) Do not think that it will take 20 years to mature and be mainstream. The estimate is 5-7 years for full maturity.
4) Do not assess progress by the US/Euro FinTech Community. While they were the first to recognise Blockchain’s inherent value and arguably have the most to gain by adopting it, they also have the biggest hurdles to overcome and could very well be last to cross the finish line.
5) Don’t make the mistake of waiting to become knowledgeable about Blockchain; it is the most highly disruptive technology we’ve seen since the Internet and it won’t wait until you are ready for it.
Michael Shaw is CPO and Executive Board Member of Sourcing and Procurement Executives (ACSPE) and Chief Information Officer at Blockchain Executive. This article was originally published on LinkedIn.