Blockchains are databases that are shared between multiple parties, storing records of transactions that cannot be changed or deleted. Blockchain, a term that refers to a host of distributed technologies, has ushered users into a new age of transparency, efficiency and trust.
Blockchain’s association with cryptocurrency like Bitcoin has generated significant hype. Companies and investors have initiated many research and pilot projects, but few have been implemented at scale. McKinsey, The World Economic Forum, PwC and IBM have all published guidelines to integrate blockchain technology to reap “cost, time, and efficiency improvements.” But according to Kristi Yuthas, professor in The School of Business and founder of the Business Blockchain Certificate Program, blockchain’s “enormous potential for creating business value has not yet been realized, in part, because we’re overlooking its strategic potential.”
In a new paper, “Strategic Value Creation through Enterprise Blockchain,” Yuthas and two colleagues create a framework to help organizations understand how blockchain can build and strengthen the organization’s strategic capabilities. The framework builds on theories of how strategic alliances and strategic capabilities drive competitive advantage.
Strategic alliances and blockchain
In traditional business strategy analysis, companies identify the resources they need for competitive advantage. They can form strategic alliances to fill in the resource gaps. Yuthas writes, “Looking at strategic alliances as a means to access resources provides the linkage to blockchain consortia — blockchain consortia are a type of strategic alliance.”
The study’s framework breaks blockchain-based strategic capabilities into three categories:
Building upon existing capabilities: Building on existing value propositions to reap bigger benefits.
For companies with competitive advantage based on the sourcing or processing of goods, blockchain can support claims of authenticity. For example, use of blockchain allows Rock Solid Diamond Collection, a manufacturer using conflict-free diamonds to trace each of its diamonds through the supply chain and prove their provenance to its ethically-minded consumers.
Sharing complementary capabilities: Providing companies access to each others’ resources and data and helping them to share uncertainty.
Companies with interlinking processes can share data that benefits all parties. The Port of Rotterdam uses a database shared with international shippers and logistics providers to dynamically allocate resources such as slips, cranes, and personnel. This increases the volume of goods that can be moved through the port.
Building blockchain-specific capabilities: Developing general capabilities around blockchain management and using specific tools like smart contracts.
Participation in one blockchain project can help companies build skills that can be transferred to other projects or used to develop new products or business models. Maersk’s experience with track-and-trace helped enable them to become the pilot client for Insurwave, which provides automated insurance products that can be pre-programmed to adjust to conditions such as engine loads and weather.
Blockchain and business
Since blockchain’s inception, it has mostly been studied through the lens of systems architecture. Yuthas founded the Business Blockchain Certificate at PSU in 2019 after noticing that blockchain was starting to be taught to computer science students but not to business students. The certificate is one of the first for-credit blockchain programs in the world. “We now have a lot of tech people who know how to build these systems, but we need business people who know how to create and capture value with them,” says Yuthas.
This program is important because businesses’ embrace of blockchain is beginning to accelerate. LinkedIn listed “blockchain” as the most highly demanded skill in 2020. As companies learn how to better position themselves to become market leaders, they will need to hire skilled professionals who can bridge the gap between technical understanding and business strategy.
This study was co-authored by Yolanda Sarason and Asad Aziz, both from the College of Business at Colorado State University.
Karen Lowe is a 2020 graduate of The Portland MBA. She manages marketing and strategic partnerships for The Give Bin and writes regularly for Portland State’s Graduate Business Blog.