A recent Gartner survey predicted that by 2023, 90% of blockchain-based supply chain initiatives will slow down. These results may sound like the thud of falling bricks in terms of the expectations and hype that has been surrounding blockchain in the past year. The survey reports that only 9% of companies have invested in it. Are these companies early adopters, or suckers? Pioneers, or believers of the hype?
Neither. In my opinion, exploring any new technology requires thinking through the approach, and the business case associated with it. This came out earlier this year, when we held a workshop at NC State in January 2019 exploring the emergence of new technologies like AI and blockchain in supply chain. The workshop, sponsored by IBM Watson Supply Chain, provided some compelling insights into how organizations need to consider investments in blockchain.
In exploring how new technologies such as blockchain should be deployed we introduced the workshop participants to the metaphor or building a bridge vs. growing a garden. Building a bridge requires years of planning, and you can’t begin to even use the bridge until it is 100% completed, and every stone is in place. This is equivalent to deploying a major ERP system like SAP. On the other hand, developing a block chain or AI capability is more like growing a garden, in that it is a long-term vision, but can be created in a series of small projects. It begins by laying the soil, which is equivalent to establishing a good data governance foundation. Then one can begin to introduce new plants, create a stone path, perhaps a small wooden bridge, etc. As one adds each new portion of the garden, it begins to take shape, and organically begins to come together. Also, you can see the results of your work immediately, and begin to enjoy the different elements of the garden right away. In a similar manner, organizations should stand up an analytics function that can work on small projects that provide immediate benefit, whilst moving towards a long-term vision for the growth of the garden.
Pilot projects need to consider return on investment, but not just on cost and efficiency- focused measures. Rather, companies would consider applications that will provide new capabilities that customers will value. Projects that focus on increased speed of decision-making, increasing asset velocity, and creation of new performance analytics in real-time beyond what is available today are examples of bold new capabilities that are important to customers.
To set the “foundation of the garden”, trusted data is critical. The results of our analytics study suggest that 75% of respondents believe their data is not in good enough shape for an AI or block chain application. Although block chain represent an opportunity for managers to drive trusted transactions in the supply chain, proponents fail to mention that it requires relevant, trusted data. To be trusted, measures of data include accuracy, completeness, timeliness, consistency, and uniqueness.
Several individuals noted that it is important to jump in and not wait to engage in a block chain, AI, or IOT initiative. And yet, the “chicken and egg” problem arises – can we do so if we don’t have good data? Companies who take a “wait and see” stance will quickly fall behind, because an important component of creating an analytics culture involves jumping in, trying out different approaches, determining what works and what doesn’t and learning to fail fast and learning from these failures. Companies who have moved aggressively are taking an agile approach to deployment, and jumping in on block chain, AI applications, and IoT pilots to determine what might work and what would not work.
When evaluating potential pilot projects, consider those that have the quickest return on investment, and which can begin by creating the greatest value right away. Consistent with the garden metaphor, you want to create block chain pilots that you can begin to enjoy and derive value from right away. Rather than open blockchains, several participants mentioned that enterprise blockchains were not difficult to begin to pilot, and that they could provide a secure means of sharing information, provided that trusted partners were part of the chain. The block chain could be used for specific instances where speed and visibility of information is needed, and as such, it is important to pick the right types of projects for block chain. Practical approaches that have an immediate effect, and which can capture information, contextualize it, and convert it into actionable decisions are at the top of the list of criteria for consideration of such applications.
Another way to select projects is to begin with a specific pain point in the supply chain, where operational inefficiencies are slowing it down considerably. The goal in such cases is to construct the most trusted supply chain in the world, one that has the fastest free cash flow, and which can quickly respond to changes in customer demand, supply situations, and operational problems. In other cases, the need to capture customer point of sale data, in a retail environment, and quickly use that to shape commodity purchasing, advance buying, risk management, and other strategies on the supply end may be the motivating factor.
Block chain and AI can also do much to improve sustainability initiatives. For instance, being able to track where a food product originated for purposes of food safety, or whether conflict minerals are part of a product, is a promising approach. However, this will require a much more standardized set of data taxonomies that are broadcast up and down the supply chain, and increased collaboration on how to create such taxonomies. This is likely to be something that will be much further in the future. So Gartner’s survey may be directionally correct, but short on suggestions on how to proceed…each company will need to establish their block chain strategy on their own, and make sure that it provides an immediate benefit if possible.