BY NATHAN SIMON
EY recently hosted an event to showcase some of its blockchain products at its Union Square Wavespace facility in New York. Among these were the firm’s “Tesseract” mobility platform for
vehicle sharing as well as its recently launched “
Blockchain Analyzer” for supporting its audit teams’ analysis
of blockchain-based businesses. The firm was at pains
to demonstrate that these platforms for organizing businesses around the distributed ledger technology are out
of the prototyping phase and into production. Introducing an audit tool into the mix helps to make the case that
there’s nothing standing in the way of companies organizing core business processes and even whole operating
models around this technology.
Perhaps the most interesting feature of blockchain is
the transparency it affords. This manifests in two ways,
both of which revolve around the fundamental value-creating production transformation process that is the heart
and soul of any business. One is at the product or service
level, where blockchain can enable the disaggregation of
Traditionally, as inputs move down each stage of
the value chain they are bundled into outputs, with the
aggregator taking ownership over the entire assembly.
In the auto industry, for example, the assembler owns
all the parts in the car even though independent suppliers produce a substantial portion of them. But along
with the revenue stream an asset earns comes risk.
Aggregation of asset ownership has been a barrier to
the efficient allocation of risk to the party most able
to manage it, which is essential to value maximization.
But now OEMs could retain ownership for the batteries
and spark plugs they make that go into cars. By disag-gregating assets into their value-creating components,
Blockchain opens a new frontier for constructing val-ue-maximizing operating models.
The other way blockchain affords transparency relates
to the interaction of business partners. Traditionally, com-
panies cannot directly observe the economics of the value
chain beyond their step in it. They know how much they
spend for inputs, what it costs to transform them into out-
puts, and how much they earn for those outputs. The mid-
dle part of that equation was always under their control,
Different value chain participants face a prisoner’s di-
lemma inasmuch as mutual information sharing among
them maximizes value but one-sided sharing can diminish
it. Blockchain has the potential to elucidate the entire val-
ue chain from raw materials to end user consumption and
make that visibility real time. This is particularly powerful
with respect to the creation and use of data and intellectual
property, among the more intangible assets that are at the
heart of many emerging business models.
Consultants are directing much of their evangelizing
on blockchain towards its potential to facilitate process
automation and waste reduction: things consultants have
always been good at. Indeed, smart contracts, for example,
could yield enormous efficiency gains in sectors like logistics that are still held captive by a cumbersome paper trail.
But the bigger opportunity is the transparency afforded by
this technology, which can fundamentally alter companies’
business models by changing how they cooperate with
each other to maximize value.
The power of ecosystems to foster innovation is a hot
topic, but consultants have always struggled to work at the
interface of independent businesses that can benefit by cooperating more effectively. The consultant-client relationship creates a bias that impedes multi-party solutions, and
there is no owner on the client side for a company’s system
of external cooperation who could hire the consultant.
Cottage consulting industries grew up around helping procurement with supplier relationship management,
counseling sales on selling value, and supporting finance
in organizing and executing transactions associated with
joint ventures and alliances. But heretofore there’s been
no cross-cutting platform for connecting these capabilities
and translating them into real strategies for their clients.
Blockchain has the potential to alter the business landscape in a way that either puts consultants at the center
of ecosystems or makes them and auditors superfluous.
Nathan Simon is a Senior Director of Research for ALM
Intelligence responsible for managing research methodology.