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Business culture is key to blockchain deployment

Updated: Mar 30, 2021

It is hard not to jump on the blockchain bandwagon at a time when Bitcoin is peaking at over $40,000 and the likes of Elon Musk are publicly praising it, creating a huge momentum not only for Bitcoin but for cryptos in general. How does this apply to supply chains though? Techs will already be familiar with the possible applications of blockchain systems to the supply network. In brief, blockchain can allow for better traceability and transparency by turning all the different steps in the supply process into a series of smart contracts, which digitally certify that a certain good has been handed over from a one actor to another. It is also possible to make sure the goods are not tampered with, by attaching a QR code or a RFID (radio-frequency identification) tag to the product that certifies it has not been moved, opened or altered in any way[1].

Despite blockchain's potential in supply chain management, large-scale adoption is still struggling to take off, even though many companies have been trying to develop their own solutions. To be fair, the supply chain world has traditionally been somewhat reluctant to adopt new, digitized systems unless their effectiveness is well recognized. A survey from the Business Continuity Institute showed how most companies still prefer to rely on excel spreadsheets when it comes to analysing the supply chain. This is not necessarily a negative trend though, as there are cases where the supply chain is not particularly broad and it might be possible to keep track of the process even without automation. This is especially true if there are good levels of collaboration and trust in the supply chain[2].

Furthermore, a study identified specific hindrances to the adoption of blockchain among suppliers. The paper highlighted how factors such as complexity, implementation costs and privacy concerns can create resistance towards adopting this technology. A similar impact occurred also in the case of low expertise and technical knowledge[3]. In general, data on the adoption of emerging technologies shows how blockchain is not doing as well as other solutions such as IoT, artificial intelligence or distributed cloud systems[4].

Interestingly, analysts have pointed out that companies should first establish a positive and collaborative culture in their supply chain and only then they can try to implement automation. Differently, using technology to bypass the lack of trust in your vendors is hardly going to work, given the cultural resistance you would have to face[5].

Also – and here the discussion gets a bit technical – there is the issue of public versus private blockchains. If a company wants to build customer trust and allow customers to verify the origin of the products they sell, then they should adopt a public blockchain. However, this can be tricky as the customization would be limited. Differently, if they used a private blockchain, the system would be easier to adjust to the business’ needs but it might hinder transparency in the eyes of the final buyer[6]. It is also worth considering the extent to which suppliers will be willing to share information with each other in a shared network. A supply chain environment is likely to include competitors in the most complex and large-scale cases, so probably some vendors would like to choose what and when to share their own industry intelligence[7]. Hyperledgder itself (one of the main provider of blockchain for supply networks) admits that varying interests should be harmonised before deploying technology solutions[8].

Based on these premises, it seems clear that while this technology has good potential, it might be set up for failure without the right organizational mindset. On this note, business leaders might want to keep in mind the following:

  • Before committing to a new solution, talk to the supply chain division to understand what their needs are and to what extent they are met;

  • Decide whether you need to deploy the new technology to the entire supply chain or only a specific part;

  • Run interviews and/or focus groups with vendors to see how they would perceive the switch to a new system;

  • Run interviews and/or focus groups with customers to see if you can generate any sort of competitive advantage on final sales;

  • Try to visualize whether this would work at all tiers of your supply chain. If only tier 1 vendors buy-in then you might be wasting time and money;

  • Scan for possible new pieces of legislation that might impact your project. However unlikely at the moment, institutions will catch up eventually.

On a final note, blockchain developers might want to pay attention to organizational culture too and work to deliver awareness-raising activities to facilitate implementation. As for any new project, it is always important to account for the human factor.

[1] [2] BCI Supply Chain Resilience Survey 2019 [3] file:///C:/Users/Gianluca%20Riglietti/Downloads/sustainability-12-08882.pdf [4] [5] [6] [7] [8]

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