Europe is being somewhat conservative when assessing the significance of blockchain. A new report from Cognizant, ‘Blockchain in Europe: Closing the Strategy Gap’ highlights that, while there are breakthrough ideas on how the tech could solve some of the most pressing problems in business and society today, there are challenges turning those ideas into reality.
It surveyed over 1,500 European business decision makers across the banking and financial services, manufacturing, retail, healthcare and insurance industries. There seems to be a reluctance to collaborate with other businesses, meaning it may take longer than necessary to make blockchain mainstream. The vast majority of European firms intend to develop their own modelling techniques, with only 2% planning to join a consortium of startups and competitors.
However, enormous benefits can be had when competitors work closely together on blockchain platforms. Looking to the car industry, BMW, General Motors, Ford, and others formed the Mobility Open Blockchain Initiative (MOBI), a non-profit collective whose goal is to make “mobility services more efficient, affordable, greener, safer, and less congested by promoting standards and accelerating adoption of blockchain, distributed ledger, and related technologies.”
From ideas to reality
Blockchain is seen as a strategic imperative, with 83% of respondents expecting it to have an important or very important impact on their industry, even if they are not yet sure how. However, for most European businesses, the tech is being used as a new way of carrying out existing tasks rather than to innovate. 49% said that it would add to current operating models, without drastically change them.
According to Cognizant, in order to truly realise the potential of blockchain, European businesses will need to explore new ways of working. Rather than focusing on improving internal business processes in the traditional way, companies should envision scenarios of how blockchain adoption of multiple parties can address systemic problems across industries in the long-term.
For example, they could significantly improve the efficiency of the order-to-cash process across global supply chains, which is often hampered by manual data reconciliation processes and data inconsistencies. However, this could only work if all (or at least the most significant) supply chain partners work across the same blockchain platform.
Playing catch up, restricted by internal barriers
70% of respondents consider competitive advantage to be a top benefit of blockchain, with business opportunities including addressing process inefficiencies (94%) or even the creation of new service lines (62%). However, the research reveals several internal barriers stopping it from becoming impactful. These include truly understanding use cases and assessing their costs and benefits (51%).
Many businesses are still working on evaluating the technology’s feasibility, or comparing different blockchains, instead of focusing on actually developing practical ways it could be put in practice to improve business operations. The study also shows that more respondents are experimenting with private, or permissioned blockchain models (40%) rather than open, or public blockchains (39%). This is due to public blockchains being seen as a bigger data security risk.
Lata Varghese, Blockchain Consulting Practice Lead at Cognizant, comments: “In a very short time, blockchain has grown from a technology with narrow applications related to payments and cryptocurrencies, to one meriting attention from many business leaders. The challenge for business across Europe is that blockchain does not fit into current operating models. New operating models for whole industries need to be designed. Further, many implementation challenges remain including scalability of the technology and integration with current enterprise applications.”
He concludes: “This way of working will mean that the full potential of blockchain may not be realised quickly enough across the region. Blockchain needs to be approached as an open, collaborative and disruptive power that can be used for institutional innovation, not merely as a way for conducting business as usual. A focus on collaboration with other players to benefit wider industry will be key to realising the real potential of blockchain.”
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.