There are technologies that shake up entire industries, and blockchain is one of them. A decade after the rise of the cryptocurrency bitcoin, the technology on which it is based is about to transform entire areas of the economy within the foreseeable future.
How blockchain is being used by companies across industries
The IT sector is not the only industry where blockchain is being celebrated as a key enabler for the high-complexity, connected future. Many other industries have also recognized its potential for their own field of activity. “Blockchain is changing companies and institutions worldwide – in every sector,” said Rodolfo Quijano, Head of Electronic Data Interchange and Blockchain Consulting at Henkel. Originally from Mexico, Quijano has always had an interest in new technology. At Henkel since 2006, he was quickly exposed to the company’s digitalization journey through the rollout of the first eCommerce portal in Latin America. Later, he immersed himself in innovation with technology just as Cloud, Big Data and Mobile started to transform the industry. As a technology scout, Quijano was responsible for creating awareness of emerging technology, as well as start-ups and industry leaders who drive change, and supporting their adoption and integration into the IT architecture. He was often seen chatting with colleagues about new business solutions in the open-space areas at the Henkel campus in Düsseldorf or scouting out new ideas at start-up events. Blockchain is a very young technology and still in the early days of being adapted for the business world, but that doesn’t dampen Quijano’s enthusiasm for it one bit. Quite the contrary. “With blockchain, companies can perform all kinds of transactions without needing confirmation by a third party such as a bank,” he said. “This carries huge potential, which businesses should recognize and leverage as soon as possible.”
Blockchain: What it is and how it works
Blockchain technology is already being celebrated as the technology of the future. But how exactly does it work? Blockchain allows digital transactions decentralized protection and full traceability. Banks were the first to be affected, as this process rendered their services threatened. However, the blockchain’s “three Ts” – Trust, Traceability and Tamperproof – can also simplify processes, increase transparency and foster innovation in many other areas.
Blockchain: A quick review
Finding applications for the blockchain technology
Henkel wants to take advantage of this, too, and is actively exploring the possibilities of blockchain technology. For this purpose, a team was created and tasked with driving the company-wide search for potential blockchain use cases. Colleagues from many different offices around the world are involved. “Our team is on the constant lookout for trends that we can use for our business,” said Quijano, adding that the quest to find applications for an innovative technology like blockchain comes with challenges of its own. “We can’t just take advantage of other companies’ successful experiences and apply them to our business.” Almost all organizations are still at the beginning of their journey with blockchain. There are scarcely any projects that have already been implemented extensively enough to serve as a blueprint for other market players.
The blockchain community: Cooperation and communication
This is why Quijano’s team is taking the opposite route: “We talk to different stakeholders from all areas of the company about their processes and the challenges they face – and then think about where blockchain could be a good solution,” he explained. Their focus in this process is on people who are close to the end customer or key business partners. In interviews or so-called “discovery workshops,” they identify initial ideas and at times develop a “paper prototype” that describes the relevant potential application. “Sometimes people tell us about very practical challenges – but most of the time, we have to throw around some ideas to get the ball rolling,” said Quijano. He believes that to find a solution to a problem, you first need to realize that you have a problem. This is why cooperation and communication are at the heart of the search for new applications, which also takes place via the company’s internal social network, Yammer. In the platform’s steadily growing blockchain community, colleagues regularly share the latest developments and news.
Thanks to this process, the team was already able to identify lots of possible applications for blockchain within the company last year.
How the blockchain revolution can transform our business
- Blockchains could make customs or tax obligation handling easier and more secure. Digitizing the required documents would create transparency and save time.
- Opportunity for customer service: Real-time information about products’ delivery status.
Supply Chain Management
- Blockchain could increase transparency in purchasing and supply chain management. The technology’s potential is particularly high in the field of raw materials procurement: A blockchain would make it possible to trace raw materials from their place of origin, through the entire supply and production chain, all the way to their use in a product.
- Opportunity for the company: End-to-end control over the sourcing and traceability of raw materials, with the long-term perspective of reinforcing consumers’ trust in sustainable products.
- Transport pallets are used to deliver products to retailers and costumers throughout the world. Currently, paper slips are used to label pallets according to their owners. These often get lost or become illegible, which regularly leads to disputes over who owns a particular pallet. For companies that ship their products around the world, the large number of transport pallets in circulation means that this can lead to substantial financial losses.
- A blockchain would make it possible to digitize the pallet slip. Clearly defined ownership would allow more reliable planning and potentially significant savings.
- Henkel is looking for new ways to increase its contact with consumers and develop new products and services. One option would be digital touchpoints, built into products and packaging, that could be used for things like loyalty programs or gamification. A blockchain would make these functions secure.
Internet of Things
- The idea that blockchain could serve as an enabler for the Internet of Things is still relatively new, but this is another area in which the technology could increase security and transparency.
- In certain emerging markets, multinational firms have an uphill battle to lead against counterfeit products, which damage both their reputation and their bottom line.
- Opportunity for the company and consumers: All original products could be registered in a blockchain. Customers would then be able to scan identifiers on the packaging and receive a confirmation of authenticity.
- Media spend in a digital world is hard to govern. Cost structures based on views, clicks and impressions are difficult to compare. Success, meanwhile, is challenging to measure.
- A blockchain could be used to better track the viewing distribution of digital ads and make accounting more efficient.
The sum of all parts: Blockchain in the corporate world
“Partnerships are essential. We are mainly looking for use cases that can improve our business processes, reduce our costs or open up new business opportunities,” said Andrea Teichmann, who is responsible for the Integrated Business Solutions area’s excubator and trend scouting at Henkel. Since summer 2017, she has been working in the heart of the “blockchain hotspot” in Berlin, which is considered one of the major global hubs for blockchain developers after London and New York. “Berlin is diverse, innovative and very popular right now,” said Teichmann. “That attracts the world’s most talented people.” According to her, Silicon Valley is much less important in this field. By contrast, more than 60 blockchain start-ups have set up their offices in the German capital. “This is where tomorrow’s innovations are being brought to life. It’s important for us to be here, because in addition to keeping up with technological progress, we also get to participate in the ideological discussions associated with it. That helps us to better understand the current situation and correctly identify the most relevant new developments,” Teichmann explained.
Just as a blockchain can only function as the sum of all its parts, its adaptation to the business realm can only succeed through cooperation. “We work closely together with multinational firms, organizations and start-ups,” said Teichmann. Although blockchain technology has been around for 10 years now, it is only recently that standards, specifications and certifications have started being developed to allow a more widespread adoption on the market. “Many things are being created and tested at the moment, but it’s precisely this flurry of activity that can lead to the technology not being used in expedient ways,” she observed.
The importance of partnerships in the blockchain ecosystem
According to Teichmann, it thus becomes all the more important to talk to several different partners within the blockchain ecosystem: to put individual opinions into context, to include a variety of aspects in the business assessment, and to identify the best partners with which to implement blockchain solutions. Henkel uses industry events like Blockchain Week in Berlin to engage in dialog with companies and start-ups. “As a member of the Blockchain Circle, we also organize our own exclusive events,” said Teichmann.
Just recently, Henkel additionally joined the Enterprise Ethereum Alliance (EEA). The global consortium’s goal is to foster cross-industry cooperation and use Ethereum technology to develop a software capable of executing complex and demanding applications quickly. “We are developing specs and certifications for blockchain-based solutions,” said Ron Resnick, Executive Director of the EEA. “This will create a level of security for companies that purchase such solutions from third-party providers.” The first specifications covering performance and operational effectiveness were published in 2018. A certification program is slated to follow in 2019.
Blockchain: From use case to pilot project
The first pilot projects are already underway. For example, Henkel is working on a digital, blockchain-secured exchange process for transport pallets together with the organization GS1, which helps companies optimize their value chains.
Going forward, the use cases identified by Quijano’s team will be ranked by level of priority and then implemented. “We will launch several more pilot projects, but in some cases, we will start by producing prototypes,” he said. "We want to start slowly and then scale up.” The long-term goal, Quijano explained, is to develop a blockchain ecosystem for the company.