Even if blockchain technology still must overcome some challenges there is a clear change in attitudes and initiatives regarding the technology behind cryptocurrencies.
Moreover, the use cases and spending patterns become clearer and show how blockchain is not just converging with the Internet of Things (IoT) but also with the foundations of a digital economy as governments invest in blockchain programs and projects. On the 1st February 2018, the European Commission launched the EU Blockchain Observatory and Forum and will fund projects, up until 2020, that could draw on blockchain technologies for up to €340 million.
While the future of cryptocurrencies remains open and some initiatives such as Kodak’s recent cryptocurrency move do ride on the waves of hype, several new blockchain initiatives don’t and show that blockchain technology is taken serious by organizations, industries and policy makers across the globe. In the end of 2017, the US Government awarded $750k to a blockchain startup while the Australian Government granted nearly 6M$ to a blockchain powered utility project in the City of Fremantle.
This was also amongst the hot topics discussed during the World Economic Forum 2018 and became even clearer as initiatives from governments and government bodies aim to drive the blockchain adoption agenda. In the meantime, new consortiums and partnerships between major companies across several industries show the almost natural link between blockchain and the Internet of Things.
Blockchain and IoT use cases: your industry will be affected too
When I was writing Digitize or Die I got in contact with Don Tapscott who is ranked the 2nd most influential management thinker in the world by Thinkers50 and is one of the world’s leading authorities on the impact of technology on business and society. He kindly accepted to write down his perspectives on how IoT will benefit from blockchain technologies. He highlights how blockchain and IoT are poised to go hand in hand in the transformation of several applications and even industries.
He recently did an interview for B2B News Network: https://www.b2bnn.com/2018/02/inside-mind-don-tapscott/
While IoT enables us to bridge the digital and physical world, IoT without blockchain would have to face scalability and peer to peer issues. Blockchain will serve as the backbone of digital trust and security for interactions, exactly what is happening at an ever larger and soon massive scale in IoT applications.
Blockchain technology, in many cases combined with AI, doesn’t just promise to be the missing link enabling peer to peer contractual behavior without any third party to “certify” the IoT transaction. It also answers the challenge of scalability, single point of failure, time stamping, record, privacy, trust and reliability in a very consistent way.
DIGITIZATION AND FINANCIAL PERFORMANCE ARE TIGHTLY LINKED
Two studies demonstrate the relationship between financial performance, customer satisfaction and digital maturity:
Cap Gemini in their report The Digital Advantage: How digital leaders outperform their peers in every industry (5) did surveys on 391 companies and analyzed 184 publicly traded companies to assess their digital maturity and more importantly, link it with their industry adjusted financial performance. The study shows that the companies that combine both investments in technology-enabled initiatives and the needed leadership capabilities outperform their peers. They statistically derive more revenue (+9%), are more profitable (+26%) and have an overall higher market value (+12%).
Another study done by The Path to Digital Transformation (18) shows that a company needs 4 years before digital transformation benefits can be seen financially. The study also highlights that after commencing with a digital transformation program, you get an average of 86% net promoter score by your customers.
On the other side not doing anything about digital transformation is a high-risk option with significant consequences. As stated by Pierre Nanterme (CEO Accenture), “digital is the main reason just over half of the companies on the Fortune 500 have disappeared since the year 2000 (132)” or, John Chambers (Executive Chairman, Cisco System): “At least 40% of all businesses will die in the next 10 years, if they don’t figure out how to change their entire company to accommodate new technologies (12)”.
INTERNET OF THINGS
Evolution or Revolution?
IoT is the rebranding of the existing Machine to Machine (M2M) market that exists today. IoT will enable horizontal and vertical system architectures as well as create new rules around reliability, robustness, cost, simplicity of usage, set of features, maintenance, integration capabilities, etc. At the same time, it will address and solve end-to-end performance, availability and traceability in a more open and cost-effective way.
Even though the Internet of Things is an important catalyst of digital transformation, it will not, on its own, transform our world. IoT is a milestone amongst other milestones such as virtualization, connectivity, mobility, IP Convergence, Telephony Over IP, and Video Over IP and the result is a more digitalized society.
What makes the IoT different from previous tech evolutions is the fact that it will create the conditions to unleash the huge amount of data that has been inaccessible, due to more connected products, services and customers. It will then enable more intelligence in and outside of the products and environments that surrounds us.
Connectivity will not be the end purpose, connecting things holds very low value by itself; it’s the data that is generated by this connectivity that will be tomorrow’s gold mine. As things get more and more connected, the need and value of information will exponentially grow. Historical and live stream of raw data will become more valuable over time. More organizations will be selling and buying information from sources that will be able to serve them. Unleashing data, connecting everyone and everything in a seamless network and creating knowledge and value around this uninterrupted flow of information will create the landscape for the next digital milestones that have already started to occur, including:
- Augmented reality,
- Virtual Reality,
- Predictive Analytics,
- Artificial Intelligence and Deep Learning.
When you add reductions in cost to the exponential advances in technologies such as communication and mobility, cloud storage and computing, miniaturization, graphical processing capabilities and robotics, you understand that there will be a switch of value from hardware to software, from software to data stream and from big data to recurrent services.
This will bring commoditization challenges for today’s analog manufacturers which must prepare their strategic move to understand how the IoT changes the rules of the game and how it can be leveraged to their benefit to leapfrog their competitors.
Leverage the IoT to Prosper in the Digital Age
Over the years, traditional analog companies have succeeded by developing their organizations, products, staffing, channels, pricing models and so forth using rules which worked well in an analog marketplace. Some of these companies became major, multinational corporations using these business models and operations.
In the new paradigm of IoT, the once successful analog business models and processes are obstructing progress. They are becoming burdensome to the point of threatening the speed of organization are adapting to the new paradigm.
The old analog business models are now a weakness and to survive businesses must adapt.
What has made those analog companies successful is now their biggest weakness. The old ways of thinking and the processes that have worked for decades are quickly being superseded by the digital evolution.
You must understand that IoT’s digital transformation can be a unique opportunity to leap frog your competition or to get, on the other side, commoditized and reduced financial performance.
You need to be the first one to succeed
There is a common belief that the first is the one that takes it all. The facts show a different reality; timing is indeed the number one success factor (109), but pioneers, on average, lose their leadership in less than 12 years leap frogged by later entrants (31).
The first entrant to the market has paid a high price in research, development and marketing. Latecomers benefit from this by improving the business model, technologies and so forth.
You could liken this to the story of the tortoise and the hare. The hare gets ahead in the race quickly, but the tortoise wins.
You need to be a digital start-up to succeed
Another common belief is that startups have all the cards in their hands to beat the well-established analog companies. In fact, analog companies have great weapons to fight back with and even lead the digital transformation, especially if they leverage their considerable resources to fight off the attacks.
When you add those two elements – time and assets – it’s not too late for incumbents/analog companies to adapt; they in fact have what is needed to lead and beat competition by leveraging and adapting to the new rules of the game.
From Digitize Or Die: The IoT Book For Digital Transformation Leaders, by Nicholas Windpassinger.