Building blocks: Overcoming the challenges of blockchain for SMBs

  • Posted on March 12, 2019
  • Estimated reading time 3 minutes
blockhain challenges

This article was originally published in MoneyInc.

When you think of blockchain as a future distributed infrastructure, there is significant potential for new types of applications. Any business with a supply chain can benefit from the increased transparency and new way to reimagine trust that blockchain can enable. But one of the challenges with blockchain today is if you have the scale to warrant using blockchain vs. a traditional database. While SMBs, like large enterprises, can find value in blockchain, sometimes it is easier for larger companies who have the control or influence over their supply chain to ensure adoption and implementation by dictating terms. How can SMBs start to think about leveraging blockchain to secure those benefits and realize similar business outcomes?

Are SMBs the missing link in the blockchain revolution?
When you hear people tout the benefits and value of blockchain, ideas like “democratizing trust” and disintermediating truth come to mind. If everyone is helping to build a shared record of transactions, then no one has exclusive access to information.

Blockchain is the platform that fueled cryptocurrency and the two quickly became synonymous, much to the chagrin of people who know that blockchain has far more potential (and deserves far less scorn) than cryptocurrency. Other democratized uses of blockchain include personal money transfers or public records like land transactions. Blockchain creates a level playing field where everyone can see what is happening with the accuracy of each transaction.

From bitcoin to big business
Things get more complicated—and significantly less democratic—when it comes to how businesses use blockchain. Just like the evolution of cloud went from public to private to hybrid, blockchain appears to be moving in that same direction. As industry consortiums are formed, private blockchains can be a great stepping stone; however, public blockchain will eventually be how an open and distributed system needs to work.

Imagine a retailer being able to tell its customers exactly where the leather on a bag came from or exactly the farm and farmer that roasted their coffee beans. For accurate information across a supply chain, it is an all-or-nothing deal. If only some suppliers participate, you lose that end-to-end transparency and ironclad accuracy that is the hallmark of blockchain. Creating and leveraging a private blockchain is easy enough to do when you have enough clout to get all the right players to participate, which is why the biggest and most powerful companies are first out of the gate. Walmart or P&G have the ability to get agreement from suppliers eager to participate.

But what about small- to medium-sized businesses? Many of these businesses deal with other small companies, each of which has its own systems and processes and priorities for technology investment. Most smaller enterprises do not have the leverage, the time or the resources to work across their supply chains to get everyone committed to participating in a private blockchain.

Without leverage and processing capabilities, are small- and medium-sized businesses destined to miss out on blockchain? Today, smaller businesses can start using blockchain today through some early blockchain applications. One of the most popular is for contracting. Blockchain allows for smart contracts that help to digitize processes, increase traceability and could be more secure. Most small businesses utilize a third party during a transaction with two parties to confirm the terms and conditions in a contract. Sometimes this is a bank, lawyer or some other intermediary. Smart contracts are digital contracts that are stored within a blockchain that removes the third party so the transaction can happen between just the two original parties.

While it is still early days for distributed blockchain apps, many small- and medium-sized businesses can benefit by potentially exploring new business models much more quickly than larger enterprises. With blockchain, it’s about looking at current business processes and determining if there’s some new technology that helps provide a competitive advantage.

Avanade Insights Newsletter

Stay up to date with our latest news.

Contact Avanade

Next steps

Talk to us about how we can bring the power of digital innovation to your business.

Share this page