Over the past few years, there has been a great deal of excitement around blockchain – some warranted, and some not. As the hype dies down, the dust is settling, and the technology is moving into a “build” phase. That is, organizations – large and small – are looking into viable use cases for the technology and deploying them. (You can find our practical framework for deciding whether blockchain is a good fit for your use case here.)
To get a pulse of where blockchain deployments stand, the World Economic Forum and Accenture Research partnered to survey 550 individuals from 13 industries, interview dozens of public and private sector leaders, and analyse 79 blockchain projects. Here are the top obstacles and challenges to getting projects off the ground:
1. Hype remains
The technology is commonly seen as a great opportunity and transformation enabler, but unrealistic expectations remain a significant challenge. Survey respondents on average expected a 24% return on investment on their early blockchain projects, but realized only a 10% return.
On top of that, 42% of respondents expected a noticeable or significant brand improvement from simply announcing a blockchain project, with that total jumping to 87% upon delivering a blockchain project. It is important for organizations to carefully consider whether there are other technologies or approaches to digitization that may deliver on their objectives more effectively or efficiently.
2. Moving from proof of concept to production requires stakeholder buy-in
Proof-of-concept projects are often led by evangelists, developed in R&D, and always in controlled environments. Moving to production requires stakeholder buy-in and can be a real challenge. As Peter Hiom, Deputy Chief Executive Officer of Australian Securities Exchange (ASX), explains, helping stakeholders to understand the technology and its benefits “is an ongoing process and it’s proven to be hugely valuable”.
“It’s enabled us to better understand the needs of our customers and ensure we develop functionality that will make their lives easier.” Everyone involved – from leadership to employees to partners – needs to clearly understand why blockchain is being deployed for a use case.
3. Working with others is difficult and it is hard to capture ecosystem value
Christopher G. McDaniel, President of the Institutes RiskBlock Alliance, says: “The whole point of doing blockchain is, it’s a team sport. If you’re trying to do it on your own, maybe that’s OK from a proof-of-concept standpoint, but if you ever want to get real production value, you have to join with others. Otherwise there’s no point.”
In order to ensure that proof of concepts (POCs), standards and solutions are adopted at industry scale, organizations must get better at working together to create an environment of shared values and partner up to solve additional obstacles. David Rutter, Founder and Managing Partner of R3, says: “In the early days, it was getting everyone to understand the technology and its uses. Now it’s more like how the operational and legal construct works with the new technology.”
4. Organizations must account for complex legacy systems and technical debt
Some 87% of survey respondents acknowledged that it is far more challenging to undertake the implementation of a blockchain solution as part of an existing digital transformation – especially when a substantial amount of capital has already been spent on a legacy technology. Alternative digital solutions may offer faster returns and be more strategic in the short term, but organizations should evaluate whether blockchain provides additional benefits in the longer term.
5. Uncertainty exists
Prior to embarking on a blockchain project, 59% of respondents said they had no confidence that the project would deliver a positive return on investment – and only 38% of those who have implemented the technology developed a business case prior to investing.
Many of those interviewed had doubts as to whether the technology was production-ready – “limitations on blockchain technology” and “scalability issues” were selected as the biggest challenges in adopting blockchain.
Though many technologists and service providers classify the technology as v1.0 and ready for production, skepticism remains. It is important to keep in mind that blockchain is in its early stages and there are limitations as a result. For example, challenges exist in fully addressing security, speed and efficiency.
The new WEF report, Building Value with Blockchain Technology: How to Evaluate Blockchain’s Benefits, is available here.