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Blockchain Benefits for Small-to-Mid-Sized Businesses

This is the first blog post in our Emerging Technology blog series. In the coming months, we’ll share thought leadership about emerging technologies such as chatbots, artificial intelligence, big data, and customer analytics.

Blockchain is a newer term that you may have encountered in discussions about emerging technology. What is blockchain? How can you use it in a small-to-mid-sized business (SMB)?

This post will break it down and walk you through one potential application of blockchain for SMBs.

Blockchain: An Overview
Blockchain affects processes with numerous transactions. These processes are often complex and, typically, costly for an organization to maintain. The transactions may be an exchange of financial assets or information like records or documents.

Why Blockchain for SMBs?
While the complexity of the technology may seem oriented to enterprise organizations, SMBs are strong candidates to serve as adopters of blockchain. A couple of reasons include:

  • SMBs are often faced with increasing workloads due to limited resources.
  • SMBs contend with new, complex processes that require diligence to solve.

In order to better explain how blockchain works, we’ll empathize with an office supply store owner.

The Scenario

An office supply store owner, Harriet, runs multiple stores that sell office supplies. Harriet works with over ten suppliers to fulfill transactions in varying cadences. Each supplier-relationship encompasses its own unique terms (e.g. different locations and quantities). Managing these interactions is difficult and Harriet’s staff is required to focus on a wide array of business activities.

Harriet does not have much visibility into vendor activity. Verifying that contractual obligations are met is costly and cumbersome. Additionally, when delivery terms aren’t met, it’s difficult to trace where an issue originated.

In this scenario, the mitigation of everyday problems by Harriet’s team is reactive.

Enter Blockchain
Blockchain is comprised of many components, following, we outline a few core pieces of functionality.

In its simplest terms, blockchain is a file (better known as a distributed ledger) that replicates the same list of transactions across a group of connected computers (known as a peer-to-peer network). The network is responsible for maintaining the ledger of transactions and verifying that the requirement(s) of the transaction has been fulfilled. If the transaction does not reach consensus, the network will reject the transaction. If verified, the transaction is stored in blocks of data, providing an architecture that makes tampering with transactions extremely difficult.

This setup creates no central source of validation – meaning no singular organization is controlling the data and integrity of its transactions. Additionally, this reduces intermediaries often required in transaction processing resulting in time efficiencies.

The Result
Supported by blockchain, Harriet and her vendors are able to work as a connected network. She has visibility into all the time-sensitive transactions in process through a singular, updated ledger and visibility into when requirements are met in an automated, intermediary-free fashion. By preserving the history in a safe, immutable way, traceability is more efficient, if issues arise (and don’t they always?).

Benefits Summarized
As a business, implementing blockchain can encourage proactivity in your team. Additionally, the team can focus on value-added activities by relieving management burdens experienced by complex processes.

To be most effective, we advise organizations to define requirements for one or two processes that fit the use case for blockchain. As different blockchain technology vendors emerge, the early business adopters will gain a competitive advantage as well as a productivity advantage.

About the Author

Max Brundige is a business and systems analyst for KSM Consulting. Daily, Max is focused on connecting people and process through the right application of technology. Connect with him on LinkedIn.