White Paper Building Value with Blockchain Technology How to uate Blockchain’s Benefits Ju ly 2019 In collaboration with Accenture World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel. 41 022 869 1212 Fax 41 022 786 2744 Email contactweforum.org www.weforum.org 2019 World Economic Forum. All rights reserved. No part of this publication may be reproduced or transmitted in any or by any means, including photocopying and recording, or by any ination storage and retri system. This white paper has been published by the World Economic Forum as a contribution to a project, insight area or interaction. The findings, interpretations and conclusions expressed herein are a re- sult of a collaborative process facilitated and endorsed by the World Economic Forum, but whose results do not necessarily represent the views of the World Economic Forum, nor the entirety of its Members, Partners or other stakeholders.3 Building Value with Blockchain Technology Foreword Introduction Landscape The cutive perspective From use-case to business case The Blockchain Value Framework Freight bill audit and pay Key Dimension 1 Improving productivity and quality Key Dimension 2 Increasing transparency among parties Key Dimension 3 Reinventing products and processes Obstacles and challenges Decision-maker concerns Recommendations Acknowledgements Endnotes 4 5 6 7 8 8 9 10 11 11 12 13 14 15 16 Contents4 Building Value with Blockchain Technology Foreword In 2018, the World Economic Forum released “Blockchain Beyond the Hype”, a practical framework that aimed to help decision-makers distinguish between hype and viable use-cases. Once decision- makers had decided that blockchain may add value, they asked another question How can this value be articulated Continuing this series, we are providing businesses, governments and other organizations with a blockchain value framework to help them build out a business case for blockchain investment. This paper builds upon the idea that blockchain deployment is not an end goal. When done right, blockchain is all about rethinking business models, rethinking relationships between companies and between companies and customers, and is, at its heart, a strategic change effort. Therefore, this toolkit helps decision-makers see how blockchain value drivers may map to organizational objectives. Through this alignment, organizations can understand whether blockchain is worth the investment for their specific circumstances and make strategic decisions on whether they should or should not invest in the technology – keeping in mind that blockchain is just one option for organizations looking to digitize. Created in collaboration with Accenture Research, this framework was based on a global survey of 550 individuals across 13 industries, dozens of interviews with public-sector leaders and private- sector chief cutive officers, and an analysis of 79 blockchain projects. A draft of the framework was further validated at a multilateral session of global leaders at the World Economic Forum Annual Meeting 2019 in Davos-Klosters. Succinctly, this framework helps organizational leaders to confidently uate the relevant opportunities of blockchain technology. Sheila Warren, Head, Blockchain and Distributed Ledger Technology, World Economic Forum David Treat, Managing Director, Accenture5 Building Value with Blockchain Technology Introduction Since the digital era, organizations have been looking for ways to improve their operating model through modernizing their technology infrastructure. Being able to simplify complex processes while enabling innovation is the driving motivation for tech modernization. Today, organizations are trying to understand what role emerging technologies such as artificial intelligence AI, the internet of things IoT, immersive reality and even quantum computing will have in their business. The Fourth Industrial Revolution has arrived, and organizations understand the need to innovate to prevent them from being disrupted. High-growth organizations are investing aggressively and taking a distinct approach to innovation that is change- oriented, outcome-led and disruption-minded. But with blockchain technology, even the leaders have challenges when realizing the true value of the technology. This white paper can help organizations by understanding the state of the blockchain environment and the path to adoption. The analysis highlights the main advantages of the technology broken down by industry, and the interviews shed light on the benefits and challenges of blockchain technology. And for organizations unsure where to begin or how to build a business case to assess the technology, the value framework shows what blockchain enables and where one can expect to realize value from it. Though peer-to-peer, privacy-enabling payments are perhaps the best-known applications of blockchain technology e.g. bitcoin, they are not the focus of this paper. This paper intends to help organizations build out a business case after deciding that blockchain may be a good fit for a particular use-case. For those looking for guidance on decision-making, see Part 1 of this series, “Blockchain Beyond the Hype A Practical Guide for Business Leaders”.6 Building Value with Blockchain Technology Landscape However, organizations are certainly taking note of blockchain. Worldwide spending on blockchain solutions is forecast to be nearly 2.9 billion in 2019, before surging to 12.4 billion in 2022. 1According to a 2018 Constellation Research survey, 67 of US companies are uating or implementing blockchain technology, with a quarter already having projects underway or completed. 2In addition to the vast opportunity, this motivation is often driven by sheer competitiveness. According to the survey, 57 of respondents investing in blockchain technology agreed, or strongly agreed, that their organization should adopt blockchain technology to remain competitive. And of those who declared their blockchain investments, 68 are spending more than 1 million, with 27 spending more than 10 million on blockchain activity. This activity is not limited to the private sector A recent World Economic Forum report showed that over 40 central banks are researching distributed ledger technology for a variety of use-cases. 3Elsewhere in the public sector, there are 202 blockchain initiatives spanning 45 countries. 4When asked what led organizations to invest in blockchain technology, 75 included their organizational priority for innovation. The top three areas of interest across surveyed industries were 1 full traceability of ination on the blockchain; 2 the ability to check that data had not been tampered with; and 3 the way the technology is distributed. Notably, few organizations selected “new business products or services” – which ranked last among the options for investment. This suggests the current focus for organizations is on improving existing products and services before considering investing in new opportunities. Overall, it appears that blockchain truly adds value in instances where there is a need for tamper-evident ledgers along with decentralized control, particularly where participants have an even hierarchy. Each organization may take the path to blockchain adoption at different times, but the steps along the way remain similar. In many organizations, the move along this path comes to a halt at some point between the proof of concept stage and production. The funding source may be a vital contributor. According to Accenture’s “Building Value with Blockchain” survey, more than 64 of blockchain initiatives are currently being funded by IT or research/innovation budgets – implying that the focus is on technology, rather than on aligning with the main areas of opportunity for the organization. Production What is it What value could it have How can it be used Can it scale Scale Can we trans industries/markets Can we create new products and markets Pre-production Proofs of concept/value R 2 increasing transparency among parties; and 3 reinventing products and processes. When building business cases to uate the blockchain opportunity, the value drivers can become the prime benefits or opportunities that organizations need to assess. These will From use-case to business case So, your team has a use-case or two you are excited about. If you are still making this decision, the World Economic Forum’s Decision Tree may help to determine the feasibility of blockchain for your idea. 6The next step is assessing the value of your blockchain use-case. This can effectively be done using the Blockchain Value Framework and the four-step process detailed below. This prerequisite step is critical. It is important to carefully consider whether blockchain is the best solution, relative to other technologies or other digitization strategies. As noted in “Blockchain Beyond the Hype”, blockchain may not be a viable solution or it may not be the correct time to pursue this avenue. The Blockchain Value Framework differ for each use-case – some will be realized in traditional metrics such as operating costs, number of employees or increased revenue; in other cases, opportunities will be measured in lives saved or privacy rights enabled. It is nearly impossible to accurately state the general impact of a use- case broadly, but given this framework, organizations can identify potential expected areas of value on which to focus within their personalized business cases. It is important to note that some of these value drivers may be achieved through digitization that does not involve blockchain. So the uation should take into account blockchain’s costs relative to other solutions. Figure 3 Blockchain Value Framework Cheat Sheet BLOCKCHAIN VALUE FRAMEWORK When building business cases to uate the blockchain opportunity, the value drivers can become the key benefits or opportunities for the organization to assess and will differ for each use case – some will be realized in traditional metrics such as operating costs, number of employees, or increase revenue; in other cases, opportunities will be measured in lives saved or privacy rights enabled. By using this framework, organizations can identify potential areas of value within their personalized business cases. KEY DIMENSIONS Improving protability and quality Increasing transparency among parties Reinventing products and processes CAPABILITIES Automation Self-validating network smart contracts enable auto cution of business rules. Control Control at the individual data element level, maximum flexibility over what data is shared and how. Distributed No single-entity data ownership, consensus applied to transactions and shared access with no central point of failure. DAx Decentralized Autonomous x Transparent, predefined rules mean new ventures may be created, providing autonomous products/services through decentralized model. Full traceability Provenance and complete history of all new data added is known. Security Data can be encrypted and segregated at the data element level, while also enhancing overall data security. Holistic view Single source of truth - all stakeholders see the same ination to which they have access. Enhanced identity A combination of capabilities with advancements in digital identity e.g. biometrics increase confidence in, and improvement of, security and management of customer and personal identity data. Speed | efciency Can enable faster data transfer, streamline tasks to optimize process Evidence tampering Underlying mathematics and cryptography allow users with appropriate access to verify data has not been altered. Tokenization and digital assets Physical objects with verified unique digital representation enable digital ownership, management and transfer. VALUE DRIVERS Auditability Compliance Data management Data security Data sharing Resiliency Authentication Identity management Ownership Payments Process automation Reconciliation Transparency Trust Marketplace creation Standardization Track and trace New enhanced products and services New expanded partnerships efficiency, particularly where intermediaries have been removed. Blockchain Value Framework