In the second half of 2015, the financial services sector witnessed a rush of activity in the innovation space to prove capabilities for blockchain – the technology still perhaps best known for underpinning the much-publicised virtual currency Bitcoin.
Many service organisations were quick to release their blockchain service or to introduce blockchain into legacy processes to prove their capability. Our company opted to take a more measured approach, by creating a ‘blueprint’ for a successful blockchain project.
This was created through the use of an in-house blockchain incubator, an approach that the team regarded as key to delivering a successful blockchain project.
Creating a blockchain incubator requires a platform that provides the framework for the rapid selection of blockchain ideas and their subsequent prototyping. As this is a new but rapidly maturing field (technology and business process) there can be significant internal challenges in getting such a project off the ground. The team addressed the task by creating a lean incubator to develop these ideas.
When designing the incubator, agreement was reached at the outset on topics such as funding and ongoing funding approvals; decision points; when to fail a project; business and technology mentoring; and support for project teams.
Deciding on this framework upfront avoids slowing down innovation later in the process. It also enabled the team to support cultural change and create an environment conducive to technology entrepreneurship.
The early stages also saw the introduction of an innovation competition, to source new ideas for the blockchain incubator. It set out a vision for the financial services industry that described an operating model where all stakeholders held their own immutable view of the transactions within that industry. Experts were asked to present ideas that delivered that vision, using the distributed ledger business model that began with Bitcoin and has since developed into a system for all types of verification. This generated some transformational ideas and concepts.
Selecting relevant business propositions
For the blockchain incubator, the team evolved a set of 10 quality metrics that all ideas were tested against. An idea was progressed only if it passed enough metrics; the most important of which were the following:
• Does the proposition attempt to address a broken process, or one that has many legacy processes?
• Are there a number of untrusted high-cost parties that contribute to the end-to-end process?
• Are there cases of fraud that have resulted from the touch points between untrusted entities?
Key decisions made
When embarking on technology prototyping for new business innovation, it is important to choose a team that supports rapid decision making, so as to avoid spending extended periods and limited resources in going down dead-ends. Developing the right prototype means having the right team of individuals, who can all agree to a base design.
Blockchain is a new technology that continues to evolve. The core technology platforms were not designed and built to be used in the way that is now being demanded of them, meaning there is a relatively slow and steep learning curve in starting to build solutions on top of them.
The company chose to accelerate its capability in this space by leveraging the experience of Applied Blockchain – a team of blockchain enthusiasts based in London’s Canary Wharf – and its open source framework (BApp). This enabled the team to hit the ground running and deliver quick results, while the architects were able to very quickly produce a solution design and architecture that would enable the smooth delivery of the prototype.
It was decided to make a bold move by making several fairly fundamental design decisions early on that were relatively controversial. Among these was to avoid at all costs the implementation of a local database, as this would have defeated some of the properties of a blockchain solution that were being aimed for.
When working with a rapidly maturing technology, it is important to make technology choices that will not limit future development, so the team worked hard to define a clear blockchain technology architecture strategy.
It also identified the need to remove obstacles quickly by identifying internal and external blockers; then putting in place a plan to address these upfront. It is important for management to understand what you are trying to achieve and fully ‘buys in’ to the process. Regular show-and-tells should be given, so that senior personnel can view progress and remain on-board.
The team gained a great deal of experience in a very short period of time with its Blockchain incubator. This applied not only across its technical capability, but also including the company’s business advisory, sales teams and management. This achievement was possible thanks to the team’s ability to react quickly, develop understanding and embrace a new technology, by engaging with the right internal stakeholders and gaining rapid approval to make an immediate start.
The key to success lay in assembling the right team across a range of disciplines from both inside and outside the organisation, in order to maximise the opportunity and create a foundation for future work in this space.
The experience gained in creating a successful blockchain prototype can now form the blueprint for future blockchain development required by any organisation.
• This blog is an edited version of the recent GFT publication ‘A blueprint for initiating business change using blockchain’.