Are you eager to start moving ahead with your blockchain project? Good. But — are you prepared?
Lack of preparation will kill a blockchain project faster than a dial-up modem.
If there’s one thing early blockchain successes and failures — especially failures — have demonstrated, it’s this: You need to start with a well-planned, focused, blockchain proof-of-concept that solves a business problem. The most successful ones not only have CEOs and CTOs working collaboratively, they also engage stakeholders from across the business.
And you know the rest: They have realistic expectations, they staff appropriately, they do their homework, and they test. Then they test again.
Everybody wants to develop blockchain technology for something, but many are ill prepared. For example, July 2017 research from Juniper Research has found that nearly 57 percent of the large corporations surveyed are either actively considering, or are already deploying, blockchain technology. But Juniper warns that many of those organizations are moving ahead without adequately assessing the situation.
If you’re thinking about launching a blockchain proof-of-concept (POC), read on. We have seven tips that can help.
1. Focus on a Business Problem
A successful blockchain project focuses on a real business problem, one that can be addressed — or even solved — by blockchain.
Too many POCs begin with blockchain’s capabilities and then try to force a business case onto it. It sounds like common sense, but it’s important to remember not to ramp up a blockchain project simply for the sake of having one. Instead, take the time to understand blockchain’s potential and its value to your business. Have an outcome in mind before moving forward.
One of the most common criticisms of blockchain is that it’s a solution looking for a problem. We know that’s not the case, broadly speaking. As we’ve discussed in previous blog posts, there are an array of problems blockchain can help solve.
It is a valid criticism, however, of many blockchain POCs — and for that matter, of much blockchain development at large. It’s easy to get carried away by what blockchain can do and forget to focus on solving a business problem.
“In many cases, systemic change, rather than technological, might be a better and cheaper solution than blockchain, which could potentially cause significant internal and external disruption,” warns the Juniper report’s author, Dr. Windsor Holden.
Here are some questions to consider at the outset:
- What’s the business problem — your business problem — blockchain can solve?
- Is that problem worthy of attention?
- Is blockchain technology the best solution (could this be accomplished with a different kind of database)?
- Is the blockchain solution a desirable, feasible, and practical one?
- How will this blockchain solution help eliminate intermediaries/improve efficiency?
- How will it help you bring more value to customers?
2. Start Small and Avoid Scope Creep
Start small. Blockchain will probably change the world, eventually. Maybe your organization will change the world with blockchain. But now’s not the time to try to demonstrate that to the world. Resist the temptation to build something bigger or flashier than you really need.
You want to focus on a project small enough and focused enough that it can fail without hurting your organization. This is an opportunity to discover what works and what doesn’t, so don’t make the stakes too high.
"When we see POCs fail, most likely you start too big and think you’re going to change the whole organization with blockchain. My advice: Start with something small that’s going to impact a very small part of your organization,” says Eric Piscini, a principal at Deloitte.
As you go through the POC process and begin to realize what’s possible, you’ll face another temptation: broadening the scope of your first use case. Of course, you already know this since this likely isn’t your first POC. Scope creep is always a potential pitfall. By keeping your POC small, keeping it realistic, and limiting it to a short timeframe, you’ll ensure initial success and lay the groundwork for future projects.
3. Manage Expectations
Across your organization, there are probably all kinds of differing opinions about blockchain. Some people may think it’s poised to change the world. Others might think it’s all hype. It’s important to communicate about your project to people in both camps, helping them understand why you’re doing a POC and telling them about the limited scope we talked about earlier.
Also remind your fellow leaders that blockchain technology is still evolving, and we’re far from fully understanding its capabilities.
“The algorithms that make Siri and Alexa possible were created decades ago, but their purpose was only discovered in the last five years,” a piece in Blackline Magazine observes. The same is true for blockchain technology.
Of course, you should move forward with that POC; just be sure to understand the limits of blockchain technology.
For example, many organizations pursuing private blockchains will be disappointed to discover they can’t interact with each other. Ray Valdes, a research vice president and Gartner Fellow, explained why in a Forbes column:
“Blockchain lacks the maturity and standards to reasonably promise interoperability among competing ledgers and platforms. It may exist at the most basic laboratory level, but promises beyond that should be viewed skeptically. Furthermore, blockchain technology from 2016–17 mostly likely won’t interoperate with a different vendor’s platform in 2018–19. Be prepared for integration challenges between blockchain technologies and legacy environments.”
The technology you’re using for your POC today may not be the same technology you want to use in future projects. In fact, says Valdes, “the best option doesn’t even exist yet. Consider current technology options as short-term experimental choices.
4. Plan Thoroughly and Carefully
One of the most interesting findings of Juniper’s research is that companies may underestimate the challenges of building a blockchain product. For example, the number of respondents expressing concerns about interoperability and other issues increased the closer the companies got to full blockchain deployment.
Even at an early stage, planning, architecture, and design are crucial considerations for blockchain implementations. Updating code for smart contracts is not a matter of simple redeployment. Think through your strategy for updating and evolving your code. Even if you never decide to go beyond a POC, planning for it will pay off in the long run.
Be sure to account for a learning curve. Even if you decide to outsource development, your in-house teams need to be up to speed.
5. Test, Test, and Test Again
Write unit tests for your smart contracts and deploy multiple times to a test network. Finding a small bug means you need to redeploy your entire contract, making the stakes higher than for most traditional software systems. The only way to be confident your smart contract is solid is to test meticulously.
Remember, the blockchain in immutable. “Smart contract development is different from most other contemporary development as there are rarely any easy upgrade paths,” explains Daniel Zakrisson, editor of ICONOMI. “Deploy it and once the contract is in use you are pretty much stuck with it.” (That’s another good reason to keep your POC small: there are no take-backs.)
6. Get Cross-Departmental Involvement
When stakeholders aren’t involved in blockchain projects from the get-go, implementation can be delayed. Failure to involve the appropriate parties can also hurt buy-in, according to a June 2017 Cognizant report. “Firms drastically underestimate the substantial challenges of managing the changes that blockchain will require, with only 6% of respondents citing culture and change management as a top barrier to blockchain adoption.”
Maybe you, the CEO, and your engineering team are ready to roll with the POC. But don’t forget to bring other internal stakeholders up to speed. Be prepared to explain the strategic role of blockchain development in general and your POC in particular. Obviously, you need to keep the board and the C-suite informed and involved. But don’t forget about these two:
- Your tax team: The POC may not directly involve them, but bring them in anyway. Blockchain could have an impact on where your organization has a taxable presence. Traditionally, the geographical location of key decision-makers is one way to establish a tax liability, explains David Deputy of Vertex, a tax data-management company. With smart contracts, key business decisions are made without humans. So taxable presence is all very much in the air.
- Your compliance/legal teams: Gartner’s Valdes points out that there’s no legal framework for local or global applications. That’s why you need to bring in your legal and compliance teams early, so they can provide necessary oversight and limit risk. After all, as Gartner points out elsewhere, the legal basis for trust, identity, etc. remains undefined vis-à-vis blockchain. “Established laws still need to be revised and amended to accommodate blockchain use cases, and financial reporting is still unclear.”
Make sure you’ve included everyone who needs to be included.
“Don’t forget you’ve got people down the chain that you need to include in the [POC] process,” says Scott Mullins of AWS. “Don’t wait to get all the way to the end with your POC ... and you have five people who raise their hands and say, ‘Hey, you need to talk to us about the different things we need to check the boxes on.’”
While it may slow your POC down a bit to get cross-departmental involvement, it’s worth it. Need help getting some of those folks on board? We talked about it in an earlier blog post you can read here.
7. Make Sure You Are Adequately Staffed
If you are already thinking about your POC, then it’s long past time to consider staffing issues.
Is your in-house tech team equipped to execute on the POC? With some training, they probably can. But what if the POC is a success? Will they have the bandwidth and the expertise? Perhaps not. And hiring blockchain developers will be tough, given that demand for blockchain developers doubled from 2016 to 2017, according to Indeed.com.
Outsourcing may be a solution, allowing you to expand beyond your current capabilities. The contracted talent could alongside your in house team, providing expertise, support, and (in some cases) even training. We tackled this in an earlier blog post: “Blockchain Development: Hire or Outsource? It’s Complicated.”
It’s a lot to think about, and we can help. Reach out if you'd like to work together on a blockchain POC.