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Of all the innovations to emerge in our rapidly digitizing world, it’s fair to say blockchain has been one of the most talked-about. Certainly, the role the technology plays in powering cryptocurrencies like Bitcoin and Ethereum has seen it feature regularly in news pages all over the world.
Yet, blockchain has the potential to be just as transformative for the manufacturing industry as it could be for financial services. Far from something ‘coming down the line’, its distributed ledger technology already offers companies a genuine way in which to drive connectedness and streamline operations like never before.
But, at the moment, that potential is going untapped. To capitalize on the possibilities blockchain offers, manufacturers have to move past the exploration phase and set the wheels of change in motion for real.
The new EDI?
When I started in the manufacturing industry in the early 1980s Electronic Data Interchange (EDI) had become the standard for intercompany communication.
These allowed companies to share and exchange electronic documents throughout the value chain – from purchase orders and invoices, to shipment notices and route plans.
At the time they were introduced in 1968, EDIs were no less revolutionary than many modern technologies today, saving manufacturers of all sizes a great deal of time and money compared to the days of paper trails and snail mail.
But even EDIs took a while to be fully adopted across the sector, with many companies wary of disrupting traditional ways of working – both within their own business and with customers and suppliers.
Fast forward to today and there’s a new kid on the block (if you’ll forgive the pun) when it comes to data exchange. And it’s experiencing the same problem EDIs did way back in the 60s and 70s. Despite all the hype around blockchain, many manufacturers are getting caught up at proof of concept stage. This is a mistake and it means they risk being left behind by more innovative, less risk averse competitors.
From why to how
After all, the benefits of introducing blockchain technology are real – faster, more reliable information exchange; greater contract and payment security; and enhanced product visibility and tracking. All these benefits have the potential to drive efficiencies, reduce costs and smarten decision-making, ultimately helping manufacturers boost their productivity and profits.’
So what’s stopping them? For me, it comes down to a mindset shift. Rather than get caught in the what and why, manufacturing companies need to be brave enough to get onto the how.
The best place to start is by identifying where blockchain could have the most positive influence in your business’ ecosystem. Anything from supply chain and asset tracking, to global trade finance and cross-border payments. Whichever use case you decide upon, the key is to move quickly through the planning phase and get directly into actually piloting something. Only then can you truly evaluate the tangible impact the technology could have.
Start small, then scale
To be clear, this is not about creating a whole new commercialized blockchain platform straight off the bat – that’s too big an objective and could present too many barriers to success. Rather, it’s about starting small, then scaling up.
That could mean taking 20% of your suppliers and working on a blockchain pilot together. Once up and running successfully, you can then increase that to 40% of your suppliers, then 60% and so on. This iterative approach allows you to learn and improve as you go, building on successes and ironing out issues while they are still small enough to control.
As my EY colleague and Technology Solutions Delivery Leader, Gaurav Malhotra, said to me recently: “We are past the point of ‘internal only’ proofs of concepts. To adopt and scale blockchain technology successfully, we have to move directly into the pilot stage with the right network partners and most critical use cases.”
Opportunity knocks
To return to our EDI reminiscence, blockchain offers an opportunity for the manufacturing industry to kick off yet another connectedness revolution.
But opportunities are only useful if they are seized. The companies that win will therefore be the ones who move beyond proving the technology could work and get onto actually using it. As many leading organizations have found, getting a platform in place for your own business often leads to others – be it suppliers or customers – adopting and building on that platform too. From there, the positive impact for the whole value chain can be considerable.
For manufacturers, this proactive, collaborative approach to blockchain is the path to smarter, better ways of working, greater competitive advantage and, ultimately, growth. The time for talk is over. The time to act is now.
