Rethink ROI for blockchain

Studies I conducted on blockchain technology highlight unique aspects related to ROI. This article will help you understand different aspects to take into consideration when calculating ROI for your blockchain project. As a result, you can build a comprehensive case for blockchain technology.

Considering that blockchain technology is an emerging technology, some of its characteristics make it difficult for innovative leaders to quantify the ROI. I was surprised by this aspect because we are so driven by establishing business cases and calculating ROI in the corporate world. When ROI calculations are iffy at best, it is hard for pioneering leaders of a company to change their stance and invest in blockchain technology. The idea of going into a project without a clear ROI might seem crazy to you, but it might give you a leg up on the competition.

Challenges with network based businesses

As we discussed earlier in the chapter, blockchain in enterprises is a network economics reliant technology. You don’t succeed with blockchain on your own. Besides the need to give the network time to mature, the companies don’t know how big the network will grow at the start of their journey. The hope is that every stakeholder in the industry will join in. That may eventually happen. But, in the beginning, you do not know how long it will take for that end state to pan out. The success of the network depends on many unknown variables. In light of this situation, you have to make projections based on assumptions about the network size. These assumptions bring in uncertainty around the ROI projections.

Newness of blockchain and ROI

The ROI is challenging to quantify because blockchain is still relatively new. You can’t rely on many available examples for guidance. You can’t lean upon any real precedents. Blockchain was first introduced to the world in 2009 with Satoshi Nakamoto’s white paper on Bitcoin. That was just over a decade ago. Their packaging as blockchain has been recent, even though the various concepts that make up blockchain have been around for a few years. More importantly, the use of blockchain for solving issues faced by companies is even more recent. Hyperledger and Ethereum were introduced in 2015 with the added layer of smart contracts. This addition made blockchain more viable for companies. With such a young technology, there isn’t much to lean on for inspiration. There is no guidance on how to use it effectively. Quantification of demonstrated value is also missing.

Scarce knowledge of blockchain and ROI

On the other hand, with the newness of the technology and not having a large body of work behind it, blockchain knowledge is scarce. It is also evolving very fast with new developments in this nascent space. The ever-changing landscape of blockchain technology makes it difficult and expensive to find people with relevant blockchain knowledge. The technology will mature over time, and current limitations will eventually be solved. Meanwhile, you should consider the evolution of this technology and plan for higher costs.

Other options

Other comparable options to solve the same problems include setting up manual processes. The use of existing technology can help get these tasks done in a quick and dirty manner. The availability of these options makes it difficult for leadership to justify emerging technology’s business case in a shorter-term time frame. Remember, you can get there faster with incumbent technology, but you give up on sowing the seeds to set up blockchain as an enabling technology for your company and get its advantages. Over a longer life cycle, your cost will decrease if you bring automation enabled by adopting blockchain technology into the picture.

Looking at blockchain technology ROI is one of those Things That may be Painful to make some hard decisions now but will be Good In The Future. It is important to not ignore this as it comes at a high cost of losing competitive advantage by not getting funds to start on you blockchain journey

Action

At the beginning of a blockchain project, ROI is hard to determine. Investigate other qualitative ways that a blockchain project might add value. Build a holistic business case for your blockchain technology project by using that information. The project will be in a better position to get funding that way.

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