Blockchain technology will start shaking up supply chains and brands. But first, what is blockchain? Here's our take:
Blockchain is a distributed accounting ledger . A mechanism to share how much was paid and received by whom, where each transaction is verified on a peer-to-peer basis. Sort of like verified reviews on Amazon. The person did buy the book.. so you can be sure that the review is not entirely "fake," as in many other web and social media contexts.
Money talks. More so, if you can record it at the level of individual transactions. And that's what blockchain promises to do. Here is how it will impact supply chains and brand power:
- Supply Chains are about the flow of goods,services downstream towards the final customer while there is a reverse flow of information and money upstream. What does the final B2C customer feel about the product and experience? Can you change something in the product (innovate) to make the customer happier? It's on the money side of transactions that things become difficult to reconcile. Obviously, if you don't pay as a customer online retailers will not ship and store security will come after you! What about the upstream manufacturers – the business that made the product, the firm that made the packaging or the transport contractor who moved the goods from factory to wholesaler. It takes years for each of these channel partners to get to know each other,develop trust and commit resources to make everything work. If blockchain does become more widespread then upstream suppliers specific to an industry will be far easier to find. Entry barriers will reduce drastically, as it becomes easier to enter an industry.
- Brands are supposed to make things easier for the customer. They give comfort for quality and reliability. Brands take years to develop.Some upstream brands try to advertise (like Intel chips for computers) and are thus able to attract a better price in the supply chain. Blockchain at its best will let you know exactly who your competitors bought from and for how much. Such transparency will spur innovation. However, brand premiums will erode in a way similar to the way store brands work at the consumer end. For example, a large segment of pharmacy consumers are happy to buy the CVS brand vs. the Tylenol brand for much lesser. Since the upstream B2B buying process is highly technical with very knowledgeable buyers, we can expect that with transaction level information via blockchain winners may take all . And resting on brand strength including B2B relationships will not be enough.
All in all, Blockchain will need a good rethink for supply chain, marketing and innovation. As always, those who care for the final consumer will thrive even more with blockchain.
We wish our readers a very Happy New Year in 2018!