Blockchain’s Occam Problem: A Response to McKinsey

For readers not following McKinsey’s financial services practice’s commentary on blockchain, an article was released last week which paints a picture a long way away from the halcyon days of 2015-17.

There are a number of points in the commentary that we would like to bring our audience’s attention to, and our views are beyond the confines of financial services:

1.       “Niche applications”

In our view, this is overwhelmingly correct.  Technology innovation always starts in niches, as Clayton Christensen observed in 1997 when presenting the case study of the minimill.  The idea that there would be a ‘big bang’ switch to blockchain was always highly unlikely – the technology is untested at scale, and as such no company considering its merits should seek to rip and replace their existing technology stack

2.       “Modernization value”

Sometimes it is not the technology itself, but the hype around it, which encourages adopters to review their current systems.  The world is imperfect, and if the hype associated with blockchain is a vehicle for innovators within and without businesses to reconsider how they do what they do, we consider this a positive step forward.  In some cases, it is only concepts that are loosely associated with blockchains underlying technology i.e. the blockchain is an enabler (often where others exist) of the concept – which have been missed or ignored, yet are now back under consideration.

3.       “Reputational value”

Yes.  The need ‘to be seen to be doing something’, too often the curse of the politician, is an excellent thing for vendors such as Saffron.  The blockchain question provides a vehicle for stakeholders in an organisation to indirectly ask other questions.  ‘What is this steel company doing in blockchain?’ could actually be restated as:

‘what is this steel company doing to ensure quality in its product, where many subcontractors are involved in the production process?’

               And perhaps: ‘what is the bank doing in blockchain?’ may actually mean:

‘how is the bank seeking to reduce the costs of transactions – either for me as a customer, or alternatively for me as a shareholder with an interest in reducing OpEx?’

Finally, the three ‘key principles’ the authors state are the age-old principles that have existed within organisations – and are repeated ad infinitum because organisations continue to fail to ensure they are applied as they go about their daily business:

1.       “Organizations must start with a problem.”

Always. 

2.       “There must be a clear business case and target ROI”

Of course.  And I’d like a DCF included in that.

3.       “Companies must agree to a mandate and commit to a path to adoption”

Yep.  Otherwise people are running around doing ‘things’ but with little likely positive outcome.  If a mandate is ‘ignore’, that is as valid as any other that has been outputted by a rigorous, structured set of assessments.

Keeping things simple – choosing the Occam solution – this is a philosophy we wholeheartedly support.

Miranda Meldrum