In the final installment of his tokenisation trilogy, NZ fintech leader, Binu Paul, outlines how businesses can move from blockchain dreams to real-life solutions…
Blockchain technology has often been labelled as a ‘solution looking for a problem’.
Despite such scepticism, however, the potential of blockchain-based asset tokenisation to transform the financial services sector remains an alluring prospect with many working examples already in play – as discussed in parts 1 and 2 of this series.
As more institutions allocate resources to exploring the opportunities offered by the rapidly advancing technology to slash costs, improve productivity and drive new revenue streams, mainstream adoption seems inevitable.
Nonetheless, businesses looking to move across the next financial frontier need to have a clear idea of where they’re going and how to get there.
Over its relatively short history to date, blockchain – repeating the experience of other technological breakthroughs – has prompted enthusiasts to moot multiple ‘use cases’ that fail to pass muster.
Experimentation, of course, is both necessary and healthy.
But I have seen far too many examples where founders as well as mature businesses float ‘use cases’ that are quite obviously dead-on-arrival.
Instead of chasing random blockchain mirages, firms will benefit more from a disciplined and organised approach to finding real business solutions using this promising new technology.
Step-changes: how to move from aspiration to implementation
Below is not a strict set of rules but general guidelines based on past experience of which practices work well and those that don’t.
Articulate your problem statement or aspirational goal
Getting this step right is fundamental to success – ie, identfying what the business is trying to achieve – is it cost savings or revenue growth or elements of both?
The business goal may need to be iterated in later stages – that’s just the process of discovery. A practical approach may be to identify niche use cases rather than trying to solve all existing problems or pursuing multiple ideas.
Establish a diverse team (cross-functional)
Handpick an internal team from across functional areas including those that are client-facing, IT, finance, marketing, legal etc.
Ensure individuals are curious by nature or have a keen interest in innovation. If practical, collaborate with peers in the industry – there is much to be said for pooling resources and avoiding redundancies. Besides, individual sectors may benefit from clubbing together to drive efficiencies for the entire sector.
Research the market
Investigate use cases from across the sector as well as outside. Those templates can be useful guides to formulating what is possible and to generate ideas.
There is also abundant literature being published by top universities as well as thought-leaders and practitioners who have been working with the technology for a number of years.
Useful insights can also be drawn from external stakeholders such as technology-solution providers, regulators, academics etc. Engage early.
Workshop ideas and use cases
This phase should focus on potential solutions to identified problem statements. These may relate to enhancing liquidity, reducing transaction costs, building new products and revenue lines, accessing new consumer groups etc – this will be specific to each business.
This ideation stage should also focus on making assessment of the relative merits of each of the use cases using criteria such as technical feasibility, regulatory complexity, implementation challenges etc. Shortlist the most attractive use cases.
Conduct validation studies
An important part of the journey is in validating the use cases through three lenses.
- Technical – consider which blockchain system to build on, security-related aspects, inter-operability with other blockchains and existing systems etc;
- Regulatory – seek legal and regulatory counsel on the implications of the solutions from a compliance perspective; and,
- Commercial – validate the commercial pay-off from adopting the use cases including potential addressable market size, initial build costs as well as ongoing maintenance expenses etc.
Build, test and evaluate proof-of-concept
Armed with the above details, it’s time to design a proof-of-concept of the most feasible idea, articulate success criteria and build a project plan for its implementation. Document thoroughly all observations from a regulatory, technical, legal and commercial perspective.
Chart out a business plan
The objective of this stage is to prepare a comprehensive business plan to present to board or management.
The plan must cover the essentials including a thorough risk assessment (with mitigation strategies) of the initiative, an implementation plan including resource requirement and acquisition and budget as well as contingency-planning as well as a set of feedback loops to ensure the project stays on time and budget.
Seek stakeholder buy-in
Ensure the plan is socialised across the organisation at the appropriate levels of board and/or management.
Feedback and monitoring progress
Track progress through the life of the project to ensure the objectives and milestones are being met. Also, expect both regulatory and technological shifts through the project given the fast-evolving nature of this technology.
Crossing the frontier into unexplored territory is never without risk but – as this series of articles demonstrates – the rewards for the financial services industry offered by blockchain-based technologies such as asset tokenisation are substantial and within our grasp.
Opportunities abound; challenges exist; fortune will favour the brave and the prepared.