CAMBRIDGE, Mass. – More and more Salesforce clients are experimenting with blockchain technology, but in most cases they wind up stuck in a proof of concept, unable to move into production, according to Salesforce’s Senior Vice President of Emerging Technology, Adam Caplan.
“We haven’t seen a lot of successful wins,” Caplan said during a talk on blockchain’s role in the enterprise during MIT Technology Review’s Business of Blockchain conference here last week. “Part of the reason…is talent. Fifty-five percent find the challenge is finding the right, skilled workers. But also relevant is the technology is hard to work with.”
And that comploexity can get in the way, he said.
For example, Caplan commonly finds clients flummoxed when he tries to explain what the term “consensus” means in the context of blockchain. “If anyone has figured out how to do that, please let me know,” he said.
The best analogy Caplan’s found is comparing blockchain’s consensus mechanism to the difference between an NBA basketball game and a pick-up game. In an NBA basketball game, you have a referee who validates points scored and penalties made; in a pick-up game, the players perform the same tasks with equal, even better, accuracy – including contesting penalties. The NBA game represents a centrally-administered database, while a pick-up game represents users of a blockchain verifying each transaction placed on the electronic ledger.
For many Salesforce customers now exploring blockchain, the technology’s more sophisticated attributes – its distributed architecture, the ability to create consortiums among business partners and smart contracts applications – hold far less appeal than its simple ability to create an immutable audit trail. Blockchain is essentially a write-once, append many-database that can be shared among any number of users inside a business.
Over the past year – even during the past six months – Caplan said the conversations he’s been having with clients has change dramatically. As the “hype” phase of blockchain has cooled, customers have begun asking what business value it can bring and what problems it can actually solve.
“I think there has been a sea change. I think the decrease in hype has helped,” he said. “Now, it’s about let’s get real, are we going to go live?”
Just give me an audit trail
While audit trails can be accomplished with other technologies, the blockchain term, Caplan said, carries a certain mystique that embodies trust.
“The blockchain word means a lot,” Caplan said. “Whether it’s for submitting data to the FDA, some financial use case, or just some internal audit or sharing data with some law firm partners, that audit trail based in blockchain is really powerful,” he said.
Salesforce clients like the idea they can get their feet wet with a simple business use case without going down a technological complex rabbit hole.
“We have some customers who say, ‘That’s all I need. I don’t care about decentralization. Let me start here. Let me get in the game here. Let me learn about blockchain. Let’s start here,'” he said.
One Salesforce customer is experimenting with blockchain to authenticate used car parts because they want to increase the value of their vehicles and make sure the parts they’re using are authentic, not cheap knock-offs that could fail. Blockchain can create an unchangeable supply chain trail from parts manufacturer to retailer.
“They don’t need a million partners or a ton of decentralization,” Caplan said.
Several of Salesforce’s clients have created proofs-of-concept to demonstrate blockchain’s ability to create a supply chain that ensures ethical sourcing of materials and anti-counterfeiting capabilities.
For example, a challenge in the cotton industry is proving it doesn’t come from slave labor in places like Uzbekistan. One retailer of high-end cotton clothing is exploring how to prove its Uzbeki cotton is sourced from the right places by tracking it from field to maker.
“They’re not sure what value it has at the end of the day. There’s probably some PR value there, there’s probably some value around making employees feel good about where they’re sourcing their cotton,” Caplan said. “There’s also a question about whether consumers would pay more for it. They don’t know yet, but…they feel like they’re in an interesting sweet spot because they sell high-margin items.”
At the same time enterprises are testing blockchain as a supply chain validator, they’re recognizing technology can only do so much. One concept they’re struggling to unravel is proof versus truth, or whether a product on a supply chain is actually what it’s claimed to be.
For example, while a blockchain ledger creates a transparent chain of transactions, each immutable and connected to the last, it doesn’t ensure someone at the manufacturer or along the supply chain hasn’t physically tampered with the goods. It simply ensures the electronic handshake has taken place between each entity along the supply route.
Caplan pointed to an enterprise customer in the liquor business who hopes to thwart product counterfeiting, which is prevalent in some regions. The company found that even if it spends money on the assembly line to put high-quality QR codes on bottle labels (so retailers and consumers can scan for product provenance) that doesn’t necessarily validate the product, because a label – or the contents – can be replaced.
“All of our clients who are thinking about [blockchain] who are not digital companies are really struggling with this concept,” Caplan said.
Tracking people, not products
Another salesforce client, Arizona State University (ASU), is testing blockchain as a universal record where each student owns their own transcripts for life. “And, that’s amazing, but that’s also really hard.”
ASU has banded together with regional community colleges on the project and is sharing transcript records. The benefit is if a community college student transfers to ASU, their pre-certified transcripts automatically come with them, as do the credits for courses completed. Conversely, when students graduate from ASU, the community colleges that have access to those same records can award a degree as well, attaining higher graduation rates and receiving more state funding from that.
Yet another client – this one in the concert ticketing business – wants to be able to share data with music fans, venue area hotels and ticket resellers. Worried that fraud and high brokerage fees could hurt their reputation, the ticketing agency hopes to use smart contracts to limit how long a reseller can hawk a ticket and cap the price they charge.
“Plus, you’re sharing all this information back [with the source of the tickets] so you actually know who’s coming to your concert, who is coming to your venue. So, you can cross-sell, upsell, and engage them with CRM – unlike today, when you may not have any idea who is even coming to your venue,” Caplan said.
Using blockchain for business collaboration
Others see the distributed ledger technology (DLT) as key to an open collaboration with business partners, even those with opposing goals.
For example, some of Salesforce’s oil industry clients have been testing blockchain’s ability to create a network over which performance-based contracts can be carried out. Each player in the oil extraction and refining process has a different role. One company supplies the equipment for drilling, another supplies the employees, while a third company handles the sale of the oil.
The company that sells the oil wants to do so as fast as possible. But the companies that supply the oil rigs or employees have an incentive to move slowly, because the longer equipment and workers are on site, the more money they make.
“So, [the company that sells the oil is] looking at performance-based contracts on blockchain to align incentives through smart contracts where bonuses can be paid based on speed,” Caplan said.
One mistake clients say those marketing blockchain as a business solution make is focusing on the technology rather than on how it can solve business problems or grow revenue.
In attempting to assist clients with blockchain deployments, one thing Salesforce often does is avoid actually saying the word “blockchain” too much. “We get stuck in this lingo, this verbiage with deep technical guys… and you kind of get away from the business problem,” Caplan said. “So, we’re trying to say, let’s step back and let’s really think about what blockchain means from a business perspective, what problems are we really trying to solve?”
When to use blockchain
Blockchain backers need to keep it simple when explaining what the technology can offer, Caplan said. For example, it should be considered when it involves multiple external partners, partners whose transactions you want visible – and your current process doesn’t allow for that.
Many of Salesforces clients have created innovation teams, but they get so focused on the technology that the business side is often left out of the process. The result: innovation teams with very smart people that don’t necessarily have a problem to solve.
“It’s the classic case of technology looking for a use case, looking for a problem,” Caplan explained. “So, we are really trying to hone in on … [whether] the current process isn’t working. What problem are we really trying to solve? Is this a real use case or is this an experiment we’re playing with here?”
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