The Elusive Nature of True Transparency
Clearly, stakeholders—from businesses to governments to entire populations—desire transparency. But it is elusive. What’s really happening in a supply chain is hidden in an ungainly maze of siloed systems and cross-border handoffs. We don’t know what part of our news is real, and what is fake. We can’t be sure if the food in our pantry is genuine.
No one can fix what they can’t see. But what if we could finally, truly, see?
What Blockchains Make Possible
All-Seeing Meets the Ever-Knowing
At times, the vision for this raw, unpolished technology can look almost beautiful, even elegant. This is one of those times, especially when IoT and blockchain technology are working together. It becomes possible to “see” hundreds of thousands of things pulsing through a tangled supply-chain maze. But this “seeing” surpasses human capability. Aided by the many smart sensors available today, we could understand so much nuance about what a thing has gone through to get to us. And with blockchains we can trust that what has been recorded has not been altered, even if many different parties have touched it on its way. In this vision of the future, we could even go back and see the details of a journey that happened many years ago.
This starts by giving each piece, component, or thing that we care about (whether tangible or intangible) a unique identifier. This identity can be tracked through its entire lifetime, like a bright star can be, night after night. The blockchain can “watch” and record all the conditions and interactions this thing goes through. This results in one view of truth, shared across an entire business network.
If the thing is a tangible asset, it may move from a mine through factories and ultimately to a store, jumping borders, traveling over buildings, and under bridges—all along the way changing form and function. Strategically placed sensors, recording their data to the blockchain, can ensure we have a record of so many dimensions of each step of the journey: temperature, humidity, time, speed, velocity, altitude, tilt, proximity, pressure, leaks, sound, light, vibration, air quality, and electricity use, to name a few. Or it could be an intangible thing: a watt of energy captured by a solar panel, fed into a network and then sent to where it is most needed, or an image perfected by its creator and then launched into the digital world, always retaining a clear trail of ownership.
Coding for Trust
Regardless, the record is secure. Permanent, tamper-proof, it is shared by a community and owned by no one. From origin to ultimate destination (and even beyond) it is traceable. Anyone in the community can monitor the activities and be sure the data on a blockchain has not been forged. Because it is based on mathematics and cryptography, we don’t have to trust in another party, or rely on central institutions to supervise or direct our relationships. Instead, the trust is coded in—and inviolable.
This could ensure sensitive pharmaceuticals are kept at the right temperature. Verify the provenance of intellectual property. Identify whether fish came from a sustainable source. Find the point at which components “disappeared.” Verify the historical storage of wine.
Tracking the Intangibles: Can Blockchains Kill Fake News?
The same features used to track assets are the focus of startups looking to combat fake news. Many of their approaches center on proven validation. There are two sides of validation: the contributor’s identity, and the content’s authenticity.
Let’s first look at contributor identity. There are many emerging companies that are seeking to become a trusted third-party verifier and protector of identity. The user shares enough with the third party so that they can verify who they say they are. This verified identity is safely stored (in anonymous, encrypted form) using a blockchain. Users could then approve specific applications, such as a social media platform, to access the stored identity and verify their credentials (again, staying anonymous to the social media platform). In this way, only “real” people with verified identities could get on the platform. Users could have confidence that they were not interacting with fake accounts (in 2017, Facebook revealed that they have up to 270 million fake and duplicate accounts).
Other companies are tackling the content challenge first. Approaches include encrypting stories on the blockchain so they are more difficult to modify, verifying the authenticity of user-generated content, or developing economic incentives and a transparent, auditable network to hold curators and the community accountable for the integrity of content.
Both can use lifetime reputation of an identity or a source to further improve their filters. Blockchain entrepreneurs also tie rewards to measures of quality.
This may be just the beginning of an arms race against fake news. There is a vast network of resources focused on generating and profiting from fake news today—and the rest of us haven’t had much of an arsenal to use in the battle. Blockchains could make fake news more difficult to perpetuate, and less profitable. However, as AI, machine learning, and bots become more sophisticated, this will likely prove to be a long-term war.
One Feature Set Drives Value for All
Like a clever, multifunction multitool, the same blockchain could serve the needs of many stakeholders. One day, a supply chain executive could use a blockchain to optimize shipping routes and cut costs . . . which also cuts carbon emissions, pleasing environmental groups. Another application built on the same blockchain could give a consumer confidence that their dinner table was really built from sustainably harvested wood. And another could assure investors that the factory that built it does not employ children. Looked at from another perspective, the same underlying technology investment could drive savings for operations, assist compliance and legal departments in doing their job, and give marketing something real to talk about to drive consumer preference.
A Step Toward a Better World
Throughout human history, we’ve seen that people can be very talented at exploiting whatever system is in use. There is no doubt that bad actors will find ways to exploit these new systems as they carry more commerce than the experiments and pilots that are in place today, and become attractive targets. While blockchains may continue to be difficult to hack profitably, someone will find ways to work around their impenetrability—slipping minerals mined by a child among those “cleanly” mined, or tampering with sensors, for example. Sheila Warren of the World Economic Forum brings up another challenge: “In traditional tech we talk about ‘garbage in, garbage out.’ On the blockchain, it’s ‘garbage in, garbage forever.’ And there are people who will try to game the system and put in garbage information. That’s just a reality.”94 But blockchains are positioned to make it more difficult, and more costly, to cheat—especially at scale.
A thoughtful adoption of blockchains could fight fraud and corruption, reinforce a company’s image, and enable open, reliable, and indelible reporting on sustainability and human rights commitments. While the work in this area is challenging and it will take a great evolution to get to prime time, there are pilots already happening around the globe. Blockchains may one day become the perfect tool for a company that seeks to generate financial, social, and environmental value—at scale.
Implications: When Authenticity Becomes More Than a Buzzword
There have never been more opportunities for CEOs to demonstrate leadership in addressing inequities and living up to social purpose. Both consumers and their own employees are continuing to push companies to respond.
Jack Leslie, Weber Shandwick chairman, 2018 World Economic Forum Meeting
Blockchains for the Bold and the Brave
As our world becomes more digital, the urgency of trust moves to center stage. Renee James, the former president of Intel, has said, “The ability to know what’s safe and good is going to become even more important to people in a world that’s less physical.”95 But even for a single sliver of a business, end-to-end transparency will present technical and social challenges that are not for the faint of heart. This is because true transparency
crosses organizational and national borders, often many times over. There are a lot of people involved, start to finish, and this is a great deal of change to broker. Even transparency of a digital asset, such as a piece of content on a social network, requires the correct placement of many pieces of the puzzle. A trusted third party may need to verify the identity of a contributor, sophisticated third-party AI engines may be used to analyze content veracity, and users need to be educated on their role in contributing to the quality of the network.
The Appeal of a Killer Combination
But industry after industry, persistent leaders are working to leverage blockchains to achieve breakthrough-caliber transparency. Irrespective of executives’ personal belief in the importance of transparency, there are two business reasons for it: transparency can help optimize operations, and it can increase customer preference. The tantalizing promise of both cutting costs and generating new revenue is a killer proposition. It’s already spurring blockchain interest, resourcing, experiments, and pilots among today’s top brands, and will ultimately drive the ambitious level of innovation required to get real solutions into market.
The kind of transparency a consumer wants and that a purely numbers-driven supply chain executive needs has historically required investment in different processes and technologies. With blockchains, it is possible that many of these needs and desires could be met with the same investment (at least at the foundational level), much in the way a single investment of an email server and application is used for many diverse business purposes. For example, blockchain and IoT investments could both track the time it takes for a bag of minerals to get to a factory, and verify the point of origin as a mine with humane labor practices. While applications built on top of a blockchain may be tailored to specific users and needs, the core investment could be leveraged in flexible and creative ways. This means that businesses may find they can more easily gather support for coldly quantitative business cases, with investment that could later be extended to support sustainability, for example.
Business-First View: Yet Another Digital Transformation Must-Have?
As the technology matures and companies start to demonstrate ROI through pilots, blockchains may become an add-on to the existing digital transformation agenda. It fits right into the eternal quest to make operations more efficient and allow workers to accomplish more in a day’s work. Those companies who are able to perform the extraordinary gymnastics required to adopt a blockchain across an ecosystem of suppliers and partners could introduce new speed and purity of execution to their operations.
No doubt, this requires massive investment, and it will be interesting to see who can act at the scale it will take to drive dominance. We may see less ambitious projects from smaller companies as well. These companies could leverage third-party services from blockchain-native companies, traditional technology vendors doubling down on blockchains, or blockchain development from existing partners (like UPS and FedEx). Regardless, with more and more companies making headlines each week with their blockchain pilots, it is only a matter of time before someone makes a breakthrough that drives real operational results.
Society-First View: Will Pioneers Push Progress?
We’ve seen that businesses have strong incentives for proving products are made in an ethical manner, without exploiting workers or destroying the environment. And now true transparency—actual proof that sustainable, ethical, and responsible practices are being used in the production of goods—feels tantalizingly possible.
We will see a few pioneers in hypertransparency using blockchains to set a new bar for what openness looks like.
We will see a few pioneers in hypertransparency using blockchains to set a new bar for what openness looks like. For years, marketing teams have made claims about social responsibility and product integrity, often with weak support. Whether or not the company delivered on the promises was really anyone’s guess. As pioneers show that facts can be immutably tracked, and perhaps even made open to the public for verification, the unblocked customer could see that they can verify their coffee is indeed organic and fair trade. That a diamond was mined ethically. Or that their favorite social network is bot-free.
We can be sure that these leaders will do their part to educate customers on their unique value proposition and use their new level of openness as a marketing tool. While it’s likely that customers won’t know that a technology called blockchains made this possible, over time they will see the results of it and start to expect it from others. They not only may be able to click down on a claim to see it’s true, but also could be exposed to new breadth of transparency. As more companies track and market different metrics, the average customer will become better educated on what, for example, sustainable harvesting or ethical labor practices actually mean. A customer who had thought only about “buying organic” might expand their perspective of quality to include other factors like these.
It’s very, very early, but many well-known corporations are already experimenting. Starbucks is piloting “bean to cup” traceability, and Coca-Cola is working with the US State Department to evaluate using a blockchain to fight forced labor. Nestle SA, Unilever, and Tyson Foods are just some of the companies working with IBM on a project to explore how blockchains can improve food safety.
Refining Customers’ Taste for Transparency
When leaders start marketing results, both flavors of transparency will shift what customers expect from a business. A more optimized supply chain can give customers lower prices and more consistently high quality. When a brand demonstrates verifiable labor practices, customers will start to question why others can’t. Eventually, a new standard for transparency will emerge. In the same way consumers now expect to be able to place an order for just about anything from their phone, the unblocked customer of the future could expect to check up on a company’s track record with ease.
This could put a huge, difficult burden of proof on brands not only to develop the capabilities for this kind of reporting, but also to continually prove their worth in a range of metrics. It may also embolden activists and NGOs to put pressure on businesses and governments to create new legislation or regulation. How many incumbent deaths in the next few decades will be driven by a lack of ability or willingness to open key metrics to the public?
A New Spin on Spin?
It’s possible that we may see a new marketing tone take hold. Already, we’ve seen that corporate responsibility initiatives without adequate transparency can be perceived as self-serving. In this future, companies may be even more sharply judged. It will be more difficult to selectively promote just the facts that support a brand’s story when the ugly or missing facts are just a few clicks away. The marketer’s penchant for spin may never go away, but marketing will need to move beyond blanket statements to speak more to veritable truth. Marketers could develop a style that authentically and appropriately frames “problem spots,” and shows that their company is mobilizing to work on any problems that they have discovered.
This hard work opens up new potential in the relationship between a customer and a business. The openness and the difficult labor of recognizing and addressing problems (and reporting on that progress) could forge a new level of trust. Whereas the internet broke down many of the foundations of loyalty, a blockchain may be the critical element to build it back stronger than before.
Whereas the internet broke down many of the foundations of loyalty, a blockchain may be the critical element to build it back stronger than before.
This Is a Natural Next Step in Our Journey
In many ways, blockchain-level openness builds on a foundation set in motion years ago. Open source software, which emerged out of the Free Software Movement of the 1980s, demonstrated the positive impact of releasing code to the public. This bold idea of “open” has bled into other areas. The “Open Movement” has become an umbrella term to describe multiple movements supporting the idea of a free and open society across government,
health care, arts, education, technology, and more.
And we see more openness day to day in our digital lives. Khan Academy offers free online courses, retailers routinely encourage customers to post reviews, tech companies are increasingly making diversity stats public, and the public has grown accustomed to sharing intimate details about their personal life on social networks.
Blockchains, by their very nature, are public (although there are private blockchains, which are open just to members of a particular community). The code is typically open source, the data recorded on the blockchain is open, and the rules of governance of the protocol itself are open. Some blockchain companies are even working on models to open their day-to-day management and investment decisions to the community.
But perhaps the biggest contribution blockchains will make to this groundswell for a more transparent world is what they could enable our world’s biggest and most influential corporations to do. Some could emerge as leaders that use blockchains to develop a new kind of collaboration between a customer’s and a corporation’s values, eventually pushing more businesses to strive toward a new standard.
Cautions and Considerations
An expectation for blockchain-level transparency presents both threats and opportunities. While some of these cautions and considerations are very future-focused, they are meant to provoke your thinking about what could come. This is by no means an exhaustive list; it provides additional food for thought on how to prepare for this new paradigm.
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