Magazine Winter 2017 Issue Frontiers

How Blockchain Will Change Organizations

What if there were an internet of value — a secure platform, ledger, or database where buyers and sellers could store and exchange value without the need for traditional intermediaries? This is what blockchain technology will offer businesses.

Don Tapscott and Alex Tapscott Reading Time: 12 min 

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Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
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Blockchain

For the last century, academics and business leaders have been shaping the practice of modern management. The main theories, tenets, and behaviors have enabled managers to build corporations, which have largely been hierarchical, insular, and vertically integrated. However, we believe that the technology underlying digital currencies such as bitcoin — technology commonly known as blockchain — will have profound effects on the nature of companies: how they are funded and managed, how they create value, and how they perform basic functions such as marketing, accounting, and incentivizing people. In some cases, software will eliminate the need for many management functions.

Sound far-fetched? Let us explain. The internet vastly improved the flow of data within and between organizations, but the effect on how we do business has been more limited. That’s because the internet was designed to move information — not value — from person to person. When you email a document, photograph, or audio file, for example, you aren’t sending the original — you’re sending a copy. Anyone can copy and change it. In many cases, it’s legal and advantageous to share copies.

By contrast, if you want to expedite a business transaction, emailing money directly to someone is not an option — not only because copying money is illegal but also because you can’t be 100% certain the recipient is the person he says he is. As a result, we use intermediaries to establish trust and maintain integrity. Banks, governments, and in some cases big technology companies have the ability to confirm identities so that we can transfer assets; the intermediaries settle transactions and keep records.

For the most part, intermediaries do an adequate job, with some notable exceptions. One concern is that they use servers that are vulnerable to crashes, fraud, and hacks. Another is that they often charge fees — for example, to wire money overseas. They also monitor customer behavior and collect data, and they exclude the hundreds of millions of people who can’t qualify for a bank account. And sometimes, they make terrible mistakes, as the 2008 financial crisis made evident.

What would happen if there were an internet of value where parties to a transaction could store and exchange value without the need for traditional intermediaries? In a nutshell, that’s what blockchain technology offers.

Topics

Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
More in this series

About the Authors

Don Tapscott is the chancellor of Trent University in Peterborough, Ontario, and CEO of the Tapscott Group Inc. in Toronto. Alex Tapscott is founder and CEO of Northwest Passage Ventures, an advisory firm incubating early-stage blockchain companies, in Toronto. They are the authors of Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World (Portfolio, 2016).

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Comments (8)
John Mathew
Thank you for the information.

Yes, the advancement of Blockchain technology is unquestionably dispelling all the doomsayers. Blockchain will support a large variety of applications. The foremost renowned is cryptocurrency like Bitcoins and Ethereum. Blockchain-based applications embody any business transaction. For example; Business order following, offer chain, Banking, and Finance, E-learning, Healthcare, on-line searching portals, Insurance, Travel, Music, Renewable energy, Contract validation so on. 

The main advantage of using Blockchain system is that it provides an advanced level of transparency to the network after all the blockchain ledger is being shared with all the nodes. Developing a blocking from a \blockchain development company is a smart move.

Regards,
John Mathew
Marketing Associate @Tokyotechie
Tom Springer
Thanks for the article. This article helps a person with little knowledge about blockchain technology to know more about it and applications. The blockchain technology has extended its application in many fields like financial services, smart contracts, smart property and encrypting our important documents like birth/death/marriage certificates, personal IDs like passports, computer passwords etc to make it secure against attacks from the spammers.
Johnny Nylon
I smell snake oil.
https://www.forbes.com/sites/laurashin/2017/11/05/alex-tapscotts-crypto-vc-firm-aborts-public-listing-will-return-money-after-falsehoods-revealed/#15ae8e0d2e27
maryam asadi
Thank you for writing and sending the article. I think maybe there would be resistance against this technology because many organizations do not prefer to clarify their transactions and contracts or maybe the clients wouldn’t feel safe on it. Also Blockchain will have new costs like implementation cost or the cost of security breaches,….
Veeresha Javli
Blockchain could change federal reserve bank or central bank the way they are processing transactions.   Alternatively, Blockchain would bring trusted processing of transactions closer to consumers without inter-mediate brokers, this means the existing purpose of the banks and central banks gets eliminated over time.
Devendra Nambiar
Firstly, thank you for the article, and the such a great description of what Blockchain and Bitcoin technologies are capable of changing. But, I have a few questions?

Although as a business and technology strategist I find these technologies intriguing, I can also see the dehumanization of commerce and a change to a more "robotic' business  world (Which maybe inevitable).  So, if all negotiations are based on the actual existing facts and figures based on transactions only, in many cases  can diminish the value of strategic intents of organizations that have possible future innovations and other roadmap enhancement to offer, but are unable to present the facts to the database for IP or other reasons. How do we account for these very important vales?

In addition, as we all are aware that the law and privacy governance have been generally far behind the "eight-ball" when it comes to new and innovative technologies, and so how can one ensure that explicit acknowledgement of the content, its use, and acceptance have been offered where personal and company information is added to the blockchain database? 

Overall, I found the article thought provoking and yes, as always if one isn't ready to at least test, evaluate, adapt, someone else will, and you may have to adopt.  

Kind Regards
Devendra Nambiar
JIM MCDONALD
I would like to identify blockchain experts who adapt this technology to specific applications.
Igor Ageyev
A firm or organisation as an subject of economy or society and a management function are complex systems which require deep analysis of potential changes and possible impacts and risks. 
It is good that authors believe in many points they state but without analysis of environment and relation with other components at least at theoretical level it sounds more like a fantasy.

There are too many gaps and assumptions in the article and it would take time to provide detail feedback but the main message of the article "it is cool, try to play with it or other people start playing first" sounds correct. 

Regards
Igor