The Transformative Potential of Blockchain

EY recently hosted an event to showcase some of its blockchain products at its Union Square Wavespace facility in New York. Among these were the firm's…

| June 07, 2018

EY recently hosted an event to showcase some of its blockchain products at its Union Square Wavespace facility in New York. Among these were the firm's "Tesseract" mobility platform for vehicle sharing as well as its recently launched "Blockchain Analyzer" for supporting its audit teams' analysis of blockchain-based businesses. The firm was at pains to demonstrate that these platforms for organizing businesses around the distributed ledger technology are out of the prototyping phase and into production. Introducing an audit tool into the mix helps to make the case that there's nothing standing in the way of companies organizing core business processes and even whole operating models around this technology.

Perhaps the most interesting feature of blockchain is the transparency it affords. This manifests in two ways, both of which revolve around the fundamental value-creating production transformation process that is the heart and soul of any business. One is at the product or service level, where blockchain can enable the disaggregation of value-creating components. 

Traditionally, as inputs move down each stage of the value chain they are bundled into outputs, with the aggregator taking ownership over the entire assembly. In the auto industry, for example, the assembler owns all the parts in the car even though independent suppliers produce a substantial portion of them. But along with the revenue stream an asset earns comes risk. Aggregation of asset ownership has been a barrier to the efficient allocation of risk to the party most able to manage it, which is essential to value maximization. But now OEMs could retain ownership for the batteries and spark plugs they make that go into cars. By disaggregating assets into their value-creating components, Blockchain opens a new frontier for constructing value-maximizing operating models. 

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