A Blockchain (BC) does not a Value chain (VC) make

I recounted the ignominious launch of my PhD research in a previous blog post (see “Mind your words!”).  I use that experience to cut through the hype surrounding BCs.  I question BC authors who portend wholesale business / industry transformation due to the technology.  Indeed I wonder whether the writers themselves understand what they are writing.

A BC is a distributed and (nearly always) encrypted information ledger or register.  In other words, text / numbers may be encrypted and stored in data structures on multiple hardware systems at different locations.  These ‘data structures’ – the computer science label for the ‘cell’ or register storing the information – can also be linked together so that they form a digital string / chain.  The web permits storing bits of the overall string / chain on memory devices (servers) which aren’t co-located.   Such distributed storage may lead to better system performance and heightened security.

The reference to ‘chain’ is confusing though.  BC and VC as terms are conflated. I previously noted that value and value activities are the building blocks of a VC (see “Value-added Knowledge Management (KM): Whose value anyway?”).  Lean management asserts that value flows from upstream suppliers to downstream customers.  My PhD research identified ‘value gaps’ due to interrupted value flows in UK and US value streams.  To detect and eliminate these value gaps, I advanced the Integrated Value Process (IVP) framework in An Empirical Framework for Evaluating, Implementing and Managing a Value-based Supply Chain Strategy (my PhD thesis accepted by the University of Bath School of Management — ProQuest publication number 3121355).

Business / industry transformation requires changing value flows

True intra- or inter-company transformation requires changing one or more aspects of the IVP.  The IVP framework consists of (a) ‘meta’ definition for value, (b) an inter-/intra-organizational process to conceptualize, configure and implement a value-based strategy across the VC, and (c) five value ‘first principles’ underlying the process.  Although offering a distributed form of information storage, BC technology does not impact value flows.

Lean management holds that the customer’s definition of value determines whether a given value stream activity adds value.  The value stream consists of information, financial and physical flows.  These flows occur across the three inter-related parts of the inter-/intra-organizational process within IVP: value conceptualization, value configuration and value implementation.

Elusive (illusory) value of blockchain technology

Viewed through the lens of IVP, it is unlikely blockchain technology will ‘transform’ any business or industry.  The technology has no effect on any of the three value sub-processes described by IVP nor on value translation / value alignment across the VC.  The technology doesn’t change the customer’s definition of value either.

This is not to deny BC usefulness.  BC proponents, however, must clearly articulate – and more importantly substantiate – its actual value.   Executives can use the IVP framework to cut through the confusion regarding the elusive – and oftentimes illusory — value of blockchains.  Understand and focus on value!

Please see my additional posts on value at www.andrewjswan.com. Kindly email me at andrew.swan@columbia.edu if you’d like to discuss value theory / definitions, value chains / streams, value management, and collective intelligence. I’m passionate about these topics.

See my other articles:

Value: “Mind the Map” (Part I)

Integrated Value Management: “Mind the Gap!”

Business Management: “Tongue-tied by the language of value”


About the Author

Andrew Swan, PhD is a multidisciplinary and cross-functional integrator of strategy, processes, and information technology. His focus and expertise center on helping executives increase value creation and optimize value flows in business. Dr. Swan holds four degrees in Management, Accounting & Finance, Information & Knowledge Strategy, and Computer Science from the University of Chicago Booth School of Business,  the University of Bath School of Management, and Columbia University.

He frequently publishes articles on value chains, value streams / flows, and Integrative Value Management on his website www.andrewjswan.com. Dr. Swan created the Integrated Value Process (IVP) Framework to help companies optimize the flow of goods & services, funds, and information across their respective value chains for multiple stakeholders. He can be reached at andrew.swan@columbia.edu or at +1.773.633.7186.  He lives in Chicago.