Karim Lakhani Shares the Truth About Blockchain in Harvard Business Review

Andrew Young — March 23, 2017

In the January-February issue of Harvard Business Review, Network member Karim Lakhani and fellow Harvard Business School professor Marco Iansiti explore the potential impacts of the emergent “foundational” technology. While bullish on blockchain’s ability to fundamentally alter (and improve) a wide array of private and public sector processes, including but not limited to financial ones:

“With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain.”

Lakhani and Iansiti are also clear-eyed in their assessment of the hype surrounding blockchain, and caution that its most transformative impacts are likely years away. They argue:

“True blockchain-led transformation of business and government, we believe, is still many years away. That’s because blockchain is not a ‘disruptive’ technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. Blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems. But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure. The process of adoption will be gradual and steady, not sudden, as waves of technological and institutional change gain momentum.”

In seeking to understand how blockchain is likely to evolve and impact society, Lakhani and Iasanti consider other foundational technologies, like TCP/IP (transmission control protocol/internet protocol), the technical infrastructure that makes the Internet possible. Based on their analysis, they find that two dimensions will primarily affect how blockchain use cases are likely to evolve:

“The first is novelty—the degree to which an application is new to the world. The more novel it is, the more effort will be required to ensure that users understand what problems it solves. The second dimension is complexity, represented by the level of ecosystem coordination involved—the number and diversity of parties that need to work together to produce value with the technology. For example, a social network with just one member is of little use; a social network is worthwhile only when many of your own connections have signed on to it. Other users of the application must be brought on board to generate value for all participants. The same will be true for many blockchain applications. And, as the scale and impact of those applications increase, their adoption will require significant institutional change.”

Read more here.