Blockchain and other distributed ledger technologies provide databases or ledgers that are shared among multiple parties. Transactions stored in these ledgers are validated, timestamped and secured. Once recorded, they cannot be changed or deleted. Shared ledgers can improve data transparency, efficiency and collaboration among participants. While initially created for the transfer of cryptocurrency, blockchain use has increased exponentially since its introduction [1]. Enterprise blockchains have emerged as the means through which multiple partners that are known to each other collaborate in storing records and conducting transactions using a shared ledger. These partners agree to certain rules, such as who has visibility into each record. These shared rules provide benefits such as helping facilitate the management and sharing of sensitive information such as customer and financial data, without breaching privacy laws [2].

Despite blockchain’s potential for strategic impact, its adoption has not lived up to what some refer to as its hype [3]. Research on 517 blockchain projects finds that many projects fail to address clearly defined and significant problems and lack evidence to support the use of blockchain solutions [4]. In this article, we examine an important factor that may contribute to the incomplete evidence supporting blockchain use. In general, blockchain has been viewed as a solution for improved operational outcomes [5] rather than a potential source of strategic value. While the operational benefits of blockchain are becoming more widely recognised, blockchain’s potential to support strategic capabilities and competitive plans is not well understood. We address this gap by providing a framework that can be used to systematically evaluate strategic outcomes of blockchain projects.

We begin by describing foundational elements of enterprise blockchains. We discuss the processes currently used to assess blockchain, processes which focus on operational improvements and overlook strategic benefits. We then introduce constructs from the academic literature on strategic alliances and the resource-based view (RBV) of the firm that are relevant for the enterprise blockchain context and provide the basis for understanding the strategic opportunities presented by these systems. Finally, we present a framework and examples that identify and categorise ways companies can build strategic capabilities through participation in blockchain consortia.

The term blockchain refers to a specific type of distributed ledger system in which transactions are stored in blocks analogous to tabs in a spreadsheet arranged in a temporal sequence [6]. Although many no longer use blocks to store data, distributed ledger systems are commonly referred to as blockchains, a term that will be used throughout this paper.

Blockchains can be “permissioned” or “permissionless”. Permissionless blockchain systems such as the Bitcoin blockchain are open to all users. Without obtaining permission, anyone can establish an identity and execute transactions over the platform, and anyone can participate in maintaining the network by downloading the software used to validate and store transactions. Bitcoin and Ethereum are the most well-known examples of permissionless blockchains.

Blockchains used by enterprises are typically permissioned. These blockchains are developed and maintained by a known group of participants who have established their identities and have agreed to abide by the rules that govern the blockchain. Governance agreements determine the rights and responsibilities of each blockchain participant. Data stored on the chain are associated with the identities of the participants who attested to its validity. Data are typically encrypted and visible only to those participants or parties to which access has been granted, such as supply chain partners, auditors, or regulators.

Core elements of interest in an enterprise blockchain are distributed ledgers, digital assets, and smart contracts. Distributed ledgers are used to store transactions that are executed by blockchain participants, such as information about the transfer of goods from one party to another. These transactions can be written to the blockchain by transacting parties or by Internet of Things (IoT) devices such as Radio-Frequency Identification (RFID) chips. Ledgers can be used to store basic transactions, as in a traditional database, and they can also store digital assets and smart contracts.

Digital assets such as cryptocurrency, software or music, can be secured and ownership can be validated on a blockchain. “Digital twins” that provide digital representations of physical assets, such as deeds, titles, patents or ownership shares can also be stored and transferred using a blockchain system. Blockchains provide the ability to ensure that only one copy of a digital asset, such as a bitcoin or car title, is valid, so that if it is sent to another party, the sender’s copy is no longer valid. This enables assets of value to be securely transferred between blockchain participants without the need for banks or other trusted brokers.

Smart contracts, which are programs containing if-then logic, can be stored on the blockchain and executed automatically as predefined conditions are met. For example, a shipping contract can be programmed so that when a set of RFID chips cross to a loading dock, a receiving report is generated and digitally signed, authorising a digital payment.

Blockchain’s unique features provide several benefits in an enterprise context. Every piece of information stored in a blockchain is linked to the identities of the parties that initiated and validated the data, which establishes legitimacy and origin. This provides accountability and ensures that information can be traced to a validated source. Entries in a ledger are timestamped and immutable, which establishes an audit trail and provides transparency into the provenance of assets.

When an enterprise explores potential benefits of blockchain solutions, the objective is typically to achieve operational improvements such as cost avoidance, risk reduction, and improved customer experience. The exploration process involves identification of potential use cases—specific uses for blockchain systems that can produce these operational benefits. This is a technology-driven process in which corporate use cases are matched with technological capabilities to determine whether blockchain is a fit.

Like information technology (IT) projects that follow an analysis-design-implementation approach, analysis of potential blockchain use cases generally begins with problem identification. Guidance provided to companies usually centres around solving current and known problems, often referred to as pain points or frictions. McKinsey [7], for example, asserts that “Organizations must start with a problem. Unless there is a valid problem or pain point, blockchain likely won’t be a practical solution.” The World Economic Forum [8] states, “Good use cases must solve real problems for organizations. Great use cases solve real problems at a cost that is significantly lower than the benefits the adoption brings.” PwC advises firms considering embarking on a blockchain to begin by assessing what the firm is trying to accomplish, which “starts with pain points that are tested against key criteria, to determine if blockchain is a good fit or if other technologies are better placed.” [9] IBM, which has been ranked as the leading service provider in the blockchain space [10], guides companies considering blockchain solutions to focus on current problems and why and for whom they are problems. At the ecosystem level IBM suggests focusing on friction, which “at the industry level, provides a Founders Handbook for evaluating enterprise blockchain solutions. The Handbook begins by focusing on problems with three essential questions for identifying potential use cases: “1. What’s the problem with the way we do things today? 2. Who is this a problem for? 3. Why is this a problem?” [11].

IBM’s approach extends the analysis to examine problems in the interactions between companies. In a white paper [12], IBM states “Blockchain technology…has the potential to obviate intractable inhibitors across industries.” The paper further argues that as frictions are reduced, enterprises and entire industries will be restructured. While these goals are expansive, IBM focuses on known operational problems. IBM’s Founders Handbook [11] also suggests focusing on friction, “Based on your professional experience within your industry, identify a specific process currently creating friction among multiple parties in the same ecosystem. We recommend focusing on a use case with the greatest amount of friction.” Klein et al. [13], who provide a use-case identification framework based on extensive research, also base their recommendations on the current state of the ecosystem. They argue that “Blockchain technology offers great potential for cost, time and efficiency improvements of existing business models.”

Traditional use-case analyses prioritise blockchain solutions to operational problems and emphasise well-understood benefits associated with these solutions. Blockchains are effective in addressing the lack of trust between trading partners by providing the ability to track the provenance of transactions and digital assets and ensuring the immutability of records. They can also reduce friction in inter-company workflows through the use of smart contracts and automated value-transfer mechanisms which can reduce costs directly or through disintermediation.

Current approaches have made strides in exploring and addressing existing operational problems, The Centre for Evidence-Based Blockchain advances this project by providing a comprehensive framework for evaluating whether the outcomes of a blockchain intervention are superior to existing solutions for solving important problems [4]. Despite the increasing sophistication in identifying beneficial use cases, there are currently no frameworks that provide guidance for envisioning or evaluating the strategic opportunities and innovations that blockchains could enable. As a result, the cost of implementing a new and unfamiliar blockchain solution is weighed against operational returns such as reduced costs and operational efficiencies but not against strategic benefits.

Some blockchain proponents have begun to recognise that blockchain can support certain strategic goals. McKinsey [7], for example, notes that “Blockchain appeals to industries that are strategically oriented toward modernization. These see blockchain as a tool to support their ambitions to pursue digitization, process simplification, and collaboration”, and points to the reputational value of being an innovator. Others have pointed to the role of blockchain in reinventing processes and products [14].

In the right circumstances, the capabilities addressed by McKinsey and Accenture could contribute to an enterprise’s competitive advantage. The strategic potential of blockchain solutions extends far beyond these examples, however, and a more complete analysis could uncover new possibilities.

To unpack how participation in an enterprise blockchain can create strategic value for a firm, we draw upon the academic literature on strategic alliances through the lens of RBV. RBV [15] presents a view of firms as collections of resources. According to RBV, to the extent that the resource endowments of a firm are Valuable, Rare, Inimitable, and Organisational to be accessible – these resources form the basis of the firm’s sustainable competitive advantage. For this paper, it is sufficient to identify RBV as a perspective that can help firms identify what resources they have, or need to access, to be successful. RBV, however, does not provide guidance on how a firm is to go about accessing those resources. Looking at strategic alliances as a means to access resources provides the linkage to blockchain consortia – blockchain consortia are a type of strategic alliance. A strategic alliance is a voluntary arrangement among firms that exchange or share resources, or collaborate in the development of products, services or technologies [16]. Alliances can also be cooperative arrangements between two or more firms to improve their competitive position and performance by sharing resources [17], [18, [19]. The RBV perspective portrays firms as collections of heterogeneous resources [20], [21], [22]. Resources that can be sources of competitive advantage are rare, valuable and are difficult to imitate or substitute [21]. Within this perspective, there has been an increasing focus on dynamic capabilities, as bundles of resources that over time can lead to competitive advantage [23], [24]. Capabilities are a special type of intangible resources, they are organizationally embedded, non-transferable, and firm-specific resources whose purpose is to improve the productivity of the other resources possessed by the firm [25]. They may include company expertise in quality, product or service, innovation, customer service or price leadership [26]. For example, Apple Inc. is seen as having strategic capabilities in their design methodology, systems integration and their understanding of consumer behaviour; Tesla is seen as having superior engineering expertise in battery-powered motors and power trains [27].

The research on strategic alliances using an RBV lens has focused on how alliances reinforce and build capabilities that can uncover sources of competitive advantage [28]. There are different avenues through which alliances can create competitive advantage [29]. One avenue is when the alliance builds on an existing capability. For example, if a firm’s competitive advantage centres on customer service, an alliance that builds on this capability can facilitate the firm’s competitive advantage. Another avenue is when there are complementary capabilities among the partners. If one firm has expertise in R&D and another firm in marketing and distribution, for example, a strategic alliance can build on each firm’s capabilities and give either, or both, an advantage in their respective marketplaces. A third avenue is when new capabilities are created because of the alliance. For example, when partners can enter a new market, each has the potential to build capabilities in new markets. This was common when traditional brick and mortar businesses entered online sales through alliances. Once the alliance was established, the brick and mortar businesses were able to develop their own capabilities around online selling.

Blockchain consortia can be understood as forms of strategic alliances, with the same potential for improving competitive advantage for alliance partners. Our framework illustrates how participation in blockchain consortia can lead to competitive advantage through these three avenues.

Enterprise blockchain solutions can provide the basis for strengthening and building a range of capabilities that contribute to long-term competitive advantage. As enterprises evaluate blockchain opportunities they should look beyond operational benefits to determine whether and how participation can affect firm strategy. In Table 1Table 1:

Blockchain-Based Strategic Capabilities Framework

The Blockchain-Based Strategic Capabilities Framework illustrates a wide range of strategic capabilities that can potentially be affected by blockchain solutions. Companies exploring blockchain solutions can use this framework as they evaluate whether these solutions offer opportunities for building and improving strategic capabilities.

Despite its promise, blockchain has not yet achieved its potential. While the operational benefits of blockchain adoption are widely recognized, strategic benefits are not well understood, even among technical and strategic leaders involved in their implementation. We present memberships in blockchain consortia as forms of strategic alliances and use RBV to motivate the introduction of strategic alliances as a tool to access resources that can be the basis of competitive advantage. We illustrate how strategic value can be created through three avenues. The first is by joining alliances and building relationships that enhance and contribute to existing capabilities. The second by sharing and building complementary capabilities with partners through access to resources and data as well as sharing risk among partners. The third by building blockchain capabilities through gaining smart contract expertise developing more managerial expertise around implementing blockchain solutions. The domain of strategic opportunities by blockchain allows firms and consortia to create value through multiple sources. Figure 1Figure 1:

Blockchain Strategic Opportunities and Unexplored Sources of Value