“The UN/CEFACT white paper covers international trade facilitation end-to-end, from cradle to grave or from farm to fork. As it involves a number of parties through the whole process including at least 10 Ministries, a higher level authority, no less than the Prime Minister’s level must direct and steer the process for cross Ministerial and cross sectoral dialog, study, planning and cooperation. This will ensure that Malaysia’s interests are protected and that Malaysia is well positioned to provide a timely, well coordinated and competitive avenue for trade facilitation with Blockchain.” – Excerpt
Blockchain solution providers worldwide are doing an aggressive if not excellent job marketing their solutions. Corporations and government agencies have been approached and all kinds of assurances have been made. But can the solutions deliver to the expectations promised?
The World Economic Forum white paper titled “Blockchain Beyond the Hype, A Practical Framework for Business Leaders” attempts to provide guidance to senior decision-makers, essentially Ministerial and C-Levels, on whether to use Blockchain or not. The guidance is provided with the aid of a decision tree (discussed later) and this blog post hopes to provide some additional points to relate the guidance to the local (Malaysian) context in order to foster better understanding by the stakeholders.
Putting first things first, the aggressive marketing of Blockchain is not a situation peculiar to Malaysia. It is a universal phenomenon. The WEF paper says,
”One of the most unique aspects of Blockchain is its high number of evangelists – people who believe Blockchain can solve everything from global financial inequality to access to financing for start-ups, the provision of ID for refugees, to solving supply chain problems and enabling people to sell their houses without needing an estate agent. It has started to seem that the most intractable of the world’s problems have merely been waiting for Blockchain to arrive. This is not only misleading and untrue but also becomes a barrier to decision-makers in taking a balanced perspective on the technology.
The very enthusiasm, therefore, to (over) promote the technology is also the very thing that is damaging its long-term prospects. In addition, a knee-jerk pivot to Blockchain when other existing technologies could suffice not only consumes resources in pointless experimentation but also slows the development of sustainable solutions for the problems at hand, and can even lead to the absorption of unrecoverable costs. Given the relatively early stages of this technology, anchoring on Blockchain without consideration of associated risks, including, among others, cost, security and the relevant industry’s regulatory environment, can be detrimental.
This level of evangelism is both unwarranted and damaging to the overall development work required to reap the benefits of distributed ledger technologies (DLT), of which Blockchain is the best-known example.”
The above quote and warning is a wake up call for senior decision-makers including business leaders and heads of Government agencies that are targets of the evangelists, and they should begin to ask themselves the question, “Have we got what it takes and have we addressed what needs to be considered when assessing suitability of Blockchain for our operations and services?”.
The WEF white paper further provides guidance to decide on Blockchain, condensed in the following decision tree chart:
Figure 1 : Blockchain decision tree from WEF’s white paper
The white paper mentions that:
“This tool is intended to enable rapid initial analysis of whether Blockchain is an appropriate solution for a defined problem. It is not intended to provide a final authoritative answer but to assist senior decision-makers in evaluating whether to deploy resources in exploring a Blockchain-based solution to a given problem space and, if so, at what scale. The hope is that shifting focus to the business problem, and away from a particular solution, will mitigate the effects of the hype surrounding this technology and encourage a practical approach while reducing the risk of ill-advised experimentation.”
A few important points mentioned in the above quote are expanded as follows:
- The decision tree is for the use of senior decision-makers. It is to be used by those in key decision making roles, whether in government or in non-government entities whose part responsibility is to maintain a helicopter view of its role in providing services to its stakeholders. The decision or recommendation should not be delegated to the ICT function of the organisation (as is quite often the case with ICT solutions and products).
- The decision tree shifts the focus to the business problem. This is important because it is necessary that the solution relates to a particular business problem to be solved.
- Some decision-makers may simply take the easy way out and say, “We don’t have a business problem to solve”, or more generally, “We don’t have a problem in providing our services or to do our business.” Those are not the context of the term “business problem” and viewing it narrowly as such, whether deliberately or otherwise, may result in unnecessary lost opportunities to improve services. The “business problem” in this context is exposed and driven by the organisation’s expected continual need and aspiration to increase efficiency both in the organisation’s internal functions and/or in providing services to stakeholders. Isn’t it one of the objectives of any organisation to improve services and strive to be more efficient?
- In any organisation or process flow across different organisations, there are bound to be functions that are fairly routine or predictable or mechanical or simply an overkill, currently performed by intermediaries or brokers, which can be adequately covered or re-intermediated to the trust feature provided by Blockchains. That is the focus of the “business problem” to be solved, i.e. reviewing and assessing the continued need or otherwise of those functions of intermediaries or brokers.
- Another category of “business problem” are those practices or processes that have been in place for ages, which have remained unchecked, unchallenged or unquestioned with many generations of heads of organisations. Such practices or processes may just be eliminated or consolidated as the case applies and need not be subject to a Blockchain implementation. However it is mentioned for completeness here as the analysis of the “business problem” in line with the objective to continually improve may uncover a number of possibilities, some of which may be addressed with a Blockchain solution and some of which may require simpler actions or solutions without Blockchain. A holistic view is necessary.
- The “business problem” may sometimes be unapparent to the entity itself, as the entity itself may be the ‘problem’. What do I mean by this? Blockchain enables the re-intermediation of trust and this discussion has been covered in my earlier blog post Trust Re-Intermediation in Blockchain – A necessary paradigm shift for Malaysians. With Blockchain implementation, the role of intermediaries will be re-intermediated. Hence there may be a tendency for such entities that are intermediaries to ‘resist’ or ‘deliberately overlook its intermediary role’ when assessing suitability of Blockchain. It is human nature that one will not admit his organisation’s weaknesses or problems or it’s (sometimes less than obvious) redundant function. Therefore it is necessary for the most senior decision maker (above that entity’s level) to take ownership of the process to assess the role and relevance of intermediary entities, and explore possibilities of using Blockchain. This goes back to the first bullet above.
The above deliberations on the “business problem” then enable the senior decision-maker to be prepared to address the first question A. asked in the decision tree (in the enlarged diagram below), i.e. “Are you trying to remove intermediaries or brokers?”.
Figure 2 : Blockchain decision tree focused on Question A.
Yes the first question is not about, “Are you trying to automate a process?”, or “Are you looking for a new technology?”. This first question is straight to the point, “Are you trying to remove intermediaries or brokers?“. Certainly an abrupt pointed question like this cannot be left and directed to anyone below the rank of Minister or CEO (the senior decision makers) to answer. So anybody below those ranks who may be tasked to do the ground work to investigate possible opportunities “to remove intermediaries or brokers” must have the necessary authority to do so or he will never get the required cooperation to do that study.
This key first question will provide senior decision-makers with a clear cut first check point whether Blockchain is to be used or not. This is the key question that Blockchain solution providers should be responsibly seeking from the senior decision-makers in the client organisation to answer. If this question A is not adequately addressed, two possibilities may arise:
- Blockchain Overlooked : The entity may have missed a golden opportunity to address some of its inherent problems and inefficiencies, by ignoring the re-intermediation possibilities that Blockchain can bring. This is especially so when the answer is ‘no’ without thorough assessment of the ‘business problem’.
- Adopt Blockchain Incorrectly : The subsequent efforts to address the remaining questions in the decision tree may go round in circles and be a waste of time. Ultimately if Blockchain is indeed implemented, it will bring more problems than the current practices and processes.
The above discussion should bring to focus the right mind-set for senior decision makers to assess, investigate or explore their functions, processes and practices to identify possible intermediary functions or functions provided by brokers that can be re-intermediated. Then question A in the decision tree can be correctly and justifiably answered and proceed to the next steps to answer question B and so on.
The framework with the decision tree was developed following several trials with real world cases across industries and “has been reviewed and further developed by members of the 2017 World Economic Forum’s Global Future Council on Blockchain and has been trialled through a variety of means, including with global chief executive officers (CEOs) at the World Economic Forum Annual Meeting 2018 in Davos-Klosters.”, as mentioned in the WEF paper.
Blockchain can be implemented in many sectors and communities at various levels and spread of coverage. However when it comes to governments and corporations, the decision to implement Blockchain must be with the careful consideration by the ‘senior decision-makers’. Within the context of the World Economic Forum agenda and profile of participants, the senior decision-makers here should be taken to mean C-level executives, Ministers and senior civil servants of governments. This is appropriately so since it is these C-level executives, Ministers and senior civil servants who should be continually on the lookout and open to means and ways to make the functions under their charge more efficient, cost effective, enhance service quality, eliminating redundancies and simplifying processes along the way. Blockchain does provide such opportunities in appropriate situations but the requisite prior assessments of the current processes must be done and tested against the decision tree and along the guidance from the discussions earlier.
The need for such C-level executives, Ministers and senior civil servants to get into the decision making process is more apparent and mandatory when it comes to cross functional and/or cross Ministry and/or cross departments and/or cross sector and/or cross jurisdictional issues.
Such will be the need when addressing the changes required in international trade facilitation with Blockchain that has recently been initiated by UN/CEFACT via their white paper titled, “White Paper on technical application of Blockchain to United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) deliverables”.
Malaysia has gone through the public review process on 10 July 2018 and have provided the feedback to UN/CEFACT. Other countries would also have provided feedback. While waiting for the updated document incorporating feedback from countries, there are ample pointers and discussion areas in the current draft of the UN/CEFACT paper for the various stakeholders in trade facilitation in Malaysia to start to follow through and plan their actions to capitalise on the direction. They should initiate discussions within their own sectors or service areas and also between agencies, departments and organisations where applicable.
These stakeholders and areas of interest or responsibility are expected to include but not limited to:
- Ministry of International Trade and Industry – trade facilitation overall
- Ministry of Transport – transport and logistics (air, sea, land)
- Ministry of Finance – customs services, financing and tax incentives, banking, securities
- Ministry of Communications and Multimedia – courier services and ICT infrastructure and facilities including cyber security, Internet of Things, artificial intelligence, automation etc
- Ministry of Agriculture – quarantine services
- Ministry of Health – food quality/safety
- Ministry of Energy, Science, Technology, Environment and Climate Change – technology, standards, accreditation, product/devices testing (for import /export clearance)
- Ministry of Entrepreneur Development – SME participation
- Ministry of Primary Industries – commodities and products chain
- Ministry of Education – tertiary education alignment
- Ministry of Foreign Affairs – UN, ASEAN and regional coordination, international strategy
- Prime Minister’s Department – JAKIM on halal handling and processing
- Prime Minister’s Department – AG Chambers on regulatory enhancements and alignments
- Ministry of Economic Affairs – economic planning
- Ministry of Human Resources – human capital planning and development
- Trade organisations, Service providers and NGOs – cover or provide services in one or more of the above areas of supply chain and logistics.
Implementation consultants and contractors will need to be engaged at an appropriate time covering the following areas:
- System architects – planning and designing overall system architecture, business process reengineering etc.
- Blockchain solution providers – providing Blockchain solutions in each segment
- Quality enforcement consultants – security, risk management, testing, integration, change management, contingency planning etc.
(Note : Please provide feedback in the comments as to whether the main sectors and areas above are adequately covered, and the main players including ministries and their areas of interest and responsibility are included. I may update depending on feedback.)
The UN/CEFACT white paper covers international trade facilitation end-to-end, from cradle to grave or from farm to fork. As it involves a number of parties through the whole process including at least 10 Ministries, a higher level authority, no less than the Prime Minister’s level must direct and steer the process for cross Ministerial and cross sectoral dialog, study, planning and cooperation. This will ensure that Malaysia’s interests are protected and that Malaysia is well positioned to provide a timely, well coordinated and competitive avenue for trade facilitation with Blockchain.
Each stakeholder organisation will have to drill down their respective areas to identify the “business problems” along the guidance discussed earlier in this post. If Malaysia does not move early enough or is not ready, Malaysia risks having to adopt solutions and processes implemented by other economies eventually that are ahead in their implementation.
The playing field is level for all parties including Malaysian stakeholders to work together concertedly to be competitive in world trade facilitation with Blockchain. But the playing field is not expected to be level for long. Malaysia used to be ahead in ICT related efficiencies when it initiated the seven flagship applications in the Multimedia Super Corridor in the late 1990s. But many other countries have overtaken Malaysia since then. Malaysia cannot risk being left behind and being followers in this UN/CEFACT led initiative for international trade facilitation.
Blockchain as a foundational technology is one of its kind that appears in very untraditional ways. It should therefore be addressed and treated in very untraditional ways and not in the ways that Malaysian planners are used to. Malaysia’s leaders must think outside the box when planning for the future with Blockchain. It is not “planning as usual”. Lead and drive and not be driven.
“In the new world, it is not the big fish which eats the small fish, it’s the fast fish which eats the slow fish.” – Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.
- Blockchain Beyond the Hype, A Practical Framework for Business Leaders http://www3.weforum.org/docs/48423_Whether_Blockchain_WP.pdf
- White Paper on technical application of Blockchain to United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) deliverables https://uncefact.unece.org/download/attachments/17832710/180522%203b%20eGOV%20Blockchain%20WP%20for%20Public%20Review.pdf?api=v2
- Trust Re-Intermediation in Blockchain – A Necessary Paradigm Shift for Malaysians https://fattahyatim.wordpress.com/2018/05/01/trust-re-intermediation-in-blockchain-a-necessary-paradigm-shift-for-malaysians/