Even though blockchain technology is still in the growing stage, up to $22 billion worth of ICO was raised in 2018 to fund blockchain-based companies. While some businesses are in testing and research phase, some others have successfully adopted the technology into its core businesses. In #BlockchainBeyondHype episode 7, we met Francis Hutley, the Co-Founder of BlockSmart, to find out how small businesses approach blockchain adoption.
Laks: We’re here today with Francis. Welcome to Blockchain Zoo. We’re excited to have you here to discuss your thoughts on how usage of the blockchain technology is spreading among small and medium enterprises. With your business partner in Europe, you help small companies bridge the gap between the blockchain technology and their business activities. What are the crucial steps of this process?
Francis: At the moment, we’re very much in the educational phase. SMEs want to know what is blockchain, what it is going to do to their sector and then the step often comes to what it is going to do to my specific business model. In terms of rolling out strategies and things like that, there are some forward thinking SMEs that want to start innovating with blockchain now. But at the moment the steps we take are an introductory workshop, SME subject matter expert training, and then we move to more specific actionable meetings about what their objectives are and how blockchain can match up with those. But it’s educational primarily at the moment.
Laks: What is the primary daily activity of managing your business? Visiting clients in their locations in APAC? Educating their teams? Acquiring new leads?
Francis: Yes. We’ve got two tracks running at the same time. We have a couple of existing clients where we’re educating them on a fairly informal basis and not looking to roll anything out at the moment. But they’re in industries, for example, ticketing where they know blockchain is an inevitability – ‘we’re a big ticketing company, we need to know exactly how it’s going to disrupt or amend our business, please, tell us how’. Not with a view of rolling out yet. So we’ve got a few clients like that who are just information gathering. Then the second track is trying to build out an educational facility. We’re setting up workshops for SMEs in Singapore and looking to launch an e-book, as well. Trying to build our network for the time when the blockchain tipping point comes and then they know who to go to.
Laks: With how many companies do you work at a time?
Francis: At the moment, it’s been one to two at a time. Again, we’re learning our processes just as much as the SMEs themselves are learning about blockchain. Once we get more efficient at that, we can take on more clients at a given time.
Laks: Adoption of blockchain technology in P2P has shown its power with the rise of Bitcoin. Who do you see as the next group of mass adopters?
Francis: It feels like two parallel streams again. You have the private blockchain consortiums where there’s a lot of research and development coming from corporates. And there’s this tension between the public blockchains and private blockchains. But we see those as being a very useful first step, and they’re providing real-time visibility for transactions happening within the network. Then public blockchain in that big ambitious states will come later. But then alongside that, there are isolated use cases which are working out and are specifically targeted to SMEs, as well. So the ICO was very much a small business use case. Then we see quite a lot in peer-to-peer lending, as well. So we think the isolated use cases will crop up that are explicitly targeted at consumers and SMEs. Then the broader blockchain network piece will happen – consortiums first and then public blockchains.
Laks: There are many spheres of adopting blockchain such as decentralized applications, cryptocurrency payments, protocol as it is… From your perspective and experience which path are SMEs taking?
Francis: It’s a combination. You have savvy opportunistic e-commerce sellers, for example, who are making a million in revenue per month. Seven percent of that is taken from using all the different banking transfer fees. And to get it back, if you’re a trader in the US, for example, to get it all the way back to Australia and then cash out, it comes to about 7 percent. So savvy ones have thought – ‘okay, well let’s use crypto and solve that problem, save 7 percent’ — very much an isolated use case at the moment. And then there are again more isolated use cases and things like supply chain provenance. Small diamond companies and all the different stakeholders started to use provenance. So these things will kind of crop up. But in terms of big on-ramp of SMEs, we’re waiting for blockchains to become properly scalable.
Laks: How is the European Union different from the Asia-Pacific?
Francis: Most of our operations are actually in the Asia Pacific. I’m from the UK, but I’d prefer to be in Asia. I think they’re slightly more forward thinking about these types of things. Europe is more risk-averse and quite strict when it comes to regulations. So I don’t know the European market that well and prefer to operate in Asia for the moment.
Laks: So is the blockchain technology actually ready for mass adoption? Scalability limitations were evident with Bitcoin payments becoming slower and more expensive. It looks like if mass usage occurred soon, the technology would crumble upon itself. How is this aspect handled in a strategic advisory?
Francis: For some use cases where there’s not a lot of transacting happening, it works quite well. So peer-to-peer loans, for example, there aren’t too many steps, and there are no daily or rapid transactions so that kind of works. And then for something like provenance where you’re just logging events to a blockchain, they also work, assuming you don’t have to log too many. If you want rapid value exchange and rapid access and liquidity and stuff that everyone’s expecting, then the blockchains have to become more scalable.
Laks: The chain of hyper-successful ICOs which did not go further than collecting funds has damaged the trust over the last two years. Are you dealing with ICOs at all?
Francis: We don’t have a legal counsel at the moment. So we do not take on any ICOs.
Laks: How do you filter out SMEs that are keen on blockchain adoption despite the lack of use cases?
Francis: We encourage them to become network leaders within the sphere operation. I think the best use cases are very much going to be within these networks, and it’s a big case of stakeholder management, building a community of people and building rules within that community. So we very much encourage them to try and be the leaders in that. We see that as an inevitability, therefore, start that now, start doing pilot, start bringing stakeholders together and then become a leader.
Laks: Large institutions can invite large consultancy companies to build a map of their digital transformation, including the usage of specific technologies like blockchain. Maybe I’m wrong, but SMEs treat consulting services as a luxury product. Is that what you have experienced with your clients?
Francis: There’s definitely a range of products. The full-scale digital transformation would be a luxury product for an SME. But you’ve got everything down from $9.99 handbooks to digital transformation and our strategy shift. So there’s a big range, and when it comes to something as complex as blockchain, it’s typically something that they seek outside help for.
Laks: What does it take to provide a small company with customized blockchain strategies?
Francis: It depends specifically on what they’re looking for. Some people want to try a specific use case they have in mind. They have an idea of saving money in a specific area, and they want to use blockchain for that. For others, it’s slightly more ambitious. They want a token and build a network. So it entirely depends on the client.
Laks: What should SMEs think through before rushing into the adoption of this technology or even before reaching out for help to a company like yours?
Francis: I think you got to spend a good period of time on the education side. At a fundamental level, you can understand it in a day. But then, there are a lot of concepts which need to sink in and a lot of moving parts which work together. It takes a period of time for that type of thing to sink in. So, definitely spend some time on the educational front and give yourself a time to work over that.
Laks: Innovation will break or make many businesses, it looks like you’re giving this unique opportunity of agile, smart, and strategic development to SMEs, which is absolutely great. What is the biggest mistake that owners of small businesses keep on making?
Francis: The ones that don’t survive just leave it too late. We very much encourage them to keep abreast with tech trends, keep up to speed, and think very critically about the different technologies that are emerging.
Laks: What kind of opportunities are unlocked after a closer look at what blockchain can do for specific businesses?
Francis: The type of 100X strategies that we want to roll out eventually are hard to come by now. You need a network of stakeholders who are operating together to get the real benefit of blockchain. There are cost saving attributes. In terms of hidden value, we’re still trying to tease out where we can find that. But until there is a network of stakeholders who are working together, it’s a little bit harder, especially when it comes to the blockchain specific solutions.
Laks: Well, this has been very interesting. Thank you for telling us about BlockSmart and how consulting can help small and medium enterprises with adopting the blockchain technology. We do like to ask all our guests how do you envision blockchain changing the world?
Francis: I think the big amazing innovations that will come from blockchain very much like the Internet. They’re impossible to predict now. We didn’t know social networking was going to be the big use case for the Internet. In the immediate term, I see the developing world as a major untapped pool of human capital that can be brought into the system where crypto does it better than the traditional world is. It is easier to build banking infrastructure for 3 billion people just giving everyone a private key. When there are no immediate valuable financial services, there’s nothing to replace, so there are no switching costs. Therefore providing a little bit of value with good crypto products and you have a good chance of on-ramping a lot of people rapidly.
Laks: And how do you think the market for blockchain-based solutions will evolve?
Francis: In terms of blockchain-specific solutions and blockchain as a service, I think that is a relatively slow-moving business. Again, there are going to be isolated use cases which crop up everywhere whether it’s peer-to-peer lending or ICOs, things like that which are going to provide a lot of value. So that’s the kind of thing we pretty much keep our eye on. This year has been the year of stablecoins and decentralized finance. Decentralized finance is providing real value at the moment, and stablecoins mean that anyone from around the world can access the US dollar. There’s going to be some cool cases with that. I’m not sure exactly what yet but that’s what we’re keeping our eye on.
Laks: Well, this has been fascinating. Thank you again for coming to speak with us at Blockchain Zoo about BlockSmart and the blockchain adoption by small and medium enterprises.
BBH Guest: Francis Hutley, Co-Founder at BlockSmart
As the Co-Founder of BlockSmart, Francis is simplifying blockchain for small and medium enterprises. His background as a social scientist, part of global venture-builder, Rocket Internet, and a top venture-backed blockchain startup in Hong Kong made him as a brilliant solution architect. Last but not least, he holds a Masters degree in Entrepreneurship from Cass Business School in London and runs the Eton College Blockchain Association.
Blockchain Beyond Hype is a series of interviews with blockchain experts and technology professionals from all across the globe about blockchain projects, challenges, innovations and the future of blockchain within the blockchain jungle!