Blockchain technology is a digital ledger that contains a record of all transactions occurring in a peer to peer network. Each entry added to the ledger is referred to as a block.
Data transferred through blockchain is encrypted, with each occurrence of a new transaction or event re-encrypting everything before it. Therefore, each time a block is added to the ledger, the entire ledger becomes more secure.
Although conversations that are blockchain based tend to revolve around bitcoin and generally end there, the possibilities of blockchain technology for business processes and financials are expanding at an astronomical rate. In fact, studies estimate that by 2027, 10% of the gross domestic product will be stored on the blockchain.
As blockchain technology becomes increasingly more widespread, business leaders are contemplating the possibilities that blockchain holds for business process management. In fact, many businesses have already begun using blockchain as part of their business process management system.
A concrete way that blockchain currently improves business process management for many organizations is within their supply chain. Blockchain based tracking of raw materials and finished products grants detailed tracking information to all third parties within the supply chain.
Blockchain not only maintains a digital ledger that benefits auditing and tracking capabilities throughout the supply chain. Blockchain can also avoid fraudulent activities, counterfeit materials, or tampering of goods, all while making it easy to trace where an offense occurred within the supply chain if necessary.
Another blockchain feature that businesses use is the smart contract which executes automatically when predetermined conditions and terms are satisfied. The use of a smart contract diminishes the need for any third party interference and maintains a copy of the smart contract that is not able to be altered by either the buyer or the seller.
Additional ways that blockchain may improve both businesses processes and business process management include-
Common process management challenges that occur during BPM include the struggle for different organizations to work together effectively and efficiently on the same business process. Whether due to communication gaps or lack of trust, business process management acknowledges how complex collaboration can be.
Thankfully, both the smart contracts and easily audited distributed ledgers that blockchain provides can improve the efficiency of third parties working collaboratively within the same process. Using blockchain provides visibility and accessibility for all approved participants, making it much easier to share important information and documentation in real time.
One BPM process improvement solution that is commonly used is employing a trusted third party to mediate a business interaction. However, adding in another party to an interaction can result in unnecessary labor costs and additional work for everyone involved.
Another BPM blockchain solution for collaboration challenges is the decentralized power of accessibility that blockchain inherently contains. As a result of this decentralized accessibility, businesses involved would be able to work together on a business process simultaneously without needing to involve a third party or continually request updated information from each other.
Blockchain allows process monitoring capabilities for many third party participants instead of each participant using their own BPM software programs separately. This blockchain technology is especially useful when different companies are working within the same regulations and additionally functions as a real time auditing system.
Although many people are only familiar with bitcoin when considering blockchain financial transaction management potential, there is a wide range of cryptocurrency options available. Blockchains can help with financial transaction management by allowing payments to be executed automatically or even held in escrow.
Businesses that could especially benefit from blockchain technology integration are organizations that use over the counter (OTC) transactions that are off exchange. In other words, transactions where a party is directly dealing with another party without a third party intermediary involved.
Examples of OTC transactions range from loans to bank guarantees. Businesses who engage with OTC transactions would greatly benefit from a distributed ledger blockchain network being utilized.
For customers or employees who are hesitant about blockchain based payments, business management professionals can use cases of companies who integrated blockchain into their financial transaction management processes successfully.
Blockchain technology is a great security feature to implement into existing business process management systems. Although BPM software has its own privacy and security components built in, a BPM blockchain adds an extra layer of protection.
Blockchain encryption techniques can limit what information is accessible to a specific participant. As additional blocks are added to the blockchain, more and more encryption occurs, continually enhancing security.
Proponents for BPM blockchain integration use cases of internal business fraud to argue for blockchain benefits. In some cases, businesses could have saved billions of dollars by implementing blockchain technology that would have enforced transaction management rules on their own employees.
As the general public becomes more familiarized with blockchain based security features, businesses can advertise their usage of blockchain technology as an incentive to acquire and retain new customers. Blockchain based security can therefore provide organizations with a competitive advantage.
Blockchain technology is a digital ledger containing the totality of transactions occurring in a peer to peer network.
Smart contract and digital ledger benefits are already being used by many companies.
Blockchain technology can improve security, payment, and collaboration processes.