While bitcoin has captured headlines in the past few years for its ability to consummate digital transactions,...
its technological underpinning -- blockchain -- has quietly been the engine enabling people to trust the cryptocurrency for financial transactions. But get ready to start hearing more about blockchain technology applications as companies study their potential to improve CRM.
Because it is a decentralized network, blockchain allows bitcoin users to conduct encrypted transactions with one another without the need for a financial institution to serve as a middleman that legitimizes and handles the currency. This peer-to-peer connection is what appeals to companies that might want to appropriate it for their own business uses: Blockchain could enable them to directly and transparently deal with customers through a secure technology.
Understanding the CRM blockchain appeal
Blockchain could appeal to organizations struggling to unify disparate data sources by enabling them to obtain 360-degree views of customers, said analyst Denis Pombriant, the founder of Beagle Research Group. CRM and data analytics technologies can provide that complete view, and a lot of companies have succeeded in shattering data siloes, but that work often comes at a high cost, and it requires great effort.
"Blockchain might be something that makes it easier and less expensive to understand customers," Pombriant said, stressing the might when imagining a CRM and blockchain union.
Blockchain is still in its early stages, though, so it could take a 10-year slog before it is accepted and adopted worldwide, let alone before it transforms CRM.
Companies have started to embrace blockchain technology applications for a wide variety of uses, finding appeal in how it automatically and securely verifies and records high volumes of transactions. Aside from being the driving force behind bitcoin, blockchain has also attracted the interest of banks, including Switzerland's UBS and the U.K.-based Barclays, which view it as a way to improve back-office functions. It's also being used to buttress transactions in education, car leasing and sales, internet of things (IoT) management, and online music.
The immutability of this public ledger -- data in a chain's block can't be changed, as each transaction is time-stamped and linked to the previous one -- also shows promise for handling exchanges between companies and customers, according to Pombriant and two technology vendors that have embraced blockchain for non-CRM uses.
CRM systems could benefit from blockchain technology applications by locking down the data trail, too. Today's CRM end users have to contend with duplicative and inaccurate customer data; blockchain could enable a customer to own one block that presents a unified and accurate picture of his or her personal information, transaction histories and other data, said Victor Wong, the CEO and founder of the New York-based BlockApps, a blockchain-as-a-service company.
Wong envisions a customer's block presenting an advantage for companies and customers. With blockchain, the company no longer has to worry about bad or repeat data hampering marketing efforts. Eliminating this would accelerate data aggregation and lead to improved customer insight. Customers would benefit from companies attaching personalized offers, rewards and loyalty points to each of their secure blocks.
Victor WongCEO and founder of BlockApps
"Blockchain and CRM can be an experience that is more user-controlled, and the offers [can be] user-specific," Wong said. "The more information that gets attached to these identities, the more valuable the block becomes."
For example, customers who add verified sources of information, such as Yelp and LinkedIn profiles, to their blocks signal to companies that they put stock in the blocks, and thus expect to receive precisely tailored offers. And because a block contains a factual and verifiable record of each and every transaction ever made, companies will see a customer's relationship with retailers, banks and other parties, and can then assess if this person is worth conducting business with, Wong said.
The potential limitations of blockchain
Despite blockchain's potential to improve CRM, none of the major CRM vendors have leaped -- at least publicly -- at the opportunity. According to Pombriant, IBM and SAP have recently shown interest in blockchain technology applications, but as a general-purpose technology rather than as a CRM-specific one. Salesforce and Oracle have not yet made their positions on this topic known.
David Sonstebo, co-founder of the Norway-based IOTA, said several organizations have approached his company about how they could implement the principles of blockchain for various functions, but he has yet to see any interest in CRM. Sonstebo contends that blockchain's biggest deficiency is that it can't handle complex microtransactions, and is not scalable for something as large as CRM. (IOTA, by the way, uses a variation of blockchain -- a technology known as the Directed Acyclic Graph, or Tangle -- to handle the microtransactions of IoT.)
"Even though companies can take advantage of a distributed ledger, they still need to offer a good user experience," Sonstebo said. "They almost think blockchain is a magic bullet, but there are limitations. It's still a back-end solution."
Blockchain is also a back-of-the-mind technology for a majority of consumers, and many believe winning their hearts and minds will take time. Bitcoin is inarguably the most popular mainstream use of blockchain technology applications, and can thus serve as an indicator of the public ledger's acceptance. The value of bitcoin transactions was expected to reach $92 billion by the end of 2016, a drop in the bucket when compared with the $411 trillion in total global payments, according to the Harvard Business Review.
Pombriant envisions the big CRM players, and not midsize and small ones, eventually tackling blockchain because its integration "won't be cheap to do, and it's going to require some thinking and architecting."
Also, if retailers eventually adopt blockchain-assisted CRM, they'll probably first ask their suppliers to implement it, so suppliers will have to work out the kinks before it goes mainstream.
"It's still the early days. However, it's still important to look out at the horizon and ask the question, 'How is this going to be used? How are companies going to deal with this?'" Pombriant said, while also predicting that companies will try blockchain for other functions before using it for CRM.
"The benefits will be clear when someone starts using it, trying it out and has some success. Then a different part of the organization will do something else with blockchain, and then you'll have the bandwagon effect."
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