Open Innovation, hyperledger & blockchain

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In this blog post, I will outline these three terms and explain the amazing transformational opportunity that arises from their coalescence.

#Open Innovation is a term originally coined by Dr Henry Chesbrough in the early 2000’s best summarised by Figure 1 below.

Figure 1 – Open Innovation

Open Innovation gives organisations the ability to create value by combining their ideas and innovation with those from their business network members.

To understand #blockchain, it’s useful to step back to realize that Business – and Governments – never operate in isolation. They are participants in a business network. Ownership of assets pass across the network in return for payments, governed by contracts. Network participants currently keep their own ledger – recording all assets they own and updated on when asset ownership changes. Whilst well tried & tested, this process is very inefficient, often piling cost on cost.

Figure 2 – Components of Blockchain for Business

Blockchain provides the business network with the ability to agree that a transaction is valid; an audit trail of asset ownership over time; a shared ledger ( “record book”) that is tamper proof, and guaranteed finality of transactions. Government oversight, compliance & audit can be part of the same network.

Hyperledger is a Linux Foundation project to render a blockchain fabric (or plumbing) for business. It’s stated goals are a “collaborative effort created to advance blockchain #technology by identifying and addressing important features for a cross-industry open standard for distributed ledgers that can transform the way business transactions are conducted globally”.

For me, the important attributes of #hyperledger are:

  1. Open Governance – direction and oversight comes from a wide cross industry base, ensuring the widest applicability of the blockchain fabric for business usage.
  2. Open Standards – hyperledger blockchain solutions will interoperate with other blockchain solutions through open, published interfaces and services.
  3. Open Source – hyperledger source code can be inspected and validated by the broadest community of interest maximising quality and fitness for purpose.

So what happens when we bring Open Innovation, blockchain and hyperledgertogether?

First we need to realise that the business network as the first “acid test” for a blockchain use case – no business network means “think again about blockchain usage”.

Our customers have different approaches to building out the networks to drive full value from blockchain, and we often get to advise and guide them in the pragmatic, practical steps of network formation. This comes down to how much our customer wants to embrace Open Innovation – that is how much they want to create value by combining their ideas with those from other business network members. This can be visualised by setting the slider in Figure 3.

Figure 3 – Open / Closed Innovation Slider

Full Open Innovation is not right for all use cases, not organisationally easy, and won’t be possible when strong competitive forces exist in the network.  But I would argue that the most transformational value can be realised when Open Innovation, blockchain and hyperledger can be brought together.

More blockchain Information?

  1. Blockchain for Government
  2. Proving Provenance with Blockchain
  3. Blockchain and Cyber Security
  4. Blockchain, how SMART is your contract?
  5. Blockchain privacy services

Originally published in Insights on Business, October 2016

[linkedinbadge URL=”https://www.linkedin.com/pulse/open-innovation-hyperledger-blockchain-john-palfreyman?trk=hp-feed-article-title-like” connections=”off” mode=”icon” liname=”John Palfreyman”] is Director – Blockchain at IBM Cloud Division