Blockchain & Its Application in Marketing - Part 1

This is the first post in the series of two posts on Blockchain Technology. This post is intended to create an understanding about the Blockchain technology  and it will be followed by the second post which will talk about various applications of Blockchain in Marketing.

A distributed ledger, a peer to peer network and a decentralized network system. Blockchain has been called all of that, and rightly so. There have been numerous posts and articles written about blockchain and what it can possibly do in future in various fields. These articles however, have still left many in binds about the fundamental and the prospects of the technology.

In this post, we walk through this new technology elixir in a ridiculously simple way to understand its founding. This may hurt sentiments of some experts, but I believe, like the fundamental of Blockchain itself, the democratization of its concept should also be transparent and decentralized.

So what are some of the problems that the Blockchain technology has potential to solve? Let’s briefly look at those first. Mind you, Blockchain is a technology that at its core create, process, store and manage data efficiently (too simplistic). Hence, it will be fair to assume, that its application will help in problems related to data. So here are some of these problems –

•                Lack of data security, For eg. loss, theft and change in data
•                Lack in data transparency, For eg. invisibility of data and how its stored
•                Difficult real-time tracking of data For eg. real-time asset location and movement
•                Inability to locate the accurate and precise value chain movement of product
•                Data ownership and control over data by limited parties in a centralized manner

Systems like ERP, CRM, SalesForce and others have in some way tried to help but none were able to solve all of the above problems at a time.

Hence, it should be understood that anywhere and everywhere, the problems cited above are present, Blockchain technology will find its application. Period. So now, think of all those places where how the data is created, stored, shared and managed, causes problems or create loopholes and darkspots. Yes, Blockchain can be applied to all these areas to solve those problems.

How does Blockchain do this?

So imagine this scenario. You want to buy a diamond ring for your loved one. You are also concerned that the diamond you buy is not from a conflict zone which helps in funding local conflicts or wars or is extracted through violence in the area. You wonder, if there is a way to find out that the particular diamond is ‘guilt’ free? Broken supply chain tracking and data opaqueness makes it difficult for anyone to confirm the source and the journey of a diamond from the mine to the jeweler. The keywords again are real time data, data accuracy and opaqueness.

A small platform pilot, Tracer, created on blockchain technology for De Beers involving a handful of miners and manufacturers was able to precisely do that. The platform helped in creating a secure and indelible trail of selected diamonds(high valued 100 diamonds to be precise) from the mine cutter, to polisher and finally to the jeweler, hence creating a strong asset-traceability. (Source:Reuters)

Now imagine this scenario. A financial transaction is initiated by you that is recorded in your account detail. The account detail is stored with the bank with which you have the account. The ownership of the data and any authority over it remains with the bank at all the times. Essentially making the bank the owner of the data. In case of an incident of data manipulation, since the data is centralized at one place (bank’s server in this case) with a single owner (bank in this case) and there is no transparency over how and where the data is stored, a data fraud or manipulation will be difficult to detect and reverse. This exposes the customer and the data to manipulative practices which are difficult to pin point and even more difficult to correct.

With Blockchain technology, the ledger (the book that records transactions) is distributed. Which means the book is not owned and controlled by one party but multiple parties or systems. Due to this arrangement, an isolated manipulative change in the data on one system will not be accepted. This is because the entry with this fraudulent transaction on one system will not match with entries on other systems. Any legitimate change on the other hand, can be implemented only on consensus  mechanism. It means that if  a change needs to be implemented, it can only be done through consensus between all the parties on the network and not by a single controlling party (like a bank or a data hacker in the above case)

This means that with Blockchain technology as foundation, fraudulent practices can be reduced to minimum, thanks to its distributed–ledger, consensus based updating mechanism and decentralization. Clearly, Blockchain technology can be implemented at multiple places where data security, transparency and ownership is complicated but important for functioning.

So based on what we know about Blockchain technology now, a definition can be put together for the same –

A decentralized distributed ledger sitting upon a network of computers which are updated for every transaction that happens in the system through consensus mechanism. This creates an indelible trail of transactions which makes the system transparent, shared, secured and watertight.

Of course, like any new technology or invention, Blockchain has its own challenges which need to be addressed for it to be viable, relevant and scalable. We will look at these challenges in the next post when we discuss what could be the potential uses of Blockchain in Marketing. Not like a laundry list which is abundantly available on internet, but based on Blockchain’s applicability which we know now. For more details on how Blockchain works technically, please watch this video.

Starbucks at it again: When people throw lemons at you, make lemonade!

Leaders aren’t those who never make mistakes. Leaders are those, who make mistakes, accept them and learn from them to make better decisions in future.

Does the recurring issue with Starbucks over sensitive topics like race and sexual orientation reflect a flaw in its corporate culture and leadership? Or the way these issues are handled by the company makes a case for a sensitive, progressive and forward looking organization?

While there can be arguments on both sides, it for sure will be biased towards latter. This for a simple reason that these issues have not kept Starbucks away from standing for what it believes in. Also, it has always responded to controversies with a calculated yet sensitive actions which make it the company people look up to for its values.

There have been multiple stories about Starbucks being the vanguard of progressive workplace values in this new service world. Its initiatives like health insurance to part-time workers and to hire 25,000 veterans were path breaking ones in the industry. It was also one of the earliest organizations to support the cause of gay marriage in spite of resistance from some of the investors.

Its employee friendly policies came to light again when after the corporate tax cut in the US, Starbucks expanded benefits to its employees in terms of monetary support and family leaves. Its coffee procurement policy and practices across the world have been much lauded for empowering local farmers.

It is surprising then, that such a progressive company, consistently finds itself on the wrong end of controversies on very sensitive topics. While Its failed #RaceTogether campaign in 2015 and the ‘Holiday cups’ controversy in 2017 were more on symbolic aspects, the recent controversy where cops were called on two black men waiting in the café, was more serious in many ways. This because a store manager was involved in supposed racial profiling and then a knee jerk reaction of calling cops on these men. Her actions were said to be prejudiced due to the race of the men in question. Unlike other incidents, where Starbucks found itself in soup due to miscommunication or mis-perception of its proactive initiatives, this time it was in controversy for actions that went against its self-proclaimed ethos and values of equality.

However, like always, Starbucks has come out with utmost humility and accepted its mistake graciously, which in itself is a mark of excellent corporate values. Not just that, they did something which was unheard of till date. In response to the incident which laid bare the unconscious racial bias which some of its employees may carry, all Starbucks owned outlets in the US, 8000 to be precise, were shut and the employees were engaged in a four-hours racial-bias training on 29^th of May 2018. Starbucks created the curriculum and the video for this training, which is now available for everyone.

Starbucks Chairman Howard Schultz in an interview said, "I don't know of another company in the history of American business that's done anything remotely close to this". While this step was seen as being transformational by him, many people doubt the credibility of a four-hours training to be able to change racial bias in people. Virtual Training in itself, is considered a weak tool for achieving behaviour change. While this may be true, but two strong benefits of this response by Starbucks are – 

•          Starbucks’ response has created a template for service recovery for other comapnies across industries to follow. This also becomes now a more of a hygiene response to address such issues in future; and
•      This has again brought to fore the sensitive discussion about racial profiling and bias in businesses which needs a consistent acknowledgement and addressal

Starbucks in particular, after their call for this action, has established itself as a truly progressive company while also accepting that it does have flaws too but it is ready to accept them and work on them to be better. It has also showed that being socially conscious is not about one initiative here and there. It is about imbibing this behavior in your core values and be ready to take the pain that comes with this promise.

Starbucks has done that with utmost brilliance time and again, and it has been able to do this because it doesn’t push its mistakes under the carpet, but accept them publicly and promise itself and its stakeholders to be better in future.

Customers love companies who act like good human beings. That is companies which are kind, moral and ethical in conduct and most importantly, aren’t scared of their flaws and being vulnerable. Customers love companies which are like them, not perfect but committed to be better. That’s why they love Starbucks!