There's a lot of hype surrounding blockchain. Do small businesses need to pay attention?
Everyone is talking about blockchain, and the savviest small-business owners are wondering: "Am I falling behind by not jumping on the bandwagon?"
What is blockchain?
Gartner defines blockchain as a "type of distributed ledger in which value exchange transactions are sequentially grouped into blocks. Each block is chained to the previous block and immutably recorded across a peer-to-peer (P2P) network, using cryptographic trust and assurance mechanisms."
Let me put your mind at ease. Gartner predicts that, through 2022, only 10% of enterprise businesses will achieve radical transformation through the use of blockchain technologies, while the remaining 90% will struggle with where to begin with blockchain (full content available to Gartner clients).
In other words, many enterprise businesses aren't even sure how to maximize blockchain yet. Given that reality, small businesses—with lower revenue and often narrower margins—can't be expected to jump in quite yet, though many are paving the way and already seeing benefits from blockchain technology.
3 key insights on blockchain for small businesses
Let's take a look at small businesses' views on and use of blockchain, why you don't need to worry about investing quite yet, and why blockchain is worth paying attention to long-term.
1. One in five small businesses already uses blockchain
In a recent Gartner survey of small and midsize businesses (SMBs), 19% of business leaders involved in purchasing technologies say they are currently using blockchain.
Roughly a quarter say they are planning to use blockchain in the next one to two years or are currently evaluating the technology. About a third of small businesses have no plans to evaluate blockchain.
In other words: A majority of SMBs have expressed at least some interest in blockchain, yet most have no immediate plans to fully commit.
Small and midsize businesses with more financial resources are more likely to have invested in blockchain so far. A quarter of SMBs with high revenue (from $50 to less than $100 million in fiscal year 2018) are currently using blockchain, a greater share than businesses with lower annual revenue.
Perhaps unsurprisingly—as blockchain is a kind of information technology—businesses in the IT industry are more likely to use blockchain (28%) than other industries, such as wholesale or services.
If you operate in the IT, healthcare, financial services, or retail sectors, there may be more successful models of how to incorporate blockchain into your business than in industries with lower adoption rates.
2. Most small businesses see blockchain as beneficial to their business
A majority of surveyed businesses who are using, planning to use, or evaluating blockchain (57%) say the technology is or will be beneficial to their business. About a quarter (23%) say blockchain is already critical for their business, while a similar share (20%) say the technology isn't necessary.
Among those currently using or planning to use blockchain, three quarters are already realizing significant impact from the technology (36%) or expect to see such impact in the next one to two years (40%). Nearly 1 in 5 (17%) say they expect to see significant impact from blockchain within the next two to five years, while just 5% say such gains are more than five years away.
3. Those budgeting for blockchain plan to spend nearly $38,000
Among those with a designated blockchain budget, the average amount SMBs plan to spend is $37,700. But this average conceals a wide range of budgets for blockchain technology. Nearly 4 in 10 (38%) businesses plan to spend $10,000 or less. In comparison, about a quarter plan to spend $51,000 or more on blockchain technology.
The data says: You don't need to invest in blockchain ... yet
While our survey shows that 19% of SMBs are currently using blockchain, don't feel pressure to invest unless your organization has a clear and compelling reason to adopt the technology.
Be sure blockchain will solve a business problem—and that it won't introduce other ones.
According to Gartner's 2019 Hype Cycle research, blockchain technology is sliding into the "Trough of Disillusionment" (full content available to Gartner clients). This means interest is waning as some early-adoption projects fail to deliver on initial promises or expectations.
Gartner believes blockchain will climb out of the trough by 2021, as new advances and practical use cases roll out. By this time, 76% of our survey respondents using or planning to use blockchain expect to see significant impact on their business.
Gartner further expects blockchain to be technically scalable by 2023, predicting that this tech will reach the final stage in its Hype Cycle (the "Plateau of Productivity," where mainstream adoption begins to take off amid consistent evidence of the technology delivering). And (roughly) by this time, the vast majority of our survey respondents (93%) expect to see significant business impact from blockchain.
Key Takeaway
This all means that you've got a good two to three years before the SMB landscape is substantially changed by blockchain results, which is when you'll want to reevaluate whether investment is right for your business.