In case you haven’t noticed, we’re in the middle of a global surge in investment in two prominent technologies: blockchains and artificial intelligence. As individual technologies, each has significant opportunity to reshape multiple global markets. Combined, they are likely to reshape how the world’s electronic markets work in the coming years as they work together.
By themselves, blockchains offer us the possibility to digitise the business transactions between companies and across business ecosystems, radically speeding up commerce. With block-chains not only will it be possible for companies to agree upon key facts – like who has what inventory or product – but also to write up and execute digital contracts between enterprises without human intervention for most routine transactions.
Into this environment of increased speed, artificial intelligence could add a further dose of transformation. Artificial Intelligence systems offer us the ability to distill very complex decision-making criteria into recommendations and decisions that, in many cases, look as sophisticated as good human judgement, but can be produced with high levels of speed and consistency.
When combined together, blockchains and machine learning are likely to transform both the decision making and the execution of complex business contracts. The digital smart contracts feature of blockchains will permit reliable, secure execution of contracts and payments, while artificial intelligence systems will enable consistent, high-speed decision making.
For some markets that consist of many small transactions, the likely result could be a transition to an entirely digital system where purchases, sales and payments are done by blockchains and artificial intelligence. Simple decisions like ordering spare parts could be entirely automated, taking people out of the loop entirely. Other markets could be restructured to enable full automation. Imagine cars that buy insurance instantly for one drive after you input the destination in your GPS. Whole digital ecosystems may emerge where trillions of dollars in commerce are done entirely between machines, including the decision making.
To understand why the potential for transformation is so large, it’s necessary to go back and look at why business to business transactions are still so slow. Robert Solow, the Nobel Prize-winning economist, once remarked he could see computers everywhere in the real world but couldn’t find them in the data on labour productivity. A similar conundrum exists when it comes to business to business transactions today, even as consumers seem able to point, click and purchase instantly.
When it comes to enterprise business operations, however, many business transactions remain remarkably slow and cumbersome. It takes the average Fortune 100 company in the US 67 days to settle a business transactions with a customer, a metric known as days of sales outstanding.
Some of this has to do with how companies like to ‘game the system’ but much of it has to do with the complexity around how ‘digital’ organisations interact with each other. Enterprise Resource Planning applications like SAP have digitised much of the information inside the enterprise, but when it comes to doing business across company lines, we often end up back in a land of analog systems. Digital purchase orders are often ‘printed’ to PDF files, e-mailed to partners and then manually re-entered back ERP systems.
Even before purchase orders can be approved or payments sent, most business transactions today – indeed nearly all of them – require human judgement. Purchasing and contracting decisions are very complex, companies must weigh issues like quality, speed, and supplier performance against price and profitability goals.
As Malta develops its strategy to become a leading blockchain developer environment, the emergence of related technologies cannot be ignored. Indeed, the most successful technologies represent intersections of multiple emerging systems from digital music and miniaturised hard drives to mobile devices and GPS location-finding. The same will be true at the intersection of blockchain and artificial intelligence.
These are not abstract concepts, they are real technologies that are being implemented today. EY has built multiple blockchain platforms for everything from drug development to car sharing and supply chain planning.
Similarly, our colleagues in Artificial Intelligence have been building smart decision-making systems to deal with complex tax or audit issues and other business decisions. The next step is to start combining them.
Paul Brody is EY’s Global Blockchain Leader and will be speaking alongside Keith Strier (EY’s Global Digital Tech Leader and Americas Artificial Intelligence Leader) during EY Malta’s Annual Attractiveness Event on Wednesday.