Business orthodoxy has always claimed that competition drives the evolution of the modern economy. Propelled by the need to generate profit, among equally ambitious firms, there is a tendency to view competition in the business world as necessary for growth and innovation. But in an age of relentless economic disruption, businesses are increasingly turning to cooperation to adapt and thrive in a digitalising economy.
“Nowadays, the best partner might be your direct competitor. Competitors tend to face similar markets and use similar resources and technologies,” Paavo Ritala, professor of Strategy and Innovation at LUT University of Technology in Finland, tells Forbes. Faced with similar challenges amid rising R&D costs and global competition, there are mutual gains to be made if competitors collaborate on innovation, product development and joint manufacturing.
And it seems that the Singapore government aims to promote such collaboration within the up-and-coming blockchain space. On the sidelines of SFFxSWITCH 2020 in December, Enterprise Singapore (ESG) and the Singapore University of Social Science (SUSS) signed a Memorandum of Understanding (MoU) with six commercial partners to “create, trial and implement” the Blockchain for Trade & Connectivity (BTC) Network. The goal is to build a unifying platform to allow blockchains to operate together with other technologies.
Kevin Lim, CEO and co-founder of Trames — a supply chain start-up that is one of the six partners — sees the BTC bringing greater cross-pollination of blockchain use cases between participating firms. Greater adoption of more trustworthy and seamless blockchain connectivity, he argues, grows the pie for everyone. The BTC MoU seeks to promote innovation and the test bedding of blockchain solutions with multimodal supply chain companies, digital platforms and technology specialists to streamline connectivity between diverse existing systems or platforms.
While working with the government is necessary to develop a robust yet flexible regulatory framework for blockchains to operate, technology providers help provide firms with the necessary technology to run their operations at affordable rates. Institutes of higher learning, on the other hand, can help conduct deeper research into blockchain solutions to unlock greater value. Meanwhile, building a broad community of users throughout business networks will be key to scaling up blockchain technology more efficiently across global supply chains.
Bigger and wider
By such collaboration, BTC could resolve two of the biggest challenges to blockchain adoption — scalability and interoperability. For the former, the decentralised architecture of a blockchain network results in the system taking a long time to enter and confirm transactions. When a blockchain gets bigger, this problem gets worse too. Blockchain technology consumes a large amount of energy, reducing the cost-efficiency of larger distributed ledgers.
The challenge of interoperability arises due to the fragmented nature of the blockchain ecosystem today. Due to an absence of a universal standard, each blockchain has its own protocol, programming language and other parameters that makes it difficult for different blockchains to share information with one another. There have thus been calls for common standards to allow for easier communication among blockchains.
Naturally, achieving these goals require a degree of cooperation between different industry players. Interoperability can only be achieved if stakeholders such as governments and firms form a consensus on how best to achieve connectivity between ledgers. Collaboration also helps firms develop economies of scale, whether by pooling together resources to spread the higher costs of larger chains or by combining expertise to develop more efficient and sustainable solutions.
Lim cites Trames’ Partner R3 as an example of scaling blockchain initiatives via technology sponsorship. Focusing on distributed database technology, R3 leads a consortium of over 200 members, such as financial institutions, trade associations and FinTech companies. Spinning out an umbrella of projects to these companies helps improve the cost-effectiveness of scaling up blockchain technology.
He also highlights TradeTrust, an interoperability initiative by the Infocomm Media Development Authority (IMDA) of Singapore. It seeks to establish a set of globally accepted standards and frameworks to support the exchange of electronic trade documents over public blockchains with reduced transaction costs.
Through collaboration with IMDA via TradeTrust as well as with R3, Trames has developed a document store product, powered by open-source blockchain platform Corda, that helps streamline customs and freight documentation across supply chains. Lim hopes to partner this technology across other production-ready blockchains in BTC with the aim of evaluating feasibility of interoperability. Trames is also looking to develop more comprehensive supply chain solutions that can optimise flows across the three layers of supply chains: physical goods movement, information transmission, and financing and insurance of these chains.
The achievement of such objectives has become all the more urgent due to Covid-19, which has required a sharp reduction in physical interaction. Lim explains: “Trade is traditionally, a paper-based and physical activity. To limit physical touchpoints, technological infrastructure is required. I do hope that the MoU seeds out the basis of interoperable supply chain infrastructure spanning the ABCDs — AI, Blockchain, Cloud and Data — of emerging technologies.”
The Trames CEO believes that such initiatives will play a vital role in levelling the playing field for SMEs in the supply chain industry. Innovations stemming from the MoU, he suggests, could improve sectoral traceability for more transparency, bringing in new business models and customers for participants. Less waste, reduced dispute fields and better security for firms adopting innovation can also bring about efficiency gains for SMEs, which Lim says will benefit from gaining access to solutions that have been deployed by leading multinational firms.
Going regional
But beyond domestic initiatives, Lim hopes that similar initiatives will eventually be translated to a regional level. “A lot of business networks and tech vendors that have signed on have regional operations,” he tells The Edge Singapore. With trade being Singapore’s lifeblood as a global city, he sees significant opportunities for firms to tap into these new technologies to strengthen regional trade by cross-pollinating technologies tested in Singapore into Southeast Asia. Regional businesses, he believes, will be keen to adopt and scale such solutions regionally.
Asean will likely prove receptive to such initiatives. Last year, the Japanese government and 20 of the largest Japanese firms introduced a digital platform to manage and integrate trade transaction information driven by blockchain technology. Initially kicking off with Vietnam, the policy will next be extended to the other nine Asean economies to deepen Japan-Asean trade relations and promote digital trade procedures.
Similarly, the Asean Smart Cities network creates opportunities for blockchain technology to be rolled out in the region’s major cities. Seeking to use technology to promote sustainable urbanisation based on smart technology, blockchains can play an important role in coordinating, integrating and controlling services in these cities in a transparent and efficient manner. Indonesia’s Cibinong smart city project sees local telecommunications firms working with South Korean blockchain firms to develop a smart city platform for the new metropolis.
Yet, Lim also believes that the regional development of blockchains requires ground-up community-driven initiatives. He observes that most blockchain pilots sponsored by an MNC typically lack regulatory support, the scale of business networks and the reduced cost of sharing technological infrastructure. Successful initiatives, he says, are usually undertaken by a community of stakeholders looking to do things better.
Greater collaboration, in fact, leads to greater resilience amid severe demand and supply shocks. Lim notes that during the Covid-19 pandemic, the companies that best handled the crisis had a digital framework that was relatively inclusive, whether through connected systems or the ability to build resilience through data-sharing and upscaling one’s networks of stakeholders. He sees this trend continuing into the future as firms look to build up resilience, preparing themselves for a possible repeat of this global catastrophe.
“A key lesson that emerged from the pandemic is that technology adoption has become more than a latent function for organisations to innovate — it has become a necessity to improve preparedness and lay down the infrastructure to mitigate potential risks moving forward,” says Lim. Improving data flows across ecosystems and automating manual processes are, he argues, imperative for firms to survive for a world hurtling headfirst into a digital future.
