Although blockchain technology leverages existing hardware, software, and networks, its peer-to-peer consensus model expands the scope, user base, and ownership model beyond common assumptions for current technology paradigms. This introduces a range of new challenges and complexities for healthcare leaders and financial professionals focused on capital planning, budgeting, and investment control. These challenges have the potential to confound established financial planning and governance processes, which in turn slows down organizational decision-making. Early consideration of how to adapt existing financial administration and governance constructs is critical to project success. A series of variance points from standard practice are outlined below; these are areas to review as early as possible in evaluation of a blockchain initiative. If it is determined that current approaches will be inadequate to support efficient financial decision making and planning, a parallel initiative is recommended to optimize them in the context of blockchain technology implementation.
Ownership is mutualized.
Varying based on the architecture, consensus model, and use case(s), ownership of a new blockchain initiative in healthcare is generally mutualized, or shared among network participants. This includes physical and virtualized infrastructure, smart contracts, transactional and other data persisted to the blockchain, decentralized applications (dApps), and the entirety of the business administrative function surrounding the initiative. From a financial perspective, it can be challenging to determine how to estimate and allocate start-up and ongoing operating costs among network participants. Stakeholders should seek to reach agreement on a common model for financial estimating and capital planning first, then formalize the agreed method of cost allocation among network participants within the given blockchain governance model. This includes, but is not limited to, (1) determination of common accounting methods for the relevant assets, such as valuation and capitalization, and (2) creating shared investment control functions.
Evaluating shared benefits and risks with partners.
Likewise, attribution of the benefit or value could also be hypothetically uneven among the network participants. Each sector brings a different set of values, priorities, resources and competencies to a partnership. The challenge of any coalition is to bring these diverse contributions together, linked by a common vision in order to achieve sustainable development goals.
Such potential benefits include:
- Access to knowledge: Greater understanding of operational context may mitigate risk and reduce potential mistakes.
- Access to people: Provides a wider pool of technical expertise, experience, skills, labor and networks.
- Effectiveness: Create more appropriate products and services, whether commercial or not-for-profit.
- Efficiency: Increased by sharing costs and delivery systems and avoiding duplication.
- Innovation: Develop unexpected and new ways of addressing legacy issues and complex challenges.
- Human resource development: Enhanced professional skills, talent management and competencies.
- Long-term stability and impact: Achieve greater ‘reach’ by being efficient and effective to create an expanded sustainable development impact.
Despite the benefits, collaborating is not a low-cost, quick fix or risk-free option. The costs can be high, due to the time needed to explore, establish and maintain relationships. Potential collaborations need to consider the opportunity costs and, preferably, establish some benchmarks against which they will measure the anticipated outcomes of collaboration to determine whether participation is worth the investment. Frequently, collaborating in the early stages can be a ‘catch 22’; partners invest time, energy and ideas (often over months and sometimes years) and then continue to stick with the endeavor even when the transaction costs are becoming unacceptable. This often occurs because organizations feel pressure from their colleagues for some kind of return on investment.
As an aid to organizations considering a collaborative approach, it is advisable that they also consider the areas of potential risk including:
- Loss of autonomy: The challenge of shared decision-making processes, requiring the need for building consensus before action can be taken and the implications of wider accountability to other participants and to wider beneficiaries.
- Conflicts of interest: Consider how to move forward where a decision or action that is right for the interests of the partnership may be at odds with the individual organization’s interests.
- Drain on resources: Commitment often becomes significantly greater than anticipated as the time and energy exerted by key staff to facilitate relationship building and project development, coupled with any additional use of financial or other resource contributions become burdensome.
- Implementation challenges: Costs related to the day-to-day demands of delivering a program as a collaborative venture, with all of the additional management, tracking, reporting and evaluation requirements that it entails.
- Negative reputation impact: When collaborations go wrong, there may be damage to the reputation or track record of individual participants by their association.
- Lack of experience: Since blockchain technology adoption is still fairly new in the healthcare sector, it should be expected that there will be a lack of experience in deploying blockchain. A learning curve is a key part of any significant blockchain use case. Therefore, limited experience and the need to account for a learning curve should be considered as another cost factor.