A perspective on managing growth in the Fourth Industrial Revolution through “Everything-as-a-Service” (XaaS), Demand Matching, and Decentralized Exchanges.
Imagine a future… Where you’re washing dishes and your A/R glasses notifies you that you’ll need to purchase detergent soon, you look at the nearly empty bottle, nod, and an order is made for the right quantity of your favorite brand of detergent, with the same scent, quality, and bottle you like, immediately.
Where you and your date are looking for well-priced dinner reservations, you find one, and realize a wine choice right in your budget and of your favorite region is noted in your reservation. You accept, and immediately head to the door to find a Uber Pool arriving in two minutes.
With the advent of the 4th Industrial Revolution, executives must begin to consider a data rich future that allows consumers and industries to share and be compensated for the use of data. One in which products and services are matched to personalized demands from consumers whose expectations are immediate satiation of their needs and wants. But how can we facilitate commerce in a way that utilizes the immense amount of data available across industries through Consortiums, and to create and utilize an exchange that is as efficient as a nod of confirmation?
The data disruptions of the 4th Industrial Revolution
The falling cost of advanced technologies is a defining characteristic of the digital revolution. It is playing a major role in accelerating innovation. Cheaper and better technology is creating a more connected world: 8 billion devices are now connected to the internet; by 2030, that number is forecast to grow to 1 trillion. The data that is generated by the combination of new technologies — artificial intelligence, big data, machine learning, the internet of things, mobile money, digital identity and 3D printing is poised to make the world more responsive and customizable to customers’ orders and expectations.
In the current business environment, with firms sharing terabytes worth of data across multiple consortiums, implementing a combination of technologies would yield much better value than implementing a single technology. For example, without the right analytics tools, it would be impossible to analyze the GBs of data churned out by IOT-linked solutions. A robust supply & demand solution set is required to match future customer expectations and requests to services and products. “Everything- as-a-Service”, or XaaS, facilitated by demand matching, and operating through a decentralized exchange platform is a highly potent solution set for the future of Digital Transformation in providing a low-risk, efficient solution, that aggregates data and utilizes its insights to generate value through efficient exchange of goods and services. In the next section, we begin exploring why we should utilize Decentralized Exchanges, and visualizing a future state operational model.
Challenges and options for the future
In order to understand the challenges and options of adopting the new emerging technologies, executives must look at value creation beyond the obvious returns that individual pieces of disruption brings. Executives need to address how to reconcile the difference between Supply and Demand within the new economy, and embrace the urgency mindset, as inaction to the rapid change in the technology stack could lead to larger impacts to business in the medium to long term through changing consumer demands and inability to fulfill or address customer needs and expectations.
- Supply: Industries are seeing new technologies that are creating new ways of serving existing needs and disrupting existing value chains. Competition is mounting as new agile and innovative entrants establish new customer standards and expectations, and push incumbents to meet on their battleground due to access to a global, interconnected community that disrupts research, development, sales, and distribution.
- Demand: growing transparency, consumer engagement, and new patterns of consumer behavior, largely built upon the previous era of SMAC — social and mobile specifically, force companies to adapt the way they design, market, and deliver products and services. Individual components of the SMAC model has shown productivity and revenue gains, but have not been combined as an aggregate solution until now.
One solution that is consistently seen across multiple technology types within the 4th Industrial Revolution and the Digital Age, is the creation of technology-enabled ”exchange” platforms that utilize Demand Match pairings that effectively and efficiently match and fulfill value for the end consumer. The current standard of centralized exchanges, such as within the ”sharing and on-demand economy”, allow for near instantaneous fulfillment of consumer requests for one specific product or service, while lowering barriers to entry for all entrants. A Dynamic Supply and Demand Exchange would enable instantaneous access and matching of all products and services, through integration of data and insights from standardized XaaS tools and products, allowing businesses to focus on their core value generating activities — whether that’s producing a physical product, or offering a life-assisting service.
Dynamic Exchange theory origins and benefits
The premise of the Dynamic Demand/Supply Chain Exchange hypothesis stems from John Gattorna’s Supply Chain concept of Dynamic Alignment, in which a segmentation of both market and supply structures allows for the appropriate design of independent supply chains to the company goals, customer objectives and supply capabilities. In combining this concept with XaaS, and a Blockchain based Decentralized Exchange, it is proposed that an efficient, trustless, solution set will allow for the instantaneous efficient matching of services and products to customer expectations and requirements.
The concept of a Dynamic Supply/Demand Matching Exchange depends on four primary pieces:
- XaaS: Isolation of value generating activities, by offloading data input, standardization, and insight generation capabilities to community vendors that adhere to a single, overarching IoT and Blockchain data segmentation standard
- Demand Chain: Parsing consumer requirement data to create an immutable record chain for consumers, while creating a Blockchain-enabled system of record and value creation for supply chain participants
- Demand Matching: Using trade matching and locking to integrate trade pair matching and recording of data on the Blockchain record
- Decentralized Exchange: Trustless platform that allows for the matching of individual consumer trends, needs, and requirements to the most cost/time/quality efficient service and product offering
Potential gains through the Dynamic Supply/Demand Change Exchange solution include:
- Lower cost of adoption among value chain participants and greater consumer value in addressing consumer needs with minimal latency
- Value generation and retention based on a network effect of businesses and consumers transacting on data and being compensated for it
- Higher velocity of funds, resources, and products due to efficient matching, while a reduction of ecosystem, or network, waste creates a new level of profit and reduction in volatility
What is “Everything-as-a-Service” (XaaS)?
“XaaS is the essence of cloud computing — a smorgasbord of utility-based offerings that can be consumed on a per-seat, per-month model, depending on usage,” explains Lesley MacDonald, Programs Manager at Dell EMC. By utilizing XaaS for Dynamic Exchanges, we allow user and device data from our IoT environment to automatically flow into a vendor, or group of vendors, to generate consumer insight or demand, that is then used to populate the exchange. Operating under the Mutual Aid organizational theory, a public or, perhaps more realistically, a semi-private consortium of product and service providers would benefit from inputting data into the exchange whether through increased sales, or through an exchange token.
XaaS is an operating model that allows us to utilize resources and functions on an as-needed basis, facilitating efficient transference of data and value. It’s is a combination of SaaS, PaaS, and IaaS:
- Software as a Service (SaaS) — Enables consumers to use the provider’s applications running on a cloud infrastructure.
- Platform as a Service (PaaS) — Deploys consumer-created or acquired applications onto the cloud infrastructure.
- Infrastructure as a Service (IaaS) — Provisions processing, storage and other fundamental computing resources to deploy and run operating systems and applications.
XaaS allows enterprise solutions to maximize their efforts through:
- Lower costs, and higher flexibility & scalability
- Maintenance is done by the provider
- Easy access to new technologies
- New business services are able to debut quickly, and allows for quick responses to market developments
What is a Demand Chain?
The term Demand Chain is created through the application of Blockchain guided principles, a global system for mediating trust and selective transparency, to modern iterations of manufacturing Supply Chains.
In applying it to Supply Chains, it allows supply chain players (both small and large) to attach digital tokens to intermediate goods as they progress along the production, shipping, and delivery phases of a supply chain and title to them the passes and activities utilized by different players6, which would result in far greater flexibility to find markets and price risk, by capturing the value that they have invested in the process at any point along the chain.
This kind of immutable, evidence based credential system will be central to the dynamic, on-demand production model of the Fourth Industrial Revolution movement, where contractual rights and obligations can be automatically executed by an autonomous system that trusted by all parties, and allow all members of a supply chain community to monitor the activity of all credentialed staff.
What is Demand Matching?
Demand Matching has been a consistent feature of Blockchain based Financial applications, where it allows for the seamless access to financial and trade data, while at the same time protecting the privacy of parties that don’t wish to reveal their identities nor the details of their transactions to the general public. Demand Matching involves a process of using a Blockchain to pair transaction requests, including data of trades and clearing positions, or in this case, demand requests. The data matching would then be timestamped and stored in the ledger, in a similar way the any Blockchain network works today.
Conversion of a Financial Demand Matching system to use with commercial transactions would be a swap of different data sources, however recording of transaction data would remain the same. Rather than cross-referencing across multiple datasets to confirm a transaction, the Demand Matching platform provides consumers and suppliers with a single golden copy of the trade, enabling participants to update their records from this ‘single source of truth’ and avoiding mismatches or duplications that need to be fixed manually.
Safeguards of the platform include transaction level details are private by default to the network and are only shared between consumer and supplier. Demand Matching platforms give users the autonomous choice to reveal what they want to reveal. Details will be published to others only with explicit consent. In the event of unsavory actions reports can be logged and verified within the specific chain, and would allow a record for error correction and handling of protection actions.
What is a Decentralized Exchange?
Decentralized Exchanges — also known as DEX’s — are a new technology that facilitate cryptocurrency trading on a distributed ledger. These exchanges shift back control of funds and trades to the user and they eliminate the single point of failure. In our example, a consumer, or a consumer’s device, can submit open buy or sell orders for a given demand token or contract, in exchange terminology this person is the Maker. Another trader, in our example — the service provider, can browse these orders and choose to execute on them, this is called the Taker.
In a Decentralized Exchange, both goods and service tokens are kept with the Producer or Provider, while currency is kept with the consumer, and cannot be entrusted to a third party at any stage9:
- Orders must broadcast directly from consumer to producer over an inter-Blockchain DHT network overlay. In our example, the demand token or contract, will be broadcast out over a distributed order book and allow a decentralized Demand Matching process to facilitate the appropriate contract fulfillment criteria
- Orders are then matched between consumer and producer/provider, and when once accepts another’s order, their apps communicate to set up the token/goods exchange process, and is then broadcast over the Demand Matching platform
- The exchange of the tokens (representation of a service or good), must be achieved without the involvement of an intermediary, in a manager that does not require counter parties to trust one another beforehand. In a cryptocurrency exchange, the process calls for an Atomic Swap protocol, where both tokens (demand and good/service) are exchanged immediately, or nothing takes place.
A future vision of the Decentralized Supply/Demand Exchange solution
Now that we understand the pieces of a Decentralized Supply/Demand Exchange solution, let’s put it to work. How would a system like this work?
Technical small steps; functional big leaps
This perspective aimed to provide a high level general guideline on how the future of Decentralized Exchanges can be applied to token conversions for physical goods and services as data accumulation becomes more widespread and used in every day activities. But how do we begin to prepare our existing technology stacks during this time of change?
Four Considerations for Implementation:
- Identification of the right XaaS suite: Executives will need to understand that technology suites will need to work in concert with each other as a whole package, as data begins to become interdependent upon each other to be utilized most effectively. Technology suites that aggregate various data points from IoT to automated services, will have their individual transaction standards, and a balance between network efficiency and data volume will have to be kept top of mind.
- Digital Transformation of current technology stacks: The majority of the immediate work will be to convert or find workarounds to integrate current state data (binary and static) to future state data (quantum and decentralized), and industries will need to find the right balance on how specific data sets segmented and sent to the network, and the inherent network design and capacity
- Data segmentation and packaging: Look at existing data structures, from centralized product databases, to decentralized cloud data storage solutions, where each structure produces data blocks whose integrity needs to be preserved in order to make sense of the resulting insights or records.
- Find the right exchange platform: In the near future, as Blockchain, IoT, and Artificial Intelligence continues to be developed, various exchange types will arise in order to aggregate and exchange based on actual goods or consumer and industry data. Keeping in mind various data and network needs, along with transaction costs, exchange selection will be important in the future.
Where do we go from here?
The majority of this perspective has been dedicated on a potential technical implementation of utilizing aggregated data and feeding them into a Decentralized Exchange in order to facilitate instantaneous commerce and value creation for consumers and providers alike. However, as we continue to embark on the Digital Transformation journey to enable the 4th Industrial Revolution, there are several steps that need to be accomplished before this perspective can be executed.
Note: all views and opinions are my own, and not of my employer.
Sources:
World Economic Forum DTI (2017), Unlocking $100 Trillion for Business and Society from Digital Transformation, retrieved from https://tinyurl.com/y9ul6qjk
PWC (2017), Deconstructing disruption: Impact of future technologies, retrieved from https://tinyurl.com/y8pec77q
Trevor Miles (2012), Dynamic supply chain alignment: A theory ready for practical application, retrieved from https://tinyurl.com/y7remhcw
Howard M Cohen (2016), Managed Service Providers Move Toward XaaS — Everything as a Service, retrieved from https://tinyurl.com/y9p5l2gl
Michael J. Casey and Pindar Wong (2017), Global Supply Chains Are About to Get Better, Thanks to Blockchain, retrieved from https://tinyurl.com/gvkfhmm
Lauren Stephanian (2017), Enhancing the trade lifecycle with blockchain, retrieved from https://tinyurl.com/y9egh6x5
Dominiek Ter Heide (2018), Understanding Decentralized Exchanges, retrieved from https://tinyurl.com/y6v9gjwz
TheBlockNet (2018), Understanding a Decentralized Exchange, retrieved from https://tinyurl.com/ycyge5pq
