Why Blockchain will Disrupt Corporate Organizations: What can be Learned from the “Digital Transformation”

Abstract

We live in a world that has historically been dominated by centralized, hierarchical organizations. Such organizations are characterized by (i) a centralized source of authority; (ii) a formal hierarchy with clearly defined “roles”; and, (iii) standardized operational systems and procedures dictated by that centralized authority/hierarchy. This type of organization has exerted an enormous influence on modern political, economic and social life, particularly in a business context. Regulatory models have been designed to support and sustain businesses organized in this way. Today, however, new digital technologies are disrupting this “old world” and introducing a shift in the practices and mindset of our society. New technologies are driving the emergence of “flatter”, more decentralized forms of organization. In this paper, we offer an analysis of how blockchain and related distributed ledger technologies are disrupting corporate organizations as an illustration of this broader “digital transformation.” The paper briefly introduces the digital transformation and main argument (Section 1); then considers how the digital transformation has led to the emergence of “platform” companies (Section 2). Since blockchain technology can be viewed as a next step in the “digital development” of a corporate organization, the paper then discusses the main features of blockchain technologies and smart contracts (Sections 3 & 4) and examines the often-made claim that these technologies are all just hype / a fad (Section 5). Section 6 explores why these technologies are so potentially disruptive in a business context and then introduces several examples of such blockchain-based business organizations, as well as possible future developments (Sections 7 and 8). Section 9 concludes.