What are the leadership and decision-making challenges posed by a disruptive technology? Case studies highlight the risks of ignoring them. If blockchain is poised to disrupt the financial sector, how should leaders respond?

This article started out to answer the question, “Will blockchain replace accountants?”

In researching the topic, it became clear that there are far more fundamental issues for businesses to consider. So, this article is going to step aside from technical issues and look at some of the leadership and decision-making challenges posed by a disruptive technology like blockchain.

And then we’ll answer the original question about accountants and look at current blockchain entrants into the financial sector.

Disruptive vs sustaining technologies

disruptive technology is one that

· displaces an established technology and shakes up the industry, or

· a ground-breaking product that creates a completely new industry

Blockchain certainly fits that description! It has created a brand-new world of cryptocurrencies and a completely new business model for start-ups and technology companies. It is also starting to shake up industries and to displace established technology.

The term “disruptive technology” was penned by Professor Clayton Christensen of Harvard Business School. In his book, “The Innovator’s Dilemma”, he outlines how a company’s success can prevent it from recognizing and adapting to the changes in markets and technologies. He also talks about two types of technologies:

· Sustaining technologies

· Disruptive technologies

Sustaining technologies are for improving a product or a service that already has an established role in the market. Companies generally are comfortable with this type of change.

Disruptive technologies, on the other hand, if applied to a company, are certain to fail in the beginning, and product quality will be poor. However, because these technologies are generally “cheaper, simpler, smaller, and more convenient to use”, some people will persevere in getting them to work. This is where large companies that have chosen to overlook these technologies until they have proven themselves, can find themselves blindsided. As the technology matures it takes over the audience and the market and threatens the status quo.

The following diagram from Christensen’s book shows how disruptive technologies are rejected because they don’t meet the quality requirements at the high end of the market. However old systems can be quite rapidly overtaken — the new ones satisfy market demand with lower costs and more convenience.

Case studies in disruptive technologies


Kodak is the classic case study of the risk of ignoring new technologies. Kodak actually invented the digital camera as far back as 1975 but didn’t follow through on it. They were afraid that it would destroy their film and analog business. At the time, more than 90 percent of photographic film and more than 85 percent of cameras sold in the US were made by Kodak.

It also “gravely misunderstood the new ways consumers wanted to interact with their photos, the technologies involved, and the market forces surrounding them”. In 2005, Kodak developed EasyShare-One, the first camera that could link to WiFi and send photos online. It didn’t sell well, and Kodak stopped it. Kodak made no move to understand how important mobile phones would become for sharing of photos. Instead, it launched into digital picture frames and photo printers.

This 128-year-old company filed for bankruptcy in 2012, its business eaten up by Canon, Fuji, Nikon, Apple and others.

Netflix vs Blockbuster and cable TV

At its peak, Blockbuster, the DVD rental company, had 9,000 stores, 60,000 employees and was valued at $8 billion. Its management made some bad decisions. Not least was that it declined an offer to buy Netflix for $50 million in 2000. It decided instead to sign a streaming deal with Enron — and the next year Enron imploded. It continued with its old model of DVD rentals from its stores. It tried an online service and reached 2 million subscribers in 2006, only to lose 500,000 of them in the next quarter. It filed for bankruptcy in 2010, with $1.1 billion in losses.

This while Netflix introduced DVD rentals-by-mail and streaming services. It surged to 6.3 million subscribers in 2006 — and in 2018 it has over 137 million subscribers.

And along the way, Netflix has also totally disrupted the cable television industry. It has led the market move towards video on demand (VOD) and OTT (over the internet). By the first quarter of 2018, It had more subscribers in the US (>50 million) than the total for the top six cable TV companies (approx 48 Million).

And who knows what it will do to the film industry as it now moves into original content production with Netflix Originals?

Other examples of disruptive technologies

These are disruptions that many of us have personally experienced:

· The PC displaced the typewriter.

· The Windows operating system led the move away from mainframes to personal computers.

· Laptops are replacing desktop computers and have made it possible for people to work from anywhere. The mobile workforce was born.

· Email displaced letter writing and the need for the postal service.

· Cell phones allowed people to call from anywhere and disrupted the telecoms industry.

· Smartphones have largely replaced cell phones — and PDAs, pocket cameras, MP3 players, calculators and GPS devices.

· Cloud computing has replaced in-house resources for business.

· Social networking has disrupted telephone, email, SMS, event planning, and even traditional marketing.

Lessons in Leadership

Leadership theory is highlighting the speed of change and the need for “anticipatory” leadership.

According to Craig Groeschel, anticipatory leadership requires brutally honest situational awareness (asking what is really going on?), an ability to step outside of our current fields and areas of comfort to discern threats and opportunities, and a willingness to disrupt our own business models before others do.

Leadership expert John Maxwell says leaders must go beyond just seeing the bigger picture:

“A leader is one who sees more than others see, who sees farther than others see, and who sees before others do.”

The key is the ability to see possibilities before others see them, and to apply the Nobel prize-winner Albert Szent-Gyorgyi’s definition of research:

“To see what everybody else has seen, and to think what nobody else has thought.”

This is not as easy as it sounds. As Clayton Christensen points out, identifying disruptive technologies can be daunting. It is difficult to predict what the probability for success will be in a market that doesn’t yet exist. It is really difficult to discount and risk legacy systems, equipment, training, procedures — and customers! And most companies really fear failure.

He, therefore, suggests “discovery-driven planning”, where companies set up completely separate units to test new technologies. These units should “operate on the assumption that new markets cannot be analyzed. Instead, they rely on learning by doing and real-time adjustment of strategy and planning.”

Will blockchain replace accountants?

The answer to that question is not certain, but it is more likely than not. At the very least, their role will change.

The short dictionary definition of an accountant is

“A person whose job is to keep or inspect financial accounts.”

Accountants are an absolutely integral part of our traditional financial systems. But what happens when a disruptive technology like blockchain appears and seems to be able to take over that role?

Blockchain can be defined as

“A digital ledger in which transactions ……. are recorded chronologically and publicly. We can actually have a look at the blockchain and see evidence of what’s going on.”

If the full record exists and anyone can confirm that it is correct, why would we need a third-party accountant, to “keep” and “inspect” the ledger?

The world of finance is one of the first to be shaken up by blockchain. “Fintech” is the new kid on the block — a new industry that uses technology to improve activities in finance. Bank tellers are being replaced by smartphone apps and online banking services. Loan evaluators are being replaced by online questionnaires and algorithms. Insurance companies can give online quotes. If they move to blockchain, they can completely change and automate these processes through immutable records and smart contracts.

And if this is true for accountants, bank tellers, loan evaluators and insurance claim professionals, who else may be disrupted by this technology? And how will this disruption happen?

Examples of blockchain’s entry into financial markets

According to JP Morgan:

“Blockchain will bring a radical shift in the way we think about financial assets and the way the financial industry will operate in the future.”


“Avoiding blockchain is the biggest risk one can take.”

Some blockchain projects in the financial space include:

· Ripple, together with its XRP coin, is a banking solution to rival SWIFT.

· Project Jasper is a project between blockchain software firm R3, banks and a stock exchange in Canada. The purpose is to test R3’s Corda ledger for high-value clearing and settlement, and for integrating securities with payment. This will remove time lags, the risk of failure from one of the parties in a transaction and the need for intermediaries.

· IBM and Stellar are using Lumens as the currency in blockchain banking across multiple countries in the South Pacific.

· Mastercard has developed its own “crypto-free” blockchain for payment in fiat currencies.

· Northern Trust, the asset management firm, is using the Hyper­ledger Fabric for keeping records of private-equity deals. Its auditors, PWC, are able to do real-time audits directly from the blockchain itself.

· JP Morgan Chase has its own private blockchain, called Quorum, based on the technology which underpinned the Zcash coin. The primary goal is to provide data confidentiality for corporations.

· Goldman Sachs is going ahead with its plans to be the first Wall Street bank to have a bitcoin-trading desk.

The Northern Trust story is really enlightening. If auditors are able to do real-time audits from the blockchain, how will that totally disrupt the work of accountants? At the moment, so much of their time is spent preparing records for “months-after-the-fact” audits. And how will real-time audits change the decision-making processes of owners and business leaders?

Blockchain, disruption and challenges to business models — how should leaders respond?

Blockchain solutions have the potential to pull banks, other financial institutions and businesses into the 21st century.

The penalties for ignoring them may be painful. However, identifying use cases and markets also may be painful. Disrupting and overturning your own business models definitely will be painful.

Leaders will have to respond as leaders have always been called on to respond — with vision, with practical solutions and with courage!