Finding Solutions to Business Woes: Will Blockchain Play A Key Role?

The beauty of decentralization is in its key feature, no central authority, meaning no need for a third party in any transaction

However big and successful modern business giants might seem now – they all started small, with some of them even being started in a garage. Having turned their humble ideas into the multi-million money-making machines, founders of these companies have probably faced a lot of struggles along the way, especially in the beginning.

Normally, small firms do not have a lot of budget to play around with, which leads to limited possibilities. They get lucky if they get funding – either from a bank (which is extremely hard) or from a friend or a relative.

With bigger funding comes faster development, yet, things are pretty slow considering the scale of these small companies. The bigger competitors are sometimes taking away their clients due to lower pricing (thanks to the economies of scale) and trying to push small players out of the market.

Adding to the struggles of young entrepreneurs, not many suppliers are willing to work with them, again, due to the small budget and size of operations. This, in turn, leads to higher fees, resulting in more expensive goods and services. 

It seems like everything is against a growing firm when it is just starting its business. 

Giants also started in a garage

Yet, as mentioned in the very beginning, some of the companies that had ground-breaking ideas were able to overcome these issues. 

Take Gillette razors for example. Back in 1895, King Camp Gillette was working as a travelling salesman for one of the cork companies in the US. He noticed how bottle caps are usually thrown away after one usage – at that time, bottling companies had to purchase more caps. This gave him an idea of creating a one-use razor. 

Six years fast forward, King created a perfect razor and in 1901, he established the American Safety Razor Company, which was later renamed to Gillette Safety Razor Company. 

Another brilliant example of a small company that now valued at USD$1 trillion – Apple Inc. Steve Wozniak created the first Apple computer in 1976. He was then joined by Steve Jobs and Ronald Wayne. Together, they launched the Apple Computer Co. from Steve Jobs’ small garage in Cupertino, California. Sometime later, they received their first order for 50 computers to get USD$500 per computer – they delivered in 30 days.

Saturated markets or limited opportunities?

Undoubtedly, these are the cases of innovative ideas and good timing and today’s small firms lack that. But that does not mean that modern businesses’ ideas are not creative or innovative – it is just that the level of market saturation is as high as it has ever been. There are so many ideas being born every day with companies struggling to keep up with the competition.  

This factor also adds to the list of roadblocks that are met by growing businesses. Normally, a business goes through a “business lifecycle” as soon as the owner is making a decision to set up a firm.

If successful, a business usually goes through 4 key stages: launch, growth, shake-out, maturity. Then comes the decline. However, many of today’s firms do not even reach the growth stage due to the harsh market conditions. 

Specifically, these firms today are referred to as micro, small and medium-sized enterprises. The European Commission’s definition of micro, small and medium enterprises is tied to a number of employees and the annual turnover of the company. To be precise:

1. Micro-enterprise has less than 10 workers and an annual turnover or balance sheet below EUR 2 million;

2. Small enterprise features less than 50 employees and an annual turnover or balance sheet under EUR10 million;

3. Medium enterprise employs less than 250 people and reports an annual turnover below EUR50 million or a balance sheet below EUR43 million. 

Yet, there are varying definitions of MSMEs all over the world, which makes it hard for companies to handle certain legal and formal decisions.

Despite no clarity in terms of legal definition, this class of companies is the second largest employment providing sector. According to the latest ‘Development Report’ on MSMEs from the Kochi based Institute of Small Enterprises and Development:

“Micro, small and medium enterprises (MSMEs), the second-largest employment providing sector, need radical reforms to solve its pressing problems and to utilize its potential.”

Will governments save growing businesses?

A lot of private and public organizations understand this urgent need to resolve this pressing issue by creating an appropriate environment for these firms to develop. There have been a number of initiatives from governments that aimed at resolving this problem, just like the Reserve Bank of India has set up the incentives in collaboration with the Indian government. 

They put forward a number of ideas that would facilitate the growth of small firms, including doubling the GST exemption limit to 40 Lakh annual turnover (20 Lakh for the North-Eastern States), speeding up the loan acquisition procedure and some shipping solutions, among many others.

Indian authorities are not the only ones that are struggling for the bright future of the growing enterprises. Many other developing countries’ governments are working on initiatives that are said to improve market conditions for small firms. 

Yet, due to the fact that most of the governments are either resistant or slow to adopt new technologies, the ideas proposed by them are not tackling the problem on a global scale. Surely, they can help growing businesses get a loan and, perhaps, set up the legal definition boundaries, but there are just too many factors that are negatively affecting the development of small enterprises.

Modern problems call for modern solutions

Modern problems call for modern solutions and, considering the fact that we live in the era of decentralization, there are tons of untapped opportunities on the market. 

Users are able to carry out transactions on the blockchain in a fast and secure way. Besides, blockchain technology can be applied to virtually any industry and be helpful – the possibilities are endless.

It comes as no surprise, the solution to the growing business sector’s woes also lies in blockchain technology. According to the OECD:

‌“Enabling SMEs and entrepreneurs to seize the opportunities opened up by the blockchain revolution can foster access to markets and finance and boost competitiveness.”

Many blockchain startups have been aiming to help this important part of the economy through their unique ideas – some propose logistics applications of blockchain, others offer business support with identifying opportunities from blockchain innovations. 

Some of the promising solutions powered by blockchain included the creation of business-oriented data infrastructure. Since one of the biggest obstacles for growing enterprises is the lack of their “creditworthiness”, the blockchain-based data platform would enable them to enjoy a secure and fast exchange network. Platforms like this ultimately lead to a stronger profile of small enterprises on the market, thus allowing them to meet their business needs without any intermediaries.

Now, as blockchain-driven organizations are coming up with innovative solutions for the small business sector, governments start to pay attention. Moreover, global authorities are entering multiple collaborations with blockchain projects, as they realize the whole potential behind this nascent technology. This development is potentially the biggest chance for growing businesses to get help.

Final words

Transitioning from traditional solutions to decentralized ledger technologies to solve one of the biggest problems the current business world faces is not easy. Governments are backing their own ideas that have little to nothing to do with blockchain and only a handful of open-minded authorities are turning to decentralization as a part of the solution. 

Yet, the growing business crisis has been around for decades and none of the government-initiated programs have been able to fix the lingering issues of small enterprises on a global scale. Perhaps, it is the time for innovation and new technologies, which could provide and be the face of local businesses, to take their chance to change the future for growing companies.