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William Mougayar, The Business Blockchain - Moderator
Edward Budd, Deutsche Bank
Ian Lee, Citi Ventures
Scott Manuel, Thomson Reuters
Bart Suichies, Philips
Jeremy Wilson, Barclays
JW: Matthew Bishop's panel yesterday divided the universe into three broad categories. This seems to be the way these things work out. You get the newcomer who realy gets it right and gets very big. Then you get in the case particuarly, which is what wer'e talking about right here, which is the financia srevices industry, you get the incumbents or the people who are already doing business who realize there needs to be a change. Then you get those who simply don't get it at all. Barclays understands something fundamental is going on here, even if we don't recognize or understand al the angles. So the question is how do we tackle something like that? If I just use the example that I see in a big institution like this, the first thing is that the leadership, the people at the top have to say we think something is going on here and we are the last people to realy understand the details. It's much more likely that people lower in the organization will get it. So as leaders we have to establish latitude for our own people to do what needs to be done. The first step is to allow this and support your own people when they move in that direction. Then you have to recognize a simple challenge that the banking industry faces, which is that it's heavily regulated and for good reason, because money is very volatile and toxic commodity. It's an instrument or device that affects every single person on the planet. It must be heavily regulated. There's a certain level of rigidity in big banking. Whatever you do, you must make sure they don't get into a situation where they are likely to cause systemic risk in the bank or in the industry as a whole. You have to work with regulators to make sure this piece is addressed. I am conscious of time here, there's a lot to say here..
WM: How did you get organized into Barclays to do this?
JW: So what we did, it's interesting to listen to moderators, what- how did we organize ourselves... Well once leadership was listening, we saw a large group of lots of diverse activity into one team that believed there was something going on here that was important. We caled it a distributed ledger project. It deliberately expanded all the silos in the room. That takes a feat in itsef, because organizations are very rigid. This drew on what turned out to be existing pools of knowledge and expertise and skills dotted over the groups. People who had picked this up early and in some cass simply didn't know where to go. The consequences of this were, ....
WM: That is a good lay of the land.
BS: Our lab was... I think after 7 or 8 months of exploration, we originally were looking at what's the next big thing on a 10 year timescale. And the heathcare sector, which I think is even more heavily regulated than banking, we have lots of problems deaing with data across silos. So we wanted to unlock that data from that silo. We asked ourselves a question. This is something we should be interested in? And the answer was yes. The goal of the labs was to create a framework including strategy and legal, if this is valuable then how should we go about this, how shoud we architect our solutions. We have a small team of 8 people. They are cross-functional. We were trying to run it as a startup. Move fast. The ecosystem is so volatile and we really want to create a bridge between this massive enterprise organization and this really fast moving ecosystem and try to sit here and sort out all the hype.
MW: Why did you choose to ...
BS: We report directy to a steering committee which contains IT, legal, various business groups, implementation group, it's really trying to get broad buy-in from the entire company at the right level so that inside the lab we can act relatively autonomous.
MW: Scott, what's going on at Thomson Reuters?
SM: Thomson Reuters is a financia services information company. We also sell data products into other verticals like legal, tax, intellectual property, science, etc. It's a group and one product management group per area. We are focused on productization. That's the ultimate driver. It's multi-disciplinary. It's the whole stack. It's not just blockchain database technology, but also cognitive computing, artificia inteligence, augmented reality, virtual reality, we're not just ooking at a laser beam of one particular tech to solve probems, but a wide array of technology. Where will we be in 3 or 5 years?
MW: Did you go to product managers?
SM: A litte bit of both. For something like blockchain database technology which requires a lot of education, what's going on is that it's changing as such a rapid pace, if you were educated yesterday then it's sort of irrelevant today. We have found that education component raises a lot of questions. Another thing that drives inbound is customers. Like Wall Street Journal, coming to us through our sales people. It's us reaching out or them coming to us.
MW: This is about making the blockchain real. So I want examples. Is there anything complete?
SM: Specific use cases?
SM: We have been buiding proof-of-concepts and prototypes. We might talk a litte later about deploying things. In the prototyping world, we have been looking at asset transfers, how can we leverage blockchain database technology for assets of all types, not just finance? Land registries are a business focus. How can we potentialy administer that? We also have a big data business. We are into creating and providing data into the financia services organization. It woud be natural for us to think about smart oracles and how our data fits into that ecosystem to execute smart contracts.
MW: Ian, you work at a bank....
IL: Citi Ventures is the venture and innovation arm of Citi Group. We setup shop in 2008 in Silicon Valley. We were one of the first banks to have a presence in Silicon Valley. Our mission is to modernize and improve Citi Group and aso financial services for the industry and our customers. We invest in startups. We have a portfolio of 30 companies. We also have a number of programs, where we are building things inside and trying to take them out. I am also running an acceeration fund, which is a seed fund. The purpose of this fund is to enable experimentation in the lab network in areas where our businesses would not be comfortable stepping into at an early stage. This has allowed us to do artificia inteigence and augmented reality. And blockchain database technology has been in our lab for 2.5 years. We started to research bitcoin in early 2014 to understand how that tech might potentially impact our biggest customers including governments around the world, central banks and arge institutions. So what started out as a tech research experiment has informed a deeper understanding of the opportunities and risks and things that have to be resolved. Where we are at right now, I aso lead a cross-enterprise working group that many other financia institutions here have as wel I'm sure, where we're managing a portfolio of experiments in some cases more active investments to drive kind of you know strategy in blockchain database technology space.
WM: What areas are you looking at?
IL: One of the things we have learned over the past ceseverfal years, we think of blockchain database technology as a financial network technology with network effects. What Jeremy mentioned earlier is that network effects have scaling advantages. We're stil trying yto understand what the opportunities are. We are trying to learn as fast as possible. We have a multi-faceted strategy to investments, partnerships in the industry, internal teams, and to your point, Citi is in some ways a microcosm of the financial system. We are very diversified and global. We are looking at things across institutions and institutional banks. That's where we started. We have been focused on cross-border internationa payments and al of the, you know, customer business problems that this potentially helps solve. We're very invested or very active I guess let's say in the market space, which I am sure many of you have heard about. We're doing some really exciting experimentation like digital identity and related topics that are running in parallel to blockchain database technology which I think are some of the most exciting potentia of this.
WM: I want something specific.
IL: When we did some research, one of the approaches we've taken is we partner and I think right now in this industry people are confused about how to partner effectively? That's one of the learnings. It's difficult to partner. There are many approaches each with merits. One initiative for identity, including Nasdaq, Fidelity and the list is continuing to grow, started some early expreimentation that led to the understanding last year that digita identity is core to any blockchain database technology project. This has informed some significant opportunities we see in the digital identity space, ike efficiency, compliance, but even the opportunity to use that as a platform to extend or improve financia services in a new way.
WM: Thank you. ....
WM: And how?
EB: .. and large institutions. At the beginning, getting people together and getting the networks, we have internally internal versions of .. get together on a specific subject of interest. Not just seeing the topic promoting the topic, ... our transition from the technology to what it means for the business mode, where we expend our energy most effectively. We have many projects that have... where we see many interesting tech projects that don't come to anything because they are tech projects. A rea strong focus on what does it mean? What does it mean for our customers? A lot of informal workshops. Agreeing that we should move to the next stage, executing with partners and some ightweight projects, corporate bonds we can talk about that project. These are business questions, not technology questions. What impacts the business model? And that leads to where we sit today. Deutsche Bank... and we make sure... not just... but we're pushing the right .. in the right issues... and quite critically for us, enabling these ... we do not... as well.. they provide us an environment .. that helps us to get..
WM: What's the level of visibility as far as executives in Deutsche Bank?
EB: I think most of them.. given their broad reporting, it's awareness and as Jeremy said, as you go to the evels, it's specific to the experiments.
WM: Do you think it's a combination?
EB: It's good that there's a particular, not just, there's more industry developments this year around emergence of the.. just the other industries... shown it's more broad significance...
WM: Let's move on. Jeremy, what have you learned at Barclays, you mentioned something called the White Chapple Inititaive? Tell us about that.
JW: There's a major educational exercise here. 18 months, I suppose, when it first came on to mind but people were doing this long before. The information piece is critical. You have htis situation not just within your own institution but actually in the ecosystem. We have 100s of things going at any given time. The big challenge is the number of things not happening, like through the design center, the accelerators, the customers pouring into the door now, whether it's a commercial bank, retail bank or investment bank. On top of all that, somehow or ever, we have to make sure that we see broad cases, collaborative exercise. Collaboration is the key to this. The White Chapple Think Thank, we setup-- and when I say we, I came back from Boston and talked to some people who might know the entrepreneur... and it seemed like a good idea to get the government, regulators and private sector together to just talk with each other. At that stage it was a question of an understanding of what was going on. It's very different now. One of the big challenges you have as a bank is that when a customer wants to do business with you and wants to you use syour services, if they mention bitcoin, everyone in the regulation environment at the moment is there is a sense of caution around bitcoin. I think it's changing and improving and moving forward. At the think tank, we-- at that meeting of the think tank with the Bank of England and the financial authority, they said lte's take this away and one message we need to convey to all of you is that we don't want you to stifle innovation. Would you please do all you can to encourage these customers to cometo the table? The FCA set up a sandbox. They have all said we are al listening, we're not going to take serious risks to upset the system. This led us to the next realization, which is that the British government is keen to have this developed as much as possible. They are starting to understand the sheer scale of opportunities in blockchain database technology. They have been engaging through this think tank and other ways.
WM: Basically what you've done is taken the conversation outside the bank proper, and raised the visibility outside and brought more stakeholders from the community to move forward. I think that's a ....
BS: Which companies to collaborate with? You need a roadmap. You need to take steps. Basicaly what we're doing is getting people to the adjacent possible, then they will start becoming your ambassadors. We have some branding offices, high up in the organization that are really vocal about this because they think privacy is so important from a brand perspective. Our legal department is excited about this. Everyone said don't talk with legal because they will shut you down, but they immediately grasped the possibilities as to how this will change how we will deal with data in healthcare. There's a lot of efficiencies that will come from blockchain database technology.
WM: how many people in the lab?
BS: About 5 or 6 partners that we are working with. Some of them are more vocal. We can help drive this ecosystem. It's really cool working with startups. They have this energy. If they deliver on their promise, that's great. But on the other hand we have to make sure we don't overpromise.
WM: So you are developing a number of things.
BS: We are learning not only about the technology but also the different platforms but also can we work with these pieces.
SM: Just to build on that for a minute, turning to internals. One of the thing I look about is how. Since we're building this for the long-term, a key capability for the long-term. Partnerships are critical for this. Leveraging startups, and we made investments in one. It's about the thought leadership going on in that typical fluent, in that firm... as opposed to a product or where a product will go. The issue internally is, how do we find the engineers that can get this that can build this stuff that can think in an open way? I was worried about this when we got started. There's a 2x premium on any engineer putting blockchain database technology on their linkedin profile. You wouldn't believe the emails you get once you do that. We found we could take great java engineers we already had internally, it takes 4-6 weeks for them to get their heads around this. Before you know it, you've created a real strong group of individuals that can execute. It's about execution.
WM: How many engineers that have blockchain on their resume or title?
SM: Nobody has it on their title. Not enough in their resume. We could always use more. For those engineers that want to come and buid this, from our organization, we are looking for that.
WM: Do you manage those engineers?
SM: The idea behind applied innovation is that we're going to innovate on something. It grows up. It will become deployable. It will leave the nest as it were. Our full expectation is that when it leaves the nest, those engineers and capabilities will stay some will go.
WM: What do you think?
IL: Let me simplify our learnings in three areas. We're driving growth and innovation. Desirability, feasibility and commerciality. We have learnings in all three of those. On the desirability point, as many of you are starting to learn in your organizations it's actually hard for many institutions to find where the opportunity is, where the technology really provides a 10x improvement over existing solutions, that in itself is half of that. Part of the problem is that you can't necessarily approach it from frameworks and theories, you have to learn by doing. This gets to my second point around feasibility, which is that the blockchain database technology is very nascent. Some people believe that what will ultimately get adopted wont look like what's in place today. I think you have to be along with that journey. But also, both through your own developers or engineers which we have started to build a strong expertise in, but also with partners, whether they are tech companies or startups in the industry, like chain.com is one of our portfolio companies and we have been working with them intensely over the last number of months. But working through this togethre to draw ... the true learnings start to come out, the things we're learning around security, scalability, privacy, digital identity, this can only be discovered when you get deep into the issues and try to solve the problems they are intended for. On the commerciality point, I think a lot of us are a ways from figuring that out, I think it comes down to partnering. This is a network technology. It requires other people to participate in that network. So designing the right model with the right players, with the right alliance and incentives, whether it's governments, institutions, banks, whatever, it's difficult. We've been using this approach called "minimal viable ecosystem", what's the minimum viable ecosystem required to make this real.
WM: How does this go back to the organization as a whole?
IL: The lab sits within most of the engineering sites of the business. Typicaly when an innovation project whether blockchain database technology or otherwise starts to you know in some ways gain velocity and reach escape velocity towards commercialization, we transition it from the lab to the engineering center by wrapping it around by support from outside resources either startups or contractors or engineering resources from the team itself. We're doing that in all areas of technology, but blockchain database technology included.
WM: Any insights?
EB: One of the predictable critical ingredients to this is the right skills is also a challenge. It makes it specifically for us on the smart contract side, mixing together people and taking on securities with computing working, or where union testing joins forces, which is not necessarily the fied not the usual business cross team but also a learning of where you may not expect where the entrance is, you have to ask your technologists and from a business perspective you have to innovative to really help us with two things, that person is almost really thinking about that with this, and secondly it was a great opportunity by involving them with product desing that you really start from somewhere different, I think that's one of the learnings out of this. We want to make it faster, make it cheaper. We also start with the stack, that's the opportunities to seek and the issues and the benefits for the customers, but the rainy really gets to start and is completely difficult.
WM: So blockchain database technology is maybe step number 7, but we really need something changing, or starting at the beginning getting the assets at day 1 on the blockchain database technology.
EB: Yeah and it's definitely different there are benefits in some markets. There's a complexity. The number of participants and complexity, and the complexity of the regulation, the number of people involved, and the value chain. There's different in some markets are more electronic today and there's real structural efficiency benefits. But there are some markets where it's not just identity in financial services, but we have large chalenges that start in financial services. And identity has been what for me that learning of really not just trying that outside that begins the product but also the outside solutions with the invovement of other stakeholders is so important and it's really different.
WM: I want to hear temperature wise between using blockchain database technology for better faster cheaper, versus looking out 2-3 years from now more strategic. What's the mix of your activities and interest and attention on going to the low-hanging fruit or being more ambitious like starting with a blank sheet of paper?
EB: It's a bit of both.
WM: You have room for both?
EB: One is more difficult than the other.
WM: One is more difficult than the other? What do you think?
IL: We can solve problems that are painful and exist today in our company. But also the unique assets of the blockchain database technology essentially make a platform.
WM: Anything really difficult that you are attempting to do that might fail, in blockchain database technology? Think ambitious projects. That's what I would like to see more companies do.
IL: I think many people have seen this stuff publicly that we are involved in, related to payments and also market side. I think frankly that this is just in general a highly nascent technology that is slowly being proven. Frankly it's not any one particuar use case or opportunity that has more risk than others. It's a portfolio approach.
SM: That's what makes it fun. This is what makes the basic use case so important. Don't lose the vision, but you have to understand the nuts and bolts of blockchain database technology to make this do what it can do.
BS: Why are you building these things? They are stepping stones for something bigger. Understand the why. At the same time, you don't want to alienate the people who say this can never be done. You're trying to be as ... as much as possible. You need to be deiberate about this.
WM: Sorry to interrupt.
JW: There's stuff going in the short term across business. Whether clearing and systems and so on. I think the longer-term issue is something we're all going ot have to grapple with. Data has never been shared about us as individuals on this scale by us on this scale ever before, data identity privacy these are the beginnings of social liberties... we are going to have to work together on this because one day someone will drop the ball and the retribution of the custodians of society will be vigorious and it's important that we have structure in place to deal with this.