Data and Analytics Leaders Need to Focus on

Blockchain Smart Contracts Now

Published: 31 May 2019 ID: G00378440

Analyst(s): Lydia Clougherty Jones

Blockchain smart contracts revolutionize data collection, use and sharing,

creating new data insights and early adopter advantage. Data and analytics
leaders responsible for combining technology with data strategy must
deploy blockchain smart contracts now or forfeit competitive differentiation.

Key Challenges
■ Organizational risk-averse approaches and internal stakeholder resistance to change prevent
data and analytics (D&A) leaders from embracing blockchain smart contracts.
■ Over endowment of internal data can blind D&A leaders to ignore trusted data sharing
opportunities from blockchain smart contract participation.
■ Lagging adoption of data asset valuation methods derails D&A leaders’ efforts to demonstrate
data value from blockchain smart contract use.

Recommendations
D&A leaders responsible for driving D&A strategies must take these three actions to leverage
blockchain smart contracts now:

■ Champion it — Champion the adoption of blockchain smart contracts by illustrating how they
enable internal data sharing and enhance data quality and trust, while increasing efficiencies
and cost savings.
■ Pilot it — Pilot blockchain smart contracts first internally, then externally with your affiliates and
partners, by automating a simple business process such as a purchase or a payment. Use the
pilots to illustrate the positive impact on data sharing and the creation of new D&A programs.
■ Prove it — Adopt Gartner’s data asset valuation methods to identify enterprise value from
blockchain smart contract application, including cost savings, risk mitigation and net new
revenue.
 Table of Contents

Strategic Planning Assumptions............................................................................................................. 2

Introduction............................................................................................................................................ 2
Analysis.................................................................................................................................................. 3
Champion It: Champion Emerging Digital Trust Technologies Now....................................................3
Pilot It: Pilot Blockchain Smart Contracts Now..................................................................................5
Prove It: Apply Data Asset Valuation to Blockchain Smart Contract Adoption................................... 9
Gartner Recommended Reading.......................................................................................................... 11

List of Figures

Figure 1. Prepare to Deploy Blockchain Smart Contracts Now............................................................... 3

Figure 2. Smart Contracts Automate Contract Formation Through Performance ....................................4
Figure 3. Smart Contracts and Blockchain Critical to D&A Strategy Success.......................................... 6
Figure 4. Almost Half of Respondents Using or Expected to Use Smart Contracts and Blockchain.........7
Figure 5. Highly Effective D&A Teams More Likely to Be Using Smart Contracts and Blockchain.............8
Figure 6. Apply Foundational and Financial Measure Questions............................................................ 10

Strategic Planning Assumptions

By 2030, blockchain will create $3.1 trillion in business value.

By 2022, more than 1 billion people will have some data about them stored on a blockchain, but
may not be aware of it.

By 2021, at least one smart contract failure with a loss greater than $100 million will be due to a
software vulnerability that could have been caught through common application security testing
techniques.

Introduction
As D&A leaders increasingly move away from IT oversight, they are expected to drive more and
more business value by enhancing data value and quality, improving analytical decision making, and
creating operational efficiencies. To meet or exceed these expectations, D&A leaders, including
chief data officers (CDOs), must actively explore the adoption of digital trust technologies such as
blockchain smart contracts. Adoption of blockchain smart contracts can enable access to new
trusted data sources and expand data sharing to support analytical decision making.

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 Yet, D&A leaders face organizational aversion to data sharing and stakeholder resistance to change,
preventing the adoption of blockchain smart contracts.

Why do D&A leaders need to focus on blockchain smart contracts now?

Because they transform a probability of trusted exchange (inclusive of the data asset) to a near
certainty of trusted exchange. This results in a superior model for data sharing that increases data
value and quality as well as enhances analytical decision making. Prepare to deploy blockchain
smart contracts now by championing the adoption of emerging technologies, piloting blockchain
smart contracts and applying data valuation methods (see Figure 1).

Figure 1. Prepare to Deploy Blockchain Smart Contracts Now

Analysis
Champion It: Champion Emerging Digital Trust Technologies Now

The most successful data and analytics leaders embrace

emerging digital trust technologies, including blockchain and
smart contracts, to enable and drive data program success.
Gartner’s 2018 Fourth Annual Chief Data Officer (CDO) Study

Emerging digital trust technologies such as blockchain smart contracts have the potential to
transform business processes, contract formation through performance, and both internal and
external data sharing. As a digital and autonomous representation of the traditional contract
process, they change how businesses process transactions across internal and external contracting
ecosystems. Smart contracts also provide a trusted data collection method, while enabling
business value and competitive advantage through the efficient transfer of data assets (see Figure
2).

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 Figure 2. Smart Contracts Automate Contract Formation Through Performance

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 As D&A leader, you must champion the use of blockchain smart contracts now. Start by
communicating the opportunities to use blockchain for strategic innovation. Use “Understanding
the Gartner Blockchain Spectrum and the Evolution of Technology Solutions” to demystify the
business capabilities of blockchain. Provide specific examples of how organizations across all
sectors primarily use permissioned blockchain, including for shared record keeping and asset
tracking, in part because it provides an immutable, (near) tamperproof audit trail (see “Assessing the
Optimal Blockchain Technology for Your Use Case”).

Then communicate the positive impact of blockchain smart contracts on data quality metrics, such
as validity, integrity, timeliness, accessibility, existence, believability and objectivity. (For more on
data quality characteristics, see “CIOs Are Fueling Digital Business With Digital-Grade Intelligence.”)

Your messaging should:

■ Emphasize that participation in enterprise-level private blockchain smart contracts can increase
cost savings by eliminating traditional third-party intermediaries (e.g., bankers, escrow agents,
lawyers) and their fees, as smart contracts perform the intermediary functions automatically.
■ Detail how the deployment of blockchain smart contracts increases enterprise efficiency by
reducing transaction time and tasks, while enabling contract terms and conditions immutable.
■ 1 2
Include the growing trend of retail organizations such as Walmart (and likely Kroger ) requiring
the use of blockchain smart contracts as a condition to doing business.

Pilot It: Pilot Blockchain Smart Contracts Now

Data and analytics leaders who are reporting to a business

leader are more likely to adopt smart contracts than those
reporting to an IT leader.
Gartner’s 2018 Fourth Annual CDO Study

In Gartner’s 2018 Fourth Annual CDO Study, respondents reporting to a business executive, such as
the CEO, CFO or COO, were more likely to adopt smart contracts than the organizations of those
respondents reporting to executives with IT titles. Seventy-seven percent of the respondents
reporting to a business executive were at that point using smart contracts, compared to 23% of the
respondents reporting to an IT title.

In that same study, 14% of respondents ranked blockchain and 16% ranked smart contracts as
“critical” to the importance of D&A success (see Figure 3). Notably, 16% of respondents reported
currently using or piloting blockchain (see Figure 4), which is significantly higher than the adoption
of blockchain reported by respondents to the Gartner 2019 CIO Survey, which was only 3%.

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 Figure 3. Smart Contracts and Blockchain Critical to D&A Strategy Success

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 Figure 4. Almost Half of Respondents Using or Expected to Use Smart Contracts and Blockchain

Further, respondents using smart contracts or blockchain were more likely to report higher D&A
team effectiveness in consistently producing clear business value for the organization and in
showing demonstrable, verifiable value to D&A stakeholders. Respondents using or piloting
blockchain are also more likely to provide information value to the organization (see Figure 5).

Though it is a small subset of respondents (fewer than 30), those who report to a business
executive, such as the CEO, CFO or COO, are more likely to have adopted smart contracts than the
organizations of those respondents reporting to executives with IT titles.

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 Figure 5. Highly Effective D&A Teams More Likely to Be Using Smart Contracts and Blockchain

As D&A leader, you must pilot blockchain smart contracts now. Start first with internal use,
deploying them to automate a simple business process, such as nonsensitive data distribution or a
simple contract formation for contract performance or management purposes. Then engage with
your affiliates and partners to pilot blockchain smart contracts to automate multiparty contracts
within a well-defined ecosystem, such as banking and finance, real estate, insurance, utilities, and
entertainment. To generate ideas for pilots, review examples of end-user offerings based on
interfacing with a smart contract (such as those provided in “Preparing for Smart Contract
Adoption”).

Look for pilot opportunities to leverage blockchain smart contracts within public/private
partnerships or by engaging in the “data for good” movement. (For free resources — including
around people, software, technology and data — from D&A vendors that support data for good, see
“How to Use Data for Good to Impact Society.”) Use these pilots to illustrate the positive impact on
data sharing and D&A outcomes.

Solidify and leverage your relationship with your CIO, CTO, data product managers and CX leaders
by developing internal and external pilot programs using blockchain smart contracts. Then create
an enterprisewide communication plan together that illustrates positive piloted use cases. Include

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 how private blockchain smart contracts promote digital trust by enabling transparency of the data
exchange, including personal data, as it is distributed and visible to anyone who has access rights
to the private blockchain via private keys. (For guidance on communication strategy, see “How Data
and Analytics Leaders Can Create Effective Influence and Communication Strategies.”)

Gartner predicts that, by 2021, less than 2% of global organizations will have adopted complex
(bundled) smart contracts, yet 20% of organizations will be subject to them. Work with your legal
counsel to understand these requirements and together use smart contracts to compose legal
documents important to data collection, use and sharing. Partner with your legal counsel to
understand and leverage new laws that encourage blockchain use, including for records
management (see Vermont S. 269, Act 205 for an example). This will help as you develop future pilot
use cases to support the adoption of blockchain smart contracts.

Prove It: Apply Data Asset Valuation to Blockchain Smart Contract Adoption
Use Gartner’s information valuation models here: “Applied Infonomics: Why and How to Measure
the Value of Your Information Assets.” Use these models to start the conversation around “asking
the data value question” to demonstrate increased data value and D&A success from the adoption
of blockchain smart contracts.

First focus on internal cost savings and risk mitigation, then on net new revenue opportunities. Do
this by applying the following foundational measures and financial measures in Figure 6 to “ask the
data value question” from the anticipated outcomes.

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 Figure 6. Apply Foundational and Financial Measure Questions

A few examples of how you could apply these measures:

■ Connect the internal cost savings (from eliminating the intermediary, for example) to the
economic value of the information (EVI) by asking, would having costs of the intermediary’s
involvement yield a higher EVI?
■ Connect risk mitigation from knowing that, with smart contracts, there is a guarantee of the data
exchange if the condition is met, with a potential increase in the performance value of
information (PVI).
■ Evaluate the market value of new D&A programs from, for example, using blockchain smart
contracts across your supply chain, assessing whether this would yield a potential increase in
the market value of information (MVI).

The value of data is dynamic, leading to suboptimal use cases and loss of opportunity. Use “7 Steps
to Create Persistent Data Value” to create persistent data value by combining data collection, use
and sharing with data value and business value. And to do that by adopting emerging digital trust
technologies such as blockchain smart contracts now, or lose competitive advantage.

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 Acronym Key and Glossary Terms
Blockchain An expanding list of cryptographically signed, irrevocable transactional records shared by
all participants in a network. Each record contains a time stamp and reference links to
previous transactions. With this information, anyone with access rights can trace back a
transactional event, at any point in its history, belonging to any participant. A blockchain is
one architectural design of the broader concept of distributed ledgers (see Gartner IT
Glossary).

Smart A computer program or protocol, typically running on a blockchain, that facilitates, verifies
contract or executes business processes triggered by events, on-chain transactions or interactions
with other smart contracts (see “Digital Disruption Profile: Blockchain’s Radical Promise
Spans Business and Society”). A smart contract is a digital and autonomous
representation of the traditional contract process, including contract formation, creation of
enforceable and immutable rights and obligations, and execution of performance (see
“Use Smart Contracts and AI to Drive Value From Data Investments” and Gartner IT
Glossary).

Blockchain Blockchain technologies support smart contracts to programmatically facilitate, verify or

smart execute the terms of a contract (see “Top 10 Strategy Technology Trends for 2018:
contract Blockchain”). This enables programmable and automated business processes, including
contract formation through performance, and creates alternative data sources.

Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.

“Preparing for Smart Contract Adoption”

“Use Smart Contracts and AI to Drive Value From Data Investments”

“Top 10 Data and Analytics Technology Trends That Will Change Your Business”

“Understand the Gartner Blockchain Spectrum and the Evolution of Technology Solutions”

“Use Gartner’s Blockchain Conceptual Model to Exploit the Full Range of Possibilities”

“Integrating Blockchain With IoT Strengthens Trust in Multiparty Processes”

Evidence
Sources of information for this research include:

Gartner’s 2018 Fourth Annual Chief Data Officer Study

This was conducted by online survey from September through December 2018, with 257 D&A
leaders from across the world. The term “CDO” is used representatively of CDOs, CAOs and other
senior executives with D&A leadership responsibilities at an organizational level.

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 Gartner Inquiry

We are hearing from D&A leaders in inquiries that they need help to better understand the attributes
and application of emerging digital trust technologies, including blockchain and smart contracts.
This research responds to that expressed challenge.

Client inquiries and other interactions over the last several years contributed to the overall
knowledge base represented by this research.

Further Reading

“The Endowment Effect: Are Your Applications and Data in the Right Place?” ITProPortal, and
“Endowment Effect,” Behavioraleconomics.com.

This bias occurs when we overvalue something that we own, regardless of its objective market value
(Kahneman and others, 1991). It is evident when people become relatively reluctant to part with a
good they own for its cash equivalent, or if the amount people are willing to pay is lower than what
they are willing to accept when selling it. Put more simply, people place a greater value on things
once they have established ownership. This is especially true for things that wouldn’t normally be
bought or sold on the market, usually items with symbolic, experiential or emotional significance.

Endowment effect research has been conducted with goods ranging from coffee mugs (Kahneman
and others, 1990) to sports cards (List, 2011). While researchers have proposed different reasons for
the effect, it may be best-explained by psychological factors related to loss aversion (Ericson &
Fuster, 2014).

S. Rafaeli, D. R. Raban, “Experimental Investigation of the Subjective Value of Information in

Trading,” SSRN.

Citations

1 By 31 January 2019, all of Walmart’s suppliers (of leafy green vegetables) were required to have
joined its blockchain. By 30 September 2019, all farmers, logistic firms and business partners of
those suppliers must join, too. “Walmart Requires Lettuce, Spinach Suppliers to Join Blockchain,”
Wall Street Journal.

2 “Albertsons Companies to Join Blockchain-Based IBM Food Trust Network to Pilot Increased
Transparency for Romaine Lettuce,” MarketWatch.

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