How Blockchain protects products against counterfeiting
Blockchain technology has the potential to digitally transform our economy and society in a profound way. In this joint interview, David Geisser, founder and CEO of collectID, and Simone Giehl, Business Lead Blockchain at Zühlke, discuss specific use cases, ecosystems, and the potential of the technology in the future.
Insight in brief
- Assessment of the potential of blockchain in different industries
- It`s potential in the creation and development of ecosystems
- Greatest challenges using blockchain solutions
Where can blockchain solutions be applied and what business solutions is this technology suitable for?
Simone Giehl: Many people are familiar with blockchain as the foundation for the cryptocurrency Bitcoin. Blockchain basically allows digital information to be distributed without being copied and is perhaps easiest to explain using an analogy. Imagine an Excel spreadsheet that is duplicated a thousand times by computers within a network that has been designed to regularly generate an updated version of this Excel spreadsheet. This is a very simplified explanation of how blockchain works. Information is regularly compared in a kind of database, which is decentralised and continuously updated.
Data is therefore public and verifiable. Since data isn’t located in just one place but in different places simultaneously, it’s also not as easy to hack or falsify. We see a wide range of applications for this technology, particularly where data needs to be exchanged between different parties that don’t necessarily trust each other completely. Various business applications are conceivable, ranging from the supply chain to fast, transnational financial transactions to a machine-to-machine economy in which machines handle business transactions more or less autonomously via blockchain.
How can this technology be used in the consumer goods sector?
Simone Giehl: Blockchain has several applications in the consumer goods sector, ranging from the supply chain to the production life cycle to new revenue models. In terms of the supply chain, blockchain unlocks the potential to create transparency among different parties along the chain and therefore increases their resilience and adaptability, since faster and more reliable information exchange also means increased responsiveness for all parties involved. This transparency can also extend to end consumers, who are able to track the unique history of a product and learn more about its production and sustainability background.
Blockchain also has great potential along the production life cycle. This includes secure end-to-end tracking of raw materials and production components, the ability to verify product authenticity, not only in primary but also secondary markets, and the after-sales process, where complaints of counterfeit products made to the original manufacturer can lead to significant costs and service delays.
New revenue models and price strategies can be established, such as where pay-per-use or outcome-based payment models for products have been implemented. In this way, blockchain creates collaborative ecosystems in which different parties can share information and values with each other in order to offer customers the best-possible product and/or service, as well as to differentiate themselves from ‘lone wolves’.
How exactly does collectID use blockchain technology?
David Geisser: collectID uses blockchain to protect products such as trainers or football shirts against counterfeiting and create clearly identifiable unique items. This is done by integrating an NFC (near field communication) chip into products. This chip contains a dynamically encrypted identity that prevents it from being copied. Every product equipped with the collectID technology is therefore a unique item (even mass-produced products). The unique identity (UID) is then saved to the blockchain as a token, and consumers can store the purchased products in their personal wallet on their smartphone.
The decentralised storage prevents the information from being subsequently modified, and changing ownership (reselling, sharing, etc.) only works with the approval of the respective owner. collectID is collaborating with FC St. Gallen to protect a limited edition football shirt against counterfeiting with the help of blockchain and to link the physical product to digital experiences. Over the course of choosing the club’s greatest legend, FC St. Gallen launched a special limited edition of a former shirt.
Marc Zellweger, a legendary FC St. Gallen defender, won the contest and 300 shirts with his name are now available to buy. Each one is equipped with a collectID NFC chip and has a digital token stored on the blockchain. Fans therefore not only know which one of the 300 shirts they own (e.g. 54/300), but also that only a total of 300 of them exist. In addition to transparency, fans are given secure resale and sharing options, as well as a neat portfolio in which to collect additional fan items. Besides transparency and authenticity, our technology also makes it possible to link physical products to digital content. This extends the customer experience beyond the point-of-sale and increases fan engagement.
Buyers of the FC St. Gallen legend shirt receive a personal message from Marc Zellweger and an exclusive video of highlights from his career. The possibilities here are virtually endless. For instance, scanning promotions at the stadium to encourage fans to wear the shirt to games are just one example. Features like ‘scan after score’, which involves scanning the shirt after a goal, offer new possibilities to interact with fans around the world from home, particularly in times of social distancing. collectID is in contact with other major European football clubs that are following the project with FC St. Gallen with great interest. There is nothing comparable in other European leagues. And the US sports market, with its enormous range of merchandising, is also a potential target for us.
How does blockchain technology contribute to the creation and development of ecosystems?
Simone Giehl: We assume that digital ecosystems will evolve increasingly along the customer journey. Blockchain can serve as the technological foundation for this, since we can assume that data needs to be shared within this ecosystem and that not all parties trust each other. However, blockchain makes collaboration – such as between manufacturers, brands, and retailers – possible. Collaboration between local retail and direct sales is then also possible. We call this collaboration between competitors ‘coopetition’. The idea is sometimes difficult to reconcile with the traditional business mindset, but it harbours enormous potential.
David Geisser: Blockchain makes it possible to construct real ecosystems. In other words, ecosystems that are not controlled by a central party. ‘Swiss Made 2.0’ is a good example. With a common ecosystem and the transparency offered by blockchain, various companies, including direct competitors, guarantee that the products sold meet certain Swiss standards.
How do participants in the ecosystem, especially end customers, benefit?
Simone Giehl: End customers can benefit from the technology on different levels depending on the use case. On the one hand, the technology can ensure security with regard to product authenticity and thus quality as well. This is also an advantage when reselling on the secondary market, which naturally promotes a circular economy. The keyword here is sustainability. Telling the customer a story about the product and its creation can increase the perceived value of the product and also improve customer loyalty towards the company. Both parties benefit from this.
In addition to the end customer, other participants in the ecosystem also benefit from the technology. For example, increased transparency and simplified verification of product authenticity increase efficiency in support and complaint management for manufacturers and also make it possible to track the product life cycle and identify potential for optimisation.
David Geisser: End customers benefit from transparency that goes beyond the brand promises of individual participants. The supply chain is becoming more open and end customers increasingly sophisticated. At the same time, the long-term value of products is increasing. A longer life cycle (reselling, sharing, collecting, recycling) is not only sustainable but also increases the product value and therefore the brand value of companies in the long term. It’s a win-win situation for both consumers and companies.
There is a lot of criticism surrounding blockchain, and not just because of cryptocurrency. What are the benefits of this new technology?
Simone Giehl: The ability to establish trust as the foundation for business relationships without the need for actual relationships between parties is, in my view, only possible with blockchain technology. It can pave the way towards actual digital and collaborative ecosystems with some of its features, such as unchangeability and decentralisation. However, the technology is obviously not a magic bullet.
It also involves a shift in the mindset of agents within the ecosystem. Blockchain is often just one part of a much larger solution. In addition – and this is where much of the technology comes from – many blockchain technologies are still underdeveloped and their scalability is currently limited. But that will change, I’m sure of it.
David Geisser: Blockchain can institutionalise trust to a certain extent and ensure – true to our slogan – ‘Transparency through Technology’. Today, blockchain technology can help simplify and secure transactions where trust between humans or in the form of ratings is required. With collectID, for example, a collectable can be bought or sold without the parties knowing each other personally and without expensive third-party verification of its authenticity. The question also arises as to how artificial limitation works for digital goods. These can be reproduced at extremely low marginal costs and consumers cannot always trust that the issuer is completely transparent and honest about the quantities sold and produced.
How do you assess the potential of blockchain technology for the future, and in which sectors?
Simone Giehl: Once the technology is mature, it will have enormous disruptive potential. It could fundamentally change the way we understand business and competition, and bring about a completely new strategic alignment – at least in theory. It’s safe to assume that there are many application scenarios where different parties are forced to collaborate and exchange data. The supply chain is often used as an example here. Development is perhaps also somewhat less disruptive here than it is incremental. However, use cases are conceivable in virtually all industries and areas.
David Geisser: I believe that blockchain has enormous potential in areas where a high level of trust is necessary. In this sense, blockchain technology also fits well with Switzerland and the Swiss mentality. Switzerland stands for trust and security like no other country, which is also something that blockchain represents. I also see great potential in the financial sector, both in banking and insurance. Cryptocurrencies only scratch the surface and demonstrate the kind of exciting ecosystems that can emerge from blockchain.
How will the technology evolve?
Simone Giehl: Today, we see many different protocols that are structured differently and seek to solve different problems. Although Ethereum is probably the most widespread technology and the basis for many different blockchain applications, Ocean Protocol, for example, focuses on problems related to data and AI, and IOTA deals with the machine-to-machine economy. There are many other examples of protocols and it will be exciting to see which of them actually prevails.
David Geisser: That’s a very good question. Different blockchain protocols must contend with problems such as lack of scalability, high transaction costs, and power consumption. Many see it as a trade-off between high transparency (as guaranteed by public blockchains, for example) and the shortcomings of these protocols. I’m convinced that solutions will emerge that take both points into account. Nevertheless, it will be exciting to see how the established and new protocols compete for the favour of applications and users, as well as which protocols will eventually establish themselves and for which application areas.
What are the greatest challenges for companies when it comes to using blockchain solutions?
Simone Giehl: Some companies have tried their hand at the technology with proof of concepts. So far, so good. According to a study by PwC, the problem in more than 95% of cases is that companies cannot manage to implement the technology in the production environment. Depending on the particular use case, there are different reasons for this.
But I believe one of the biggest challenges is mindset. It’s often counterintuitive in business to think collaboratively, and there is a very proprietary mindset regarding data. Plus, for many use cases, it’s not only your own mindset that is important but also that of other players within the specific ecosystem. This kind of mindset does not change from one day to the next.
What process requirements must be satisfied internally?
Simone Giehl: Of course, it’s important that a certain degree of digitalisation already exists. If there isn’t yet any digital data to share, then a blockchain can’t really help much. However, if those things exist, then it’s mostly the willingness to try it that is needed.
David Geisser: That’s difficult to answer. As a startup, we just grew into it and were able to develop on a greenfield site in line with the needs of our customers.
How are companies approaching these projects and how does Zühlke support them in this process?
Simone Giehl: That depends entirely on where a company stands. Some of our customers have already done initial experiments with the technology or at least have use cases available. Others are still at the very beginning. In my opinion, it makes sense to first examine the economic aspects of a use case after an idea has been developed and then focus on the technological implementation.
Many of the companies we talk to also proceed in this way. Zühlke brings a mix of experts to the table that allows us to accompany the customer throughout the entire process, including business consultants, user experience specialists, and technology experts.
About David Geisser
David Geisser is founder and CEO of collectID, a product authentication ecosystem allowing users to easily authenticate and trade products by simply tapping their smartphone on the item. By combining blockchain technology and NFC hardware, collectID fights the problem of counterfeiting. Thus, collectID reinforces consumer confidence in brands and retailers while simultaneously creating a new, secure resale market. David holds a Master’s degree in Business Innovation from the University of St. Gallen, where he did a one year program in Design Thinking in collaboration with Stanford University. As part the program, he developed an MVP for a Swiss-based retail bank. After his studies, David joined Boydak Strategy Consulting where he focused on business model innovation and rapid prototyping. During this time, David led several projects and developed various MVPs for different clients.