Evolution and survival require the embrace of change
The subjects of innovation, transparency, efficiency and regulation were all on the agenda at the DigitalShip Copenhagen conference. It was an apt venue: the country’s bulk sector is fighting for survival but its container operator is hailed as an innovative leader. It also hosts Danish Maritime Days, an event which has sought sustainable answers to structural industry questions.
Plenty of opportunity for blue sky thinking one might think. In fact, asking a panel comprising Wartsila, Maersk Maritime Technology, Danish Maritime and Shipowners’ Association, a self-confessed industry disrupter and satcoms provider SpeedCast for their perspectives created enough heat and light to inspire the most cynical industry observer.
Avoiding the temptation of opening with an easy topic, we wondered whether maritime could truly encourage a mindset of open collaboration that could help overcome a long term downcycle? And to put that into perspective, BIMCO analyst Peter Sand had earlier likened the dry bulk market to a patient breathing only with life support. There were, he added, plenty of dinosaurs in the market who would be wiped out if they could not evolve.
Christoffer Husell of Shift Actions, who describes himself only half-jokingly as a ‘start-up troublemaker’ observed the missing link in the event’s talk of efficiency, costs and optimisation. “I think almost no-one today has brought up the customer. Innovation has to be customer-driven, it’s where the pressure comes from.” he said.
Sini Spets said the Wärtsilä approach is not to think like a big OEM but rather about the services that reflect what customers are doing, listening to all segments. “I don’t see a challenge in creating different types of software. Business models should be easy to tailor, it’s about how open and daring you are in the discussions and how open you are to listening.”
But Michael Rodey of Maersk Maritime Technology doubted that industry could make a leap to more collaborative ways of working. “Social Media for example makes money from data and there is a lot of value there, but will our industry change and share that data? Probably not.”
To Spets, this was too cynical. The engine maker, she said believed there was ‘immense value’ in openness and it was something they would promote. “You may choose to perceive that as idealistic but competition is between brains, analytics and capabilities, not just who has the most data.”
Rodey countered that collaboration between owner/operators and OEMS on maintenance and performance is not transparency but rather “another tightly controlled relationship”. But perhaps the perspective is the problem.
“There’s a great difference between horizontal and vertical sharing of data,” said Michael Prehn of Danish Maritime. “The vertical sharing will come we are able to safeguard it. You have to be sure that the data you share with Wartsila does not go to MAN and your competitors.”
Does that mean the business model is in fact irreparably broken. Must the industry destroy and remake itself or can the patient be saved? To Husell, the changes happening in the market are so radical that it implies that there should be bigger response than seen so far. “I’m betting that when people make this scale of losses there has to be a change. Sometimes it feels like that change needs to be a quick death for new ideas to come up.”
And if not enough attention has yet been paid to new approaches outside shipping, much has been spent on the forces that potentially held it back. Will the industry be able to tackle the chicken and egg of regulation as both driver and impediment to innovation?
Speedcast’s Martin Reason argued that regulation has become increasingly critical to technical innovation. With maritime companies forced to demonstrate compliance, it is becoming a bigger driver of innovation than IT companies telling end users what they should be buying.
But he doubted that the regulations of the future could they be driven by shipboard data unless its collection was mandated. “The type of vessel and company’s technology will make a huge difference. Without the right technology they won’t be able to collect that data”.
Maria Bruun Skipper of the Danish Shipowners’ Association admitted that owners can suffer from a lack of knowledge even when it comes to their core business. “As an association we provide a platform for collaboration, but there have to be a clear limits to how far they want to go.”
She cited the EU’s MRV regulation on CO2 emissions which has been opposed by some owners on the grounds that the information reported is commercially sensitive. But she added that a shipowner that is not innovative will be left behind.
“Efficiency has to take regulations into account not just to save fuel. When we look at CO2 there will requirements for absolute reductions and by then, technical and operational measures will not be enough,” she pointed out.
The huge discrepancy in enforcement is just as important, because it allows owners to fly under the radar and create market distortions. Prehn believes that regulation “can drive innovation in areas where the market does not do so and that’s true for all sectors. Regulations covering air pollution from trucks or ships will never be market-driven”.
Rodey said MMT has looked outside the industry for rules as well as best practice. “Unfortunately what we have found is many technologies that if we tried to implement them at IMO level would be blocked, so there are regulatory hurdles as well as opportunities.
To Christoffer Husell the discussion of regulation as an impediment to innovation is easily disproved. “Banking, insurance and healthcare are highly regulated industries full of sensitive information and security and there is so much innovation going on there,” he said. Start-ups are eating the incumbents’ revenues day by day. By some estimates, one third of conventional banking revenues would be taken by start-ups in the next five years. “To me it feels like an excuse not to push the envelope.”
Until that happens, shipping will continue to seek greater efficiencies, but here too, the game needs to change to achieve anything like the improvements required. Rodey pointed out that in a commoditised business, there are only two paths to obtain competitive advantage: cost and efficiency.
“The efficiency path of digitalisation leads to smarter fleets and is also a way to capture advantage over competitors who are locked into an analogue world,” he said. Maersk has invested millions in the efficiency of its fleet but has it, like others, inevitably hit a wall formed of fundamental design principles? Rodey said he’d need a crystal ball to answer that one. “Other industries like rail transport are still innovating, even though they been around for hundreds of years. Efficiency is a lot of different things and its not just design, but also the way you operate.”
There is a risk in using the ‘super-users’ as the paradigm which makes best practices too lofty for the mainstream open-minded attitudes are not buried too deep. Wärtsilä recently hosted the Marine Mastermind competition to foster innovative ideas from start-ups and Ilari Parkkinen said the process had gone beyond insight on the future of the industry.
By encouraging new ideas and combining invention with analytics he said an owner could get access to information that hasn’t been available before. “Instead of regulations based on lowest common denominator, we could be looking at operations based on real history and existing information which could actually give us foresight. We need to break the orthodoxies of our very traditional business. If we don’t question, then we won’t create the disruption.”