Towards a knowledge-based shipping industry
A combination of formal and tacit knowledge can produce better results in the shipping industry, writes Torger Reve
I grew up in Farsund, a small sleepy town at the southern tip of Norway. Farsund specialised in shipping, and there was not much else. We used to say that Farsund was the largest shipping town in the world, measured in terms of tonnage per capita. Young people went to sea early, often as young as 14, with no further education.
Those who succeeded in these early formative years at sea, came back some years later to study at the local maritime school to become officers. Their career goal was to become chief engineer or captain. The captains ranked highest socially, only the shipowners were their superiors. The most experienced captains often returned to work for the owners, to provide the technical and commercial skills needed at the shipping office.
Shipping almost 50 years ago was solely based on tacit knowledge, transferred by apprenticeship, experience and practice. You started at the bottom of the hierarchy at a young age and advanced by discipline, learning and hard work. Then you added a minimum of formal knowledge, but college degrees were seldom required. Maritime was an industry of practice, not theory.
Modern shipping is totally different from the industry of 40-50 years ago. Former shipping towns like Farsund, have little or no role to play in global shipping. Almost no young Norwegians begin their working lives with work at sea, unless it is in the small, advanced offshore vessel market, where Norwegian owners still dominate. Asian seafarers have taken over at sea.
The shipping companies in Oslo, London, Singapore and Shanghai are run by highly educated executives with degrees and MBAs from Harvard or London Business School. There are still self-made shipping tycoons, but more and more the shipping industry resembles the financial industry.
Have we lost something valuable in the transition from practice industry to professional industry? I think we have. The practical knowledge learned through experience is a basic component of all well-functioning industries. At the same time, all industries need professional, formal knowledge to handle the complexities of technology and markets, not the least to match the financial industry that funds and evaluates so much of what we are doing.
In my own research on the competitiveness of global industries, I have identified three types of competences that are required in order to succeed in international competition.
First, we need research-based knowledge and advanced technology as a platform for operations and innovation. We need commercial and market knowledge to make sure firms stay competitive and remain profitable and we need practical experience-based knowledge to run it all.
You cannot run ships safely and efficiently from skyscrapers in Manhattan. You need qualified people both at land and at sea to run ships and manage people. Good and well managed teams produce results that reach all the way to the boardroom.
Excellent organizations have excellent management at all levels of the organization. This is why we train people in people skills, not only in technical skills. Sometimes we need to train the whole organization.
The competence challenge in modern shipping is to preserve the three major competences in the same organization, combining technological, commercial and operational experience.
In the traditional shipping world of small organizations, each shipping company had all these competences combined in the experienced captains (like the ones I remember from my child home town of Farsund).
Modern shipping requires highly educated specialists, and often specialists do not communicate so well, and they do not always work so well together. The three main skills of business need to be in constant interaction and each should be treated with mutual respect. This respect extends across vertical levels of the organization and across cultural and ethnical boundaries.
It is the difficult combination of formal and tacit knowledge that produces the best results in business. Formal knowledge can be transferred by educational programmes, given that we invest in people. Tacit knowledge requires years of experience and is much more difficult to transfer. But this also means investing in people. Successful firms should manage both processes in a systematic way.
Torger Reve is the Wilh Wilhelmsen Professor of Strategy and Industrial Competitiveness, at BI Norwegian Business School, Oslo
This article first appeared in HELM magazine http://issuu.com/wwgroup/docs/helm_01_2014_web_es