June 19, 2019
In a market populated by too many conferences, there is something refreshingly positive about the attitudes in evidence at Nor-Shipping. There are good reasons for this of course but it is the country’s willingness to discuss its ambitions that is unusual in an industry predicated on secrecy rather than sharing.
Nor-Shipping can probably take the credit; for now, standard practice of inviting a futurist to give a perspective on what is happening outside the bubble then invite owners to bring them back to reality. But these days, the owners, while perhaps a few steps behind, are onboard. The question now is what they can do to take advantage of digitalisation, manage the threats and move the industry towards sustainability.
In setting the scene for the conversation Ramez Naam, Adjunct Professor at the Singularity University described the ‘democratisation of technology’ and its impact on numerous industries. The transformation of businesses once thought impregnable is well advanced, though identifying examples in shipping is a harder save for those in logistics and container transport, he observed.
CEO of Torvald Klaveness Lasse Kristoffersen is the opposite of that model but has led the dry bulk operator through the first stage of transformation. He is encouraged by the start that the industry has made but admitted that four years ago he recognised that if the company was to change, it had to change itself.
“Our strategy has two factors that create value; the energy transition which includes short term efficiency and long term climate neutrality and how we use technology to solve problems. I don’t really like disruption, it sounds like something that comes and kills you, it’s really a transition. Disruption you can’t do anything about, a transition you can manage,” he said.
Ann-Christin Andersen, Chief Digital Officer of TechnipFMC Worldwide stressed that sector companies needed to retain and apply domain knowledge that disruptors could not easily acquire.
“In a B2C environment you need very little domain knowledge but a lot of digital competence,” she said. “But the shipping industry is subject to cyclical demand and it’s also a risk-based business. We have to absorb digital technologies at a much higher speed, it’s the only way to remain competitive, achieve productivity gains and address environmental issues.”
As the canary in the digital coal mine, Naam was keen to point out that the main opportunity remains to use technology to identify new opportunities: “People will still move and use goods, that will not change, but as the mix of cargoes shifts, you have to look for growth opportunities outside traditional shipping markets.”
It is these adjacent markets – such as offshore energy, ocean mining or food – that could provide an opportunity for owners to grow even as their traditional cargo base declines. Asset-heavy industries are not dead, but new digital industries built on top show the fastest areas of growth, so creating a new business to explore that could create a longer term growth capital structure.
The Klaveness strategy embraces diversification but also focusses on what problems the company can solve for existing customers using technology unavailable five or 10 years ago.
“We thought we had a technology issue, but really the issue was agility; how do you identify problems worth solving. We had to move from one-year projects and budgets down to two-week sprints,” Kristoffersen reflected.
It also meant founding a new business that he admitted, might one day be a challenger to the existing one. “The biggest dilemma you have as CEO is that it’s much easier to build a new business than transform an existing one. We had to do both at the same time.”
For an organisation the size of Technip, the issue is not creating a digital strategy, it’s having the right business model. As Andersen pointed out “digital is just a means to the end, unless you have the right business plan you can spend a lot of money getting nowhere. But if you let a platform get in between you and your customers you will lose out.”
The issue for shipping – and other industries – is that digital disruptors comprise a business model plus the technology that enables that model and little else. What supports them is a strong network and the ability to identify value in unused assets – and they thrive on change.
“The number one mistake that large organisations make is to underestimate how much there is an immune system inside a company,” said Naam. “Most are driven by process and have always worked a certain way. Try to bring in something new and it gets slow-walked, attacked or resisted. You have to encourage innovation at the edge, away from your core business.”
Andersen agreed that the single most important factor is being able to open the eyes of executives that when data is connected the result is full transparency for the customer, the owner or vendor at the same time. “You will have to educate your CEOs on that because they will know the mistake at the same time as you make it. Your business model is an ecosystem of providers and you have to trust it’s being dealt with. That trust is a big culture change.”
For Klaveness which has founded its own academy to retrain its people to think in this new way, Kristoffersen estimates that “one third of employees has not yet understood what we are trying to do, one third is trying to catch up and one third is running like crazy. The problem is they were already running when we started. The bigger issue is getting the last third up to speed and what happens if we don’t.”
For him and all those scaling the digital Everest, Naam had a simple formula, often repeated, but less often heeded. “You need to have the right people and give them autonomy. The management model of Spotify is ‘trust beats control’; identify your best people, give them room to run and they will deliver new ideas and engines of growth for your business.”