Five factors shaping the future of shipping innovation
Innovation in shipping requires collaboration, scale, data and entirely new set of business models
The Lloyd’s List ‘How to Innovate in Shipping’ webinar looked at how smart ideas and smart money can help shipping escape its siloed thinking and kick-start a more collaborative, connected approach to integrating seaborne trade in the global supply chain
THE global pandemic has catalysed the digital revolution; decarbonisation is demanding immediate innovation; global venture capital funding is at an all-time high; and bigger funds featuring dedicated teams with industry experience have created a more mature environment for smart ideas to meet smart money.
In short, the conditions are ripe for change.
The question is whether a conservative, fragmented industry, in which corporates have rarely been rewarded for experimenting and failing, is finally ready to take full advantage of this groundswell of innovation?
The Lloyd’s List ‘How to Innovate in shipping’ Webinar, held on July 14 as part of a series of events examining the future of shipping, pulled together four of the industry’s leading innovation experts to discuss factors shaping the future of shipping.
Five key themes emerged from the session, which is available to watch on demand here.
1. The biggest innovation will be in overhauling shipping’s business models not the ships themselves
The shipping industry may be on the cusp of a golden age of technical innovation, but business models will need to adapt to incentivise investment across the value chain.
Innovation has tended to occur in siloes and to date has focused on maximising the operational performance of the assets. But shipping’s traditional model offers no premium, and often penalises owners for investing in efficiency. Changing that requires a shift in the way the entire value chain is set up, rather than starting with improving the individual ships.
“People are going to have to reinvent their business models and start looking at performance-based trading,” said Andy McKeran, director of maritime performance services at Lloyd’s Register.
While shipping will continue to tweak efficiencies via specific cost-driven efficiencies, the priority, says Mr McKeran, is to map shipping’s “value stream” from construction through to how contracts are set up and how the vessels are embedded into a more circular economy.
By identifying the roles that all stakeholders play and identifying the gaps between ‘current’ and ‘future state’ models, the industry can create a better idea of where changes need to be made.
“The capital expenditure of installing energy-saving technology into vessels can be enormous, so we need to look at the whole value chain. We need to look how to bring in longer-term charter party contracts, how we finance shipping and enable this transition to happen,” he said.
Moving towards an incentivised trading schemes for those that have met their ESG credentials is ultimately the most critical innovation that the industry can focus on right now.
2. Technology is not a differentiator; it’s how you use it and share it that counts
“Nobody wants to be the first,” said MSC’s global chief digital & information officer Andre Simha, during the debate around data ownership and scaling innovative advances. “I remember the early days of e-business in this industry in 2000 to 2001.
“The idea was to create standards. It was about how do we exchange messages, how do we try to speak the same language. And we did that, but then we didn't progress from there. And I think the reason is because we're so fragmented as an industry and we still often think that tech is a differentiator, whereas in my opinion, it is not,” said Mr Simha, who is also chair of the Digital Container Shipping Association.
“When we sat down with one of the large shipping lines and we said, ‘Let's try to create this this association and the standards we need’, the idea was really to share innovations… And I think we are now finally seeing the beginning of what’s possible when we share those ideas with innovative companies and with start-up companies — it brings a benefit to the market.
“If MSC does something fantastic and you're all very happy with it, but you're also shipping with other companies, then it’s not going to be useful for you. So I think that collaborative aspect is very important. The tech should not be a differentiator, it doesn’t make sense any more in my view.”
3. Innovation requires collaboration and scale
There is no silver bullet to innovation. It’s a portfolio game, according to Angela Noronha, director for open innovation at Rainmaking Transport.
“Technology is not the barrier. It’s actually just a willingness to adopt certain things,” she said. “In many cases the technology and the tools are already there, but it’s still not growing because of the fragmentation of the industry.”
While technical innovation is clearly required, the greater need is for businesses to start re-thinking the way in which things are done and start acting as consortia to create scale and adoption of new technology.
“If you have tech that works, why struggle to sell this into five or 10 different key ports, when maybe a lot of the ports already work with each other and then they could work as a group?”
The focus at Rainmaking, as well as with many of the accelerator programmes name-checked during the webinar, is for angel investors and partners from different parts of the value chain to collaborate.
“That’s important because instead of just working with an owner and then later on months later struggling to talk to a charterer or talk to an operator, you get everyone in the same room, and you can ask all the important questions in one go and then you can get that industry adoption faster,” said Ms Noronha.
4. Smart start-ups require smart money, but they also require smart support, collaboration and open innovation to thrive
The proliferation of start-up accelerators has made it easier for small companies to work with large companies, but it also breeds collaboration.
Claus Nehmzow, chief innovation officer at Eastern Pacific Shipping, has seen at first hand the approach work in the energy sector via his previous role at BP and believes that programmes like the ones he oversees in Singapore are an essential component to shipping’s future, but they must be conducted with collaboration in mind.
“We have no intention to keep any of the technologies exclusively to us, it's really the opposite,” he explained. “It starts with bringing in mentors to offer guidance and we allow them to test on our ships wherever that is possible, which is a huge advantage. But we also bring external mentors, so it’s totally open from the very beginning.”
While that provides and invaluable opportunity for start-ups looking for scale and funding that might otherwise be out of reach, Mr Nehmzow argues that the advantages for the corporates engaging in a more collaborative fashion are clear.
“Often the technology start-ups are the ones challenging the current situation and pushing for collaboration — they can often be the facilitator bringing ideas into companies that otherwise have incentives that are not perfectly aligned [and would have missed these opportunities].”
5. Size matters when it comes to innovation, but so does data
“It's difficult for small companies to do business with large companies,” said Eastern Pacific chief innovation officer Claus Nehmzow — a point all panellists agreed on.
However, as Lloyd’s Register’s Andy McKeran argued, there was plenty of opportunity to bridge that gap via what he described as “a collective of the like-minded” with a shared vision of a more collaborative future for shipping.
“When we bring the start-ups and the larger partners from across the value chain together, they all come out of this with a deeper understanding of how it works,” explained Angela Noronha from Rainmaking Transport.
“I think the other aspect is that there’s a realisation in maritime around data quality, data integrity, data availability, that is the elephant in the room around why some of these initiatives don’t get off the ground because there’s a leap of faith assumption in the start-up world that the data will be available and often it’s not,” said Mr McKeran.
“I think, if we look at standardisation of the data usage and rights, I think that will unlock an awful lot of the potential that start-ups could bring to maritime.”
You can access the webinar here.