DIGITAL connectivity is changing shipping and it can not be ignored.
CMA CGM, Maersk and ZIM now have a strategic partnership with Alibaba. Amazon too is moving closer to the liner companies, a potential threat to freight forwarders.
Meanwhile DNV GL has teamed up with Microsoft, while Radio Holland has a new partnership with Cisco, and Swedish telecoms infrastructure giant Ericsson has signed agreements with Inmarsat, Pole Star and others. Ericsson has already signed deals with AP Moller Maersk and U-Ming to provide an infrastructure service for shipping lines.
These are strong signs that mainstream information technology firms see a potential in the shipping sphere.
Companies like Transas, the ECDIS and simulator experts, and Wärtsilä, the engine maker, are broadening out their services, seeing shipping’s future in a holistic interconnected environment.
An environment where their future lies in being value based rather than transactional. This means offering services and securing revenues from partnerships, perhaps more so than the sales of one off items such as radars, ECDIS units or marine engines.
What they see is a future connectivity of shipping like one finds in a smartphone, that indispensable life tool we never knew we needed until Apple told us.
And if you have an Android phone, have you noticed how seamlessly your photographs are automatically connected between devices thanks to your preinstalled Google Docs or Photos apps? This is the current experience in the consumer world, and is the predicted future of the business world. It has begun happening in other industries and is happening in shipping.
A new shipping sphere
Accenture Chief Executive Pierre Nanterme wrote in an article for the World Economic Forum last year.
“Digital disruption is at the heart of all the conversations I have with CEOs today. And this is not surprising, as it presents the most significant threats and opportunities any of us have faced in business. When assessing the implications, consider the fact that new digital business models are the principal reason why just over half of the names of companies on the Fortune 500 have disappeared since the year 2000.”
“New digital business models are the principal reason why just over half of the names of companies on the Fortune 500 have disappeared since the year 2000.”
Unsurprisingly the shipping industry has not been spared the predictions of futurists who see an industry that is substantially different than the one of today. Regardless of the cynicism these self-claimed crystal ball gazers get, there are some clear facts that support their thoughts.
Drones can swarm and utilise machine-learning to achieve goals, unmanned submersible craft and small unmanned naval demonstration vessels show autonomous capabilities.
Disruption has already occurred in the retail and other service sectors with well-known examples such as Airbnb and Uber, while Tesla and Google are leading the pack in electric powered autonomous vehicles, with Elon Musk also pushing ahead with what would have been unthinkable at the turn of the century, with Space X and the Hyperloop.
It is no surprise disruption happens in the shipping industry when the ship operators’ customers often have digital transformation as a growing part of their business mindset.
Now online platforms such as Xeneta and Clearmetal offer services to shippers, giving power back to these customers and pushing ship operators to be clients to whichever company is the primary owner of a product’s logistics chain.
Also financial bodies such as banks, stock exchanges and brokers are, according to many experts, likely to see blockchain, a new kind of digital ledger, make a huge impact.
Helsinki-listed Wärtsilä is an OEM that is pushing to redefine itself. In recent years it has shed off its image of being a heavy industrial company by selling its two-stroke engine business, acquiring SAM Electronics and pushing forward more digital services.
To drive this change it has appointed one of the industry’s first board level digital officer recognising that this digital mind set needs to be throughout its own organisation as it develops its new services for shipping.
Wärtsilä’s digital officer is Marco Ryan, and he has been recruited from outside the shipping sector.
The current newbuilding orderbook is so low that companies have been forced to look at increasing other revenue streams, and for Wärtsilä this has been deliberately focused on being more service orientated.
Customers want better, integrated, reliable and predictable products that are also modular and flexible, says Mr Ryan in an interview with fathom-news.
Customers want better, integrated, reliable and predictable products that are also modular and flexible, says Mr Ryan in an interview with fathom-news.
This, he says, calls on a mind-set that is more heavily focused on data, analytics and digital services.
Inmarsat head of maritime Ronald Spithout has made no secret of the UK-listed satellite providers drive to use the App model with its Global Xpress service as it pushes to make satellite broadband at sea more seamless.
Transas, for example, has three main customer groups, ship owners and operators needing navigation tools and fleet management tools, regional and national vessel traffic managers needing surveillance and communication tools, and the academies needing simulators representing the latest equipment.
Transas chief executive Frank Coles sees these three areas being interconnected under THESIS – the Transas Harmonised Eco System of Integrated Solutions- that the company is currently championing.
So why is shipping changing? Why is it looking at transformation, at disruptive startups and ideas that threaten some corners?
To some extent the answer is simple: such change has taken place elsewhere already, shown to create efficiencies, and as shipping is an industry struggling to keep costs down, there is an appetite for new ideas that many have never seen before. Environmental regulatory imperatives are also part of this, with data analytics able to improve performance and reduce operating cost with relatively low investment.
Preparation and awareness
To quote one executive speaking to fathom-news, the digital change is like a tsunami. Ship-owners need to recognise the difference between very low water and the warning signs of the rush of change.
Some companies are going to be ready, and will surf this wave, others will not be so lucky.
One of the clearest explanations why shipping is facing the challenges of digital transformation can be found in the forward of a PriceWaterhouseCoopers report published in September 2016. Based on a survey of 104 decision makers at German shipping companies on their view of the future, the report author Claus Brandt wrote: “Over the last few years changed value chains have caused shipping companies to evolve into service providers for the logistics industry. For this reason it is necessary to take a look forward.”
“Over the last few years changed value chains have caused shipping companies to evolve into service providers for the logistics industry. For this reason it is necessary to take a look forward.”
But given the close link between container ship operators and freight forwarders or cargo owners, this represents a direct connection between digital commerce and the hitherto conservative ship-owner communities.
Add to that the comments from Accenture’s boss Pierre Nanterme and a picture of how shipping is responding to the digital imperatives of its customers can be seen.
The survey notes some distinctive changes in attitude over the last two years.
Respondents showed much more acceptance of increased automation and even unmanned ships, despite many still having technology reservations. Many also see today’s shipping companies in Germany becoming service providers of nautical expertise in the transport chain, something that belies the changing power of the shipowner in the future.
Another important finding from the survey is the increased acceptance that shipping firms need more expertise. Nine out of 10 of the 104 respondents believe they need more IT competence in shore side positions.
This raises the uncomfortable question of where the industry will find experts with nautical and digital knowledge and skills. In short, the current shipping business model is transforming and owners will be increasingly connected, and have to react to customers’ digital communication and business systems.
fathom-news
editor@fathom-mi.com
