The digital transformation has shaped the past decades, across all industries. It influences almost all companies in various ways: From operational efficiency to business model development to customer acquisition strategies, and more. Since the beginning of the digital transformation, start-ups with fresh perspectives have completely turned entire industries upside down with the help of new technologies and business models.
Innovation and digitization are far more than simply an additional source of revenue for heavy asset industries - including, of course, the maritime industry. Rather, they are a key factor in taking the lead in the field of competition.
According to research done by Inmarsat and Thetius, COVID has sped up digitization in the maritime industry by three years - a trend that increases the pressure on all its companies to proactively explore new business opportunities at early stages.
There are various strategies that companies in different industries utilize to seek digital transformation. We will compare four common strategies and look at how some of the most well established shipping companies leverage them.
1. Source solutions from startups
Many organizations face the dilemma of “build vs. buy” decisions. Almost all thought-leader articles have the same opinion: a company should “build” business value and “buy” the basics.
Shipping companies & technical managers are experts when it comes to run a vessel. Technical & Nautical Superintendents know like few others the intricacies of solving everyday problems and managing large-scale dry docking projects.
Digital solutions should be built by people with an equally deep footing in the world of product development, UX optimization & database architecture.
In general, startups have a lot of expertise and operate with immense focus, while taking into account the feedback of early users. Sourcing solutions from startups can accelerate the speed of digitization.
Additionally, by working with startups, corporations can foster a culture of innovation within their own organization. It’s common to see companies like CMA CGM supporting innovative startups as part of their digitization plan.
Intrapreneurship means empowering internal people to start entrepreneurial initiatives within a company, often leveraging existing resources. According to research done by Sifted, 60% of leading companies have such programmes in place for more than five years. These companies evaluate 500-1,000 potential projects each year, of which they then implement around 5-50. Examples of companies that have such programmes are Siemens with Next47 or Intel with GrowthX. In the maritime industry, Maersk’s subsidiary Svitzer also has such program.
There is no doubt that intrapreneurship can generate value for companies. But it also brings some risks and disadvantages:
▶ Advantages of intrapreneurship programmes:
Employees know a company and its industry much better than outsiders. Research shows that 82% of employees say they have ideas that could improve the business. That means that employees might be better able to identify opportunities that have been overlooked than external consultants or agencies.
That means: Organizations can leverage their existing resources to test and launch the ideas. Once the ideas are validated, they could be integrated into the company’s eco-system faster, and hence create profit earlier. In addition to that, Intrapreneurship also often creates a more open and innovative culture in the companies.
▶ Disadvantages of intrapreneurship programmes:
Despite these advantages, less than 1% of the ideas that result from these programs are useful. The vast majority of intrapreneurship projects lead nowhere. Intrapreneurship, just like entrepreneurship, makes high demands on people. Instead of creating intrapreneurs, innovation programs should focus on finding the people in the company who already bring the necessary potential.
In the maritime industry, it was e. g. leading shipping company Hapag Lloyd that has set up a “Digital Business and Transformation Unit” in 2017, which can be characterized as an intrapreneurship project. The unit consists of five teams: Product, portal, digital marketing, growth and data insights. Looking at the available information about its strategy, the company’s management style appears to be OKR driven. (OKR is a goal setting framework that was created by Andy Grove and is now used by various tech giants like Spotify, Airbnb or Linkedin.) The Digital Business & Transformation Unit of Hapag Lloyd’s derived intermediate goals from company strategy level and then broke them down into a few key results, which they summarize and check every 90 days. The introduction of the unit is considered a great success. Especially during the COVID pandemic, the comprehensive digitization of the business proved to be an immense advantage.
3. Accelerator programs
A corporate accelerator is a specific form of seed accelerator (also called startup accelerator) which is sponsored by an established for-profit corporation. Corporate accelerators serve two purposes: Help entrepreneurs grow their business and feed the startups into the corporation. Corporate accelerators usually support early-stage startups through mentorship, business development introductions, and sometimes capital in return for the equity of a startup. There are two main types of accelerators: Open innovation programs and external corporate accelerator programs.
▶ Open innovation is a strategy where organizations bring tech startups into the company to nurture and scale their products. The selected startups will receive support on engaging their stakeholders, such as potential clients, distributors, suppliers or key strategic players in the sector, so that they can receive feedback and refine their product and offering. An example from the maritime sector was the Smart Port Challenge, a port sector hackathon that took place in Morocco in 2020 to 2021.
▶ An external corporate accelerator is generally a partnership between a corporation and a 3rd party accelerator where the corporation brings in funding and industry-wide connections while the 3rd party accelerators help to scout startups and design a program for the startup to be integrated into the corporation’s strategic plan. External corporate accelerators are the most common accelerator programs in the maritime industry. Two examples: Eastern Pacific Accelerator has a partnership with Techstars, while Lloyd’s Register has partnered with Plug and Play to run its safety tech accelerator program.
One advantage of external accelerators is that they simplify access to startups, and there is less logistics for the corporations to handle by themselves. At the same time, however, these programmes are also heavily dependent on the external accelerators, who in turn do not always have the greatest industry knowledge. This can lead to them applying a one-size-fits-all strategy instead of focusing on the specifics and requirements of the corporation’s industry.
4. Corporate venturing
Corporate venturing is a type of VC fund where corporations invest directly in external startups. Corporate venture capital and mergers & acquisitions saw a steep growth trajectory in Q1 2021, nurturing the hypothesis that COVID-19 leads to further acceleration in funding and acquisition due to the increased awareness regarding innovation strategy.
According to research, a corporate VC fund can move faster, more flexibly, and more cheaply than traditional Research & Development to help a firm respond to changes in technologies and business models. In some cases, such a fund can even help stimulate demand for a company’s own products. In general, corporate-backed startups tend to perform better than normal VC-backed startups. On the other hand, running successful corporate VC programs isn’t easy: Companies’ processes and rules can make them slow-footed and unfocused.
A typical corporate venture unit in the maritime industry is part of a company that owns and manages vessels. Such a unit has a focus on early stage technology startups and entrepreneurs in the shipping, logistics and commodities space. Outside of funding, they also connect startups with their global network and provide access to their assets.
Conclusion, or: Do these strategies work for the maritime industry?
The strategies presented here all have a “raison d'être”, and this also applies to their application in the maritime industry. However, the chances of success vary.
Intrapreneurship, for example, has very little chance of resounding success overall. This is because such projects require a completely different type of management than is usually found in most corporations. Compared to teams inside of a company, startups are much more driven and work much faster on developing a solution that solves industry-wide problems. The greatest benefit of intrapreneurship projects is therefore usually that they encourage a more innovative culture in the companies using them.
3rd party accelerators can open up the corporation to the startup network, but it requires iterations for an accelerator program to fit into a specific industry. Corporate venturing can move faster than traditional Research & Development processes. It benefits both corporations and startups. However, the VC funds need to have a focus and move fast and decisively - only then is the potential for success really great.
Buying from startups encourages entrepreneurs to solve the biggest challenges within the industry from a fresh point of view. It is often also the fastest way to digitize business processes, and the only one that provides clear and aligned incentives between all involved parties.
As a maritime-tech founder myself, I experienced first hand how the industry switched gears within the last year. Since many “build” projects from the last decade have failed, and solutions in place were sourced before the financial crisis in 2008, shipping executives are now actively engaging in discussions with digital entrepreneurs in order to become and stay market leaders. Many companies now adopt a best-in-breed approach on top of open platforms.
The approach to buy from startups and incentivizing entrepreneurship is particularly promising, and combined with the other methods presents the opportunity for a true evolution. The maritime industry is therefore well advised to seize these opportunities with great ambition and focus.
Read the original Splash article HERE