Don’t judge the future by the values of the past

Trying to persuade an industry in crisis to invest in new technology is a hard sell. It’s harder still when that industry is shipping and the crisis has begun to move outside predictable cyclical models.

Eight years into what was supposed to be a five year downcycle, the industry is uncomfortably confronting a changed world order. The fact that there has been so little disruption and dislocation to date is surprising, but reflects the size of cash piles the industry had to burn.

And while it seems unlikely that the kind of bubble seen in the years to 2008 will be repeated, for some sectors the risk is that a return to healthy, sustained growth fails to appear at all.

Structural shifts in production and consumption suggest demand peaks for coal, oil and iron ore are in sight. Whether globalisation remains the predominant economic force will determine whether demand for container shipping is sustained.

Looked at from this downside scenario, the need for Smart Shipping is imperative and its drivers clear. Its chances of successfully taking hold industry-wide are harder to judge.

At the start of this year the chief executive of one of the industry’s biggest lenders pointed out that in no other industry would debtors be allowed to stave off restructuring or foreclosure for so long. The availability of money for conventional newbuildings let alone research into future transport systems is available only to a few.

Neither can we overlook the leading edge/lagging majority model that defines the industry. That is unlikely to change and makes discussion of a global industry almost irrelevant.

Of course it is hoped that regulation will level that playing field, but we know that it does not. The argument that smart shipping demands smarter regulation has been growing ever louder, though without much progress. The least we should hope for is an end to unintended consequences at a time when the money to pay for them is nearly impossible to come by.

Given the lack of a homogenous industry, the concept of smart shipping must necessarily mean different things to different people.

To some, smart shipping is the sort that does not comply and does not get caught, or does the bare minimum and still makes a profit. To others it is the embrace of energy efficiency, asset optimisation, meta-compliance and sustainable performance. To the majority in the middle, its inefficiencies and opacity are a margin opportunity that does not support the sharing traits of the digital economy.

Proponents of Smart Shipping need to recognise these differences and segment their approach. Despite this somewhat gloomy analysis, there is a huge amount of innovation going on in shipping. Its inherent inefficiencies mean it will continue to attract entrepreneurs, inventors and disruptors.

In a conventional funding vacuum characterised by massive fleet oversupply, excess shipyard capacity, qualified crew shortages and potentially a structural decline in cargo volumes I would argue that more than ever, that innovation needs to come from the ground-up, encouraged by the far-sighted.

Shipping needs to accept change and that change is going to come from unexpected sources, many of them outside the industry. Embracing a start-up culture is not the traditional maritime model, but I would argue that it is essential to long term survival.

This is as true for the shipowners, operators and lines as it is for the vendors and developers. There are plenty of examples where start-up thinking can make a difference in terms of new technologies and business models.

The idea that having got itself into the current crisis, shipping has all the tools it needs to get out of it is plainly wrong. Instead, it needs to recognise that the future of shipping isn’t going to look like the past, but not necessarily for the reasons we thought.

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