08-05-2018 Shipping urged to collaborate to reap technological benefits, By Nick Savvides, technology editor, IHS Maritime
In 2016, Bloomberg reported on a secret plan by Amazon to move into the shipping field. The plan was code-named ‘Dragon Boat’ and envisioned the global commerce firm owning the supply chain from the factory to the consumer.
Dragon Boat was first mooted in 2013. However, Amazon chief financial officer Brian Olsavsky toned down the narrative at the time, claiming that Amazon “was simply looking to supplement its delivery partners – not replace them – during peak periods like the Christmas shopping season”.
Since the Dragon Boat story broke, there have been no reports of vessels ordered by or delivered to anyone other than its existing carriers. The lack of activity implies that either the secret Amazon plan never existed or it was shelved and delayed. But what if the disruption threat to shipping comes not from a major new competitor like Amazon, but instead, from more general technological effects?
In a recent interview with Fairplay, Blockchain Labs for Open Collaboration (BLOC) chief executive officer Deanna MacDonald warned of the risk to traditional shipping presented by new technologies, the lack of understanding within the industries these technologies are serving, and the absence of concern within shipping to the looming existential threat.
According to MacDonald, the danger exists because the industry is fragmented, with an abundance of different IT and reporting systems. At the same time, she noted that “this is why it is such a great opportunity for shipping to come together”.
There has also been a failure to apply digitalisation to the real world, not only within shipping, but within the global economy, which indirectly affects it. As Danish Ship Finance research head Christopher Rex said in a recent client note, “In today’s market, the hardware of the industry is increasingly becoming a commodity. Modern vessels offer little opportunity for differentiation. However, the data they generate may prove extremely valuable. The value of the data may not reach its full potential until it is turned into proper intelligence by combining it with other sources.”
Rex predicted that next-generation vessels are “likely to be super-connected assets”. In addition to driving uses, such as predictive vessel maintenance, real-time data could lead to more profound changes involving trading decisions. “The industry essentially needs to digitalise and develop an additional layer of revenue that is powered by the data generated by trading the vessels,” said Rex, who believes that in the coming years, this data could be more valuable than the assets themselves.
According to BLOC, collaboration will be the key to developing the systems that will benefit the industry in the future. Shipowners can be in competition in the same digital infrastructure in the way that owners already compete for cargo, but “the only way to succeed is for your competition to be in the same digital space”, MacDonald argued.
The first thing that needs to change is the mentality of those involved in shipping – to a more collaborative approach. “Each company is competing for the crumbs within the cargo-carrying industry, while conglomerates eat the whole pie,” MacDonald said.
Rex put it another way. “Trade data fuel the algorithms that provide insights into markets, customers, and business processes. The shipping industry should increasingly treat data as competitive advantages. But data without a context carry very little worth. Data need to be shared, used, and combined to unlock value,” he said, pointing out that shared data could offer an “early indicator for the underlying global economy, which can be used in multiple contexts, not just related to the shipping industry”.
Collaboration on this scale is not entirely unheard of in shipping; today’s alliances represent one example. Nevertheless, the idea of sharing commercially sensitive data with competitors has been, and still is, anathema to most owners. It is a leap of faith that BLOC is asking the shipping industry to make.
“A major benefit of being sponsored by the Lloyd’s Register Foundation [BLOC is receiving funding for the launch of its Maritime Blockchain Labs from Lloyd’s] is that they see the value in collaboration and education,” MacDonald said. “Some 95% of shipping companies are small- to medium-sized players and they don’t have the economies of scale of the bigger players in the space. While [the smaller players] see the value of having the bigger players at the table and are keen to negotiate a path forward, the larger players generally don’t need the smaller actors in the same way,” she said.
“The potential of a technology such as blockchain, [which] allows direct peer-to-peer transactions, affords small actors the same opportunities as their counterparts, while disintermediating their largest costs – the brokering of trust and communications in the maritime space.”
MacDonald acknowledged that blockchain can offer an opportunity to transform the maritime space only if it provides a global and accessible digital infrastructure to which all players can connect. So far, that is not happening. What is now emerging is a landscape of competing blockchains. The solutions that are being built are unlikely to be compatible with one another unless interconnectivity is addressed.
Maersk and IBM are working together on the Hyperledger blockchain for end-to-end documentation. DNV GL is building its solution for flagging and classification on the VeChain blockchain. BlockShipping has created a fundraising token on the Ethereum blockchain.
Some of these blockchains are open, some are private, none of them have standards, and no one has come together to talk about how their solutions will be interacting with one another, MacDonald said, explaining that “information comes in from many different sources so the challenge remains to take these different inputs and send out the same output – a classic problem”.
Contrary to the current popular narrative, blockchain solutions do not inherently solve these challenges. Devices linked to the Internet of Things each provide their own communication outputs, enterprise reporting systems vary across the industry, blockchains are coded in different languages, and each platform will emerge to fulfil specific needs. “Interoperability is necessary and we can begin to account for this through open collaboration between blockchain practitioners and industry actors in order to source industry needs and processes, discuss best practices, as well as lessons learned, and to share use cases and systems design,” she said.
BLOC is agnostic to the technology used, so long as it provides a solution that addresses the needs of the industry and is interoperable with existing legacy systems. The company intends to document the new business models and value chains created, as well as their successes and failures, to serve as the basis for industry education and collaboration.
BLOC’s aim is to connect the dots, create events that will allow blockchain users to collaborate, and lead by example through building pilot projects aimed at applying the technology in industrial settings that “build a bridge between the digital and physical worlds, one that is secure and tamper-proof”, MacDonald said.