Meeting the upstart
Virtually every industry around the world is facing disruption from new companies, new technologies, and new ways of working. Traditional business models are being challenged by newcomers that understand the digital space and can develop new solutions fast. The shipping industry is no exception. One of these newcomers is right on the doorstep of the Wilhelmsen group global headquarters in Oslo, Norway.
Xeneta, a benchmarking platform for container-based ocean freight, is led by Patrik Berglund. When the young Norwegian founder and CEO arrives at Wilhelmsen he emits a casual confidence and a curiosity about what one of the industry’s major players will have to say.
Such has been Patrik’s impact, he was recently given the Lloyd’s List Next Generation Shipping Award, which recognises the year’s most noteworthy young, up-and-coming shipping industry leader, one who has made an outstanding contribution to the industry.
“We have managed to build up the company by going to the end customers and crowdsourcing their shipping contracts. We collect, track and display this data so our customers can easily see the variations in price,” explains Patrik. “They pay to get their cargo shipped on hundreds of different routes, which all have high price volatility. We help to create transparency in pricing so the end customers can see how high or low their procurement costs are relative to the market.”
It is a strategy that has paid off for Xeneta. “We knew from the beginning that if we could get the most important clients of the shipping lines and freight forwarding companies onto our platform, it would make our case towards the supply side of the industry. About one year ago, we started onboarding the first suppliers, so we now have a platform with both supply and demand data.”Keen to meet Patrik was Wilhelmsen group CFO Christian Berg. While the decision to appoint a ‘finance guy’ to lead the digital transformation of Wilhelmsen may surprise some, Christian’s background is very much in business development. Prior to joining Wilhelmsen, he worked as senior partner in HitecVision, one of Europe’s leading private equity companies focused on the offshore oil and gas industry.
“The worst thing we can do is to be afraid and shut our doors to companies like Xeneta,” says Christian. “We need to learn and see how they can help us to serve our customers more efficiently. We need to become a part of the same community by listening, because the industry is rapidly changing. We have a proud history but the only way for us to remain an industry leader is to embrace this digital disruption and be at the forefront of the community working to create a new model.”
THE INDUSTRY IS READY FOR DIGITAL DISRUPTION
Patrik believes the time for digital disruption within shipping is now. “A lot has changed since 2012 when Xeneta was founded. Startups and new initiatives are getting more attention, more venture capital and more private equity funding. We used to face closed doors, whereas now the doors are open.”
When asked what disruptive innovation will bring to the shipping industry, Patrik believes it is important to look to other industries which have already undergone a transformation. AirBnB have challenged the hotel industry without owning any property, while Uber has altered the taxi industry forever despite owning no cars.
“The challenge for the existing asset-based players is to build the cloud-based systems first. They have a lot of value tied into their physical assets but letting others build the digital assets is a big risk. If a company like Amazon or Alibaba adds a digital layer on top of the supply chain, all of a sudden they hold the power over the entire logistics operation while holding no or few physical assets themselves.”
Christian agrees on the likely future of the industry, but says the key question for Wilhelmsen is whether we are to remain a supplier of relationships, or just a supplier of capacity into such a model. “Will our customers be looking to partner with Wilhelmsen for all their shipping requirements, for that branded, consistent experience from start to end, or will they be simply looking to book cargo on a ship? The threat from companies like Xeneta is that they are trying to commoditise a service that we do not want to see commoditised.”
As the conversation turned to what the future holds for both Wilhelmsen and Xeneta in such a model, both men identified changing global trade patterns as key factor. One of the biggest question marks centres around the digitisation and automation within manufacturing. The introduction of 3D printing seems likely to result in a decentralisation of production, which will make the world a more efficient place with less need for longdistance cargo transport. Both Christian and Patrik are also keen observers of the changes taking place in the car industry, and what that might mean for shipping demand.
“When it comes to self-driving cars, taxi platforms like Uber and local car sharing schemes, the common belief is this will lead to less cars on the road and therefore less new cars being shipped. But thinking logically, the usage of the cars will be much higher today, meaning they will need to be replaced more often. Look at how often car rental firms replace their cars, for example. So the exact effect of these changes on the shipping demand from the car industry is difficult to predict at this stage,” says Christian.
Patrik believes the number of new cars being transported will drop, because of the different mentality to business models in the digital world. “The Silicon Valley busi- ness model is not about the market share or the number of cars on the road, but how to monetise each and every mile that is driven,” he says. And this gets to the core of the potential problem. If technology drives global trade patterns to shift significantly or even decrease, and technology also successfully commoditises the shipping industry, what role is left for players such as Wilhelmsen, and perhaps the most important question for the industry to answer, who will build the ships?
WHO WILL BUILD THE SHIPS?
“If the only way a shipping company can sell capacity on a ship is through a platform and the ability to sign long-term contracts is lessened, how can anyone defend building a new ship? Would any bank lend the shipping company money when the risk is entirely held by them?” asks Christian.
He also points out that the car carrying industry includes hundreds of ships with an average of less than 20 years remaining life, there will be time to discover the answer. Patrik believes the key to the Wilhelmsen’s successful future lies in the wealth of data that lies within the company’s systems.
“I agree the biggest worry for the traditional players in the industry, whether a shipping line or a trucker, is that someone else owns the supplier-customer relationship and you sit in the middle. But established companies like Wilhelmsen are sitting on a potential goldmine of data. It is data that tells you so much about world economic trends and trading patterns. There is this whole ecosystem around transportation and logistics – some of the world’s biggest consulting companies, banks and financial institutions – that are crying out for such data.”
Christian says that he knows the wealth of data the group is sitting on, and that plans and initiatives are in place to take advantage of it. “Amongst others, we have hired a new head of digital and a group of four digital trainees to disrupt from within. These are all talented individuals with entrepreneurial spirit but they have chosen to put their talents to use with us here at Wilhelmsen. They will look at the data we have and how we can create value from it, but also other ideas around technology and automation. Neither the head of digital nor the digital trainees will complete these tasks by themselves. But rather as a part of the business streams and companies they support, who also have a vast number of exciting projects running already. One concrete example is the use of drones on our larger ships to deliver samples of oil and water, check if the cargo hold is clean and so on. One of our digital trainees is focused on these possibilities.”
With startups like Xeneta challenging the long-held assumptions and business models of the shipping industry, it is an uncertain road ahead. Yet with Wilhelmsen investing so much time and money in developing new digital solutions, it is an exciting one. One thing is for certain, with Xeneta challenging Wilhelmsen to improve our offer to customers, it is the customers who will benefit most from disruptive innovation.