The Maritime Economist Magazine Spring 2015 | Page 26

THEMARITIME Economist Profession & Practice Let us now discuss how we might decrease capital intensity, and for also how to increase the closeness to the customers intensive. Innovations seem to provide a key to both challenges! Therefore, let us now first briefly discuss the process of innovations. The Process of Innovations ME Mag We might distinguish between three major types of innovations: • Business maintenance Innovations. These represent the minimum necessary to stay in business, to remain competitive etc. This is also what we discussed as the minimum needed when following an in/out, long/short atomistic mode of competition. • Business Enhancement Innovations, These represent ways of strengthening one’s particular shipping business by tailor-making more – what we typically would characterize as niche shipping. While the basic ship design might remain, there might still be important innovations to be had to meet given customers’ needs. • Disruptive Innovations: are innovations which fundamentally change a given business, such as the introduction of container ships instead of conventional liner ships, double – hull tankers (for pollution safety reasons), etc. Christensen (2000) has come up with this term. While such innovations might be highly advantageous they tend to be rare to find/ hard to come about. Typically entirely, new competences shall have to be brought into a shipping company, to achieve this. This might be having to do with new technical dimensions, say in materials science; engineering, aquadynamics, logistical expertise… 26 ship“ It seems critical for ahim/ owner not to spread herself over too many different shipping market segments, but to concentrate instead on a better in depth understanding of just one, or a few. Cognitive limits easily set in! Unfortunately, many ship-owners, may under estimate the complexity of this task! to aim at safety, and that things must function when it comes to the logistics function. So, why take any risk here, by innovating beyond what might traditionally be seen as safe limits? We might list many such defensive factors contributing to the dampening of one’s innovative drive. How then can one become more active in making use of innovations as a competitive weapon? To form cross-disciplinary groups, which also might have the ability to work with lead customers in coming up with innovations relevant to them, is key. To pick such lead customers is therefore essential, i.e. progressive, open – minded ones! And to establish a team that is able to develop good relations with a particular key customer is also a necessity. In this way, the two sides might be able to interact so as to have relevant innovations come about! This mode of competition, i.e. based on effective innovations, is particularly key for the relatively low capital intensive / relatively high customer closeness shipping business segment. But here too, of course, timing is still relevant- especially for purchasing of tonnage and / or for making technical modifications, but the innovative dimension is still relatively much more fundamental! What can slow down innovations? How to Decrease Capital Intensity? Conventional thinking often represents a major impediment to innovations in the shipping firm. “We have always done it this way, so why change?” Unfortunately many clients also tend to act in rather conservative ways. Related to this is the high desire It has been understood for some time that capital intensity might be reduced by chartering in tonnage instead. I have earlier argued for the split between owning steel (i.e. owning ships) vs operating steel – many shipping companies as well as many liner – or