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…

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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