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Enterprise Change: Keynote speech from Frank J Coles, Transas CEO

By BCShippingNews 13 March 2018
Keynote speech from Frank J Coles, Transas CEO
Coles sets the tone for shipping industry future...

You know if Elon Musk was to attend a plenary session of the IMO, he could be forgiven if he thought he was watching a reenactment of the Charles Dickens book Hard Times, with Mr. Gradgrind the Headmaster.  What a sad reflection of our industry.  Imagine instead!

Imagine a world where logistics companies and cargo owners drive ship design, innovation and demand the level of quality in ship management.  Where maritime assets are operated in a global ecosystem of tracking, monitoring and safety.  Imagine a world where ships are operated in a “ship as a service” or “system of systems” infrastructure.  Where we have replaced the current fragmented IoT and applications model.

This is a world where consolidation has removed many of the industry’s historical middlemen. So, imagine a world without brokers, agents, maybe even without Class.  A world with fewer equipment and service suppliers.  A world with standardized solutions.

Imagine the new world where countries and regions innovate and drive quality.  Where they have overtaken the bureaucracy and regulators who drag their heels unable to keep up.

This is the maritime world of a green, safe and efficient means of transporting goods.  Where we have reduced the human element risks, provided a greener ship and, operations fit for purpose.  Most importantly, this is an environment where the younger generation will actually want to carve out a career in the maritime industry.

A year ago, we spoke of the perfect storm facing our industry. Where, all at the same time. Economic, technological and environmental challenges continued to bear down on the shipping and maritime sectors.  Where the evidence pointed at a growing possibility that innovation from within would be inadequate to stave off the disruption coming from outside the industry.

I deliberately distinguish between industries, shipping and maritime. I reiterate this as there is a growing divide between the logistics and maritime operations sectors. The pace of changing logistics far exceeds that seen in maritime operations.

Until recently the maritime players have failed to make this distinction. This has prevented a clear path for maritime.  It needs to change.  Last week, Lloyd’s List reported on the direction Maersk was taking by choosing to focus more on logistics and less as a pure operator.  

I am not sure Lloyd’s List fully appreciates the scale of disruption that is coming, as it still talks of Maersk ‘upsetting the freight forwarders’. I think freight forwarders are going to disappear, so that’s not the real issue.

We have all been “Block-chained”. But what does it really mean? Every article, trade magazine or conference told us it was coming.  Or they told us that autonomous ships were right around the corner.  We are bombarded by doomsday scenarios of failed cybersecurity, which will line the pockets of lawyers, consultants or anyone with a software package to sell.  

Yet most of them forget the fundamental issue: The Human Factor. Until we change the attitudes to the business and the current maritime culture, technology remains just a patch, not a solution.

Let’s look at how much shipping has changed in the past twelve months. 

Large container companies have spoken of embracing Blockchain. One significant player has announced they want to be like FedEx. But surely being more like FedEx means under attack from Amazon, because that is what it is like to be FedEx today. Anyway, those aspirations only address yesterday’s battle, not tomorrow’s war.

At least one large shipper in the bulk space has introduced online bidding for their cargoes. We also see numerous disruptor start-ups appearing. They provide solutions to many aspects of logistics and the value chain, such as booking cargo space. All of this is in shipping, not maritime operations per se.

Maritime operations   and infrastructure thinking seems to change at a snail’s pace. We seem to be content to have old-fashioned ships and an old-fashioned business infrastructure sitting alongside modern logistics.  

In maritime, change mainly seems to be coming from engine manufacturers and use of alternative fuels and more efficient engines. That progress is important for the preservation of our Oceans and should be applauded.  Many other issues stall while talks roll on with the regulators and other background influences.  There has been progress but we have not done enough.

Some of you might point to the growing use of connectivity. Or to the use of monitoring and of data for analytics and performance.  However, today these solutions are fragmented IoT applications.  They are unconnected and not part of an integrated solution. Meanwhile it seems at times that communications suppliers delight in totally confusing the market with their lack of transparency. If there was ever a need for some clarity and consolidation, the Satcoms sector is a strong candidate.

Despite denial and misinformation by many suppliers to the industry, we’ve reached the point where communications, electronics, navigation equipment are commodities. This is driven by a glut of supply from too many vendors.  But also by buyers who focus on price at the expense of all else. This is another weakness. 

How is it that companies can spend large amounts of money on Blockchain and cybersecurity in their logistics operations? Yet when it comes to maritime operations, they adopt an online auction mindset. This lowest-cost, fragmented-purchase model is sure to result in a weak cyber structure.

However, it is also driven by the infrastructure of the industry. The regulators are failing to drive home a standardized solution for a safer, efficient, greener ship and solution. We have reached a frankly ridiculous point. Where a lobby of suppliers, owners and think-tanks creates a bureaucrat’s solution in committee. That can take years to come to any conclusion. This is not going to work in the new world.  We cannot keep designing a donkey when we are looking for a racehorse.

It’s going to bite us on the ASS.

That is, of course, an acronym for: Archaic Spaghetti Structure. It’s archaic because it’s an out-of-date business-style of endless meetings.  It is a spaghetti structure because, we have multiple stakeholders all vying for an opinion and ultimately producing a messy result. We need to build ships with integrated systems of systems, not a mishmash of standalone IoT applications.

What’s absent from the last twelve months is a proper appreciation of facts behind digitalization and the cybersecurity of ship operations.  

Ships and ship-operations work in dark dungeons compared to the shipping logistics model. The business of maritime operations is a FOSSIL: Fleet Operations Solutions Stuck In Limbo. We are in limbo because we add technology while navigating with paper.

We layer modern technology on top of old-fashioned business processes. The old-fashioned structures of regulators, clubs, lobbies and representative bodies no longer fit with the new world. Nor do they move fast enough to keep up.

Attitude lies at the heart of our inability to change. We have a real problem with how we regulate the industry.  

The class societies and the flag states continue to be influenced by owners and unions to compromise safety.  This allows old-fashioned rules to remain in place and to be enforced. Class and P&I Clubs find themselves balancing safety against revenue. They know that enforcing or supporting the right decision could lose them clients.  

How can it make sense in our modern world to allow human life or our precious environment to be weighed on a scale of risk and be treated as a statistical probability?

Should the IMO continue to have the mandate on safety? Safety must be naturally embedded in everything we do, not just in platitudes.  Today, final decisions seem to be political, voted in plenaries where half the audience is asleep, many others don’t care and a select, motivated few busily lobby their agendas.

Many of the so-called experts on such committees have no interest in progress but more in the endless drafting of useless clauses that have no bearing on the modern world. How can they justify spending four hours on whether to use Shall or Should in a sentence in a sub-clause in a paragraph in an appendix?  They are the same people who assess that only x number of scantlings should be strengthened, because it’s worth the risk of human life.

They live in a CAVE.  These are the Citizens Against Virtually Everything.

There is another major reason change is necessary. The next generation are simply not going to put up with such an archaic business or tolerate its structures.  They will have no inclination to work in an unconnected environment.

This new connected generation will not accept the lack of safety. Nor will they accept a lack of respect for the environment or the lack of sensible inter-connected ecosystems. They have grown up playing strategy games, immersing themselves in virtual reality and living in an interconnected world. They expect the same in their workplace.

Modern day shippers who care about the environment and efficiency will demand change in the maritime model to protect themselves from a consumer backlash when - inevitably - things go wrong.  This is why the oil industry has adopted a higher code of conduct. In a hyper-connected world, a strong ethical stance is expected of all corporations.

Technology is an enabler: it provides decision support; it reduces workload; it provides analytics to enable smarter operations; and it removes the drudgery.

All this only happens in a correctly-prepared environment.  In the hands of an untrained user and, in a structure that does not remove the older processes when new technology is introduced, it has the opposite effect. It increases risk and reduces safety.

The benefits are too great an opportunity to be hindered and held back by Fossil-makers and CAVE-dwellers.

Companies in maritime operations need to up their game and, move to the same high standards as other transport modes, where an incident can lead to a loss of life, or an ecological disaster. In other words, they need to become High Reliability Organisations (HROs).  

When it comes to safety, the maritime sector does not operate to the level of excellence that the average person would expect of a global industry in the 21st century. On the contrary, the sector’s establishment works in the complete opposite direction. The consensus-driven committee structure of its global regulator results in 'lowest common denominator' rule making.

The attitude seems to be "what is the least we can get away with?". This is at odds with the aim of saving lives and property. Furthermore, it is at out of sync with a world that is becoming increasingly transparent, where anyone with a smartphone can become a whistleblower, where bad practices can no longer be covered up as easily as they once were.

HROs in the aviation and nuclear power industries or the space program understand they operate in an environment where a single incident could be catastrophic. For this reason, they require a strict culture of excellence. They have a commitment to correct faults before disaster. They develop a deep awareness of their own vulnerabilities. They operate at a level of quality, not a level of acceptable risk. 

This is where the human factor   and digitalization intersect. This is also where cybersecurity meets the human factor.  To quote Admiral Mike Rogers, head of the US military Cyber Command: “It’s about ethos.  It’s about culture.  How you man, train and equip your organisation, how you structure it and the operational concepts that you apply.”

Today’s maritime operations and fleet processes continue to be in limbo. We are disconnected from the rest of the ecosystem. The tools are in place, there is an ability to share decisions, information and monitor data across multiple stakeholders, but it is not being done. We confuse logistics with operations, and port information with safe navigation. We have to be able to separate the elements so that the right solution is used for the right problem.

It’s time to leave FOSSILs on the beach where they belong as a relic of the prehistoric past. It’s time for new ideas to take FORM. We need to have an ecosystem of Fleet Operations Resource Management.

We need to move towards an ecosystem in maritime safety and operations not unlike that of aviation.  We need to separate the cargo elements, port operations from the safety of navigation elements.

Maritime needs an integrated operations ecosystem for the safe navigation of tomorrow’s ships.  We need professional   FORM, with a quality traffic control and monitoring service. We also need to factor into this the human element at a level where it is properly trained, properly equipped and structured in a modern way to fit the model.

If not, the maritime industry will slip further away from the realities of the modern world, the needs of the next generation and the demands of the new shippers.  

We can no longer be held back by the stubborn ASS, or we will get bitten badly. The disruption has begun.  We just need to remove the final roadblocks.  As the dinosaurs are removed the new dawn will take shape.