Physical and Digital Innovation in Shipping: Seeding, Standardizing, and Sequencing

Two innovations within shipping are analyzed. (1) Containerization, an analog innovation that commenced about 50 years ago, created a new system for the handling of global trade and drove shipping costs to the point of financial irrelevance. (2) Sea traffic management is an EU digital innovation in process that aims to revolutionize the shipping business. We identify the seed innovation, which in each case initiates a standardization process and a series of sequenced and coordinated innovations that created a new transport system in one case, and are planned to fashion a smarter system in the second. We conclude with some research questions on seed innovations and the sequencing of innovations for new system emergence. 1. A critical global problem The global shipping industry is responsible for around 90% of the world’s trade [1] because it is the most cost-effective form of transport. A container ship can move the equivalent of several large warehouses of goods with a crew of about 13. For instance, the cost of transporting a kilogram of coffee from Asia to Europe is only fifteen cents, or one percent of item cost. Because ships need to carry sufficient fuel for a voyage, they are powered by energy dense fossil fuels. With a yearly growth rate of about 4% [2], water borne transport will be a continuing source of carbon emissions for some years. Significantly, in 2007 ocean cargo shipping produced about 840 million metric tons of CO2 [3], approximately 2.7% of the estimated global carbon emissions. Without major changes in technology and policies, shipping could by 2050 1 http://www.worldshipping.org/benefits-of-linershipping/efficiency 2 http://co2now.org/Current-CO2/CO2-Now/global-carbonemissions.html account for 17% of global CO2 emissions [4]. The industry is a sustainability slowcoach [5]. This article compares and contrasts two shipping innovations for improving efficiency and sustainability. Containerization, an analog innovation, was initiated 50 years ago, and sea traffic management, based on a digital innovation, is in the early stages of implementation. 2. EU funded innovation In 2010, the European Union (EU) commenced a multi-year project to fund innovation in the shipping industry to improve efficiency, safety, and sustainability, goals which parallel the triple bottom line of profits, people, and planet [6]. The initial project, MONALISA 1.0, concentrated on increasing ship-to-ship collaboration through sharing routes among ships and shore-based vessel management authorities. The project operated in the Baltic Sea Region. This project was then extended, MONALISA 2.0 (2013-2015), to cover more regions in Europe with more partners and an increased budget. The focus, inspired by the Single European Sky Air Traffic Management Research (SESAR) project, was to enhance Sea Traffic Management (STM) by applying three concepts (voyage management, flow management, and port collaborative decision-making) supported by a digital data-sharing infrastructure. In 2015, the project was renamed STM validation and the consortia was granted €43 million to validate STM concepts in 13 ports with over 300 participating ships. The EU sees acceleration of the industry’s digitization as critical to meeting its goals, and it expects STM to revolutionize the shipping business. The STM project’s success will require the coordination and integration of multiple layers of innovation, from data messaging to governance. 3 http://stmvalidation.eu 4756 Proceedings of the 50th Hawaii International Conference on System Sciences | 2017 URI: http://hdl.handle.net/10125/41741 ISBN: 978-0-9981331-0-2