Lloyd's List Business Briefing: Oslo
Topic video - Immediate and near-term impact of digital disruption
Watch our panel of experts discuss the immediate and near-term impact of digital disruption on the shipping industry and offer practical advice on how to cut through the hype surrounding automation and digitalisation. This panel was filmed at the Lloyd's List Business Briefing Oslo on 29 May 2017.
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We have a fantastic afternoon lined up for you today. I'm very grateful that some of the biggest brains in the business have accepted our invitation to talk about opportunities and threats in the shipping industry.
We talk about modernise or sync, we talk about digitise or die, or we even say things like big data is for us like sex is for teenagers, are you thinking? So, everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so I think this is also one of the articles recently published in Lloyd’s List, it's a good way to describe digitalisation in shipping.
Gentlemen thank you very much for joining us, before we started we asked each of you a very simple question, we asked our experts from both of the panels to identify which digital innovation they expect to have the biggest impact on their businesses over the next 24 months. Now, we will get into some detail, but can I ask that we start there, and just give a flavour of your positions on this, Knut you've already started us off there but give us a little bit more depth in terms of how you see innovation affecting DNV GL and the role of class?
I think if I look at one of the really high potential developments it's what we are doing now with machine learning to really put smart algorithms in place to help speed up the responses that we are providing to our customers on technical questions.
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Now we just hired a digital trainee, so this is a machine learning algorithm, she's been with us now for about three months and she has the accumulated knowledge of about 200,000 questions and answers on technical subjects, and the speed that in which she learns is truly amazing, and we are using her now to direct these questions that we are getting from our customers to the right expert in the organisation. The next step, which I think will take place in a couple of months’ time, is that she will also come up with the proposed answer and then the technical expert can validate that response, and I foresee that we will really speed up the response time incredibly by doing that. So, it's pretty amazing in three months she has the accumulated knowledge of 200,000 questions and answers.
Lloyd’s List journalists in the audience take note, you can be digitalised. Ari, I mentioned Blockchain because that was something we were talking about but I think our discussion has gone beyond that to some extent, you are a believer in technology and the power for its change but very much now seeing a more pragmatic reality I think, would be fair to say?
I was reflecting on it when you made your introduction that it's very easy to see where we want to go, kind of the other side of the river, and then it's very easy to see all the practical challenges we have here, but it's kind of hard at this time and age to see the bridge from here to there. There is a lot of dust in the air at the moment, there's a lot of hype, you called it fluff, I think we're likely at peak digitalisation in the sense that it can't get much more; the balloon is pretty expanded at this point in time, that being said I firmly believe in, I think and your example Knut is great, there is massive potential but we certainly have to navigate our way and find the next stone to cross this river.
I am a little bit worried about companies fearing that everyone else is doing a lot and going off and making big investments and thinks that might be a little bit rash, particularly when it comes to Blockchain and other technologies that I think are important from a supply chain basis, meaning that we actually need to interact with each other. I think it's important that we collaborate, that we actually talk together and that we don’t compete on having the best and the biggest and the shiniest, that won't take us to where we want to go.
Andrea, do you have the biggest, the best and the shiniest? Are you investing heavily in digital twins and digital assistants to get some efficiency into the V Group fleet?
Yes, and I want to first make a small step back. I feel myself, I feel old because I feel privileged because when I finished university I came in the industry in the hype of automation. It was middle of the 80s and was another revolution, maybe the; I don't know this is 4.0 revolution that was 3.0, the automation, and I was in a very exciting; I was very lucky to be in a very exciting project for Saipem, one of the biggest semi-submersible drilling rigs, Norwegian design, so I was at home in Oslo and she is still operating in the Norwegian sector, she has expanded this rig, the Scarabeo 5 spent all their life in the Norwegian sector and at that time I remember I was project manager and we were designing for 4,000 input and output signals from the automation and eventually... I was 30 years younger and very excited and with great hopes and there it was automation will replace the human beings, and still after 30 years automation is supporting but still we have the drilling rigs with the same amount of people, the vessels with 25 person, maybe we cut two or three positions but no big changes.
I think that digitalisation is impacting us the same as automation impacted us. The important thing is not data, it is the Connected Ship because we have the data on board we need to take them ashore. We all think when we talk about digitalisation we talk about the cruise vessels, the offshore where the pipelines are huge in communication, we have 60,000, maybe not, you have better data, 60,000 bulk carrier tankers where you have 20 people on board and very little connection.
Two years ago we made a survey, just out of the 1,000 ships we manage only 40% were connected decently to get decent use of data, now it's increasing, the communication price is going down and this is the important thing, and together with this I think like in automation is that common sense has to prevail, we will still have human beings on board because I; and I try to be a little bit provocative here, I don’t see the autonomous vessel being replicable for the 60,000 seagoing vessels around the world so we will still have the human element on board.
The important thing that a lot of people do not take is we need to translate this data with algorithm for decision support system for the people onboard and ashore because without this automatic algorithm that are translating the data in decision support system for the people who manage the vessel we will fail.
We will inevitably come back to that point in just a second, but before I do I want to give Christopher a quick opportunity to come in with an opening statement. I put Christopher on these panels largely because I find him very compelling, but also, I like watching everybody’s jaw drop when he effectively sort of spells the doom mongering that goes on in shipping, but does it in a very compelling way.
Christopher your latest report due to come out, I've had the pleasure of reading an advanced copy, well 30% of it, I can't quite bring myself to get to the shipbuilding bit yet, but I will do once I've had a few drinks. Give us the brief synopsis of where we are, for anyone who doesn’t know Christopher is; I described him as the Cassandra in Chief because he keeps saying, “the future is coming, the future is coming”, and more and more people unfortunately are now believing him, so what does the future look like in your book?
I would like to take a slightly different perspective into the question than I had planned because I would like to follow-up on your comments. To my understanding the 4.0 is not necessarily only about autonomous or digitalisation or whatever we would like to call it, to me the challenge is we have a more fundamental change going on here. On the one hand, we have an aging consumer base in the OECD basically, that basically means that all global consumers are about to retire, this is not to say they will not continue to spend but our spending behaviour will change towards services that are not seaborne driven, so that basically means that we are about to see global trade volume stagnating. And now we come back to the combinatorial effects of the 4.0 revolution, because why I think that the 4.0 is about more than just; not just; I know that it's extremely complicated and please excuse me, but about autonomous, this is about we may not necessarily need the same amount of fossil fuels in the future, so instead of having unarmed drilling rigs, this is much more about looking into the effects we have seen with renewable energies.
Today we can see that both solar and wind energy are compared to a non-subsidy basis in most of the sunny parts of the global economy, in particular in southeast Asia, this is a place that matters the most because this is the place where everybody is investing in new ships hoping that the future demands will come from due to population growth, so when these regions we are basically being about to provide electricity at a grid parity level with fossil fuels, but on a smaller investment level with a quicker repayment period, this is a very significant change in energy outlook both for the energy sector of course but in particular also for the shipping sector. So, basically what we're saying is that in most of all ship segments we should not expect to see major increases in demand for the next 15 year plus, something like that, so this goes basically much more beyond all the things we are seeing digitalisation in our business model, this basically means that as a banker at least what this is about is we have to pick the right winners of tomorrow because there will be a lot of struggles in the next few years, the market will not turn in 12 months, 18 months whatever. But of course, shipping will still need ships and we will still need fossil fuels but the growth in these commodities is much less than what have seen in the past, so we need to adapt to a new situation.
It's interesting because we talk about digitalisation in the broader sense of the term but obviously these things do not exist in isolation, the decision to invest in technology one way or another does not happen without understanding and having a view on where the markets are going, it doesn’t exist without having a view on where the regulatory future of the industry lies, so these decisions are not being taken in isolation and we can't really view digitalisation as a single decision, but it does feel like we are in the midst of some fairly fundamental change, on a market level, on a technology level, and it feels like we are shifting towards something that is perhaps greater than the sum of these individual conversations and I think it's certainly something I take from each of these comments.
John, in terms of your relationship as a stakeholder within this industry, I am interested in the relationship you have with partners, because you’re coming in and offering digitalisation services and you are working on a number of live projects with the shipping industry. What’s your impression of how realistic the expectations are from your customers and are we, as an industry, ready to digitalise, are we doing this properly?
First of all, I think we already there, we are talking about digitalisation every day and the industry have done it for many years. When we move into customer engagement, they are already well aware what they really want to do with the technologies that they have available right now. What is the problem is what also was in the other panel discussion, what about the future? What about building some kind of a bridge from where we are today to be where we really want but nobody really knows the technology in twelve, eighteen, twenty-four months’ time.
When we discuss digitalisation technology with our customers, it is more about really understand to build a trust relationship and do it an agile way of working and an agile partnership where you develop, based on the technology that is available on the market.
The engagement that we are doing as well is together with partners, you are right, we can’t do this alone. We are from a different industry, we are coming from IT Telco. What we are doing is that we have a lot of experience from other industries. We try to take all these great experience and knowledge from other industries, bring it in to the maritime, not only shipping. I think we have too much focus on only shipping, it’s about maritime. It’s about the whole logistic chain to be connected together.
So, it’s really about how you, in the maritime industry, try to find the right partners to secure that you are connected and that you do the journey together. I believe that, Ericsson believe and also together with our partners, this is a journey based on HR management because the technology...what you wanted to buy yesterday is already outdated tomorrow so that’s why we need to be in a position to make a big change management. I think that is one of the biggest challenges in the maritime, also in the oil industries, change management. Also, how do you change the behaviour of human because it’s you and me that needs to work with the new and latest technologies. So, it’s not about making the internet smarter or the shipping smarter, I think it’s more, how can I make the human smarter to use the technologies.
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