Harvesting the crowd

How to bring back innovation to the port?

Most port-cities float on 20th century dominant designs. The transport and industry which are supported by the port and its infrastructure of roads, electricity grid and energy supply are based on fossil fuels. But also institutions and transactional systems run on dominant logics that were invented centuries ago. Dominant logic can sustain competitive advantage for a long time, but also works as a filter in which relevant data are implicitly selected. What works is maintained and what’s new is received with scepticism, unbelief and disdain, while the messenger is disregarded. This is also true for Rotterdam, the largest port in Europe, home to five oil refineries, and one of the largest petrochemical clusters in the world. Although still considered the motor engine of Dutch economy, it falls behind in terms of innovation power. What is the best way forward to disrupt existing business models of the port while using the inherited resources of the port cluster?

Disrupting existing business models

Disruption – often used nowadays – is actually what Schumpeter called creative destruction, a process where industries renew themselves from within by replacing existing businesses and make old ones redundant. Entrepreneurs – start-ups if you like – are at the heart of this process, acting as change agents, free spirits who think and act differently. For Rotterdam the ambitions to break through the dominant logic and disrupt a business model in which existing customers to this very day invest billions of dollars, it sounds like a paradox, an impossible yet inevitable assignment. Slowly, but gradually however, it seems both local authorities and incumbent industries seem to accept the ambiguity, see the need but don’t know how to move forward and make the transition.

I consider platform innovation to be most powerful instrument to disrupt existing business models. Most companies that survived the first internet bubble (early 2000s) have built themselves operating platforms: Apple’s iTunes for music, Google’s Android for mobile communication, Microsoft Office 365 for desktop productivity, Sony’s Playstation for games. Subsequently Facebook created a sharing platform for social events. The question is what makes platform innovation so different and how to create a platform? Essentially, most innovations often result in more of the same ‘stuff’. A car manufacturer comes up with a new car model, often built upon the previous design, but with new headlights, seats and shapes. Other innovations lead to optimisation. Such innovations enhance efficiency, provide transparency or create an abundance of choice for the customer. Platform innovation goes one step further, instead of using algorithms to aggregate more (of the same) data, it actually creates more inventory of content: music (Spotify), rooms (AirBnB), taxiseats (Über). Instead of building more hotels in Amsterdam, AirBnB turned thousands of apartments in hotel accommodations, just like Über turned every car into a taxi and Amazon is turning 2 million small pop and mom stores into one online shopping mall.

How to create platform innovation?

Existing theories on innovation in port clusters consider sophisticated demand of lead firms as the main drivers for their suppliers to innovate. This assumes that innovation potential is already within the cluster. Platform innovation takes quite a different approach, innovation is an open process, wherein everyone can participate, a crowd like approach between insiders and outsiders. Boudreau and Lakhani (2013) explained how the crowd can become a source of innovation in a number of ways: through contests, crowd communities, crowd complementors and crowd labour markets.

Contest

Contests are the most straightforward way to engage a crowd. They may also be the oldest type of using the crowd. A good example is the World Port Hackathon which was first organised five years ago in Rotterdam and brings sponsors (the port authority and lead firms in the port) together to first brainstorm on the challenges and provide open data in a port data laboratory. Next, a crowd of hackers, programmers, experts, students and professionals get together for a 24-hour ‘hackathon’ and at the end of the day the solutions are presented in front of a critical jury. Best solutions win a prize. In recent editions, the initiators also provided for a launch path to bring the best ideas to a robust business proposition up to the point that the prototype is adopted by a launching customer. Such contests have revamped into the corporate world. New entrants, young talented people are welcomed with open arms. Wärtsilä’s Marine Mastermind concluded a quest for a ‘game-changing start-up’ in June 2016 after generating 47 applications from 17 locations around the world. It creates a buzz around their company of innovation, brings recruiters in close contact with bright talent, and also stimulates own people to join in (intrapreneurship). There are also some drawbacks: the effect is only temporary, so repetition requires the same enthusiasm, effort and endurance of top level support. In Norway an initiative is ‘From Planet to Profit’, a contest aimed to bring the sustainable development goals into the maritime industry from the bottom-up, addressing the young maritime generation to make a change. Also here, a long breadth and passionate leadership is key.

Collaborative communities

Collaborative communities also have a long tradition. In a way the omnipresent guilds in medieval Europe were closed collaborative communities. They shared the same objectives namely to be leaders in specific craftsmanship and produce, sell and trade their products to other cities and states. The fundamental difference with today’s communities is that these are open. Most famous since the emergence of the internet is Wikipedia, which still is a crowdsourced community. In the port and maritime industry some countries have set up ambitious communities to foster their own R&D efforts. A good example here is ‘Our Oceans Challenge’, an initiative piloted by Dutch offshore contractor Heerema and in its second year has become a broad sustainability initiative of leading Dutch offshore companies, universities and launch partners, such as Yes!Delft and PortXL. The fundamental condition for others to join in is that contributors will have to believe in the ‘do good’ mission of the community. The ‘what’s in it for me’ has changed into ‘what’s in it for us’. It builds on the premise that the intentions of the community appeal to the needs of the crowd, quite often linked to societal goals, or even the Sustainable Development Goals. Another condition is to use sophisticated crowdsourcing platforms, which brings wild idea generators into contact with seasoned professionals industry expertise and can help funnel the best ideas into feasible business opportunities.

Crowd complementors

Complementors empower the crowd to build upon a core product or technology, thereby transforming that core product into a platform that works like an accelerator. Commonly used examples are Apple’s iTunes and iCloud solutions build upon Apple’s core mobile products. In logistics, Amazon.com is rapidly doing the same. In 2016 Amazon acquired a Chinese license to sell and buy space on ocean-going vessels from China, after already having invested heavily in US domestic air cargo distribution network the year before. The license allows Amazon to buy space from carriers and sell it to the public. For industry experts, the tandem between Maersk and Alibaba as an answer to Amazon’s moves as a new kid on the block in shipping did not come as a complete surprise. Such platforms have most potential if they become open platforms, not just for themselves but also for smallholders to sell their products in Amazon’s globally connected shopping mall. Freight forwarders and logistics service providers have been selling end-to-end-supply chain solutions for almost twenty years, but always fought battles with other supply chain partners to link operating systems and provide transparency for the cargo owners. This is what makes the Amazon proposition to promising, the shopping mall is online, so therefore shipping is also online, not the other way around.

Crowd labour market

In the fourth type of crowdsourcing the inventory of human capital is at the core of the proposition. Collaborative communities still have the bottleneck of allocating people to R&D processes in an old fashioned manner, often with fixed contracts. These people may not be the most motivated, neither have the best skills for the task, or be available when they are most needed. Freelancers are the best these companies can get. They are the bees who fly from one company to the other, where the precious honey symbolises the knowledge they harvest by temporarily performing the task. In the connected society, knowledge is no longer locked up in companies, neither are freelancers the only knowledge workers. Intermediary platforms match immediate support and work like spot markets and dating sites. The construction industry – particularly in the home improvement segment – is likely to adopt this new opportunity, whereas in the USA there are numerous examples. The biggest challenge may not be to find the people whose knowledge is brought into the crowd labour market, but to find the best management and organisation model to manage the tasks, align them, link micro to macro plans, and be able to see the big picture. The port’s current innovation ecosystem is not providing for this type of crowdsourcing, and as a result social innovation is running behind with other regions in the world.

Harvesting the port’s unique assets

Back to the beginning: the port of Rotterdam, particularly the operating companies run behind in terms of innovation, while the ambition is to become the ‘smartest port’. Whether you agree or not, there are clear signs that the port and the entire shipping and logistics industry is at a crossroads, an exciting time but surely ambiguous. This ambiguity creates tensions, raises eyebrows and gives cold sweat on a Summer day. What can be done? Successful start-ups are often the talk of the town, but the question what makes these innovations so different is not answered. They are innovative not because they have smart algorithms, but they understand the new laws of competition, which is actually as old as mankind: what can be harvested, needs harvesting and brought onto the platform: rooftops and screens of factories, warehouses and office harvest the sun, windfarms harvest wind, sensors are harvesting the motion of transport units and position of fixed infrastructure and let them interact with each other, matchmaking platforms harvest the human skills of an open labour pool, software developers harvest the abundance of data that comes along with cargo flows and turn it into user-friendly dashboards…. With a little help from the crowd the list will be endless. Those business models are built on distributed inventories connected via the network. The port is a platform, and functions like it has always done: a place where stocks (of capital) are piled up and distributed to bring wealth to the city.

Albert Einstein already concluded: what we need is not knowledge, it is imagination. In Rotterdam we add: and now get on with it (‘en nu aan het werk’).

References: Using the Crowd as an Innovation Partner, by Kevin J. Boudreau and Karim R., April 2013, Harvard Business Review.

About the author

Maurice Jansen works at at STC-Group at the Innovation, Research & Development department. He lectures at Netherlands Maritime University and is a visiting researcher at Erasmus University Rotterdam.