The Futurenauts: Paul Østergaard

The Futurenauts

As part of our mission to chart shipping and maritime’s technology-enabled future, we’re profiling some of the people shaping that future.

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ShipServ Founder & CEO Paul Ostergaard

Marking 15 years in business this year, ShipServ and its founder and CEO Paul Østergaard could be described as shipping’s original digital disrupter.

Paul’s vision of how the Internet could change the economics of shipping, driving out inefficiencies and increasing competitiveness led to a ground-breaking shipping e-commerce idea, which is now the world’s leading maritime e-marketplace.

ShipServ’s proposition—to help marine and offshore buyers find the best suppliers, and speed up purchasing to save money and trade efficiently, and to enable suppliers to serve customers better and reach new markets—seems simple, but was revolutionary in 1999.

Turning an innovative idea into a successful business is always a challenge, and in a conservative industry like shipping perhaps more so. Where many others fell by the wayside, ShipServ succeeded. Now serving the sourcing activity of over 50,000 users in 101 countries, ShipServ continues to grow and innovate.

In an increasingly volatile and unpredictable world we were keen to ask Paul—hardly a grand-daddy, but certainly the elder statesman of digital shipping businesses—some questions about ShipServ, and shipping’s, technology-enabled future. His answers are fascinating, and we’re delighted to count him as our third Futurenaut.

Here’s what he had to say:

Futurenautics: ShipServ is marking 15 years in business this year, reporting trading volume over $2.3bn in 2013. Your concept and its execution has proved extremely successful, but with such a ground‐breaking business there must have been failures along the way. What is your attitude to experimentation and failure and how important do you think that’s been?

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Now the world’s leading maritime e-marketplace, lean startup principles and agile development processes have been at the core of the ShipServ philosophy from the outset.

Paul Østergaard: We are great believers in lean startup principles and agile development processes and they have been at the core of our philosophy for all of our 15 years in existence. When I first had the concept of ShipServ, I put together a very basic prototype and went out to clients and we still adopt that MVP [Minimum Viable Product] methodology in all our product development today. For example, we have been testing and refining ShipServ Match [a matching engine which selects the best available supplier based on 14 years of trading data from thousands of maritime purchasers] with clients for nearly two years.

This iteration and build-measure-learn methodology means that your users are consistently giving you feedback in the product development process so that when you are ready to launch the full product, you know it has been thoroughly tested and that the failures are not going to be catastrophic, just further minimal iterations.

HTS when fully functional will undoubtedly have a massive impact of ship operations including procurement. From unmanned vessels to remote engine monitoring all of these new capabilities will affect what is brought and used on board ships.

Futurenautics: We’re talking connectivity this issue; how will the HTS promise of higher bandwidth at lower cost affect the ShipServ business? Are there new opportunities offered by better connectivity with the vessel—perhaps crew making individual purchasing decisions?

Paul Østergaard: HTS when fully functional will undoubtedly have a massive impact of ship operations including procurement. From unmanned vessels to remote engine monitoring all of these new capabilities will affect what is brought and used on board ships. It also increases the options for shipping companies and crew and helps promote suppliers further as their products and service now have further visibility with ‘always on’ connectivity. We already have our ShipServ Onboard suite of products that allow crew to specify and find the right supplier when they send the requisition ashore, and higher bandwidth means that supplier information can be continually updated.

Futurenautics: TradeNet, (the ShipServ trading platform) has KPI and business intelligence capabilities—normally a vital precursor to the development of big data projects. As an industry are we even really at business intelligence yet?

Paul Østergaard: Definitely – both from an owner/manager perspective and also for suppliers and manufacturers. Since the recession in 2008/2009 a lot of focus in ship owning/managing companies switched back to operating costs as freight rates plummeted. This meant that C-suite execs both wanted and needed analysis of data to measure operating cost performance and we have really noticed a dramatic increase in the requirements by owners and managers for KPIs that cover this and allow them to benchmark against their peers. We currently send out quarterly KPIs detailing their procurement performance but we are looking to increase the frequency and also provide relevant indices to instantly gauge trends.

On the supplier side, we have seen increasing use of our measurement and data tools such as the Supplier Insight Report that allow suppliers to view search data, view win rates (a key driver of cost and profitability for suppliers) and see when RFQs have already been lost, and we have helped provide data analysis to major suppliers to understand sales trends in specific products. The key in future years will be extracting more knowledge and power from big datasets.

Futurenautics: You’ve recently launched ShipServ Match—a matching engine which selects the best available supplier based on 14 years of trading data from thousands of maritime purchasers. That sounds like an algorithm. Do you have in‐house expertise to develop algorithms? How key will they be in the future?

Paul Østergaard: We have multiple algorithms that help make sense of our data for a variety of purposes. The most sophisticated of these algorithms help our Matching Engine to match demand from buyers (searches and RFQs) with the most suitable suppliers based on three different inputs. Firstly, what the supplier says they do – based on catalogues, profiles and other information loaded onto ShipServ; secondly, what others say the supplier does – buyer reviews, ShipServ’s Supplier ranking – TradeRank and brand verification by manufacturers; and, thirdly, what the supplier actually does – based on their entire trading activity on ShipServ. As an e-marketplace developing, maintaining and improving the algorithms and the acquisition and accumulation of data to ‘feed’ those algorithms are our core assets. You wouldn’t be able to analyse large/big datasets without algorithms so it’s very critical to future operations.

We don’t only deliver technology, we completely infuse our operations with technology, but I think it’s now hard to function as a business in any industry without being technology-enabled.

Futurenautics: ShipServ is arguably the most advanced and data‐rich player in the industry. With some analysts arguing that it takes at least 5 years of data before it can be properly operationalised, does that mean ShipServ is in an unassailable position?

Paul Østergaard: When we started there were 70 companies claiming to be a maritime e-marketplace or revolutionise e-procurement—there’s certainly not that many left now! However, it’s important never to be complacent and to continuously evolve and produce products that a client needs and that are not just ‘nice to have’.

Futurenautics: You identified that digital operations could drive out inefficiencies and waste in the shipping industry. More people are coming to that conclusion. Which are the most potentially disruptive digital businesses in maritime at the moment?

Paul Ostergaard: We have seen a number of ‘disrupters’ in the maritime industry and not just over recent years. When we launched in 2000, companies like Q88 and Rightship were starting to revolutionise the voyage information and ship vetting processes and have gone on to be an integral part of those sectors – just like we have with marine procurement. More recently, the algorithm behind VesselValues has helped to radically change the vessel valuation process and made it far more transparent. Any product or service that removes ‘inefficient practices’ with a blend of technology and change management will initially be seen as a disrupter due to initial resistance from its targeted user-base, but once the benefits have been realised the barriers are often removed and it becomes a core part of the process. The expected revolutionary changes in connectivity at sea will undoubtedly create further disrupters.

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“It’s important never to be complacent and to continuously evolve and produce products that a client needs and that are not just ‘nice to have’.”

Futurenautics: ShipServ’s model is to charge both suppliers and purchasers. Jeff Bezos famously said, “Your margin is my opportunity.” Is the ‘rake’ which ShipServ, and other marketplaces, take on transactions potentially an Achilles heel?

Paul Østergaard: We have a number of different models for both suppliers and buyers and they can both use ShipServ for free if they wish. For example, our StartSupplier tool is free for suppliers to send quotes and Purchase Order confirmations. We differentiate our pricing by the value we add at each level and constantly review and balance our pricing accordingly. It goes without saying that a sustainable and successful marketplace is one where the value of being in the network clearly outshines any transactional costs charged for being in the network.

Futurenautics: Inmarsat’s Global Xpress® went live for a portion of its customers this month. Their SEP (Service Enablement Platform) is an applications marketplace, much as ShipServ is an e-commerce marketplace. Do you have any advice for them?

Paul Østergaard: Inmarsat are a great company with very smart people so not sure if they need advice! I think the Service Enablement Platform is a fantastic concept and has the ability for 3rd parties to get directly onboard. Like any embryonic marketplace it’s important to satisfy the needs of both sides of the marketplace—many companies failed in the early 2000’s because they became too buyer or supplier centric. It’s also important to build a platform that has the least amount of friction both in terms of product and pricing.

Futurenautics: When you’re asked to categorise the business for reporting purposes, do you tick Internet business, technology business or maritime business?

Paul Østergaard: All of them! My background is both shipping (in procurement for J.Lauritzen) and technology (Oracle) and our senior management team have extensive knowledge in both and as mentioned we work very closely with our clients on product development and their needs so live and breathe the shipping industry. We don’t only deliver technology we completely infuse our operations with technology, but I think it’s now hard to function as a business in any industry without being technology-enabled.

Futurenautics: SMAC—social, mobile, analytics and cloud—is a buzz acronym at the moment. Does it apply for ShipServ, and how should it apply for other maritime companies?

Paul Østergaard: The convergence of the SMAC technologies will undoubtedly change the way companies do business and will be driven by the B2C markets. We use social for both customer service and sales/content marketing, we have developed analytics into all our internal and external platforms, ShipServ is available on mobile platforms and we are 100% cloud, so it definitely applies for us. In a post-digital era companies will need to have a decentralised structure, work in collaboration with customers and must use technology as a business enabler rather than use it as a support function.

Futurenautics: We discussed Industry 4.0 last issue and the potential impact of 3-D printing or additive manufacturing. In future we could well see shipping companies printing their own spare parts, or 3-D printing fabs located at ports. How would that impact the ShipServ e-marketplace and its service offering?

Paul Østergaard: We are actually very excited about the prospect of 3-D printing onboard vessels and are watching the developments with keen interest. We see it as a natural complement to our business as our mission is to enable owners/managers to source the right parts at the right time – whether it’s the physical part or with 3-D printing the virtual drawing that requires a key to access from the supplier.

Futurenautics: What advice would you give to someone with a killer technology idea for the maritime market?

Paul Østergaard: Come and see me! Apart from that, I would encourage them to use lean startup principles and work on a Minimum Viable Product with selected beta trialists and then iterate. You also need to really understand that it’s not just all about the technology, there needs to be a fair amount of change-management practice when adopting new technology and that is often overlooked. Your prospective clients need to see clear benefits to use technology and understand the entire implementation process. My other piece of advice would be to pace yourself and not get too far ahead of your clients.

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“There needs to be a fair amount of change-management practice when adopting new technology and that is often overlooked.”

Futurenautics: What will be the next major technology disruption in shipping? Who will it most affect?

Paul Østergaard: Good question. Artificial Intelligence, logistic drones, 3-D printing, unmanned vessels, new fuels and the impact of regulations will affect everyone in the shipping industry in some shape or form within the next decade.  I look forward to following the development of all of these in future editions of Futurenautics!

Futurenautics: What was the last piece of technology—consumer, industrial or professional—which made you say “Wow!”?

Paul Østergaard: Genetic engineering, the progress with stem cell research and the convergence of traditional ‘technology’ and biology that essentially enables the manufacturing of living organisms is an area that simultaneously blows me away and frightens me. Combine that with AI and I think technology in general is approaching a point where we will need a strong ethical framework in place to ensure that it doesn’t end up causing unintended harm on a large scale.

At the same time, this point where technology essentially surpasses humans—the singularity as some call it—carries with it many amazing possibilities for creating a utopian world. I wish more people would redirect the energy they put into resisting technological progress into ensuring it truly serves humanity.

Paul Østergaard is the Founder and CEO of ShipServ. Visit them at www.ShipServ.com

Images courtesy of ShipServ.

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