Batten Down for Hatches

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Data is the asset that’s hatching a new breed of maritime company adept at accessing, blending, commercialising and managing it, and the future belongs to them, explains Marco Ryan.

 

The maritime industry is not alone in the unprecedented amount of change and disruption lapping at its shores. You only have to look at any conference agenda to see it peppered with talk about digital transformation, disruption, Artificial Intelligence (AI), big data or other buzzwords. But at the same time the industry has not been forced to change at the same pace as some of the other industries such as Financial Services, Travel or Telecommunication.

In other industries, such as mobility or travel, start-ups like Uber or AirBnB, have been particularly disruptive because they have taken advantage of an asset light model, which when combined with mass market reach, have reduced the barriers to entry.

This has driven an unprecedented pace to scale that most ‘traditional’ maritime companies have not been able to respond to. In addition, these newcomers often play by different rules.

They have a ‘seek forgiveness not permission’ approach to flaunting regulations allowing them to drive market penetration at pace, only responding to legal action afterwards to clear up the debris of the change they have created.

The marine industry had until recently therefore, a degree of inbuilt protection. Two major factors have now begun to erode this barrier, and as a result the industry is poised for a massive transformation.

The first of these is the ease with which data can be created and shared—which is achieved through a combination of low cost sensors, cloud technology and low-cost connectivity.

The second is the degree to which this data, combined with AI, can be used to drive new insights, revenue streams and opportunities, often in the unregulated part of the industry but increasingly also touching on the regulated areas.

The value of data is something that the industry is still waking up to and in this early stage of awareness it often confuses volumes of data, data ownership and the use of data as proxies or measures of value.

The volume of data available now is unrivalled. Low costs sensors, the Internet of Things (IoT), and online data sources provide a volume and richness of data that is unprecedented. When these different sources are mixed together—the structured sources such as data in databases, and the unstructured sources such as social media data, reviews, and comments—we end up with big data.

The growth in AI algorithms, combined with cloud-based, affordable processing power, means that suddenly the volume of data no longer presents a technical or storage challenge. Complex data sets—whether structured, unstructured or big data—are not a barrier to gaining insight. Indeed, it is the very extent and richness of these massive data sets that can provide a level of accuracy and insight simply impossible for the human mind to process.

So if it is not the volume of data that drives economic value, is it the ownership of that data which holds the key to future value?

Many organisations seem to be obsessed by who owns the data, as if ownership conferred some kind of short-cut to a new revenue source.

Whilst there is of course a link between ownership and the legal right to use that information for commercial gain, very few organisations in the maritime industry have yet to demonstrate the direct linkage. Indeed, there is a considerable cost to owning data.

Historically that cost was storage related, but the cloud infrastructure has largely commoditised this. Today the cost is much more about the legal implications of holding data and protecting it, rather than in its use. New regulations, of which the GDPR is a good example, can impose massive financial penalties on organisations that fail to meet data storage, archiving and security requirements.

Nor is data always ‘clean data’. Missing fields, spelling mistakes, incorrect data entry, the wrong time stamps, language or protocol can all require remedial action if the data is to have a value. That costs money, sometimes to the extent that really large data-sets become simply uneconomic to maintain.

So if the value is not in the volume or the ownership, where is it? I would argue that it is in the right to use the data. That right might need to be anonymised or aggregated to satisfy data protection requirements or commercial confidentialities, but that does not mean it is valueless. Indeed, when existing data is augmented with other data to create ‘new data’, or combined with some other IPR to create a solution or service, then typically the use of that data can be charged for, meaning that finally the data has a tangible economic value.

The economic vale of a warm seat, or the ability to play a jingle during the flush cycle may be questionable, but a sensor on each of the 4000 toilets on board a cruise ship, giving insight into frequency and amount of water usage, can form part of a smart on-board environmental solution.

Let me give a simple example. Sensors on toilet seats. At the first glance many of you (myself included) might question why we would need a sensor on a toilet seat? Those who have spent time in Japan or Korea will most likely appreciate the unusual mix of innovation and toilet technology and smile in recognition.

I am not sure I have worked out the economic value of a warm seat or the ability to play different jingles during the flush cycle, but perhaps I am too conservatively minded. Surely this type of data has no value?

If that data is used to play a musical tune, then arguably not. But now imagine that this toilet sensor was one of 4,000 on a cruise ship that helps us to understand the frequency and amount of water being used on board.

The difference between a toilet using 15 litres and 16 litres of water per flush is relevant when you consider the thousands of toilets on a modern cruise ship and the frequency of their use. One litre of water is statistically irrelevant but 1 litre x 4000 toilets x 5 times a day is now 20,000 litres of water.

This insight can form part of a smart on-board environmental solution that helps process the waste, filter it for different purposes, perhaps even recycle it for other uses or identify what waste needs to be offloaded at the next port.

Suddenly the sensor on our individual toilet seat has a value not only as part of the on-board environmental waste ecosystem, but also in the larger marine ecosystem where accurate information about waste volumes, docking schedules etc. can help to increase the predictability and profitability of port side operations too.

The value of data really comes when we understand the ‘use case’ for that data. Much of the data vessels produce has a short shelf life—i.e. the period in which it can really add value or be commercialised is often time sensitive. Value can be created by both understanding the context of that data in a broader ecosystem value cycle (as with our toilet seat) but also in the refinement of the AI algorithms.

The latter is a great example of how legacy data can be used for trend analysis, or in a world of artificial intelligence for running digital twins, training cognitive learning algorithms or augmenting it with other data sources.

Imagine now a young First Officer on a night watch, passing through a challenging and narrow straight. He or she doesn’t want to wake the Master for help but would hugely value, and benefit from, a second opinion. Imagine then a system that provided a decision support analysis tool based upon thousands of other similar vessels’ passage through that specific spot, filtered by vessel tonnage, weather condition, time of year, tidal state, engine health, the Master’s hours at sea etc.

This tool—a sort of ‘ask the virtual Master’ app – is clearly of value to the First Officer during his watch, but also to the Master and the ship operator/owner, who has now reduced his insurance premium by subscribing to such a service.

Will we ever see data as an asset on the balance sheet? I suspect in the next year or so it will happen—perhaps not in the maritime industry, but probably in a service industry. Regardless of whether it does or not though, we can all adopt that sort of mind-set.

We should ask questions such as ‘Will it drive revenue or an outcome that can be measured? Does it have a shelf life? If so over what period or would we have to deprecate it? Can it be protected—from a physical, cyber and IPR perspective’? These are all typical questions when companies look at their capitalisation policy and I would contend it should be no different with data.

Identify potential partners with predefined APIs with access to data feeds, those with ‘sandbox’ environments, and those with Innovation Labs or Acceleration centres where you can experiment not just safely, but with dedicated support. All of these will help you to quickly and cheaply explore new potential business ideas together, but make sure you have unique data, or can make a unique contribution.

But what if you are a more traditional maritime company, perhaps with less unique data or relying on some 3rd party for insight? What can you do to be part of this transformation?

There are some areas where it is in the interest of the marine ecosystem to collaborate, and this is where I would encourage all of us to take an active role. That could be around safety, it could be around cyber threats, it could be around standards or protocols. With increasing focus on sustainability and environmental issues, perhaps there is an opportunity for an industry-wide collaborative project to help modernise, or demonstrate the significant progress being made.

Perhaps we can look to put pressure on insurance companies, financial institutions, even global institutions to help create new value in our industry by looking at ways to explore how we can recognise data as a financial asset.

On a practical level you should seek to work with an OEM (Original Equipment Manufacturer) and companies that have clear data policies and cyber capabilities.

When looking for potential partners identify those with predefined Application Programming Interfaces (APIs) with access to data feeds, those with ‘sandbox’ environments where you can try out new ideas safely, and particularly those with Innovation Labs or Acceleration centres where you can experiment not just safely, but with dedicated support. All of these will help you to quickly and cheaply explore new potential business ideas together, but do ensure that your idea is one where you have unique data, or can make a unique contribution.

Perhaps you should also be considering the state of your own data. What standard/format/state of cleanliness is it in? Could you share it with a third party easily? If not, what data would you need to prioritise to get it ready? Do you have some particular service, intellectual property or capability that could be valuable to others? Do you have dedicated resources focused on data management, archiving and security?

In conclusion, there is no shortage of data in the maritime industry, the vast majority of which is free or has little commercial value when dealt with in isolation. But companies are waking up to the new, unforeseen opportunities that arise when that massive volume of free data is combined with other data streams, and supported by cloud based computing and artificial intelligence.

A sure sign of this is the burgeoning number of data and AI start-ups focused on the marine ecosystem. But with increased cyber threats and tighter data regulation, the incorrect husbandry of data can become a significant cost.

The trend to viewing data as an asset is accelerating, so it is only a matter of time before data appears on an organisation’s balance sheet. This in itself will tilt the balance in favour of the companies that understand how to access it, blend it, commercialise it and manage it.

Data is the asset that is hatching a new breed of maritime company, and it could well turn out to be a golden egg.

 

Marco Ryan, Chief Digital Officer & EVP, Wärtsilä. "Will we ever see data as an asset on the balance sheet? I suspect in the next year or so it will happen—perhaps not in the maritime industry, but probably in a service industry. Regardless of whether it does or not though, we can all adopt that sort of mind-set."

Marco Ryan, Chief Digital Officer & EVP, Wärtsilä.
“Will we ever see data as an asset on the balance sheet? I suspect in the next year or so it will happen—perhaps not in the maritime industry, but probably in a service industry. Regardless of whether it does or not though, we can all adopt that sort of mind-set.”

 

 

Images courtesy © Getty Images/Wärtsilä.

This article appeared in the Q4 2017 issue of Futurenautics.

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