Traditionally technology has been used to automate and streamline business processes. This started with mainframe based solutions that automated payroll or certain accounting functions, spreadsheets that enhanced and improved analytical capabilities or MRP and ERP solutions that sought to automate end to end supply chain processes and in some cases attempted to create an integrated whole. What these solutions have in common is that they enabled the organisation to execute their chosen business model more efficiently and more effectively than they could have without the technology. What they didn’t really do however was enable the organisation to substantially change their business model. Enter digital.
You can certainly continue to use digital technologies to improve and streamline operations however unlike previous generations of technology digital can also be used to fundamentally change our existing business model. When this occurs we need to think more about how to create and sustain “systems” level change and less about the technology itself.
One standout example of a leader who created change at a systems level is Malcolm McLean.
In 1955 Malcolm McLean, the owner of a trucking company, invented the modern shipping container. McLean’s shipping container went on to change not only sea freight but the global supply chain in ways previously unimagined. For starters it reduced freight costs by as much as 90% and was a significant enabler of global trade as we know it today.
McLean was not the first to invent containers, many others had the idea. Coal miners, railway companies and the military are among the many who had created and used containers within their operations well before McLean but none had the impact that McLean did. So why was McLean so successful compared to earlier attempts? Based on the reading I have done there seem to be three main contributors.
The first is the design of the containers (led by Keith Tantlinger, an engineer engaged by McLean) was well ahead of any previous attempts and included many innovations. Among the inventions, which we take for granted today, was that the containers were stackable, secure so the contents were safe and incredibly easy to move from one place or one mode of transport to another.
The second factor was his ability to standardise the container across all modes of transport within the supply chain. McLean started the process within his businesses but standardisation really took off when Tantlinger convinced McLean to give the patents that he held for the container to industry. These designs became the cornerstone of the standard shipping container and the emergence of the ISO backed “twenty foot equivalent unit” or “TEU” as the standard for shipping around the world.
The third and perhaps most important factor in McLean’s success is that he looked at this as a holistic supply chain problem (as we would refer to it today) rather than as a trucking company efficiency problem. The story goes that McLean was sitting in a queue of trucks waiting on his turn to load goods onto a ship. As he waited he watched the port practices of the day where the stevedores physically manhandled creates, barrels and sacks individually from the trucks to the ship and thought there must be a better way?
This view was unique. Previous uses of containers looked to solve individual company productivity issues rather than broader supply chain problems. Coal miners looked to move more coal from mines to market (or ships), railways looked to carry more freight by rail more securely and the military needed to move equipment more efficiently to the theatre of war.
When McLean looked at containers he was looking at them from the perspective of a new way to move goods from source to the end user irrespective of the transport mode. Or in 21st century cliqued language he “reimagined” the global supply chain.
Yes he invented the modern container but he also adapted trucks so that containers could easily fit the deck of the truck and be secured, and he adapted ships to take the containers easily and over time rail carriages were adapted to containers and ports were reconfigured to efficiently handle standardised containers. Initially he did this through his own personal business interests. McLean owned one of the largest trucking companies in the USA in the 1950’s and he bought a shipping company and retrofitted the ships to take containers. Over time as the advantages of containerization became more widely known (McLean could offer freight at a 25% discount to his competition) others joined in and containers spread.
It’s a great story and earnt McLean a place on many lists as one of the most influential businessmen of the twentieth century but what does it have to do with today and what does it have to do with digital? Well as a starter for 10 (for those that remember University Challenge) here are some potential lessons for us today.
Context / perspective rules all. McLean saw this as a supply chain problem that crossed company boundaries not as a trucking problem or a shipping company problem. As a result he used containers to solve this problem. Others saw the issue as an internal productivity issue and so they used containers to solve this problem.
- When you are evaluating a new technology, what level of problems are you looking to solve? Is it process efficiency? Is it organisation wide integration? Is it a fundamental operating model change for your enterprise? Is it system or industry redefining? Which level you use to frame the evaluation will likely have an impact on how you see the value of the technology.
Value is often less about technology and more about system level (operating model) changes. In McLean’s case the value delivered was more about “reimagining” the supply chain across all modes of transport and all interconnect points around the world. Without these changes the container may have been a nice productivity improvement but it would hardly have been a game changer.
- So, what operating model changes do you need to consider to maximize the value delivered?
- What will it take to deliver these changes?
Real change often requires openness and agreement to industry standards rather than relentlessly clinging to proprietary IP. Technology has some credibility here and outside of the shipping container are one of the few industries that actually has some agreed non proprietary standards that benefit all. Examples include IP4 and IP6, also numerous “interconnect” agreements and the development of APIs are examples of at least partial standards. But there is also a lot of shielding of IP in the industry in the name of individual advantage (1 click from Amazon, 1000’s of proprietary algorithms and many many more examples of captured IP).
- For some investments you should ask, is this better to open your IP for general industry use (maybe through creative commons licencing) or hold your IP tight to serve your proprietary needs?
These are a few examples to start. I’m sure there are many more and would love to hear your ideas. Then again, maybe you think I have over stretched the case study. Either way I’d love to hear your views.