{"id":26904,"date":"2017-11-15T22:59:34","date_gmt":"2017-11-16T03:59:34","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/"},"modified":"2017-11-15T23:41:41","modified_gmt":"2017-11-16T04:41:41","slug":"when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/","title":{"rendered":"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey"},"content":{"rendered":"

\"\"<\/a><\/h1>\n

Self-inflicted Growing Pains from Economic Downturn<\/h1>\n

 <\/p>\n

Today, the container fleet market \u2013 led by Maersk \u2013 accounts for more than half of the 80% of global merchandize trade that travels by sea and for more than one third of the global trade. [1] Despite this continuing YoY growth in TEU volumes, the revenue per TEU has been volatile and not grown in line with rising costs \u2013 resulting in declining profitability, see Table 1 below. [2]<\/p>\n

Table 1: Maersk Financial Performance<\/p>\n\n\n\n\n\n\n\n
Billion USD<\/em><\/td>\n2013<\/em><\/strong><\/td>\n2014<\/em><\/strong><\/td>\n2015<\/em><\/strong><\/td>\n2016<\/em><\/strong><\/td>\nLTM 2017<\/em><\/strong><\/td>\n<\/tr>\n
Revenue<\/em><\/strong><\/td>\n47.386<\/td>\n47.569<\/td>\n40.308<\/td>\n35.464<\/td>\n37.925<\/td>\n<\/tr>\n
Gross Profit<\/em><\/strong><\/td>\n12.383<\/p>\n

 <\/td>\n

12.701<\/td>\n9.466<\/td>\n6.989<\/td>\n7.710<\/td>\n<\/tr>\n
Operating Income<\/em><\/strong><\/td>\n6.825<\/td>\n7.552<\/td>\n4.261<\/td>\n2.263<\/td>\n2.931<\/td>\n<\/tr>\n
Net Income<\/em><\/strong><\/td>\n3.450<\/td>\n5.015<\/td>\n791<\/td>\n(-1.939)<\/td>\n(-4.259)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Historically, Maersk and other companies in this global transportation and logistics business, maintained profitability by growing scale \u2013 building larger ships, consolidating vendors, etc. However, as the market reaches consolidation and bigger has stopped meaning better due to current excess capacity in the system as a result of the unforeseen economic downturn \u2013 companies like Maersk must now look to work smarter rather than larger. (Note, this does not ignore Maersk\u2019s $4.3 billion takeover of Hamburg Sud \u2013 the 7th largest carrier \u2013 just this month but is intended to state that scale alone is not going to be sufficient in the future and opportunities to further consolidate will likely be blocked.) [3]<\/p>\n

Digital as a Driver of New Business Models and Value<\/h1>\n

McKinsey & Company recently reported a future in which 3 or 4 major container-shipping companies will emerge as \u201cdigitally enabled independents with strong customer orientation and innovative commercial practices\u201d. [4] \u00a0If this is to become reality, Maersk must ensure it is one of these three companies left standing. To do so, Maersk must invest in digital technologies such as\u00a0the internet of things, big data, and machine learning\u00a0to \u201cdifferentiate their products, disintermediate value chains, improve customer service, raise productivity, and cut costs.\u201d [4]<\/p>\n

Becoming the Global Integrator of Container Logistics<\/h1>\n

Maersk has begun taking actions in the short term to address its survival imperative of investing to develop digital products and services across its brands. Maersk\u2019s CEO, S\u00f8ren Skou, has placed digitization as an important pillar for growth in 2017 and stated, \u201cdigital innovation will be vital in creating and expanding synergies between the five brands that enable Maersk to deliver on the new vision of becoming the global integrator of container logistics.\u201d [5] In terms of setting the tone for the organization and formalizing the organizational structures to drive the necessary changes, Maersk appointed Ibrahim Gokcen to be the companies first-ever Chief Digital Officer. Gokcen has since set the priorities for the Transport and Logistics Digital Organization as shown in Figure 1 below.<\/p>\n

\"\"<\/a><\/p>\n

Figure 1: Priorities of Transport and Logistics Digital [5]<\/p>\n

Gokcen cautiously notes, \u201cWhile technology will play a big role in this process, our domain expertise will allow us to play and win in the race to digitize.\u201d [5] In the short term, to accelerate their digital journey , Maersk has begun forming partnerships with tech giants such as Microsoft to use its cloud computer platform Azure and IBM to explore the benefits of blockchain technology for Maersk\u2019s digital efforts. [6] Over the long-term, as Maersk is able to become more digitally savvy its aim is to \u201csimplify and enhance visibility in supply chains by providing a seamless end-to-end digital experience for customers.\u201d [6]<\/p>\n

Tech Startups and VCs: Competitors or Collaborators?<\/h1>\n

A major risk that Maersk should take actions to mitigate very early on is that tech giants and digital disruptors will capture value from customer relationships by moving faster. Forbes reports that \u201cEvery five days, a digital logistics startup is born somewhere around the world.\u201d [7] Competitors of the future could include a whole new set of fast-moving technology players such as Google and Amazon \u2013 note, Amazon has already launched its own air freights. Similarly, VC-backed startups such as ClearMetal are taking new approaches to generate dynamic predictions in real-time made possible by application of artificial intelligence, granularity at scale, big data cloud computing, machine learning, and predictions via APIs to the complex, global supply chain. [8] With pressure coming from outside their own industry, Maersk must take steps now to ensure they are positioning themselves to take advantage of these new developments \u2013 even going so far as to perhaps seed some existing revenue streams or the promise of next-generation growth and innovation strategies. [7]<\/p>\n

Questions Left Unanswered<\/h1>\n
    \n
  1. As Maersk undertakes its digital journey, a malware attack earlier this year shutdown systems resulting in negative impacts of 200-300M USD. How should Maersk account for these risks and what is an acceptable risk tolerance?<\/li>\n
  2. \u201cMaersk has a window right now to capitalize on the energy and agility of digital startups \u2013 or else risk meeting these new entrants head-to-head as competitors in the future.\u201d [8] What is the duration of this window? What approach would you take to assessing different engagement opportunities and partnership approaches?<\/li>\n<\/ol>\n

    (Words: 798)<\/p>\n

    [1] \u201cGlobal Container Fleet Market 2017-2021,\u201d Research and Markets (December 2016), \u00a0TechNavio \u2013 Infiniti Research Ltd., https:\/\/www.researchandmarkets.com\/research\/bss4g2\/global_container<\/a>, accessed November 2017.<\/p>\n

    [2] Source: Maersk Income Statements, Capital IQ, Inc., a division of Standard & Poor\u2019s.<\/p>\n

    [3] Rob Ward, \u201cMaersk get green light on Hamburg Sud takeover,\u201d Journal of Commerce<\/em>, Sep 25, 2017, https:\/\/www.joc.com\/maritime-news\/container-lines\/hamburg-sud\/maersk-gets-green-light-hamburg-sud-takeover_20170925.html<\/a>, accessed November 2017.<\/p>\n

    [4] Steve Saxon and Matt Stone, \u201cHow container shipping could reinvent itself for the digital age,\u201d McKinsey Quarterly (October 2017), McKinsey & Company, https:\/\/www.mckinsey.com\/industries\/travel-transport-and-logistics\/our-insights\/how-container-shipping-could-reinvent-itself-for-the-digital-age<\/a>, accessed November 2017.<\/p>\n

    [5] John Churchill and Flemming J. Mikkelsen, \u201cEverything will be digitized,\u201d press release, June 7, 2017, on Maersk website, https:\/\/www.maersk.com\/stories\/everything-will-be-digitised<\/a>, accessed November 2017.<\/p>\n

    [6] John Churchill, \u201cMaersk partners with Microsoft to power digital,\u201d press release, April 26, 2017, on Maersk website, https:\/\/www.maersk.com\/stories\/maersk-partners-with-microsoft-to-power-digital<\/a>, accessed November 2017.<\/p>\n

    [7] Catherine Shu, \u201cClearMetal gets $9M from Prelude Ventures and Eric Schmidt\u2019s Innovation Endeavors for its logistics platform,\u201d TechCrunch<\/em>, September 20, 2017, https:\/\/techcrunch.com\/2017\/09\/20\/clearmetal-gets-9m-from-prelude-ventures-and-eric-schmidts-innovation-endeavors-for-its-logistics-platform\/<\/a>, accessed November 2017.<\/p>\n

    [8] Joris D\u2019Inca and Max-Alexander Borreck, \u201cDigital Logistics Startups Are Both Chalenge and Opportunity for Industry Incumbents,\u201d Forbes<\/em>, July 28, 2017, https:\/\/www.forbes.com\/sites\/oliverwyman\/2017\/07\/28\/digital-logistics-startups-are-both-challenge-and-opportunity-for-industry-incumbents\/#4ddb17f31589<\/a>, accessed November 2017.<\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    While Maersk and others in the shipping and logistics industry historically have maintained profits through scaling ship size and market consolidation, new challenges require them to embrace digitalization of the supply chain in order to survive.<\/p>\n","protected":false},"author":9780,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[298,4235,2123,1503,21,17,4200],"class_list":["post-26904","hck-submission","type-hck-submission","status-publish","hentry","category-big-data","category-digital-logistics","category-digitalization","category-iot","category-logistics","category-supply-chain","category-supply-chain-digitalization","hck-taxonomy-organization-maersk","hck-taxonomy-industry-shipping","hck-taxonomy-country-denmark"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nWhen Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"While Maersk and others in the shipping and logistics industry historically have maintained profits through scaling ship size and market consolidation, new challenges require them to embrace digitalization of the supply chain in order to survive.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2017-11-16T04:41:41+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Picture1-49-300x200.png\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/\",\"name\":\"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/Picture1-49-300x200.png\",\"datePublished\":\"2017-11-16T03:59:34+00:00\",\"dateModified\":\"2017-11-16T04:41:41+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/Picture1-49.png\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/Picture1-49.png\",\"width\":1020,\"height\":680},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/","og_locale":"en_US","og_type":"article","og_title":"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey - Technology and Operations Management","og_description":"While Maersk and others in the shipping and logistics industry historically have maintained profits through scaling ship size and market consolidation, new challenges require them to embrace digitalization of the supply chain in order to survive.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/","og_site_name":"Technology and Operations Management","article_modified_time":"2017-11-16T04:41:41+00:00","og_image":[{"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Picture1-49-300x200.png","type":"","width":"","height":""}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/","name":"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Picture1-49-300x200.png","datePublished":"2017-11-16T03:59:34+00:00","dateModified":"2017-11-16T04:41:41+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Picture1-49.png","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Picture1-49.png","width":1020,"height":680},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/when-scaling-alone-no-longer-scales-maersks-digital-transformation-journey\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"When Scaling Alone No Longer Scales: Maersk\u2019s Digital Transformation Journey"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26904","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/9780"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=26904"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26904\/revisions"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=26904"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=26904"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}