APRIL 2021
Moving the Frontiers of Trade and Logistics:
Why The Industry Stands to Gain the Most from Innovation Whitepaper
MOVING THE FRONTIERS OF TRADE AND LOGISTICS: WHY THE INDUSTRY STANDS TO GAIN THE MOST FROM INNOVATION
APRIL 2021
Introduction Global trade and logistics organisations will be some of the biggest winners from innovation – the constant creation of newer and better ways to deliver value that solves problems and makes our lives better. How innovative is your organisation? What are you doing to create a culture of innovation? Have you developed and launched a comprehensive infrastructure to enable innovation activities? Have you developed internal R&D capabilities and introduced new technologies? Are you able to connect your innovation process with the global ecosystem in which you operate? And, finally, have you thought about the timelines on which you intend to deliver your innovations?
Executive Summary As global trade and logistics continue to be reimagined, their opportunities for innovation continue to multiply exponentially. From environmental sustainability and smart technology to space logistics, tomorrow’s leading industry players are investing today in the people, practices, and policies that will ensure their future successes. Many are expanding their current core businesses across the value chain with investments being made to become more actively engaged leaders in the fields of logistics, trade, and manufacturing. Finally, innovations have demonstrated their greatest impact as they change lives for the better, starting in the communities in which they were created. A positive social and economic impact is a must for innovators who view problem-solving through an increasingly human lens. We found that the most innovative organisations think and function differently than others. They are: - Creating a culture of innovation, building the organisational capability and governance - Developing and launching comprehensive infrastructure to enable innovation activities - Ensuring internal R&D capability and introducing new technologies - Connecting their innovation process with the global ecosystem
About Our Research Earlier this year, we conducted telephone and video call interviews with innovation experts in the Middle East region and around the world. Our research questions focused on strategic objectives being employed to increase organisational innovations that drive change. We wanted to learn what some of the world’s leading innovators were doing to ensure innovation remained at the heart of their businesses and how.
- Building a balanced portfolio of innovations across short, medium, and long-term time horizons
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MOVING THE FRONTIERS OF TRADE AND LOGISTICS: WHY THE IND STRY STANDS TO GAIN THE MOST FROM INNOVATION
APRIL 2021
CREATING A CULTURE OF INNOVATION: Controlled Risk-Taking is Critical to Success Every global trade and logistics organisation would like to be more innovative. But how is that culture created, and where does it start? Creating a sustainable organisational culture of innovation starts with a group’s highest-level executive taking a decision on the amount of risk an organisation can comfortably entertain, and then attracting the right people to manage the innovation process based on agreed policies, procedures, metrics, and timelines. Technology and innovation are fundamentally important to shaping the future of business and industry. Not only do they have an immense impact on initiatives, processes, and strategies, but they are also vital contributors in accelerating economic transformation. The path to becoming a beacon for technology and innovation is outlined by Hub71, the flagship initiative of Ghadan 21, Abu Dhabi's accelerator programme for business based in the UAE capital. One of its leading experts told us: “Corporates must embrace change and assess how they can harness innovation to transform how they interact with customers, reduce costs, streamline processes, and ultimately boost their performance. “Over the course of the pandemic, innovation reinforced the value of operating in an agile manner to adapt to changing circumstances. Corporations that quickly develop and apply new technologies within their business can pave the way to more innovative thinking that will help them overcome economic volatility. Those that don’t will simply fall behind.” “You cannot innovate without taking risks; it cannot happen. Sustainable innovation is about managed risk-taking. Creating controlled, safe spaces for risk-taking that de-risk the innovation process as much as possible. It is okay to fail, provided it is quick and cheap,” another contributor to this paper told us. It is critical to strike the optimum cultural balance between risk minimisation and opportunities maximisation, in which entrepreneurship and experimentation at different levels of the
organisation are continually maintained and encouraged by leadership. “Innovation is not something that happens in labs or only among a group’s most senior, most experienced people. A true innovation culture should exist at every level of an organisation and across every function. It is a mindset, a way of thinking, an approach to organisational problem-solving.” It is important for organisations to attract and retain staff with an entrepreneurial and innovative mindset. In addition, the world’s most innovative companies always try to partner with other companies that share the same entrepreneurial spirit, creating working environments, spaces, conditions, and policies that nurture creativity. One contributor suggested that organisations should consider conducting more training that directly addresses innovation-related competencies at individual and group levels, including cross-functional collaboration, teamwork, and the like. The training should be directly linked to an organisation’s established innovation competencies and aligned with its existing innovation strategy objectives. On a related note, organisations should consider creating a system in which employees spend an agreed amount of time each month ideating/collaborating/meeting and discussing innovation challenges linked with the strategy. Dedicating time and resources towards training, empowering people to be creative, and stimulating new ways of thinking, is providing many organisations including global maritime and logistics operators a clear roadmap to not only enhance knowledge and core competencies but to exponentially grow and expand in a sustainable manner. Finally, in an effort to drive positive change, organisations should be prepared to look at expanding group and individual KPIs on an annual basis, but this, of course, is dependent upon an organisation's innovation maturity.
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MOVING THE FRONTIERS OF TRADE AND LOGISTICS: WHY THE INDUSTRY STANDS TO GAIN THE MOST FROM INNOVATION
APRIL 2021
DEVELOPING INFRASTRUCTURE TO ENABLE INNOVATION: Practicality and Accessibility are Key Truly innovative global trade and logistics organisations do not simply present themselves overnight, they require infrastructure. Whether it be physical or digital, it is vital this be linked directly with the innovation assets – the investment portfolio. The infrastructure (for example, a smart container data centre, or an in-house 3-D printing lab), should be built-for-purpose and address specific strategic objectives, both corporate and innovation objectives, ensuring short, medium, and long-term ROI is considered. “Innovation is not only an innovation lab or centre, for example. It must be part of something much bigger; it must be connected to the people and the processes of innovation. It does not simply translate into standalone facilities and centres. Innovation must be decentralised across the organisation, and
it must be accessible to everyone, including frontline workers who may want to share ideas and trial concepts,” one contributor said. The infrastructure should be practical and usable, and, if necessary, training should be provided to ensure positive ROI. Organisations wishing to be truly innovative are advised to develop a ledger of innovation assets (i.e. tangible investments), and link them directly to their respective group innovation strategy objectives and initiatives. As the Global Innovation Management Institute told us: “Innovation is the creation and capture of new values in new ways – through new offerings, experiences, technologies, channels or business models – across the extended enterprise including customers, channels, suppliers, and partners.”
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MOVING THE FRONTIERS OF TRADE AND LOGISTICS: WHY THE INDUSTRY STANDS TO GAIN THE MOST FROM INNOVATION
APRIL 2021
ENSURING R&D CAPABILITY TO INTRODUCE NEW TECHNOLOGIES: Improve Methods for Commercial Benefit For global trade and logistics organisations, R&D is crucial to supporting the driving of change and innovation. Innovation and R&D are two complementary goals, but they are not one and the same. We were told that the most innovative companies were those that focused on introducing better ways of doing things, rather than those which invested heavily in the research and development of new technologies simply for the sake of discovery, often with little or no commercial gain. Rather, the innovation experts with whom we spoke recommended that organisations should be investment-driven, while at the same time should commit to maintaining a focus on budgeting processes, as well as specific development areas/markets. It is also very important that they follow through with resource commitments to innovation and create a continuous stream of innovation – for example, have a portfolio that is continuously updated based on strategic priorities – and that these organisations allow for different types of processes/tracks for R&D project implementation,
for example, fast track and traditional/complete process. We were reminded that R&D metrics that focus on future results should be in place, not only past performance, and that R&D not be isolated from innovation initiatives taking place across the company. “Validating the assumptions of the different solutions will allow project teams to get valuable feedback so they can further experiment and explore areas they weren’t aware of. It is a way of de-risking innovation. Going through this iteration process a few times, will help the hypotheses evolve and give the solution some maturity until it reaches a level where management feels confident enough to allocate more resources – financial, human capital, etc so the solution can grow and roll out,” one expert shared concisely. One area where global innovators have shone has been through global competitions which have sought to attract the world’s best minds in search of a solution to a given problem. Incorporating such challenge-driven processes into the existing innovation strategy of a given organisation can be disruptive but often very constructive.
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MOVING THE FRONTIERS OF TRADE AND LOGISTICS: WHY THE INDUSTRY STANDS TO GAIN THE MOST FROM INNOVATION
APRIL 2021
CONNECTING TO GLOBAL ECOSYSTEMS: Think Beyond Traditional Relationships The very essence of global trade and logistics is that of a worldwide network of interconnected people, processes, and technologies.
across the internal value chain – creating governance structures that better manage the decision making such that the process is seamless.
“Organisations must think beyond traditional customer and supplier relationships, traditional advice and consent relationships. They must drive and support teams that can work across the enterprise,” we were informed.
In addition, the experts with whom we spoke advise organisations to develop a more comprehensive list of existing and potential partnerships, and then link them directly to their respective organisation’s innovation focus areas, strategy objectives, and initiatives.
An innovation portfolio should be linked with an innovation partnership management system, bearing in mind that commercial, technical, and execution risks must be assessed and managed on a continual basis. It is advised that organisations create a series of boards and councils that enable management
Finally, best practice suggests the establishment of strategic partnership agreements detailing the nature of a given partnership, its objectives, inputs, and expected outcomes, along with a clearly defined connection to the organisation’s innovation policy goals, and KPIs.
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MOVING THE FRONTIERS OF TRADE AND LOGISTICS: WHY THE INDUSTRY STANDS TO GAIN THE MOST FROM INNOVATION
APRIL 2021
CONCLUSION Global trade and logistics organisations have not yet truly begun to benefit from the positive disruption that innovation can deliver. From warehousing and portside operations to shipping and trucking solutions, there are still so many advancements to be seen that will enable the faster, smoother, safer, and more efficient movement of goods around the world, right down to the last mile. By creating a culture of innovation, developing infrastructure to enable innovation activities, ensuring internal R&D capability, connecting one’s innovation process with the global ecosystem, and building a balanced portfolio of innovations across short, medium, and long-term time horizons,
organisations can more fully partake in the new era of global trade and logistics. As one consultant with whom we spoke said: “Innovation is far-reaching and goes far beyond technology. Innovation is a process, not an event, and, as such, it can be developed and mastered. “Many organisations place emphasis on the front-end of innovation, where ideas are generated, but the true value is created on the back-end, where those ideas are evolved into business concepts, assumptions are continuously pressure tested, and, eventually, prototypes are brought to market. If organisations start putting more emphasis on this back-end, they will experience tremendous progress on their innovation maturity.”
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