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ISSUE 132 MONTHLY FOCUS: TRANSPORT AND LOGISTICS
THE FUTURE OF TRANSPORT
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From the web
Top honour for RSA Logistics RSA Logistics was conferred with the “Employer of the Year” title at the 2016 Middle East HR Excellence Awards. Abhishek Ajay Shah, Co-founder and Managing Director, RSA Logistics, said, “We are honoured to be named Employer of the Year. We strive to create an enriching, value-based culture and environment of learning, engagement and endless possibility for our team to help them achieve personal growth. We are very proud of our team, and will continue to push ourselves to deliver the best for them.”
For further information, please visit: www.rsalogistics.com
Study reports key insights on driverless cars A recent study using YouGov’s Omnibus Service revealed that most UAE residents are enthusiastic about driverless cars, with 57 per cent of respondents aware of driverless car trials taking place in Downtown Dubai. Moreover, the study reported that 61 per cent believe driverless cars will allow everyone to get around easily regardless of their driving ability, while 43 per cent believe that driverless cars will help reduce traffic congestion on roads. Many respondents, however, continue to have concerns over the technology’s safety and implementation.
To read more about please visit: www.research.mena.yougov.com/en
Compelling research on mobile devices in the workplace A recent survey from Gartner, Inc. reported that even though 80 per cent of workers surveyed received one or more corporate-issued device, desktops are still the most popular corporate device among businesses, with more than half of workers receiving corporate-issued desktop PCs. “The low adoption of corporate-issued mobile devices underlines the fact that large numbers of personally owned mobile devices are used in the workplace,” said Mikako Kitagawa, Principal Research Analyst at Gartner. “In fact, more than half of employees who used smartphones at work rely solely on their personally owned smartphones.”
To read more about please visit: www.gartner.com
Editor’s Note
Change in the fast lane
RUSHIKA BHATIA EDITOR
With increased connections between people, vehicles and roads, the automotive industry has undergone rapid growth over the last decade. Notable developments have been made across the board right from driverless cars and electric vehicles to connected cars and the Hyperloop. We reached out to industry commentators from the World Economic Forum, PwC and Swinburne University of Technology to assess some of these emerging trends and their implications. Enjoy their comprehensive reports on pgs. 32, 36 and 90 respectively.
Another major area of disruption has been the emergence of the sharing economy – catapulting the likes of Uber, Careem and Ola to the forefront of the sector. With a lot of debate surrounding the growth of these businesses, one thing is for sure: they have proved to be game changers for transportation. Get more insights in our detailed analysis of one of these companies on pg. 86. On the regional front, new and established businesses continue to devise innovations that are helping drive progress. We speak to the likes of Global Jet Centre, Airships Arabia,
RSA Logistics and Hawk Freight Services from pg. 56 to pg.78. The success of the UAE – and Dubai – as an international logistics hub reflects on the success of companies such as these; their achievements are further supporting the country’s vision for globalisation. It’s fair to say that the transportation sector has made great strides and advanced considerably. Even so, it has faced significant challenges such as cyber security, data management and lack of proper regulatory frameworks. Autonomous or driverless cars, for instance, are gaining a lot of attention for safety and regulation related concerns. A legal expert from Clyde & Co. sheds some light on pg. 80. Finally, when putting this issue together, we were faced with the herculean task of encompassing all of the different spectrums of this sector in one month’s edition. So, we decided to provide a snapshot of the top industry trends in our ‘Infographic of the month’ section on pg. 46. Enjoy reading this issue of SME Advisor!
Contents
The economist’s view 028/ Getting smart about transport 032/ The fast track: Hyperloop One 036/ Avenues for growth
Talking trends 042/ Top airports of the world
Infographic of the month 046/ The future of transport
Digitally Disruptive 048/ Delivering Success
086/
KALANICK RECENTLY ANNOUNCED THAT HIS COMPANY IS INVESTING US$500 MILLION IN A GLOBAL MAPPING PROJECT THAT WILL MAKE ITS OPERATIONS LESS DEPENDENT ON GOOGLE MAPS.
093/
A MODIFIED VISUAL TURING TEST CAN POTENTIALLY BE USED TO TEST IF THE SELF-DRIVING SOFTWARE IS TAILORED TO THE MULTISENSOR INPUTS AVAILABLE TO THE CAR’S COMPUTER, AND IS MADE RELEVANT TO THE CHALLENGES OF DRIVING. Business banking 052/ Closing the gap: cash management & your business
Top change makers 056/ Road to success 062/ Flying into the future 068/ Reaching new heights 074/ People-Focus leads to success
Organisation & structure 080/ A look at the semi-autonomous road ahead
The Big Debate 086/ Unstoppable Uber
Technology for business 090/ Driverless cars - Are you ready?
28
Digital technologies are shaping the cities of tomorrow. Learn more here.
36
In conversation with Baburaj Vakiyal, COO and founding member of Hawk Freight Services.
Presenting strategies that freight carriers can use to survive in a competitive market.
56 62
80 The big debate on driverless cars continues...
Abhishek Shah has created a workplace that is propelling his company - and people - to new heights.
74
Naushad Ahmad of Global Jet Centre, plans to take advantage of every opportunity that comes his way.
C O N T E N T C U R ATO R S 026
CONTENT CURATORS
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Presenting this month’s portfolio of industry specialists and thought leaders, who played a critical role in producing the feature content of our magazine and ensuring that we were more topical than ever. ANDREW TIPPING PRINCIPAL PWC US PG. 36
““ ERIC D. RUBEN SENIOR COUNSEL, CLYDE & CO. PG. 80
SME ADVISOR
“There is a rising recognition among shippers that transportation and logistics can yield a considerable competitive advantage for them; shipping is no longer a tactical decision influenced solely by cost, but rather a strategic consideration based on such factors as customer expectations, sales volume, and product mix.”
“The self-driving cars of futuristic Hollywood are already roaming the streets, learning our roads, signs, signals and habits to take the life and death responsibility of driving out of human hands.”
C O N T E N T C U R ATO R S 027
““ WOLFGANG LEHMACHER HEAD OF SUPPLY CHAIN AND TRANSPORT INDUSTRIES WORLD ECONOMIC FORUM PG. 32
“Two companies – Hyperloop One (formerly Hyperloop Technologies) and Hyperloop Transportation Technologies (HTT) – are now exploring Musk’s idea with a view to building the first transportready tube by 2020.”
““ BABURAJ VAKIYAL COO, HAWK FREIGHT SERVICES PG. 56
“The demand is for greater integration and better tracing visibility. As a service provider, we definitely recognise the need to be a step ahead. In a world where a client is only a WhatsApp message away, we need to be able to offer exceptional responsiveness and quick turnaround times.”
““ HUSSEIN DIA ASSOCIATE PROFESSOR SWINBURNE UNIVERSITY OF TECHNOLOGY PG. 90
“Driverless cars are likely to create new business opportunities and have a broad reach, touching companies and industries beyond the automotive industry and giving rise to a wide range of products and services.”
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GETTING SMART ABOUT TRANSPORT Digital technologies are playing a major role in shaping the smart cities of tomorrow. A critical aspect of this transition requires the integration of smart transport. Hussein Dia, Associate Professor (Transport), Swinburne University of Technology, provides his expert opinion…
SME ADVISOR
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he reform of urban mobility remains one of the biggest challenges confronting policy makers around the world. According to the United Nations, it is estimated that 1.3 million people are killed on the world’s roads each year. If left unchecked, this number could reach 1.9 million fatalities worldwide by 2020. The human cost attached to these road crashes in terms of unimaginable suffering and grief - is profound. Furthermore, the economic cost is a staggering US$100 billion a year in developing countries alone. It is also estimated that the social, economic and environmental costs of congestion account for more than one per cent of the GDP across the European Union, and cost the US more than US$115 billion each year. Road traffic also continues to account for around 80 per cent of transport CO2 emissions and is expected to reach 9,000 Megatons per year by 2030 if current mobility trends are not curbed.
New approaches are needed – intelligent mobility for smart cities During the last 20 years, we have seen a shift in the thinking on how to provide the transport infrastructure required to support our mobility needs. For example, instead of building additional road capacity, there is more reliance nowadays on using technologies to optimise the performance of existing infrastructure, ‘sweating the assets’, and focusing on positive operational outcomes and customer experience. Support for these technologies across all modes of transport (including active and public transport) is expected to increase in future years given the limited budgets available to governments and asset owners, and the increased awareness of the role of smart technologies in optimising asset performance.
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9000
megatons
of CO2 emissions per year by 2030 has been predicted if current mobility trends aren’t changed
80% of transport CO2 emissions are accounted for by road traffic
1.3 million The estimated number of people killed on the world’s roads each year
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Instead of building additional road capacity, there is more reliance nowadays on using technologies to optimise the performance of existing infrastructure.
What is the business value of the intelligent mobility approach? A best practice case study from the Florida Department of Transportation (FDOT) sheds some light on the benefits. Each year, the FDOT issues annual reports providing snapshots of the Department’s programs on Intelligent Transport Systems (ITS) in each of its districts. The FDOT District Six Report for 2013 shows the key financial benefit to South Florida customers is reduction in incident duration and traffic delays resulting in time savings estimated at US$1.72 billion in FY13. Comparison of the estimated benefits to annual operating expenses and capital investments showed the ITS Program yielded around US$36 in economic benefits for every dollar spent (Benefit-Cost Ratio of 36:1). Similarly, the FDOT District Four ITS Program has been shown to produce high Benefit-Cost Ratios (BCR) in excess of 7:1 as shown in the diagram on the next page. The latest BCR reported for 2014 was around 10:1 and demonstrates how the program
has maintained a consistent Net Present Value (a measure of long-term profitability of investment in ITS) of US$2 billion for the eighth consecutive year. How do these benefits compare with value derived from traditional investment in physical expansion of roads? Comparison of returns for different road investments shows an average BCR of 2.7 for ‘traditional’ road capacity projects, compared to average BCRs as high as 62 for some ITS investments. In a report from the McKinsey Global Institute, Intelligent Transport Systems were shown to offer a superior option to the addition of physical road capacity. A case study cited in the report further demonstrates the benefits: the cost of the transport technology solution on the UK’s M42 motorway was US$150 million and took two years to implement; widening the road to produce the same outcome would have taken 10 years and cost US$800 million. SME ADVISOR
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Many types of intelligent traffic systems offer superior benefit-to-cost ratio than the physical expansion of roads Comparision of returns for different road investments Average benefit-to-cost ratios
Source: Intelligent transportation systems, Capitol Research, Council of State Governments, April 2010: Transport for London, 2007: Intelligent transportation systems, benefits, costs, deployment, and lessons learned desk reference: 2011 update, US Department of Transportation, September 2011: Urban mobility plan, Seattle Department of Transportation, January 2008: McKinsey Global Institute analysis. Infrastructure productivity: How to save $ 1 trillion a year. McKinsey Global Institute, 2013. Available at www.mckinsey.com
EDITOR’S PICKS 01. During the last 20 years, we have seen a shift in the thinking on how to provide the transport infrastructure required to support our mobility needs. 02. The benefits of investing in smart mobility systems are compelling, particularly given the improvements that could be made in terms of providing innovative solutions to lift our economic efficiency and productivity.
SME ADVISOR
Going forward The benefits of investing in smart mobility systems are compelling, particularly given the improvements that could be made in terms of providing innovative solutions to lift our economic efficiency and productivity. Whilst decision makers and leaders who run the world’s cities - are increasingly recognising the role of smart technologies in ‘sweating of assets’, deployment at a global scale is still sporadic and not widespread. To spur change programmes and capture potential savings, we must move beyond a projectby-project view and upgrade systems for planning, operating, and delivering smart infrastructure. This sort of investment will give our cities an opportunity to modernise their infrastructure and help drive economic growth and create jobs for the 21st century.
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To spur change programmes and capture potential savings, we must move beyond a project-by-project view and upgrade systems for planning, operating, and delivering smart infrastructure.
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Smart Mobility is one of the key focus areas identified within the Government’s Smart Dubai strategy.
Dubai’s Smart City initiative Smart Mobility is one of the key focus areas identified within the government’s Smart Dubai strategy. The official website – www.smartdubai.ae – states: “Mobility, within the definition of Smart Dubai, impacts both transport of people as well as transfer of ideas. This requires a level of coordinated innovation in the city’s hard and soft infrastructure that has little precedent globally. Focus areas within Smart Mobility include: transportation, roads infrastructure and traffic management – including Dubai’s taxis, bus, metro network, water taxis or shared cars – each to be serviced by smart touch-points. Enhanced asset management initiatives, such as smart parking will drive true seamlessness and efficiency. Sustainable Mobility initiatives are already being implemented in the form of electric vehicle charging stations and legislative support around renewable transportation. The city’s existing ICT infrastructure, together with future initiatives will enable impactful movement and implementation of ideas.”
Key initiatives undertaken by Roads and Transport Authority (RTA) Dubai 1. At GITEX 2016, the Roads and Transport Authority (RTA) exhibited latest technological innovations of interacting with customers, where Artificial Intelligence is used across its Interactive Voice Response (IVR) system, website (www.rta.ae), smartphone apps and selfservice kiosks. 2. RTA has also partnered with the Dubai Future Foundation along with a few businesses to identify and address anticipated challenges in Dubai. As part of the prestigious Dubai Future Accelerators Programme, it hopes to introduce solutions that will transform the future of transport.
3. RTA Dubai recently signed two Memoranda of Understanding (MoU) with Khalifa University and the University of Dubai to collaborate in the field of robots and drones. This comes as part of RTA’s endeavour to keep pace with the latest technological trends, share expertise with the academic institutions concerned with robots & drones, and provide sophisticated services to cover various community segments.
Source: www.rta.ae
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IN THE FAST TRACK:
HYPERLOOP ONE Wolfgang Lehmacher, Head of Supply Chain and Transport Industries, World Economic Forum, presents compelling insights.
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SME ADVISOR
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WOLFGANG LEHMACHER HEAD OF SUPPLY CHAIN AND TRANSPORT INDUSTRIES WORLD ECONOMIC FORUM
EDITOR’S PICKS 01. Elon Musk suggested that a San Francisco-Los Angeles Hyperloop would cost US$11.5 million a mile. 02. The 19-mile “maglev” line in Shanghai has cost US$63 million a mile, and a proposed 178-mile track in Japan is expected to cost roughly US$250 million a mile. 03. Building and operating a Hyperloop is estimated to be in a similar range as building and operating high-speed rail infrastructure and trains.
SME ADVISOR
Imagine if it only took a day for products to travel over land from China to Germany. It could soon be a reality, if Russia goes ahead with a plan to introduce a new fastspeed pipeline called the Hyperloop. Just as oil and gas travel through pipes, cargo and passengers may soon find themselves shooting through pneumatic tubes at speeds of up to 760 miles per hour. Tech entrepreneur Elon Musk once envisioned a tube transportation project that could move passengers and cargo from San Francisco to Los Angeles in 30 minutes. Two companies – Hyperloop One (formerly Hyperloop Technologies) and Hyperloop Transportation Technologies (HTT) – are now exploring Musk’s idea with a view to building the first transport-ready tube by 2020. According to the CEO of Hyperloop One, feasibility studies have been launched not only in Russia but also in the United Arab Emirates, Finland, the United Kingdom and the United States. Hyperloop One has joined forces with the city of Moscow and Summa Group, a local
investment and construction conglomerate, to bring the vacuum tube to Russia. So what are the benefits? Air transportation is fast but costly, so most cargo is shipped by sea. To travel by sea between Asia and Europe can take around 30 days – and that’s without considering overland transport to and from the ports. Rail transportation takes nearly half that. The southern rail route between China and Russia is 6,213 miles long and takes 12 days, while an 8,077-mile northern rail route through Russia takes 16 days. Can the Hyperloop ultimately provide the quickest transportation option, at affordable cost? Construction costs are important to consider. Building and operating a Hyperloop is estimated to be in a similar range as building and operating high-speed rail infrastructure and trains. The construction cost for high-speed rail lines, such as the Haikou-Sanya line in China and MadridAlbacete line in Spain, come in at about US$15 million a mile.
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9 Automobile- 6-8 hours
7
Flight: - 5-6 hrs
(hr) 5
Full HSR 3-4 hrs
3
1
Hyperloop 1/2 hr - 1hr
Drive I-5
8 hrs 5 hrs 20 min
Flight: SFO - LAX 3 hrs 10 min
Full HSR Hyperloop
Trip to Transport
50 min
Waiting for Transport
(hr)
1
Elon Musk suggested that a San FranciscoLos Angeles Hyperloop would cost US$11.5 million a mile. Hyperloop One estimates the cost of building the vacuum tube to be anywhere between US$5 million and US$20 million a mile. However, the cost might be much higher if instead of pressurised air generated by compressors (as proposed by Musk) the more expensive magnetic levitation technology is installed, using powerful electromagnets to lift the train carriages. The 19-mile “maglev” line in Shanghai has cost US$63 million a mile, and a proposed 178-mile track in Japan is expected to cost roughly US$250 million a mile. Earlier this year, HTT announced an exclusive deal to license passive magnetic levitation technology, which would eliminate the need for power stations along the track and could therefore lower operating costs. Also, HTT had filed permits in Kings
2
3
4
5
6
County, California to build a five-mile test track. Hyperloop One tested the propulsion mechanism on May 11,2016 in Nevada. Although the test result can be considered a first proof of concept, the outcome isn’t yet clear as the demonstration focused only on one part of the complex solution. The race is on. But a project the size of the Transonic Silk Road would require sizeable political and financial support from China. Initial interest seems to exist: CRRC Corp, China’s largest maker of railway equipment, has apparently been in talks for a potential investment in Hyperloop One, according to a Bloomberg report earlier this year. Depending on these developments, the Belt and Road initiative might soon connect Asia and Europe overnight by the Hyperloop, potentially requiring a quick name change from Belt and Road to Belt and Tube.
7
8
Actual Transport
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Hyperloop One estimates the cost of building the vacuum tube to be anywhere between US$5 million and US$20 million a mile.
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AVENUES FOR GROWTH Andrew Tipping, Principal, PwC US, highlights current trends, explores strategies freight carriers can use to survive in a fiercely competitive market and talks about the way moving forward…
O
n the surface, the commercial freight transportation and logistics industry looked calm over the last year. However, beneath the relative tranquillity, rolling forces were (and are) at work. These dynamics are rooted primarily in the changing needs of commercial transportation and logistics customers. Shippers’ supply chains are becoming ever more complex, even in market segments where their needs have been relatively straightforward in the past. These changes are best encapsulated by five trends:
ϭϭ The fracturing of supply chains, which
EDITOR’S PICKS 01. Established commercial freight and logistics companies are generally not suited to satisfying their customers’ full range of new preferences. 02. M&A can be an excellent tool for obtaining capabilities and fleshing out product and service portfolios, but only if you have an effective tactical plan for meeting customers’ needs. 03. Many additional competitors will arise in the near future, including but not limited to Amazon, which most of the industry views as the most threatening disruptor.
increasingly feature a mix of offshore, nearshore, and onshore locations, and the expanding number of nodes in shipper distribution networks aimed at reducing delivery time to customers from days to hours.
ϭϭ The rising recognition among shippers
that transportation and logistics can yield a considerable competitive advantage for them; shipping is no longer a tactical decision influenced solely by cost, but rather a strategic consideration based on such factors as customer expectations, sales volume and product mix.
ϭϭ The expanded presence of high-
margin shippers selling valuable and sensitive products, such as specialty pharmaceuticals and fragile electronic equipment, that require exceptional handling, security, reliability, and tracking procedures from their transportation companies.
ϭϭ The frequency and magnitude of
disruptive events – higher peaks in demand, “100-year” storms and other natural disasters, labour strikes, and geopolitical uncertainties — that are causing shippers to re-evaluate their procurement tactics and the efficacy of their logistics networks.
ϭϭ The double-digit growth of e-commerce and the inroads that it is making in the business-to-business arena, where shipment complexity is higher and transparency and tracking requirements are greater. These trends are creating new demand patterns for the commercial freight transportation and logistics industry. Shippers want logistics partners that can operate across their diverse supply chains and distribution networks and that are strategically inclined – as comfortable in the C-suite as in a buyer’s office.
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Shippers particularly seek carriers that can accommodate spikes in volume and maintain a high level of performance during disruptions. And they are looking for business-enhancing opportunities, such as 3D printing and digitally enabled solutions that provide visibility into multiple vendors, greater price transparency, and a consumer-like user experience. Enter the disruptors Established commercial freight and logistics companies are generally not suited to satisfying their customers’ full range of new preferences. Their network configurations, physical assets, skills, and service offerings are the product of an earlier set of market conditions and customer expectations. As a result, a raft of new competitors are slicing off bits and pieces of the logistics sector, offering targeted services that some shippers perceive as providing more value and innovation than the more traditional, wider but less specialised, menus of the larger companies. One category of disruptor — let’s call it “local network builders” — bucks the conventional model of centralised warehousing and expansive transportation networks for a distributed, localised structure that exploits the benefits of speed and dynamic flexibility at a competitive cost. Currently, leading e-commerce retailers like Amazon.com are building such networks for themselves. But it doesn’t take much imagination to see the emergence of thirdparty logistics consolidators — perhaps the aforementioned retailers themselves — that can build out local networks providing better service than established carriers. Another kind of disruptor could be termed “crowdsourcing fillers.” Such companies leverage the fundamentals of social networks to offer shippers the supply chain flexibility and agility that they need to better manage surge capacity and network disruptions. This category includes firms like Cargomatic, which connects shippers and carriers through Web and mobile apps, and Roadie, which connects customers to people who will transport their stuff. The success of these businesses is not a foregone conclusion, but their very existence suggests SME ADVISOR
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Shippers particularly seek carriers that can accommodate spikes in volume and maintain a high level of performance during disruptions.
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that a creative and flexible model that addresses today’s workforce challenges — such as driver availability and unionisation — eventually will succeed. A third sort of disruptor is something we might call “startup simplifiers.” These companies target new and small shippers that don’t offer enough volume to warrant the attention of larger carriers. Their elevator pitch is that they view such shippers as more than just high-margin customers to be harvested by a specialised sales force. Rather, they see small shippers as a distinct customer segment that requires specific and differentiated products and services. Their offerings often go beyond shipments to a broader set of logistics activities, such as website design and online channel management. ShipStation and uShip are two companies in this niche. A fourth disruptor could be labelled “big data manipulators.” They use a strategy that harnesses digital capabilities and the power of analytics to satisfy shippers that require more consumer-like buying experiences and greater control over their shipments. When
managed well, these services can also yield substantial cost savings for the carriers and logistics companies that provide them. These savings can be reinvested in extending their digital competence. Companies such as Echo Global Logistics and Keychain Logistics are good examples of players pursuing this strategy. An appropriate name for the final disruptor type is “hybrid carriers,” because they seek to balance the traditional divide between asset-light and asset-heavy models, creating a combined ground network that offers the best of both — a base load of fully controlled, owned equipment plus a portfolio of instantly available non-owned equipment that can be contracted to manage demand fluctuations. Companies such as XPO Logistics, which recently acquired Con-way Trucking for US$3 billion to enhance its small freight portfolio in North America, are adopting this approach and rapidly expanding their transportation and logistics services. It’s highly unlikely that any one of these new
niche value offerings will come to dominate the commercial freight transportation and logistics industry (or that these are the only new strategies we will see), but they are already reshaping the sector. Many additional competitors will arise in the near future, including but not limited to Amazon, which most of the industry views as the most threatening disruptor. Disrupt yourself What should executives of established commercial transportation and logistics companies do to defend against these disruptive business models? How can you strengthen your market position in the current environment? We believe the answer lies in developing a set of capabilities that address changing customer needs, that are sufficiently flexible to shift direction to match those changing customer preferences, and, importantly, that take advantage of the deep specialisation that your firm excels in while greatly improving operating efficiencies to drive optimum
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performance. That’s a tall order — and one that most logistics firms are not prepared to take on. To help in this transformation, here are some pathways for success, focusing especially on required priorities and skills:
ϭϭ Create a better balance between
customer needs and operational efficiencies. Empower and encourage frontline employees to address shippers’ challenges within the framework of their daily duties. They should be able to provide shippers with greater visibility and manoeuvrability with respect to the timing and mode of shipments, and they should automatically aid shippers with global, cross-modal solutions — perhaps by mixing and matching owned and third-party services.
ϭϭ Enable supply-side vigilance and
strategic M&A deal making and integration. Foster the habit, throughout your company, of continually scanning
SME ADVISOR
for new competitors, seeking to understand how customer needs are being addressed by those competitors. When you identify product and capability gaps, consider acquiring companies that fill in those holes in your business model. For example, UPS’s US$1.8 billion purchase of Coyote Logistics gave it access to proven freight e-brokerage technology. And C.H. Robinson, a Minneapolis-based logistics company, has made M&A a central component of its strategic initiatives, spending nearly US$1 billion on acquisitions since 2010 on outfits that offer expansion opportunities in geographic regions or customer bases. Don’t view M&A in itself as a sufficient strategic response to the shifting demands of shippers. M&A can be an excellent tool for obtaining capabilities and fleshing out product and service portfolios, but only if you have an effective tactical plan for meeting customers’ needs.
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Deploying data analytics includes tools needed to capture and store data effectively, the analysts who unlock insights from data, and the pathways needed to transform those insights into operational realities.
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ϭϭ Fully deploy data analytics and digital
management. Deploying data analytics includes tools needed to capture and store data effectively, the analysts who unlock insights from data, and the pathways needed to transform those insights into operational realities. Integrate this data with your customers’ systems, and with the systems of other third-party firms they work with. Design and implement advanced customer-facing digital tools.
ϭϭ Enhance network agility and support
capacity management. Develop your own local shipping networks or use thirdparty networks, bypassing traditional hub-and-spoke operations and taking advantage of more dynamic approaches to pickup and delivery of goods. These local networks can be more flexible than national systems because their
packages travel only a short distance. They can promise overnight delivery even for pickups as late as 10 pm, which gladdens many shippers because most Internet orders are placed after dinnertime. Moreover, local networks can support the effective management of supply chain disruptions and of large variations in demand on a daily, monthly, and annual basis.
ANDREW TIPPING PRINCIPAL PWC US
Together, adopting these capabilities — or the right combination of them for your company’s business model and customer base — can help carriers and logistics companies respond to the shifts in shipper demand that have opened the door to disruptors emerging within their markets. That’s a much more palatable option than sitting back and watching as your position in the marketplace erodes. SME ADVISOR
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TOP AIRPORTS OF THE WORLD A round-up of the world’s largest, busiest and most prominent airports. Here’s a quick comparison, with statistics to support.
Atlanta Hartsfield Jackson International: This airport has been named the busiest airport in the world of 2015 by the Airports Council International (ACI). Year-on-year, this airport records growth in terms of passenger traffic and movement owing to its strategic location. Atlanta Hartsfield Jackson International is considered to be a popular choice as a port of entry to the United States for passengers across the globe. Here’s a snapshot of the data ACI provides (in 2015): PASSENGER TRAFFIC: 101.5M GROWTH IN PASSENGER TRAFFIC: 5.5% TOTAL MOVEMENTS: 882,497
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Dubai International: It’s no hidden fact that prolific location – connecting the East and the West – makes it an ideal hub. This is exactly why the city’s airport has been ranked amongst the top airports in the world. To accommodate increasing capacity, Dubai has also launched its new Al Maktoum International Airport to reinforce its position as a global aviation hub. Here’s a snapshot of the data ACI provides (in 2015): PASSENGER TRAFFIC: 78.0M GROWTH IN PASSENGER TRAFFIC: 10.7% TOTAL CARGO: 2,506,092 METRIC TONNES GROWTH IN CARGO: 3.4%
Chicago O’Hare International: After Atlanta, this is the second busiest airport in the United States. Here’s a snapshot of the data ACI provides (in 2015): PASSENGER TRAFFIC: 76.9M GROWTH IN PASSENGER TRAFFIC: 9.8% TOTAL CARGO: 1592826 METRIC TONNES GROWTH IN CARGO: 15.6% TOTAL MOVEMENTS: 875,136
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Beijing Capital International: This airport is regarded as one of the most prominent hubs of Asia. It has often been compared to Atlanta Hartsfield Jackson International, forecasts even predicting it to become the busiest airport in the world. However, 2015 saw the gap between the two global airports widening. Here’s a snapshot of the data ACI provides (in 2015): PASSENGER TRAFFIC: 89.9M GROWTH IN PASSENGER TRAFFIC: 4.4% TOTAL CARGO: 1889829 METRIC TONNES GROWTH IN CARGO: 2.3% TOTAL MOVEMENTS: 590,169
London Heathrow: With high figures of international passenger traffic, this airport has created a place for itself in the ranking of the world’s busiest airports. Here’s a snapshot of the data ACI provides (in 2015): PASSENGER TRAFFIC: 75.0M GROWTH IN PASSENGER TRAFFIC: 2.2% TOTAL CARGO: 1591637 METRIC TONNES GROWTH IN CARGO: 0.2% TOTAL MOVEMENTS: 474,103
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Moving ahead
The future of transport Global overview US$1.5 trillion
NEW BUSINESS MODELS, IMPROVED CONNECTIVITY AND ADVANCED MOBILITY WILL EXPAND AUTOMOTIVE REVENUE POOLS BY ABOUT 30%, ADDING UP TO US$1.5 TRILLION.
2030
WILL SEE FULLY AUTONOMOUS VEHICLES ACCOUNT FOR 15% OF ALL CARS SOLD ACROSS THE GLOBE.
25,000
SERIOUS ACCIDENTS ARE EXPECTED TO BE PREVENTED BY CONNECTED AND AUTONOMOUS CARS BETWEEN 2014 AN 2030. SME ADVISOR
3.6% THE GROWTH RATE OF GLOBAL
ANNUAL CAR SALES IS EXPECTED TO DROP FROM 3.6% OVER THE LAST FIVE YEARS TO AROUND 2% BY 2030.
1NEWinCARS 10 SOLD IN 2030 WILL BE A SHARED VEHICLE.
380 Million 10-15% CONNECTED CARS ARE EXPECTED ALL NEW CAR SALES IN 2030 WILL TO BE ON THE ROAD BY 2021
BE ELECTRIFIED CARS
60-100 SENSORS ON AVERAGE WILL BE
22 billion SENSORS IN CARS WILL BE
ONBOARD MODERN DAY CARS.
SOLD WORLDWIDE BY 2020.
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Securing success: Dubai’s Strategy 25%
ALL TRANSPORTATION TRIPS IN DUBAI WILL BE SMART AND DRIVERLESS BY 2030.
396 million
PRODUCTIVITY WILL BE POSITIVELY AFFECTED – WITH A POTENTIAL INCREASE OF 13%, SAVING PEOPLE UP TO 396 MILLION HOURS OF TIME WASTED ON THE ROADS ANNUALLY.
AED900 million THIS STRATEGY IS POISED TO
REDUCE TRANSPORTATION COSTS BY 44%, WHICH IS EQUIVALENT TO AROUND AED900 MILLION.
AED 18 billion
IT WILL ALSO HELP IN SAVING AED1.5 BILLION THROUGH REDUCTION OF ENVIRONMENTAL POLLUTION AND AED18 BILLION THROUGH RAISING EFFICIENCY OF THE TRANSPORT SECTOR BY 20%.
AED 2 billion
FINALLY, THE STRATEGY WILL CONTRIBUTE TO REDUCING ROAD ACCIDENTS, AND THEIR ASSOCIATED ECONOMIC LOSSES, BY 12%, SAVING AED2 BILLION A YEAR.
Sources: KPMG, McKinsey, RTA, Deloitte SME ADVISOR
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Delivering success From funding and technology to expansion and winning Etisalat’s Hello Business Pitch Please, Samer Al-Nimr of Deliver 2 Mum takes us through the various stages of his start-up life. Here are exclusive excerpts from the budding entrepreneur’s personal diary…
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John Lincoln, Senior Vice President - Small and Medium Businesses (SMB) at Etisalat, said: “Etisalat’s Hello Business “Pitch Please!” was a unique opportunity for start-ups to give their best performance in front of an expert panel, who assessed their business models through the strength of their pitch. The primary objective of such a platform is to empower these entrepreneurs and SMBs with knowledge of global best practices that will help productivity and profitability. Deliver 2 Mum emerged as the winner mainly due to their focus in understanding the needs of their target audience with the use of innovative tools and solutions. They used their passion to turn the challenges into opportunities.”
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he Inception The idea of Deliver 2 Mum came with the birth of our first born in October 2013. As two working parents, we wanted to spend as much time as possible with our daughter, and hated spending time away from her. With no support system in terms of extended families (as is the case for most expatriates in the UAE), it was stressful having to cater to our daughter’s needs while also enjoying quality time with her. I discovered there was a market need to have all available leading baby consumable brands found in one place instead of different categories of baby products being found in various places, and a convenient system to deliver directly to the mum, thus saving her time – the most precious commodity she needs. That is how Deliver 2 Mum was conceived. It was bootstrapped with AED 125,000 initial capital investment. We are still working with this funding and from the profit that the business has generated. It took around six months to build the initial platform and have it ready for the soft launch in August 2015. During the next four months, we fine-tuned the offer and had it ready by the start of the New Year. In the digital age with rapid developments, we have to continue to innovate and evolve; this has become part of our ethos. The
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EDITOR’S PICKS
development of our products and services is constant and is part of the company’s DNA.
01. Deliver 2 Mum was bootstrapped with AED 125,000 initial capital investment.
Tackling challenges One of the biggest challenge’s was building up a repertoire with the mums and spreading the word about our service via word of mouth. With the UAE being composed of different nationalities and the lack of funds to conduct mass advertising, it was imperative for us to rely on our current customers to spread the word about our company. We were extremely blessed to have some great customers who loved our service and utilised their network to raise awareness about our service. We found a solution via the traditional approach of Steve Blanks’ Lean Launchpad programme. We asked for feedback and listened to our customers. And we were flexible enough to pivot and tweak our business model. This was done via adding new products that they needed, by enhancing our delivery system to make it faster and more agile. Of course, this is still an ongoing process.
02. The start-up gets around 70 per cent of its business from recurring customers. 03. With 81,000 live births in the UAE alone and with favourable demographic trends, Samer believes that he still hasn’t scratched the surface of where he can go with Deliver 2 Mum.
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Perseverance is key. When we were only getting an order every couple of days, it was a low point and there was thoughts of returning back to the corporate world. In fact, I had a meeting with another online baby store which is well-established. However, it was my belief in my business which helped me through that difficult time. Surviving in a competitive market We focus on being close to our customers and exceeding their expectations. With around 70 per cent of our business being from recurring customers, we have seen that our principle of “imagine that this order is for your own baby” drives our team to go above and beyond the call of duty. For example, one customer (from Qatar) ordered some infant formula due to this particular brand being non-available in Qatar temporarily. We had someone personally carry it with them on a plane to Qatar! Believe it or not but our Managing Director has done deliveries himself as well. It is this personal touch which resonates with our consumers and helps us create a bond with them.
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The growth curve Our month-on-month revenue growth has been +38 per cent. Our average basket size has increased from AED 100 to over AED 390. New customers are registering every day. We broke even (on an operational profit level) in July 2015 (within 12 months of launching). And, the best part? With a market share of less than 0.3 per cent, we still have tremendous upside potential. Finding funding Our strategy at the beginning was to build up some traction and ensure that our backend was working smoothly and effectively. Now that we have established the platform and brand, and can operate profitably, we are seeking strategic investors to be able to scale our business and achieve significant growth. Our entry into the Etisalat’s Hello Business Pitch Competition, alongside other impressive start-ups, was our first entry as we felt the need to seek affirmation by the start-up ecosystem. Winning it was beyond our dreams and provided us with the confirmation that we are ready to pitch to investors and think about the next stage of growing the company and building up a full team. Moreover, we have been presented with some business opportunities that would require funding and heavy investment. That is why we are currently looking for the correct investor.
processes and systems. We want things done and believe there is a lot more that we can do. With 81,000 live births in the UAE alone and with favourable demographic trends, we believe that we still have not scratched the surface of where we can go with Deliver 2 Mum. The opportunity to build a business with your own hands is something that drives us. And the fact that we are helping mums fulfil the hardest and most important job in the world gives us immense satisfaction and purpose. In the short-term, our goal is to continue raising awareness about Deliver 2 Mum, revamp the website and optimise our product portfolio. In the long-term, we want to move upstream by becoming a distributor of certain leading international brands that don’t have a presence in the UAE and move towards a B2B service offering for corporates and nurseries. We are also working on a four hour express service in addition to other features which will be announced in due time. Watch this space!
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As an entrepreneur, you need to have the passion to turn challenges into opportunities.
The role of technology Technology has made business easier, faster and more convenient. There are a multitude of online tools that are free which help you grow your business. Not being from a technology background, we carefully assess which tools to use, experiment with them, then apply them if relevant to our business on a step by step basis. On the horizon Just like the city of Dubai, and the UAE in general, we, as a start-up, are young and nimble enough to experiment with different SME ADVISOR
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CLOSING THE GAP: CASH MANAGEMENT AND YOUR BUSINESS
T Cash is the ultimate SME dream and we have offered advice on several different ways to liberate your business cash flow. In the following feature, however, we speak to Hariraj Subramanian, Executive Director and Head of Cash Product Management at National Bank of Abu Dhabi, and present to you a fresh perspective on managing cash flow, controlling your business spending, increasing revenues and improving cost-efficiency. SME ADVISOR
he reality is that cash anytime, anywhere gives businesses the malleability to scale and grow faster. Cash flow is the backbone of any growing enterprise and a cash strapped company can find itself in a downward spiral. A financial expert from the US Small Business Administration (www.sba.gov) says: “For small businesses, cash is king. You need it to start, operate, and expand your operations, but many small business owners often have trouble managing and maintaining cash. Inaccurate cash flow analysis - or lack of available cash - can affect the everyday operations of your business and your eligibility to receive a loan. Cash flow is the movement of money in and out of your business. The process includes:
ϭϭ Inflow which comes from operations
such as the sale of goods and services, loans, lines of credit, and asset sales.
ϭϭ Outflow which occurs during operations such as business expenditures, loan payments, and business purchases.
It’s crucial to balance these two figures and maintain a reasonable balance of cash at all times. An effective cash flow system will help you manage funds to cover operational costs and bills and help you foresee potential problems in the future.” Understanding cash management The implementation of a proper cash management strategy enables a business to glean a better picture of its financial situation and dip into extra resources, as and when required. Cash management is particularly significant for a growing business that is looking to expand its product portfolio or enter a new market; this is when you need to optimise cash balances and secure any additional funding. At times like these, business owners need to sit down with their CFOs/Financial
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managers to take control and adopt a cash management plan. Remember, cash management goes beyond keeping track of how much money flows in and out of any business. It is also –
services. Some of these products or services can effectively enable SMEs to outsource financial functions to the bank.
ϭϭ An essential tool for companies to make
Deposit and savings products provide businesses with basic financial management tools to help organize revenues and savings.
decisions to free up cash flow
ϭϭ Fundamental in positioning businesses
ϭϭ Deposit and savings products
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Cash management goes beyond keeping track of how much money flows in and out of any business.
to negotiate for more attractive financing terms
ϭϭ Critical in supporting strategic approach Businesses tend to focus on inflow and outflow, but they should ask themselves the following questions instead –
ϭϭ Am I maximising cash flow – bringing
in payments as quickly as possible and holding on to cash?
ϭϭ What’s the right amount of excess cash
for the business to hold? Where should I invest the excess cash?
ϭϭ Is the business getting the best discounts from suppliers?
ϭϭ Is my company “bankable”? ϭϭ Can I secure funds when I need to, and will I get the best payment terms?
Working with a banking partner Banks now have the ability to support SMEs by helping them manage and sustain their cash flow in a systematic manner. Rapidly changing markets and needs require that banks are now more connected than ever, via state-of-the-art technology and advanced products and services – all of which makes it far easier to provide SMEs with a seamless solution. SMEs have important operational needs that banks can meet with non-lending products that include deposits and savings, transactional products, and advisory SME ADVISOR
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Additionally, mutual funds and other investment products provide businesses with opportunities to obtain earnings on excess capital.
ϭϭ Transactional products Transactional products facilitate SME access to and use of available cash. Automatic payroll and payment collection, debit cards, and currency exchange are transactional bank offerings that lower the cost of doing business and streamline potentially complicated processes.
ϭϭ Advisory products SMEs can benefit from help in producing reliable financial statements, developing business plans, and selecting appropriate financing products. These advisory services can improve SME access to finance by enhancing its capacity to apply for credit.
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To enhance and optimise your operational needs, your banking partner can offer assistance through: Advisory ϭϭ Thought Leadership ϭϭ Dialogue sessions ϭϭ Training ϭϭ Specialist support and advice Efficiency ϭϭ Internet banking platforms – Free up resources used for manual payments ϭϭ Account structures – Choice of accounts with cost benefits ϭϭ Reconciliation solutions Technology ϭϭ Internet banking platforms ϭϭ Mobile banking ϭϭ ATMs/Branch network/Call Centres ϭϭ Host-to-Host integration
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The implementation of a proper cash management strategy enables a business to glean a better picture of its financial situation and dip into extra resources, as and when required.
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Products and services ϭϭ Cash flow management ϭϭ Cheques/Electronic payments ϭϭ Payroll Payments ϭϭ Electronic collections – Merchant payments ϭϭ E-commerce payments ϭϭ Direct debits The power of technology – NBAD’s iBANKING Channel In addition to a comprehensive range of cash management solutions mentioned above, our team was seeking to create something that would give businesses efficiency and control, visibility and transparency, security at multiple levels, convenience, and flexibility for customisation. For this purpose, we have designed iBANKING to give businesses more control and precision over their online banking transactions, anytime and anywhere around the world. Some of the key features of this new electronic banking platform include – ϭϭ Account and transaction inquiries ϭϭ Payment initiation and transfers ϭϭ Swift advice and MT940 reports ϭϭ Cheque book ϭϭ Payroll services ϭϭ Multi-bank reporting ϭϭ Consolidated reporting There are a lot of solutions available today to help you run your business effectively and efficiently. Ensure that you are taking sufficient time to explore all the options and choosing a combination of those that suit the unique requirements of your business. You may look forward for the upcoming issue for more information on Corporate Internet Banking.
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This interview is part of our “On The Road Series” conducted in partnership with Interview
ROAD TO SUCCESS Stellar customer service is the key to long-term partnerships in today’s business world says Baburaj Vakiyal, COO and founding member of Hawk Freight Services.
EDITOR’S PICKS 01. From a small team of six to 55 membersstrong in 2016, Hawk Freight Services has some big plans for the Middle East. 02. Customer service is the name of the game for Hawk Freight Services and has been the driving force behind the company’s consistent growth.
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awk Freight Services is the UAE wing of Hawk Freight Logistics, established in the UK in 1987. Based out of Heathrow, London, the company’s management decided to set up shop in the UAE in June of 2003. This also marked the start of Baburaj’s stint with the company, kicking off operations in a leased unit warehouse to now being a marked presence in DWC. The chat with Baburaj begins with him reflecting on the company’s growth curve in what has proved to be a slow year for many businesses. “The growth we’ve seen is truly remarkable,” he beams with pride. “We’ve always looked for ways to adapt to market circumstances and maximise revenue streams. So in a year where many other business would have been happy to
only sustain, we have continued to identify ways to grow and distinguish ourselves from the competition.” “Our fundamental business strategy has been to optimise and improve the services offered to customers, because we don’t want to get involved in a price war with the competition. The difference isn’t usually a lot, and price war victories are very temporary. Someone will come and beat your price tomorrow. Our differentiating factor, therefore, is our quality of service,” Baburaj explains. “But if you’re able to win on service, then you have set the foundation for a long-lasting partnership. We haven’t been afraid of taking on projects even on a negative profit margin because we are always compensated in terms
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of client loyalty. If your proposition is based on low prices and little else, then you aren’t really offering clients long-term partnership value. As our clients grow, we grow with them, and this is only possible in a long-term partnership.” The company’s business strategy echoes Baburaj’s sentiments: Customer service that delights. As a company based in the UK, does Baburaj feel there are customer service challenges that are unique to the Middle East market? “I’ve been here for about 19 years and can see a huge difference in terms of connecting with people and forging partnerships. There is a lot of pressure because you work with a lot of expats and everyone is trying to add value to their organisation. The competition
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is greater and you have to keep adding value to retain clients and continue to grow though new business. We have a 24/7 customer service department to cater to the needs of our overseas clients. Friday, for instance, is not only a working day in other markets but is also one of the busiest days of the week. A lot of consignments get released by shippers on Thursday and Friday, which means they require immediate operational support. This is a major gap that we’ve been able to fill.” Building capabilities Emerging technology is proving to be a game changer in the transport and logistics industry. Drone deliveries, 3D printing and delivery apps were unheard-of in the
BABURAJ VAKIYAL COO, HAWK FREIGHT SERVICES
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previous decade but are being looked upon to add even more value in terms of speed, efficiency and flexibility. Speaking on the role of technology in the company’s success story, Baburaj admits that the company has faced a few challenges in keeping up with tech savvy clients. “The demand is for greater integration and better tracing visibility. As a service provider, we definitely recognise the need to be a step ahead. In a world where a client is only a WhatsApp message away, we need to be able to offer exceptional responsiveness and quick turnaround times.”
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Emerging technology is proving to be a game changer in the transport and logistics industry.
Trends to watch “When we started 20 years ago, 3PL was a term unheard of. Now people are talking about 4PL. The sky is the limit for the SME ADVISOR
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transport and logistics industry, and we have ambitious plans for expansion in this region. In 2017, we aim to open another office in DAFZA and undertaking freight transport projects within the GCC,” says Baburaj looking to the future. With the UAE becoming an increasingly favourite destination for start-ups, Baburaj feels there is still a lot of room for new players in the transport and logistics sector. “There are many gaps that remain to be filled and still new ones that are being created by the ever-evolving market. There is enough room for new entrants in the industry. We come across new names every day. We see employees leaving existing companies and setting up their own, and then those companies being dismantled and
the partners setting up their own separate firms. To truly survive, however, you need to have a unique value proposition upon which you can build long-lasting partnerships,” he concludes.
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There is demand for greater integration and better tracing visibility.
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5120_Hello Business_SME Advisor ad 22.5x26.7cm.indd 1
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This interview is part of our “On The Road Series” conducted in partnership with Interview
FLYING INTO THE FUTURE EDITOR’S PICKS 01. G lobal Jet Centre started this business on the basis of its relationships with clients and service providers alike and that will continue to be the USP of its business model. 02. As with any business, Global Jet Centre’s journey has not been without its challenges. 03. The entrepreneur continues on the note that while apps undoubtedly are the future, it would be unwise to become fully reliant on technology and ignore the human interaction aspect of a business relationship.
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Having successfully completed three years of operations since its inception in the UAE, Global Jet Centre is all set to take on the business aviation sector by storm. Here’s an excerpt of our interaction with the aspirational entrepreneurs…
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aking-off Three like-minded individuals founded Global Jet Centre in November, 2013 – Naushad Ahmad, Bashar Beasha and Claudio Lietaert. The trio have more than 35 years of combined experience and have put together an interesting product offering: flexible and readymade aircraft charter solutions for business, leisure as well as medical evacuations. Naushad Ahmed, Managing Partner and Co-founder of Global Jet Centre, reveals that the idea of starting the business came about when the three friends felt it was time to use their experience to create something of their own. “We’re essentially brokers,” he says. “Between the three of us (co-founders), we put up a sum of thirty thousand dirhams to start the business. We hardly have any liabilities and fixed costs, and have fairly good relationships with both clients and service providers – so we capitalised on that.” This allowed the partners to hit the ground running. Naushad confidently implies that the enterprise has been making money from the first month, and there has been no looking back since. What sets Global Jet Centre apart from other companies following a similar business model? Naushad believes that his personalised business relationships have helped him stay competitive. “In a world where there’s an app for everything, we acquire our business based on our personal relationships with clients. We deal with our clients one-on-one and are available 24/7. We don’t work 9am to 5pm. If a client needs a quotation or a proposal at 2am, we have a system in place to ensure the call is returned in 15 to 20 minutes. Agility and responsiveness are vital in today’s business environment. An unreturned call means missed business – it’s as simple as that,” he opens up. He also emphasises the need to be flexible in terms of the solutions his company offers. “Whether it’s a business trip or personal time off with family, we’re able to provide our
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Agility and responsiveness are vital in today’s business environment. An unreturned call means missed business – it’s as simple as that.
clients with solutions customised to their needs and budgets. We offer a comprehensive range of solutions to our clients. Yet, if there is something that needs to be tweaked to suit the individual requirements of their business, we are happy to do that. The team works hard to understand the likes, dislikes and preferences of every customer; such is the nature of our business.” Managing turbulence As with any business, Global Jet Centre’s journey has not been without its challenges. Naushad remembers a certain period in the previous year when market rumours and forecasts resulted in business slowing down temporarily. Naushad also confesses that 2016 seemed like it was going to be a difficult year due to a lot of market speculation. “We felt a bit of a shift in demand for leisure-based charters towards business charters, and had to tweak our offering accordingly. Every market has its own dynamics and it’s only possible to be flexible if one is well-versed with the
market,” he continues. “We also realised that learning is a never-ending process, even if you have been working in the industry for 10 to 15 years. You cannot allow yourself to get complacent. The moment you start to think you know it all, an entirely unforeseen situation will come along and give you a very hard reality check. There are a lot of situations and challenges that only an industry insider can be aware of and we need to keep abreast of these at all times.” The company, however, is seeing the light at the end of the tunnel and is now in the process of expanding the team. “We’re getting a bigger office and also looking into establishing an international office,” he beams. “What we’re NOT doing is getting our own aircraft.” He smiles as he aptly quotes Richard Branson, “If you’re a billionaire and want to become a millionaire – start an airline.” Drafting the flight plan “Yes, we are looking into another platform,” Naushad lets on. “Even though our SME ADVISOR
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business model is based on our personal relationships that apps don’t really cater to, the reality is that we can’t ignore that apps are the future. Technology has reshaped our business and we have a website that clients can visit and get updated information about basic products and special packages. We’ve done our best to make the website as user-friendly as possible. At the end of the day though, it all goes back to personal relationships with the client, how well you assist and guide them into choosing the best aircraft service. Retaining clients is never easy, and to do so a business must keep innovating and looking for that sweet spot to keep clients coming back.” The entrepreneur continues on the note that while apps undoubtedly are the future, it would be unwise to become fully reliant on technology and ignore the human interaction aspect of a business relationship. “We started this business on the basis of our relationships with clients and service SME ADVISOR
providers alike and that will continue to be the USP of our business model.” “In an era where apps are the new way of doing business, it is perhaps easy to get carried away by all that technology can do. Global Jet Centre’s business model however represents a more traditional modus operandi. Traditional client engagement involves personalised interaction that strengthens brand loyalty versus an app that allows 24/7 remote engagement with clients, all while taking advantage of the most basic features such as comments, feedback and usage metrics. While there is a large client base that appreciates more human interaction, there is a growing number of innovators and early adopters who prefer the convenience of a few thumb-clicks on their smartphones. The way forward we feel is one where digital and traditional business practices are used together to achieve a harmony of the opposites, and one complements the other for a more holistic consumer experience. The consumer, after all, is king,” he concludes.
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lobal Jet Centre’s G business model however represents a more traditional modus operandi.
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This interview is part of our “On The Road Series” conducted in partnership with Interview
REACHING NEW HEIGHTS Gregory Gottlieb, Founder and Managing Director, Airships Arabia, opens up about his disruptive concept and the profound implications it will have on the industry, businesses and consumers…
EDITOR’S PICKS 01. Airships Arabia’s offering sets it apart from others and gives it a serious competitive edge. 02. The company currently offers aviation, logistics and management consulting with a specific focus on matters relating to airships, hybrids and aerostats to government and commercial clients. 03. Gregory has an ambitious goal set for his company, but there are hurdles he needs to overcome before he races to the finish line.
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s soon as you hear about Gregory’s business concept, it’s hard not to be amused. “Airships Arabia is a company that is currently offering aviation logistics and management consulting services, but with a focus on bringing hybrid airships to the Middle East,” says a wide-eyed Gregory. Hybrid airships? He smiles as he goes on to explain: “These will be the first airships to have ever been in the Middle East and will provide both logistics & cargo services as well as passenger services starting in the next few years. Hybrid, in this context, means airships that derive their ability to fly from a combination of helium gas carried in the airship, aerodynamic lift based on the shape of the aircraft and engine thrust pointed down towards the ground. This is a new class
of aircraft that is in its flight test stage in the UK and in development in the US and elsewhere. We hope to become an operator of this aircraft once they become available after type certification by the relevant authorities. The benefits of these airships is that they are much more sustainable, costeffective and environmental friendly.” He continues: “Operating our own fleet of hybrid airships will eventually enable us to provide freight services at competitive prices to customers across the region. With initial payload capacity of 10 tonnes per load growing to more than 50 tonnes per load in due course, with an unrefuelled range of more than 3,500 km, we will provide an unmatched capability for direct, point to point transportation. It is anticipated that this service will commence from 2018.” SME ADVISOR
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When you start a business, ensure that you have enough working capital for at least two years. Remember, it is likely that your costs will be more than you anticipated.
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Gregory’s experience in the field can traced back to 1990. Yet, his excitement and enthusiasm for the industry remains. “I was in the British Army and I was responsible for airship programmes from 1990-98. Following my time at the Army, I joined an airship development company called CargoLifter. It was during that job that I got exposed to the world of airships and gained a lot of knowledge. I then went on to undertake several airship and aerostats projects for private companies as well as government entities. The idea of Airships Arabia was born soon after. At the moment we are operating as consultants and supporting the logistics industry, but we have a larger vision for the company,” he explains. Charting the wind Airships Arabia currently offers aviation, logistics and management consulting with a specific focus on matters relating to airships, hybrids and aerostats to government and commercial clients. In the medium-term, however, it aims to become an airship
operations, maintenance, repair, overhaul, and crew training enterprise in its own right, with a focus on hybrid airships, as they become available from manufacturers, following type certification. Gregory has an ambitious goal set for his company, but there are hurdles he needs to overcome before he races to the finish line. “We are still at an early stage of our business. Given the nature of our company, we have to rely on the successful creation of somebody else’s product. In fact, once the product has been built, it has to also be certified and tested,” he admits. Another challenge he faces is the lack of an established regulatory framework. “There has never been an airship of any type in the Middle East, so there are no regulations that allow them to operate. We will need to address this over the upcoming months, working closely with the relevant authorities in the UAE.” But, this isn’t the first time that Gregory and his team have faced this problem. Having worked with European authorities to develop regulations in the
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It is our firm intention to have more than one airship and at least one hybrid operating here in time for Expo 2020.
past, his team is well equipped to take the necessary steps. He has also ensured that he has a phased plan to secure the growth of his business. “There is historic evidence that airships have worked successfully in the past. Essentially our business model entails a three-phase activity. The first phase, which is where we currently are, involves market development, talking to potential users of hybrid airships, interacting with beneficiaries of services to get them on board and to educate them on what will come in the future. In addition, we’re going to be offering our services to help them get ready for when hybrids come – whether we operate them or someone else does. The second phase is to bring small convention airships to the Middle East for the first time, which we aim to do in a realistic time frame. These will be providing advertising or branding services, in addition to carrying cameras and assisting the police for traffic control or sporting events or any other activity, which would benefit from an airborne camera. We’re operating in a SME ADVISOR
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fundamentally different market space. What we offer is a technology that has been in development for more than 100 years, but has taken a huge leap in capability in the last 20 years and has not yet been addressed by anyone in this region.” Sky is the limit There is no doubt that Airship Arabia’s offering sets it apart from others and gives it a serious competitive edge. The company has tremendous potential, but its success and uptake in this part of the region remains to be seen. “Our objective for the next year is to bring small airships to the Middle East. That will enable us to break ground in terms of the operation of airships in this environment. It is our firm intention to have more than one airship and at least one hybrid operating here in time for Expo 2020. We’re already in discussion with potential partners across the region to establish a model that allows Airships Arabia to set aviation standards, conduct training and undertake maintenance,” Gregory concludes.
GREGORY GOTTLIEB FOUNDER AND MANAGING DIRECTOR, AIRSHIPS ARABIA SME ADVISOR
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This interview is part of our “On The Road Series” conducted in partnership with Interview
PEOPLE-FOCUS LEADS TO
SUCCESS
RSA Logistics’ success comes from aspiring to create a workplace where employees feel like entrepreneurs within the organisation says Co-founder and Managing Director Abhishek Ajay Shah.
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The company’s culture plays a major part in its continued success.
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Rough start Circumstances were not all rainbows and butterflies when Abhishek Ajay Shah cofounded the award-winning RSA Logistics Company along with his family members in 2009 - set against the backdrop of a global economic crisis. “We were amongst the first few in Dubai World Central in the midst of a sea of sand. We had to be innovative to win clients. We put a lot of emphasis on bringing on board the right partners to gain access to some great customers around the world and provide them with unique propositions. From there it catapulted as we grew in terms of knowledge, experience and an understanding of what customers were looking for,” he recalls. Abhishek has the good fortune of coming from a family with a vast entrepreneurial background. This means that he not only had access to the funding needed to launch an enterprise, but also benefitted from a
treasure trove of entrepreneurial experience. But, as any seasoned entrepreneur would know, you need more than just funding and luck to build a successful business. And, Abhishek was well aware of this. He had the foresight to start from the ground-up; getting his hands dirty with the most basic cargo-handling procedures. This gave him detailed insight into the operational side of the business, which was necessary for identifying the gaps. “Our vision has always been to creatively overcome the supply chain challenges our customers face and to help them grow,” reveals Abhishek. “Logistics, by the nature of its existence, is continuously evolving and we need to reanalyse and revisit our clients’ supply chains. We want to be an enabler of their success stories, a partner rather than just a traditional warehouse and delivery agent.” He adds that technology has played a big role in RSA Logistics achieving that vision. The company led the way with developing apps as early as 2011 to track retail deliveries. The idea was to eliminate the long chain of communication between the courier, the customer service operator, the customer’s customer service operator and the customer’s customer – with no real information getting to the person who first requested for it. Technology eradicated this noise by “putting power in the courier’s hand and information on the screen in the customer’s office,” as Abhishek puts it. Even though technology has been a key enabler for RSA Logistics, the ambitious leader believes there is still a long way to go. “We’re seen as a very innovative company, but this has not happened by design. What we did aspire to be is a market shaker by developing great relationships, great partnerships, bringing the right people to the table and ultimately delivering on our commitments.” Bringing the company’s systems to the cloud for example, is aimed at not only allowing the company to setup in multiple geographical locations, but more importantly enable the team to concentrate
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The Employer of the Year title was conferred upon RSA Logistics for its outstanding people development strategies.
on outward thinking, customer focus and developing and programming for the customers. “That just goes to show how we keep evolving to focus on the customer’s needs, developing and listening for their programming, reiterating and delivering information the way they want to see it.” Abhishek is quick to add also that technology is not the only key differentiator between RSA Logistics and other service providers catering to the market. “Technology is a big factor of our success and why many of our customers like us. But in a nutshell, our USP is our technology systems, the speed of execution, high quality infrastructure that we design and develop for very specific uses and of course phenomenal personalised service. Our tagline is ‘Logistics Personalised’ and we really mean that.” This is also where the company’s culture plays a major part in its continued success. “We still have that founder’s mentality throughout the organisation,” he states. “We know this is our bread and butter and
that sentiment really flows through the value system of the organisation. We give people complete freedom and autonomy on how they take care of their clients and take ownership of the organisation’s success as a whole.” Continuing in the same vein, Abhishek proudly tells SME Advisor that RSA Logistics’ greatest success would be its focus on people. “We wanted to become an employer of choice where our people are free to become entrepreneurs within the organisation and actually deliver something from and for themselves. I do like the fact that we’re creating a workplace that people want to work for; and feel like they’re a part of the family.” Despite only recently having won the “Employer of the Year” award at the 2016 Middle East HR Excellence Awards he humbly adds that this is a milestone that they are still working hard to acheive. The title was conferred upon RSA Logistics for showing outstanding people development strategies that fostered an environment of
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We wanted to become an employer of choice where our people are free to become entrepreneurs within the organisation and actually deliver something from and for themselves. We’re creating a workplace that people want to work for; and feel like they’re a part of the family.
engagement and motivation, leading to higher productivity. Growth Speaking about the future of the company and whether it would continue to be a family-owned entity, Abhishek tells us his plans, “The customer is who it’s all about, so we’re doing what we understand will help us deliver value to the marketplace. We’ve already taken a step towards RSA Logistics no longer being an exclusively family business by taking investable equity joint venture partnerships with both family and non-family organizations. These partnerships have helped us spread our wings and attain a greater understanding of what we can or cannot do.” Elaborating on plans for the company for 2017, Abhishek tells SME Advisor, “We have a few very interesting projects we’re hoping to launch in the UAE. Our Kenya operations are progressing steadily and we’re also in the process of amping up operations in India. Operations in Saudi Arabia is on the cards as well. Those are very diverse markets and
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kicking off our plans in all four would be a big milestone for RSA Logistics.”
opportunity, “We’re thinking about how to get involved.”
Forecast Abhishek tells us there are two major developments he feels will majorly affect the logistics sector. The first is autonomous vehicles which will be a huge development especially in our part of the world where road safety is a major challenge. The other game changer he feels will be 3D printing which could actually threaten the supply chain business in the long-term because people will start much closer to the market instead of stocking. Rather than seeing it as a challenge however, Abhishek sees it as an
Takeaway So what are the lessons learned by a young entrepreneur in an industry with bigger, more experienced players? “If I had to bring it down to three core learnings,” Abhishek divulges, “the first would be to surround yourself with a great mentorship network. Really seek advice. It’s surprising how many other successful people don’t mind helping you with advice and support. The second is to make your own luck by working hard and making sure that you’re in position to take advantage of opportunities that come your way. Lastly and perhaps most importantly is to hire people that are way better than you which will allow you to focus on the bigger vision.” Unconventional perhaps, but sometimes unconventional works!
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A LOOK AT THE SEMI-AUTONOMOUS ROAD AHEAD As the big debate on driverless cars revs up, Florida-based Eric D. Ruben, Senior Counsel, Clyde & Co. shares his insights on the current scenario and forecasts the further risks moving forward…
EDITOR’S PICKS 01. The May 7, 2016 fatal crash involving a Tesla Model S with “Autopilot” introduced the first resounding thump on the rocky road that is semi-autonomy. 02. The self-driving cars of futuristic Hollywood are already roaming the streets, learning our roads, signs, signals and habits to take the life and death responsibility of driving out of human hands.
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hen the US Transportation Secretary unveiled President Obama’s plan to provide a 10year, US$4 billion investment in autonomous vehicle development earlier this year, America signalled its faith in technology to save us from ourselves. Even with all of the incredible advancements in vehicle safety, the National Highway Traffic Safety Administration (NHTSA) reported 32,675 people died in automobile accidents in the US in 2014 and a staggering 2.34 million more suffered injuries. Further, a NHTSA survey conducted from 2005 to 2007 and presented to Congress in 2008 concluded that driver error was the critical reason for 94 per cent of all crashes involving light vehicles. That means that on average a person dies in a car crash in America about every 16 minutes and more than four people are injured in accidents every minute of every day; and, to be frank, the finger of blame can almost always be pointed in one direction – us.
Let’s set aside the overwhelming human carnage that has no doubt somehow affected every reader of this article. A 2011 AAA study found accidents in the US cost roughly US$300 billion dollars per year in deaths, health care and property loss (yes BILLION). That same study estimated the costs of traffic congestion including, for example, lost productivity and wasted gasoline, at US$100 billion. In total, the costs of car accidents in terms of injuries, death and human delays is roughly 2.6 per cent of the American GDP. In other words, if you are fortunate enough to be spared the anguish of injury or death to you or a loved one, each of us is still taking a major hit to our wallets. But, all is not gloom, doom, and despair. The self-driving cars of futuristic Hollywood are already roaming the streets, learning our roads, signs, signals and habits to take the life and death responsibility of driving out of human hands.
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Autonomous vehicles, from Level 1 to Level 4, will save lives and money.
It is no longer fantasy. One day in the not too distant future, drunk driving will be a thing of the past. Texting and driving will be a misnomer. The elderly and disabled will gain or regain the independence of unassisted transportation. Our auto insurance premiums will take a nosedive or even disappear. The cost of transporting goods will plummet. Car accident attorney referral services will fizzle, However, the car buyer’s options will not be as simple as full autonomy or no autonomy. The May 7, 2016 fatal crash involving a Tesla Model S with “Autopilot” introduced the first resounding thump on the rocky road that is semi-autonomy. NHTSA has identified five levels of automation: Level 0 is no automation, Level 1 includes some function-specific automation, but the driver is still in overall control (like adaptive cruise control), Level 2 (like the Tesla Model S) includes combined function automation where drivers can cede limited control in certain situations, Level 3 includes limited complete self-driving with drivers still ready to regain control, and Level 4 is full automation (no steering wheel or pedals necessary). It is the Level 2 and Level 3 vehicles that will likely trigger significant litigation and SME ADVISOR
lead to other growing pains that could stagnate, disrupt, or even temporarily raise premiums and other costs. The legal intrigue of Level 2 and Level 3 vehicles is not necessarily with the technology, but with the very concept of rotating responsibility between man and machine. The NHTSA definition of a Level 2 vehicle, for example, is chockfull of vague, translatable, and litigation-prone wording. It states that the driver can cede “active primary control in certain limited driving situations,” and the driver is still “responsible for monitoring the roadway and safe operation and is expected to be available for control at all times and on short notice.” Where can a trial lawyer begin? What are “certain limited driving situations?” Something tells me plaintiffs and defendants will disagree. Perhaps more ambiguous, what is “short notice?” Is it 30 seconds? Five? An instant? One look at the 2016 Tesla Model S owner’s manual furthers this point. The Driver Assistance section includes 52 individual warnings and six cautions. Then, there is the “catch-all” informing the driver of ultimate responsibility: “Never depend on these components to keep you safe. It is the driver’s responsibility to stay alert, drive
ERIC D. RUBEN SENIOR COUNSEL, CLYDE & CO.
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safely, and be in control of the vehicle at all times.” None of the foregoing should be read to suggest the Model S Autopilot technology isn’t an amazing feat and generally extremely safe when used properly. In fact, Tesla stated that the fatal event in May was the first in 130 million miles of autonomous test driving compared to one death every 94 million miles among all vehicles in the US. But, plaintiffs’ lawyers are already salivating over potentially vague statements and arguable consumer expectations, not to mention the typical design and manufacturing defect claims that will be tailored to autonomous vehicles (e.g., autonomous parts out of specification, alleged software or algorithm defects, and the inevitable supposedly better alternate design). For example, Tab Turner is one of the country’s most successful vehicle defect plaintiff’s attorneys. Turner was recently quoted comparing the Autopilot system to an “attractive nuisance” where he argues it
is dangerous to tell drivers they can cede control while simultaneously saying they better still be monitoring at all times. Frankly, the very name “Autopilot” could suggest a total cessation of control more suitable for at least a Level 3 vehicle. Consumer Reports has encouraged Tesla to disable Autopilot until additional security is developed, saying the word “Autopilot” can give consumers a false sense of security. Google’s CEO of Self Driving Cars John Krafcik seems to generally agree as he recently stated Google abandoned development of Level 2 vehicles after finding test drivers were not paying attention even when told to do so. As things stand today, Americans are not anxious to hand total control of the wheel to a machine. A University of Michigan study published in May of 2016 (the same month as the fatal Tesla crash) found almost half of respondents had no interest in self-driving cars, and only 15.5 per cent want a fully autonomous vehicle. Perhaps movies like
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Never depend on these components to keep you safe. It is the driver’s responsibility to stay alert, drive safely.
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The car buyer’s options will not be as simple as full autonomy or no autonomy.
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Terminator and The Matrix have conditioned us to mistrust machines with our safety. Then, there is the general human desire to maintain even a false sense of control. Regardless of the reason, we are likely to see Level 2 and Level 3 vehicles in higher numbers before Americans accept fully autonomous vehicles. That leaves insurers still unclear as to whether and to what extent drivers could be held responsible for crashes. We can then prepare for intricate, conflicting arguments of comparative negligence. Essentially, who was in control at the time of the accident, who should have been in control, did the vehicle perform properly, and was it properly maintained? Autonomous vehicles, from Level 1 to Level 4, will save lives and money. But, there should be caution in the semiautonomous road ahead that could fill Americans with questions and doubt as we follow sensationalised stories for each crash leading ultimately to a future of litigation with juries listening to “he said, it said.”
Further information If you would like further information on any issue raised in this update, please contact: Clyde & Co LLP PO Box 7001 Level 15, Rolex Tower Sheikh Zayed Road Dubai, United Arab Emirates T: +971 4 384 4000 F: +971 4 384 4004 Clyde & Co accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. www.clydeco.com
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Unstoppable Uber A leaked document reveals the huge growth and even bigger losses behind the infamous ride-hailing app. Even so, Uber remains a force to reckon with. Here’s why…
EDITOR’S PICKS 01. There are a number of reasons for Uber’s burning pockets: promotional discounts, high operating costs and an expensive marketing campaign. 02. Uber raised US$3.5 billion from Saudi Arabia’s sovereign wealth fund this June, the largest single investment ever made in a private company.
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‘Uber: to an extreme or excessive degree’. When CEO Travis Kalanick launched his company in 2009 he could not have known how apt his choice of name would prove. Uber really does only operate to the extremes, in this case extreme growth and extreme loss. A leaked confidential report reveals that although the business is growing exponentially, it is still massively unprofitable. According to the document, GAAP losses (net revenue minus cost of revenue, operating expenses and other costs) totaled US$987.2 million in the first half of 2015. To put that into perspective, GAAP losses were US$671.4 million for all of 2014. There are a number of reasons for Uber’s burning pockets: promotional discounts, high operating costs and an expensive marketing campaign. But being in the red doesn’t mean the company isn’t bringing in big business. Uber remains the market leader and saw gross bookings (total fares charged to app customers, before the drivers get their cut) of US$3.63 billion in the first half of 2015, up from just US$2.93 billion in all of 2014. But profitability is impossible when you have expenses of US$159.1 million in operations, US$295 million in aggressive advertising and US$72 million in promotions in the first half of 2015 alone.
For most other businesses such eyewatering losses would mean a sentence to the scrapyard. But not for Uber. The company has an enviable set of airbags in the form of international investors, who act as a buffer against bankruptcy. What does Kalanick care if he’s burning fuel at the speed of light if he has a whole oil rig at his disposal? Already valued at US $62.5 billion, Uber raised US$3.5 billion from Saudi Arabia’s sovereign wealth fund this June, the largest single investment ever made in a private company. The deal gives the company a stronger chokehold over the Middle Eastern taxi app market and strengthens its commitment to strategic regional expansion. Uber claims the Saudi’s investment puts the company’s total balance sheet, including cash and debt, at more than US$11 billion. Ready to overtake Bolstered by the recent injection of funds, the company is continuing to splash the cash. Kalanick recently announced that is it investing US$500 million in a global mapping project that will make its operations less dependent on Google Maps. That’s not all. The firm is also currently testing driverless car technology –
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Kalanick recently announced that his company is investing US$500 million in a global mapping project that will make its operations less dependent on Google Maps. SME ADVISOR
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The price you’ve got to pay Worldwide startups with a current valuation of at least $1bn, at August 30th 2016.
US$3.5 billion The amount Uber raised from Saudi Arabia’s sovereign wealth fund this June
US$500 million Uber’s investment in a global mapping project
*Including debt & Equity
Source: CB Insight, company reports www.economist.com
and has its self-driving cars prowling the streets of San Francisco. This is quite an achievement for Uber given that it was only about a year and a half ago that it built its Advanced Technologies Centre in Pittsburgh to make driverless cars a reality. Expressing their sentiments on this advancement, the Co-founders of the company said in a news release on their website: “This pilot is a big step forward. Real-world testing is critical to the success of this technology. And creating a viable alternative to individual car ownership is important to the future of cities. Of course, we can’t predict exactly what the future will hold. But we know that self-driving Ubers have enormous potential to further our mission and improve society: reducing the number of traffic accidents, which today kill 1.3 million people a year; freeing up the 20 per cent of space in cities currently used to park the world’s billion plus SME ADVISOR
cars; and cutting congestion, which wastes trillions of hours every year.” Despite the considerable losses lagging behind it, Uber is racing ahead in the fast lane. India and China are next on Kalanick’s growth agenda. In fact, economictimes.indiatimes.com reported that in a meeting with Indian Law and IT Minister Ravi Shankar Prasad, Kalanick said: “We are very excited about the future of Uber in India. With hundredsthousands of driver opportunities and jobs we have come here with, we couldn’t be more excited to serve India and to work with sons and daughters of India who run Indian operations.” The company has an insatiable appetite for spending, one that would run most other businesses off the road. But, as the name suggests, Uber thrives in extreme environments.
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India and China are next on Kalanick’s growth agenda.
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DRIVERLESS CARS: are you ready?
The most ambitious leap in the field of transportation is no longer a distant vision. Hussein Dia, Associate Professor at Swinburne University of Technology, sets the scene‌
EDITOR’S PICKS 01. Driverless cars are likely to create new business opportunities and have a broad reach, touching companies and industries beyond the automotive industry and giving rise to a wide range of products and services. 02. Policy remains the last major hurdle to putting driverless cars on the road. 03. Car manufacturers and technology companies are working towards a vision of fully autonomous vehicles, and that vision includes taking the human driver out of the loop.
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he transition to fully driverless cars is still several years away, but vehicle automation has already started to change the way we are thinking about transportation, and it is set to disrupt business models throughout the automotive industry. Driverless cars are also likely to create new business opportunities and have a broad reach, touching companies and industries beyond the automotive industry and giving rise to a wide range of products and services. New business models We currently have Uber developing a driverless vehicle, and Google advancing its driverless car and investigating a ridesharing model. Meanwhile, Apple is reportedly gearing up to challenge Tesla in electric cars and Silicon Valley is extending its reach into the auto industry. These developments signal the creation of an entirely new shared economy businesses that will tap into a new market that could see smart mobility seamlessly integrated
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in our lives. Consider, for example, the opportunity to provide mobility as a service using shared on-demand driverless vehicle fleets. Research by Deloitte shows that car ownership is increasingly making less sense to many people, especially in urban areas. Individuals are finding it difficult to justify tying up capital in an under-utilised asset that stays idle for 20 to 22 hours every day. Driverless on-demand shared vehicles provide a sensible option as a second car for many people and as the trend becomes more widespread, it may also begin to challenge the first car. Results from a recent study by the International Transport Forum that modelled the impacts of shared driverless vehicle fleets for the city of Lisbon in Portugal demonstrates the impacts. It showed that the city’s mobility needs can be delivered with only 35 per cent of vehicles during peak hours, when using shared driverless vehicles complementing high capacity rail. Over 24 hours, the city would need only 10 per cent of the existing cars to meet its transportation needs.
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HUSSEIN DIA ASSOCIATE PROFESSOR SWINBURNE UNIVERSITY OF TECHNOLOGY SME ADVISOR
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The Lisbon study also found that while the overall volume of car travel would likely increase (because the vehicles will need to re-position after they drop off passengers), the driverless vehicles could still be turned into a major positive in the fight against air pollution if they were all-electric. It also found that a shared self-driving fleet that replaces cars and buses is also likely to remove the need for all on-street parking, freeing an area equivalent to 210 soccer fields, or almost 20 per cent of the total kerb-to-kerb street space. Other studies have also shown that dynamic ridesharing using driverless vehicles will increase vehicle utilisation up to eight hours per day. Car insurance A recent study by McKinsey on disruptive technologies suggests that up to 90 per cent of all accidents could be prevented by
driverless vehicles. So why buy insurance if automation makes accidents far less likely? “The truth is, if it’s a safer way of driving, it’s good for society and it’s bad for our insurance business,” the US business magnate Warren Buffet said recently when asked about the impact driverless vehicles may have on his car insurance subsidiary. “Anything that cuts accidents by 30 per cent, 40 per cent, 50 per cent would be wonderful, but we won’t be holding a party at our insurance company.” Other studies have speculated that premiums could be reduced by 75 per cent, especially if drivers are no longer required to get coverage, and liability is shifted from drivers to manufacturers and technology companies. Under this scenario, insurers might move away from covering private customers from risk tied to “human error” to covering manufacturers and mobility providers against technical
failure. A Rand Corporation report also predicts that drivers might end up covering themselves with health insurance instead of vehicle insurance. Will driverless vehicles destroy the very idea of ownership? Does all this mean car ownership is passé? In some ways, you may not own every facet of your driverless car anyway. Vehicle manufacturers are arguing that since they own the software that runs a connected vehicle, they also own the machine that runs that program. In comments submitted to the US Copyright Office, vehicle manufacturers argue that purchasers are only licensing the product and it would be unsafe for them to modify the vehicle programming or even make a repair. The Copyright Office is currently holding a hearing on the issue. If it rules in favour of the manufacturers, it will
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Vehicle manufacturers are arguing that since they own the software that runs a connected vehicle, they also own the machine that runs that program.
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A modified Visual Turing Test can potentially be used to test the self-driving software if it’s tailored to the multi-sensor inputs available to the car’s computer, and is made relevant to the challenges of driving.
set a precedent that can change the whole landscape of vehicle ownership. Not everyone will be excited by this vision, and many would be sceptical and disagree that we are at the cusp of a transformation in mobility. Others still want to drive and not everyone is likely to want to rideshare on a daily basis. Many might also argue that better investment in public transport would achieve similar outcomes. Whether you embrace or object to these scenarios, the reality is driverless vehicles are coming and they will have socioeconomic impacts and other effects on our society – some good and some bad. I see them, along with urban transport technologies, as having a role in delivering new mobility solutions as part of a holistic approach to improve road safety and promote low carbon mobility. The market will ultimately determine whether they can succeed.
The regulatory challenge What procedure can be used to verify compliance? Should the AI self-driving software pass a benchmark test, developed specifically for autonomous vehicles, before it can be recognised as a legal driver? Who should develop such a test and what should it include? Make no mistake, car manufacturers and technology companies are working towards a vision of fully autonomous vehicles, and that vision includes taking the human driver out of the loop. They have already made huge advancements in this space. The selfdriving software that has been developed, based on “deep neural networks”, includes millions of virtual neurons that mimic the brain. The on-board computers have impressive supercomputing power packed inside hardware the size of a lunchbox. The neural nets do not include any explicit programming to detect objects SME ADVISOR
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in the world. Rather, they are trained to recognise and classify objects using millions of images and examples from data sets representing real-world driving situations. But the driving task is much more complex than object detection, and detection is not the same as understanding. For example, if a human is driving down a suburban street and sees a soccer ball roll out in front of the car, the driver would probably stop immediately since a child might be close behind. Even with advanced AI, would a selfdriving vehicle know how to react? What about those situations where an accident is unavoidable? Should the car minimise the loss of life, even if it means sacrificing the occupants, or should it protect the occupants at all costs? Should it be given the choice to select between these extremes? These are not routine instances. Therefore, lacking a large set of examples, they would SME ADVISOR
be relatively resistant to deep learning training. How can such situations be included in a benchmark test? Turing tests The question of whether a machine could “think” has been an active area of research since the 1950s, when Alan Turing first proposed his eponymous test. The basis of the Turing Test is that a human interrogator is asked to distinguish which of two chatroom participants is a computer, and which is a real human. If the interrogator cannot distinguish computer from human, then the computer is considered to have passed the test. The Turing Test has many limitations and is now considered obsolete. But a group of researchers have come up with a similar test based on machine vision, which is more suited to today’s AI evaluations. The researchers have proposed a framework for a
Visual Turing Test, in which computers would answer increasingly complex questions about a scene. The test calls for human test-designers to develop a list of certain attributes that a picture might have. Images would first be hand-scored by humans on given criteria, and a computer vision system would then be shown the same picture, without the “answers,” to determine if it was able to pick out what the humans had spotted. There are a few vision benchmark data sets used today to test the performance of neural nets in terms of detection and classification accuracy. The KITTI data set, for example, has been extensively used as a benchmark for self-driving object detection. Baidu, the dominant search engine company in China, and which is also a leader in self-driving software, is reported to have achieved the best detection score of 90 per cent on this data set. A modified Visual Turing Test can potentially be used to test the self-driving software if it’s tailored to the multi-sensor inputs available to the car’s computer, and is made relevant to the challenges of driving. But putting together such a test would not be easy. This is further complicated by the ethical questions surrounding self-driving cars. There are also challenges in managing the interface between driver and computer when an acceptable response requires broader knowledge of the world. Policy remains the last major hurdle to putting driverless cars on the road. Whether the final benchmark bears any resemblance to a Turing-like test, or something else we have not yet imagined, remains to be seen. As with other fast-moving innovations, policymakers and regulators are struggling to keep pace. Regulators need to engage the public and create a testing and legal framework to verify compliance. They also need to ensure that it is flexible but robust. Without this, a human will always need to be in the driver’s seat and fully autonomous vehicles would go nowhere fast.
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