Innovation Footprints

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Technology

Update #02 | Request For Startups: MaritimeTech Edition

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Dr. Christopher Clott delivers the opening remarks at the kickoff event for Maritime Global Technologies Innovation Center at SUNY Maritime College on Thursday, March 15, 2018. Photo Credit: Virna Wong, SUNY Maritime College.

Note/Disclaimer:

  1. This blog post represents my opinions only. It does not represent the opinions of my teammates at Particle Ventures (formerly known as KEC Ventures), either individually or collectively.
  2. This blog post does not represent the opinions of any one at Maritime Global Technologies Innovation Center (MGTIC), SUNY Maritime College, or any of their related affiliates.
  3. This blog post does not represent the opinion of The New York Supply Chain Meetup (#TNYSCM), nor does it represent the opinion of any of my co-organizers at #TNYSCM.
  4. This blog post does not represent the opinions of any of the individuals or companies that is specifically mentioned as a result of their participation at the event that this article covers.
  5. Where I felt it would be helpful, in some cases, I have added supplementary background that wasn’t part of the presentation.

This blog post is the third in a series that I have been writing about our effort to create a maritime technology innovation hub in New York City. You can read the preceding instalments here and here, respectively. You can also read my blog posts on trucking; here, and an update here, as well as shipping; here, with an update here.

We finally held the kickoff event for Maritime Global Technologies Innovation Center (MGTIC) at SUNY Maritime College on Thursday, March 15, 2018. It was a reverse pitch that brought together maritime industry professionals and entrepreneurs, developers, journalists, and investors. The reverse pitch format involved leaders from the industry pitching pain points for which their companies are looking for innovative solutions – naturally the unspoken assumption is that these are problems faced by the maritime shipping industry as a whole. Therefore responding to these reverse pitches would be the first step in an entrepreneur’s effort to prove the market.

This is my recap of the reverse pitch.

Background: What Does MGTIC Do?

MGTIC’s goal is to help turn challenges faced by the global maritime industry into profitable opportunities for incumbent companies AND new entrant software technology startups. Basically, MGTIC connects the maritime industry, technology startups, and investors in a neutral and collaborative environment in which they can pursue mutually beneficial relationships and partnerships. The center hopes to accomplish this goal by marshalling the extensive resources available through the State University of New York network, as well as the resources and professional expertise available because of its location in New York City.

Opening Remarks & Keynote

MGTIC is founded by two members of the faculty at SUNY Maritime College;

  1. Dr. Christopher Clott, ABS Chair of Marine Transportation and Logistics at SUNY Maritime College, and
  2. Dr. Richard Burke, ABS Professor of Naval Architecture and Marine Engineering.

They reminded the audience of MGTIC’s goals, and set the stage for the remainder of the event. Dr. Michael A. Alfultis, 11th President of SUNY Maritime College welcomed us to the campus, and emphasized that SUNY Maritime College must play a role in shaping the future of the global maritime industry give the role it plays in training men and women who go on to fill positions of leadership in the industry. MGTIC is the first step in the effort to harness the changes that the industry must inevitably grapple with as time progresses.

The keynote address was delivered by Roger Matus. He walked us through the basic highlights of Prof. Clayton Christensen’s process of Disruptive Innovation, ending with the following summarizing points;

  • Tech startups seek markets that they can disrupt. The purpose of a reverse pitch is to educate entrepreneurs, founders, and technologists about markets that may be ripe for a disruptive new product or business model.
  • The initial goal a startup should pursue is a proof-of-concept, or a minimum viable product that early-adopter customers are willing to pay for in order to prove that a market exists.
  • A successful proof-of-concept should lead to a iterative and circular process of hypothesis development, creation, and learning . . . Customer development, basically, to use the term of art.
  • Many startups will lose money, but some will get acquired if they successfully prove the existence of a new market.
  • The pay-off entrepreneurs and investors is in the form of equity. If things work out then that equity undergoes a substantial increase in value.

Pitch #01: Fuel Analysis Automation – Bunker Procurement & Oil Data

Josh Shapiro, Chief Operating Officer at Liberty Maritime Corporation, delivered the first reverse pitch. Liberty is a New York-based commercial shipping company which operates a fleet of 6 U.S. flag and various foreign flag vessels that transport ” . . . bulk, break bulk and bagged commodities as well as a variety of Roll On/Roll Off (Ro/Ro) cargos around the world for the U.S. Government, the United Nations, Private Voluntary Organizations (PVO’s) and private commercial entities.” ((Quoting from Liberty Maritime’s website. Accessed Saturday, Mar 31, 2018.))

Fuel costs can account for as much as 50 to 60 percent of operating costs for a shipping company. Generally, this means that shipping companies are constantly under pressure from rising costs of crude oil, and try as much as possible to pass these costs on to their customers. However, more pressing is the announcement by the International Maritime Organization that its regulations to limit sulphur oxide emissions will come into effect on January 1, 2020. The current limit is 3.50% m/m (mass by mass). Come January 2020, the new limit will be 0.5% m/m. You can read more about this here: IMO Sulphur 2020 – Cutting Sulphur Oxide Emissions.

As one might imagine, given that fuel costs account for such a significant chunk of a shipping company’s operating costs, carriers like Liberty Maritime Corporation gather a lot of market data about fuel. Among other things, they;

  • Gather general data about heavy fuel oil (HFO) and Marine Gas Oil (MGO),
  • Gather data on futures, forwards, and other financial derivatives related to the fuel markets,
  • Perform hedging, speculation, and correlation analyses, and
  • Use their data to customize advantageous fuel procurement or fuel hedging strategies.

Unfortunately the state of the art for this kind of work is not user-friendly. So the need here is for a system that;

  • Has an easy to use, easy to understand general user interface that does not require years and years of training, and that will minimize mistakes,
  • Can run and report on various future scenarios based on previously established criteria,
  • Can combine proprietary, open source, and other third-party data to perform the analyses required,
  • Is customizable given the needs of a specific customer, and
  • Is affordably priced, with add-ons and upgrades that can be purchased at extra cost.

Pitch #02: Blockchain in Logistics

Josh Shapiro presented the second reverse pitch as well, this time he focused on blockchain in logistics. This is a topic I have previously blogged about here: Update #01: White Paper | Towards A Supply Chain Operating System and as I highlighted, it was a major topic of discussion at #TPM2018: The Woodstock Of International Container Shipping & Logistics.

Josh highlighted the following problems and opportunities;

  • Recording the quantity and transfer of assets like pallets, trailers, containers, etc,
  • Tracking purchase orders, shipment notifications, or other trade-related documentation,
  • Assigning or verifying the provenance and integrity of products
  • Linking goods in the physical world with a virtual or digital twin in order to enable tracking using serial numbers, barcodes, RFID, etc,
  • Sharing information about processes like manufacturing, product assembly, delivery, and maintenance.

This touches on two themes that have been repeated in conversations I have had with people in the maritime industry about the role that distributed ledgers might play in how the industry operates in the future;  The first is Supply Chain Transparency: This is the extent to which information about every organizational entity in a supply chain is readily available to every other participant in the supply chain. The second is Supply Chain Visibility: This is the extent to which all participants in a supply chain can track the movement of parts, components, materials, and finished products as they travel in all directions within the supply chain as goods travel from suppliers to the end-use customer. Taken together, increased Supply Chain Transparency and Supply Chain Visibility reduces operational risk and increases customer satisfaction.

Pitch #03: Cybersecurity in the Maritime Industry

Anthony Patti, Vice President of Global Cybersecurity Services at Duff & Phelps delivered the third reverse pitch. Duff & Phelps is a global advisory firm which assists its “. . . clients in the areas of valuation, corporate finance, disputes and investigations, compliance and regulatory matters, and other governance-related issues.”

After a brief overview of the basics of a corporate cybersecurity program. Anthony discussed the state of cybersecurity in the maritime industry and why it’s vulnerable to attacks;

  • Increased use of computer services, technology, and automation,
  • Lack of encryption,
  • Across the board, there’s a lack of cybersecurity awareness and training,
  • Safeguarding against cyber attacks can be expensive, and finally
  • People in the industry feel that there’s a low risk and they do not understand the threat.

As the maritime industry continues to embrace automation and software technology the systems he thinks are most vulnerable to attack include, but are not limited to;

  • Bridge Systems – these are the interconnected systems that enable centralized monitoring of various navigational, propulsion, engine, and other operating information about a ship. This is usually accomplished by gathering and presenting the information from a ship’s systems to a group of screens from which personnel monitor the ship.
  • Global Positioning Systems
  • Cargo Handling & Management Systems
  • Propulsion and Machinery Management & Power Control Systems
  • Access Control Systems
  • Passenger Servicing & Management Systems
  • Passenger Facing Public Networks
  • Administrative & Crew Welfare Systems
  • Communication Systems
Cybersecurity and Maritime Industry in The News – Anthony Patti, Duff & Phelps.

As an example, he discussed one scenario that could arise from a cyber-attack; A collision could be initiated after a ships navigation system is hacked. This could lead to;

  • Physical loss of, or severe damage to ships and other equipment,
  • Physical injury to crew, and possible loss of life,
  • Loss of cargo through damage, or theft,
  • Pollution,
  • Business interruption,
  • Disruption to port and terminal activities leading to broader, economy-wide aftershocks and losses due to interruptions in the flow of trade and commerce.

To wrap things up Anthony suggests that the perfect cybersecurity solution for the maritime industry would;

  • Automatically track all information technology and operating technology systems,
  • Automatically monitor for all vulnerabilities,
  • Automatically track patch management,
  • Automatically monitor access controls and audit/log access,
  • Automatically monitor ship-to-shore interfaces, and all systems connected to the internet,
  • Automatically monitor all systems, especially those supplied by third parties, for unauthorized access and entry to shipboard equipments and network systems,
  • Train personnel to correctly use and monitor systems connected to the internet, and
  • Provide a command-center-style dashboard for shoreside and onboard personnel to understand if there are any issues that require special attention, assessment, or remediation.

As is the case with fuel regulations, cybersecurity is an issue that the International Maritime Organization is taking seriously – new regulations come into effect on January 1, 2021. You can read more here: Maritime Cyber Risk. Also, The Baltic and International Maritime Council’s Joint Industry Guidelines On Cyber Security.

An example of how easy it is to gain access to some communication systems on a ship; Anthony Patti – Duff & Phelps.

Pitch #04: Port Trucking & Terminals

Chris Gabarino, Vice President of Operations at Port Newark Container Terminal (PNCT) delivered the fourth reverse pitch. PNCT “. . . located in Port Newark, New Jersey occupies 267 acres, handling over 700,000 containers annually. PNCT secured a long-term extension of its lease agreement with the Port Authority of New York/New Jersey with options through 2050.

As one of the largest infrastructure projects in New Jersey, PNCT will invest $500 million into the expansion before the year 2030. The expansion is expected to double the number of containers moving through the terminal, creating significant economic growth within the region.

PNCT has already doubled its on-dock rail capacity, purchased three (3) super post-Panamax ship-to-shore cranes and has significantly expanded and improved its fleet of container handling equipment and support yard. PNCT is ready today for the ultra large container vessels which will be calling the Port of NY/NJ once the Bayonne Bridge is raised.

Further expansion plans include the development of 74 additional acres, a new gate facility, additional berth deepening and upgraded container handling equipment including additional super post-Panamax ship-to-shore cranes.” ((Quoting from PNCT’s website. Accessed on Saturday, Mar 31, 2018.))

The problem: Terminal operators lack visibility into what is happening at the ports. As a result there are significant, and many believe unnecessary delays in getting goods in and out of the port as quickly as possible.

This is a major problem, since nearly 80 percent – measured in tons, if not more, of trade between the United States and its international trading partners passes through the nations ports. Ports work in tandem with carriers, labor, logistics service providers, professional services providers – like finance, contract lawyers, etc., government agencies, local communities, importers and exporters, rail operators, and others.

The opportunity: A product that reduces trucker wait time and increases trucker turn time at a terminal by linking terminals with the greater shipping and trucking community by;

  • Providing visibility into a terminal’s real-time inventory for the port drayage, trucking, and shipping community,
  • Matching real-time shipper needs with top-box inventory at the terminal,
  • Enabling truckers to react in a timely manner to changes in freight status.

Pitch #05: Compliance

Kelly Raia, a trade compliance and supply chain specialist at Blue Tiger International, presented the fifth reverse pitch.

International supply chain trade compliance is the process that ensures that goods leaving or entering a country’s borders comply with all relevant rules, regulations, and laws. So the goal of international trade compliance is maximizing the adherence to relevant rules, regulations, and laws while simultaneously facilitating the free flow of goods across national and international borders. According to Crane Worldwide Logistics; Trade compliance includes export control and reporting, import clearance, anti-bribery, antitrust and competition analysis, third-party agent vetting and management, supply chain security, and overall assessment and management of trade and regulatory risk. Trade compliance is interactive and all-inclusive. ((Lightly paraphrased from http://www.craneww.com/what-is-trade-compliance/. Accessed Saturday, Mar 31, 2018.))

The product for this market would;

  • Enable companies to maintain good trade compliance policies for the aspects of their business that involve international trade,
  • Enable companies to implement, maintain, and monitor standard operating procedures for parts of their business that involve international trade.

For imports some of the activities that such a product would facilitate include; Classification, Valuation, Country of Origin Marking, Use of Trade Agreements, and Recordkeeping.

For exports some of the activities that such a product would facilitate include; Denied Part Screening, AES Filing, Export License Requirement Documentation, Use of Trade Agreements, and Recordkeeping.

Pitch #06: Maritime & Marine Risk Management

Scott Parry, Senior Marine Risk Consultant at Allianz Global Corporate & Specialty (AGCS), presented the sixth reverse pitch. “Allianz Global Corporate & Specialty (AGCS) is the Allianz center of expertise for large corporate, industrial and specialty insurance.” AGCS has a worldwide network in over 210 countries and territories, and it is one of the very few global insurers with an exclusive focus on the needs of global corporate and specialty clients.

At a high level;

  • The world of insurance is changing, and data is becoming more important to the underwriting process than in the past because so much more data is now available.
  • Insurance carriers need to adapt to emerging technology trends in order to increase their ability to more adequately tune their processes to match each clients unique business needs.
  • The increasing trend towards mega-ships represents an accumulation of risk and uncertainty. How should insurers prepare to face this development?
  • How can insurers do a better job of harnessing real-time supply chain data?
  • How should the trends in cybersecurity risk factor into an insurers underwriting processes?
  • What technology can be developed to reduce loss due to cargo theft?

Pitch #07: Electronic Logging in Trucking

Matt Guasco, Owner, INF Marketing and Logistics discussed issues facing the drayage and long-haul trucking markets. Matt’s company represents Logistic Services USA, a company that “specializes in providing true “End to End” logistics solutions. We utilize our companies assets (fleet of trucks, warehousing, technology) and our non-asset partnerships to provide a truly seamless and flexible logistics solution. We simplify the process and give our customers world class reporting capabilities and real time tracking throughout the entire life-cycle.” ((Quoting from http://logisticservicesusa.com/. Accessed on Saturday, Mar 31, 2018.)) They provide port drayage, long-haul and short-haul trucking services, trans-loading and warehousing services throughout the United States.

According to Matt; The introduction of Electronic Logging Devices (ELD) and the attendant shortening of allowable hours has created a host of problems for his clients. However, ELDs are here to stay since the argument that we should return to an environment of less safety is an untenable one to make – ELDs permanently and automatically record a driver’s hours of service and rest periods. For example, a long-haul driver is allowed 11 hours of drive time over a consecutive 14 hours during which that driver is on duty. The introduction of ELDs has has caused an uptick in operating costs truckers of about $40 per truck per month. As a result of the ELD mandate, and other accompanying factors, American Truck Business Services (ATBS) predicts an eventual capacity shortage of between 200,000 and 300,000 trucks. Even before things get as bad as ATBS predicts, rates are already being driven up as some truckers can now pick and choose what freight to transport and some carriers simply refuse to honor existing contracts. Also, poor availability of equipment in the drayage markets eats away at precious time and exacerbates the problem. He admits that the ELD mandate will decrease truck accidents and reduce insurance costs.

The Need: Software that will enable trucking companies to increase capacity and decrease transit times, while adhering to the ELD mandates.

My additional comment; It would also be great if such software could increase fuel efficiency in the process – fuel costs account for about 30 – 40 percent of operating costs in the trucking industry.

Pitch #08: Ocean Carrier Differentiation & Marketing Strategy

The eighth, and final reverse pitch came from Peter Mastandrea, Port Captain and Manager of U.S. East Coast Marine and Terminal Operations for Hyundai Merchant Marine (HMM). HMM is the 14th largest container carrier in the world and is headquartered in Seoul, South Korea. According to HMM’s website;

  • HMM is an integrated logistics company, operating around 130 state-of-the-art vessels. HMM worldwide global service networks, Diverse logistics facilities, leading IT shipping related systems, a professional highly trained staff, and continual effort to provide premier transportation services.
  • HMM has formed a global business network with four international head-quarters, 27 subsidiaries, 76 branches, five overseas offices and 10 liaison offices. It is highly regarded as one of the world’s top integrated-logistics companies with its targeted market prospects, efficient organization, top personnel, and advanced internet systems.
  • HMM transports nationally strategic materials such as crude oil, iron ore/coal and diverse special products as well as import/export goods. Earnings are eight trillion Korean won per year, clearly playing a major role in Korea as a vital economic artery.
  • HMM invests to continuously expand vessel fleet, acquires container terminals in the worldwide primary location and inland logistics facilities, and develops premiere customer oriented IT system. As a result of these endeavors, HMM will become a world top integrated logistics company giving “Hope to shareholders, satisfaction to customers and pride to employees”.

But, enough with the propaganda . . . You want to know what Peter had to say. 

The container shipping industry is largely built around alliances. For background on shipping alliances you can read this blog post from Xeneta.

In a world in which each of the 10 biggest container shipping companies belongs to one of 3 alliances, how does HMM survive as an independent player?

What strategic messaging should HMM develop to set itself apart from the hordes, in a good way? Is there are marketing strategy that HMM ought to be deploying if it is convinced that operating outside the alliance structure is the path it should pursue?

There are bigger ideological issues at play here. For example, conversations I have had with people since I wrote the two shipping blog posts that I referred to at the beginning of this article suggest that the Chinese government has decided that it is in China’s national interest to enable a Chinese shipping companies to become big enough to dominate global maritime trade. After all, the thinking goes, if China is the world’s factory, why should the goods it ships to the rest of the world travel on ships owned by Europeans. Early steps in this direction may be seen in the merger between COSCO – a Chinese state-owned shipping carrier, and the Hong Kong-based Orient Overseas International Line (OOIL) and its container shipping subsidiary, Orient Overseas Container Line (OOCL). According to this article by Bill Mongelluzo in the Journal of Commerce, the merger will make the combined entity the largest carrier of US imports.

Similar nationalistic tendencies may be the driver behind the decision by Japanese shipping lines Kawasaki Kisen Kaisha (K Line), Nippon Yusen Kabushiki Kaisha (NYK), and Mitsui O.S.K. Lines (MOL) to operate jointly as the Ocean Network Express (ONE), which began operations in April 2018.

So, what is Korea to do? Does she draw a line in the sand and put full force of the power and might of the government of Korea behind Korea’s shipping companies, enabling them to operate as HMM would like to operate, or does she let the markets dictate what will happen with the possibility that Maersk, or another of the top 10 shipping companies by market share comes in and acquires HMM and other Korean carriers? How would the current geopolitical situation between North and South Korea affect thinking around this topic.

To wrap up the discussion about the reverse pitches, I will borrow the advice Josh Shapiro gave entrepreneurs in the audience; Focus on products that

  • Increase profitability,
  • Reduce operating costs,
  • Increase operating efficiency and supply chain information integrity, or
  • Simplify regulatory compliance.

Next Steps

MGTIC is now collecting proposals for presentations for possible inclusion at an event to be held during the Marine Money Conference. This would be on Tuesday June 19, 2018 at The Pierre Hotel in New York City.

The team is most interested in proposals that respond specifically to the areas pitched at this March 15, 2018 Reverse Pitch. However, they will consider other proposals too. 

The proposals should be brief, clear and to the point, no more than 2-5 pages. They will create a proposal template that will be published on MGTIC’s website but in the meantime proposals should at a minimum provide the teams’ preliminary thinking about the following areas:

  • Overview
  • How it works
  • Business model
  • Customer segments
  • Revenue streams

 

Proposals should be sent to mgtic@sunymaritime.edu.

They’d like proposals as soon as possible but will consider all entries up to Thursday, April 12.  Include a point of contact. Given the tight turnaround time, feel free to ask about an extension of the timeline. I assume they’ll consider such requests on a case-by-case basis.

Good luck.

MGTIC is a joint-initiative by SUNY Maritime and EEX Maritime to create a maritime technology center in New York City. This center will benefit from the central position that SUNY Maritime occupies in the global shipping industry, the network and know-how that EEX Maritime is building as a connector between technology startups and the shipping industry, and the prominent role that New York City occupies in the global supply chain market.

About SUNY Maritime: SUNY Maritime College is one of six state maritime academies in the United States. Located 30 minutes from mid-town Manhattan, Maritime College educates dynamic leaders for the global maritime industry.

About EEX Maritime: EEX Maritime is a joint-venture between MarineCycles and EEX. EEX Maritime helps startups gain access to the global shipping market through its hubs of activity in Helsinki, New York, and Singapore.

#CountDown: 3 Days to #TNYSCM04 – Supply Chain & Artificial Intelligence

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A cross-section of the audience at #TNYSCM #02, January 2018.

We’re now less than a week from The New York Supply Chain Meetup’s fourth gathering. The purpose of this post is to outline our plans for that event, and preview what we expect to do between now and June 2018 . . . We’re still in the early days of building this community, so much of this is subject to change, especially as we go through the process of recruiting sponsors.

Our Mission

To nurture and grow the world’s foremost open, global, multidisciplinary community of people devoted to building the supply chain networks of the future – starting in NYC.

Become a coporate sponsor. Email me at: brian@tnyscm.com for more details about our vision, and the team that’s working behind the scenes to build this community.

The New York Supply Chain Meetup is powered by Particle Ventures, a seed-stage fund based in NYC that invests in Supply Chain & Industrial Intelligence. Particle is built by the same team that launched KEC Ventures.

Logistical Details: #TNYSCM #04

  • Date: Thursday, March 15, 2018.
  • Time: 17:30–20:30
  • Location: SAP America, 10 Hudson Yards - 48th Floor, New York, NY. An organizer will be downstairs, at the security counter.

#TNYSCM #04 combines a Lightning Talk, a "Fire-Side" Chat, and a Showcase. It is sponsored by SAP.iO and co-hosted by The New York Supply Chain Meetup and the New York City Bots and Artificial Intelligence Meetup.

SAP.iO helps innovators inside and outside of SAP build products, find customers, and change industries.

REGISTER HERE!

Agenda

5:30 PM - 5:55 PM: Pre-event Networking
5:55 PM - 6:00 PM: Welcome Remarks (#TNYSCM, NYCBAI, SAP.iO)
6:00 PM - 6:30 PM: Lightning Talk (15 Minutes), Q&A (15 Minutes)
6:30 PM - 6:50 PM: "Fire-Side" Chat (15 Minutes), Q&A (15 Minutes)
7:00 PM - 8:00 PM: Showcase (10 Minutes, with 5 Minutes of Q&A, each)
8:00 PM - 8:30 PM: Closing Remarks, Post-event Networking

Lightning Talk: Evolution & Use Cases of Artificial Intelligence in Supply Chain, From An Industry And SAP Point of View

David Judge (@DHJudge) is Vice President of Predictive Analytics and Machine Learning products at SAP. He guides product strategy and drives increased market awareness for SAP Leonardo.

Geoff Maxwell (@geofflm) is Global Head of Business Strategy and Execution Analytics and SAP Leonardo. He is responsible for go to market strategy for SAP’s portfolio of Leonardo solutions.

Fireside Chat: The Future of AI-Driven Transformation in Retail Supply Chains, and in Government Agencies.

José P. Chan is VP Business Development for Celect, a predictive analytics firm founded out of MIT, which helps retailers optimize their inventory portfolios in stores and across the supply chain. Previously, he worked internationally in retail for over two decades with LVMH, Richemont and Roberto Cavalli. José has held senior management positions and has extensive experience in buying, marketing, merchandising, planning, and has run retail store networks. He holds an SM from Massachusetts Institute of Technology, an MBA from University of Rochester, a BS from Cornell University and an AAS from the Fashion Institute of Technology.

Sameer Anand is a Partner with A.T. Kearney’s operations practice with over 16 years of experience in management consulting. He advises clients on large scale transformations to drive step changes in productivity with an underpinning of analytics and digital across CPG, retail, industrial products, and high tech industries. His areas of expertise include consumer products, manufacturing, supply chain planning, sourcing, bracket pricing, logistics, and advanced analytics. Prior to joining A.T. Kearney, Sameer worked at Deloitte and American Airlines.

REGISTER HERE!

Showcase Presentations

At #TNYSCM #04 we'll have 3 startups talk about the artificial intelligence-driven products they are building for the supply chain logistics industry. They will appear in the following order;

ClearMetal (@ClearMetalInc): Founded in 2014, and based in San Francisco, CA, ClearMetal provides predictive data and analytics for the supply chain logistics industry, enabling its customers to unlock increased efficiencies in global trade as ClearMetal enables them to solve complex problems using a data-driven approach. According to CrunchBase and CBInsights ClearMetal has raised $12M over two rounds of financing, most recently raising $9.0M in its Series A financing which was led by Innovation Endeavors. SAP.iO is an investor in ClearMetal.

Wise Systems (@goWiseSystems): Founded in 2014, and based in Cambridge, MA,  Wise Systems develops route-optimization software that schedules last-mile delivery truck drivers while considering multiple constraints like customer time windows, traffic, and service time. Wise automatically dispatches schedules to drivers and the software recalculates and updates schedules in real-time as things change in real-time. According to CrunchBase and CBInsights, Wise Systems has raised $1.1M in seed capital. Dynamo Accelerator is an investor in Wise Systems. Santosh Sankar, a co-organizer of The New York Supply Chain Meetup, is also a co-founder & director of Dynamo.

Optimal Dynamics: Based in Princeton, NJ, Optimal Dynamics brings AI to the trucking industry based on over 30 years of academic research and development centered on the use of Computational Stochastic Optimization and Learning in solving problems related to dynamic assignment problems in transportation and logistics. Optimal Dynamics recently raised an undisclosed amount in pre-seed funding.

REGISTER HERE!

Preview — #TNYSCM  in April, May, June

Here is what our team of organizers is working on, between now and June.

  • April 26: A panel discussion and keynote presentation, focused on the issues that have kept blockchain and other distributed ledger technologies in the lab and out of the real world. The keynote presentation is by Silvio Micali, he will talk about his work creating Algorand. THIS IS GOING TO BE BIG!
  • May 24: A showcase of startups in Fashion, Apparel, and Retail supply chain. THIS IS GOING TO BE BIG!
  • June 21: A Sourcing 101 workshop for startups building physical products.

Other "Upcoming" Supply Chain Events

  • TPM2018: Is now behind us. It was awesome. Read my blog post about it here: #TPM2018: The Woodstock Of International Container Shipping & Logistics
  • Maritime Global Technologies: Reverse Pitch on March 15, 2018 from 09:30–12:30. MGTIC is an initiative of SUNY Maritime College to build a global maritime technology innovation hub by bringing together all that the New York City metro-region has to offer entrepreneurs building software for the global shipping and maritime logistics market. I’m a member of the advisory board and have previously blogged about it here and here. I will be there. Say hello, if we've never met before
  • Transparency18: This is the flagship event series started by the founders of the Blockchain in Transport Alliance. It follows BiTA’s Spring Symposium, a members only event that occurs on May 21, 2018. I will attend both days of Transparency 18 May 22 and May 23.

#TPM2018: The Woodstock Of International Container Shipping & Logistics

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I’m posing with the TPM2018 Signage in the Speaker Ready Room at the Long Beach Convention Center in Long Beach, CA.

Notes:

  1. This blog post represents my opinions only. It does not represent the opinions of my teammates at Particle Ventures (formerly known as KEC Ventures), nor does it represent the opinions of any one at Journal of Commerce, JOC.com, JOC Events, IHS Markit or any related entities therein. It also does not represent the opinions of any of the people I mention specifically.
  2. Particle Ventures is not an investor in any of the startups highlighted in this post.

I have not been shy about telling people how much I hate travelling, and how much I hate big conferences. So, it takes a lot to persuade me to travel in order to attend a big conference. This year, I am happy I broke my own rules in order to attend TPM 2018.

What is TPM? TPM stands for Trans-Pacific Maritime . . . and TPM2018 is the 18th successive annual instalment of the conference. I have not read an official history of TPM, but from what I have gathered it began as the brainchild of Peter Tirschwell, Senior Director of Editorial Content at IHS Markit and a few of his teammates and colleagues at IHS Markit and Journal of Commerce. Early last year, after one of my conversations with Fauad Shariff from CoLoadX he said to me “You need to attend TPM. You’d get a lot out of it.” I had just published a needlessly long blog post; Industry Study: Ocean Freight Shipping (#Startups).

Early this year, Peter emailed me to ask if I’d consider moderating an Innovation Jam at TPM. We had previously met in September 2017, while I was at IHS Markit in Manhattan, NY visiting Daniel James who also works at IHS Markit. Given my experience at CMA2017, and how much more I’d learned about supply chain in general, and shipping in particular since February 2016, I knew I wanted to see what TPM is all about. So, after talking it over with my teammates at Particle Ventures, I said “yes”.

I have always believed that seed-stage VCs should spend as much time learning about industries in which they intend to invest. Some of that learning comes from reading books, media articles, and research articles. Some of that also involves speaking with individuals who actually work within the industry. Another avenue to learning about an industry is attending industry conferences, because conferences allow you to get a sense of the community or communities that come together to makeup the industry. Done well, conferences enable you to learn about trends and issues of concern within the industry, and simultaneously meet individuals for on-on-one conversations.

Context – Who Am I? What did I Expect?

I am a partner at Particle Ventures, a seed-stage venture fund based in New York City that invests in technology startups with a focus on Supply Chain & Industrial Intelligence. Our team at Particle believes the greatest technological shift of our time is happening at the intersection of data and heavy industry. Particle is built by the same team that built KEC Ventures.

Together with a team of co-organizers, I also founded The New York Supply Chain Meetup in August 2017 – to my mind, a logical next step in my evolution as a VC developing a specialty in supply chain and industrial intelligence; I wanted to hangout with people who think obsessively about software, global supply chains, and innovation. We’re building multidisciplinary community to bring techies and supply chain professionals together to pursue ways to enable innovations that will lead to the supply chain networks of the future. We expect to launch a website soon. Stay tuned!

As a result of my background, it is very likely my interpretation of things will seem strange. It will also often be wrong. When I am wrong, I hope you’ll let me know, and tell me how to correct my knowledge. If you are in the shipping industry and want to connect, or if you are a startup creating a new product for the supply chain industry . . . I am easy to find online. Don’t hesitate to connect.

To say TPM2018 met my expectations would be an understatement . . . It blew expectations completely out of the water. Here’s my recap.

Sunday, March 4

I thought it would be helpful to attend the Editorial Luncheon, because I find what journalists do to be similar to what early stage VCs do in some respects. So I wanted some insight into how journalists who cover container shipping and international logistics are thinking about the industry. The luncheon was phenomenal . . . I told someone after it was over that if I’d been told that was it, we all had to go back home because TPM2018 had been cancelled, I still would have felt the trip was absolutely worth it.

I know, I know . . . You’d like to know more details. Sorry. That conversation was off the record.

Next, I had coffee with Chayenne Wiskerske. Chayenne is a managing director responsible for sales and management at Wiskerske Onions, a family run business that has existed since 1933. She’s the 4th generation of her family to go into the business. Wiskerske Onions is a Dutch company that exports onions to 110 markets, and has a network of growers in 23 countries. We talked about many things, including

  1. The use of distributed ledger technologies and digital tokens as a way to keep track of produce in the supply chain with transparency and visibility, but just as important,
  2. As an alternative to existing banking infrastructure in situations where multinational corporations like Wiskerske Onions encounter foreign currency risk due to regulations that severely limit how much foreign currency they can transfer out of countries in which they do business around the world.

Monday, March 5

I was up way too early on Monday, March 5, 2018 . . . I decided to head to the Long Beach Convention Center before sunrise on Monday, March 5, 2018.

I started my morning by meeting with Christy Coffey, a cybersecurity collaboration advocate, computer scientist, and inventor. She currently serves as the VP of Member Services for the Maritime & Port Security Information Sharing and Analysis Organization (MPS-ISAO). We talked about trends in cybersecurity especially as it relates to maritime shipping and port operations. I am interested in how early stage cybersecurity startups can collaborate with the maritime shipping industry, so meeting Christy was one step towards helping me begin to get some ideas about how channels of communication may be enabled between cybersecurity startup founders and people responsible for increasing the maritime industry’s cybersecurity preparedness. This also one area of focus for the Maritime Global Technologies Innovation Center at SUNY Maritime College, which I have been helping get off the ground.

With Christy Coffey of MPS-ISAO, after we’d been talking about cybersecurity and maritime operations – port and vessel operations, at the Long Beach Convention Center on Monday, March 5, 2018.

The morning’s program began with welcome remarks, followed by the keynote address. This year, Jochen Thewes, CEO and Chairman of The Board of Management at DB Schenker delivered the keynote. A few things struck me about the welcome remarks, as well as the keynote . . .

  1. Software technology is top of mind . . . The theme for the Innovation Jam frames things nicely and captures the mood around technology in maritime shipping;Beyond the hype and the promises “What Can Technology Really Solve?”
  2. Artificial Intelligence is already making a small difference for some of the big players in the industry . . . The goal now should be to apply AI even more broadly to augment existing efforts. Some of the sentiments about AI in maritime shipping are echoed here: Cargo Drones and Data Swarms: Experts Weigh In on Digital Transformation in Shipping & Maritime
  3. Like everyone else, people in the shipping industry are really excited about bitcoin and blockchain. The jury is still out how or if the shipping industry will adopt it as quickly as some hope.
  4. Jochen Thewes is a really good public speaker.

During the keynote, Jochen Thewes made a remark about how a team of mathematicians DB Schenker has hired relatively recently has made a big difference in how they run their business. I chuckled and muttered under my breath . . . “Uhm. That’s what mathematicians do. They solve problems.” The gentle man sitting next to me looked at me and said, “You find that impressive? The forecasting timeline?” I replied, “Yes. Given the business they are in, yes, that’s impressive.” Then I looked at him and asked, “What do you do?”

He said, “I am the Chief Economist at Maersk.”

My mind was immediately blown.

Graham Slack is Chief Economist and Head of Strategy at Maersk! Can you imagine what insights he must have into the state of the world’s economy? I discovered I was sitting next to him during the kickoff keynote on Monday, March 5.
Graham Slack, Chief Economist at Maersk takes the stage to discuss the 2018 outlook for container shipping.

Another highlight on Monday, was the concurrent session Technology II: Blockchain – An Example of How it Could Apply to Shipping. It was moderated by Daniel James, Director of Commodities Financial Markets at IHS Markit. The panelists were;

  1. George Goldman, President, Zim USA
  2. Gadi Ruschin, CEO, Wave Ltd
  3. Bjorn Vang Jensen, VP of Global Logistics, Electrolux, and
  4. Jason Manganaro, VP of Sales, SPARX Logistics.

The room was packed with people interested in hearing about a specific implementation of Wave’s distributed ledger document management network. From Wave’s website; “Wave has created a peer-to-peer and completely decentralized network that connects all carriers, banks, forwarders, traders and other parties of the international trading supply chain. Using decentralized technologies, all communication between these parties will be direct and will not pass through a specific central entity. Due to its decentralized nature, the Wave network will not have any single point of failure and will not rely on any single entity.”

Tuesday, March 6

As you can imagine I woke up feeling nervous on Tuesday morning, which is the day that the two hour-long Innovation Jam Sessions were held. It’s one thing to be in front of a big audience and to have no idea who’s judging you . . . It’s a completely different issue to be in front of the best and brightest of the industry . . . . Especially, for someone like me; I used to have a very severe stammer as a child. In fact, the first time I spoke in public in secondary school, the audience booed at me. Nevermind, I endured all 9 minutes of it. The story has a happy ending, so ask me about it when we meet in real life.

To calm my nerves I went and took a walk around the Grand Ballroom at the Long Beach Convention Center while it was empty.

The Grand Ballroom at The Long Beach Convention Center, in Long Beach, CA.

Personally, I think the highlight of Tuesday’s agenda was listening to Lior Ron, cofounder of Otto and now head of Uber Freight discuss Uber Freight’s vision for digital freight marketplaces during TPM Accelerator: The Future of Trucking and What it Means for Shippers.

Here are two videos that explain the vision.

The Innovation Jam

Photo Credit: Caught in the Moment Photography.

Quoting from TPM2018’s website; “Technology is all well and good, but what problems can it actually solve? That remains the disconnect between the hype and the reality of the digital revolution as it relates to transportation and logistics. Despite hundreds of millions of dollars invested in startups — not to mention massive technology investments by legacy players — basic problems that shippers experience every day remain unsolved. The question, then, is whether technology can solve them. The JOC editorial team set out to answer that by reaching out to beneficial cargo owners about their most severe supply chain challenges, and inviting technology providers and others to propose how they would solve them. The result was nearly 80 proposed solutions to 17 of the most severe BCO pain points, proposals that an ad hoc committee of BCOs then reviewed and ultimately decided which ideas it wanted to see presented at TPM. The result: Eight technology providers will present their proposed solutions to pain points that range from poor supply chain visibility, exception/contingency management, gate efficiency, rolling of cargo, and variability in ocean carrier schedules. Attendees will have the opportunity to vote on the solution that most convincingly addresses the pain point it addresses, with the winner announced at the end of the jam.”

What Problems Can Technology Really Solve? First of a Two-Part Track – Exports Session

As sponsor for this session, John Golob, CEO of Lanetix kicked things of with an introduction. For the first hour we had 4 presentations from 4 technology providers, each addressing a specific BCO pain-point.

From Left to Right; Adam Compain CEO, ClearMetal. Zvi Schreiber, CEO, Freightos. John Motley, CEO, Log-Net. Robin Jaacks Vice President, Sales Operations, Ocean Insights. Photo Credit: Caught in the Moment Photography.

What Problems Can Technology Really Solve? Second of a Two-Part Track – Technology Session

As sponsor for this session, Todd Ericksrud, President and CEO of MatchBack Systems kicked things of with an introduction. For the second hour we again had 4 presentations from 4 technology providers, each addressing a specific BCO pain-point.

From Left to Right; Gordon Downes, CEO, New York Shipping Exchange. Sumitha Sampath, Vice President of Operations, XVELA. Karim Jumma, Interim Chief Product Officer, INTTRA. Vladimir Pshonyak, Founder and CEO, Pier Trucker. Photo Credit: Caught in the Moment Photography.

Based on votes from the audience, Gordon Downes and the New York Shipping Exchange walked away with the prize for most persuasively addressing the pain-point that NYSHEX had been invited to discuss with the audience of BCO representatives. That being said, I thought each of the presenters did a good job . . . I’m already thinking about ways to make the Innovation Jam at TPM2019 better for the folks chosen to present; more guidelines about where to place their emphasis, and more direction about how to prepare for a presentation like this – It’s a hybrid between a normal sales pitch, a product demo, and some elements of an Oxford-style debate – with possibly big implications for each business that’s presenting. At the least I think people who agree to moderate should do more to help each presenter put their best foot forward by helping guide presentation prep and practice ahead of the conference. This may also mean getting the process of selecting presenters for the innovation jam done about a month earlier than happened this year. That said . . . 2018 is the first year in TPM’s history that there’s been an Innovation Jam, so I think we’re off to a great start. Now the focus has to be on making the communication between startups and the maritime industry more robust and free-flowing.

(L) Brian Laung Aoaeh, CFA, Partner, Particle Ventures and (R) Gordon Downes, CEO, New York Shipping Exchange. Gordon won the TPM2018 Innovation Jam via Audience Poll. Photo Credit: Caught in the Moment Photography

I felt beat after the Innovation Jam . . . So I went back to my hotel and walked 14.4 miles as part of my effort to get back in shape after suffering a case of plantar fasciitis last summer.

Wednesday, March 7

I was supposed to head back to NYC from Long Beach on Wednesday, in the afternoon . . . But snow storms on the East Coast caused me to change my plans. So Instead of heading out early, I now could stay for the full day of programing on TPM2018’s final day. I am happy I did.

I will highlight two things;

Technology Forum: Preparing The Port of Los Angeles-GE Transportation Information Portal for Prime Time was a series of presentations followed by a panel discussion that focused on how GE Transportation, the Port of Los Angeles, and the Port of Long Beach are working together, and with other stakeholders to remove bottlenecks to the free flow of intermodal cargo once it arrives at the ports. I hope this is only the first example in a a model that spreads to other major ports around the world. Essentially,GE Transportation, the Port of Los Angeles, and the Port of Long Beach have created a collaboration model that brings together technologies from large and small companies, and some early stage tech startups too to create a system that will ease congestion at the ports. Project44 and Voyage Control were part of the presentations, and they participated on the panel discussion too.

Lunch with Speaker – “Bold and Clear Predictions” was a presentation by Lars Jensen, CEO and Partner, SeaIntelligence Consulting. I am happy I had to stay for this because of my change in travel plans . . . He discussed some questions I have been thinking about over the duration that I have been teaching myself about supply chain and the opportunities for innovation driven by tech startups – the kind I hope to discover and invest in. For example;

  1. He talked about some of the business models that he believes will work, and he also talked about some of the business models that he feels have less promising prospects. He confirmed some of my assumptions, and some of my concerns on this topic.
  2. He highlighted some of the startups he feels have strong prospects of gaining adoption by the industry. I became happier as I heard him confirm some of my guesses when I was studying the opportunities for startups in the maritime shipping industry in February 2016.
  3. He also discussed industry dynamics I did not know . . . I now will go and spend some time following up on some of the threads he pointed us towards.
  4. He discussed the Amazon Effect in some detail, but he has a different perspective than other speakers. Most others spoke about Amazon as a threat. Lars sees it as more of an opportunity . . . The shipping business is so tough that he believes that I Amazon decided to become a carrier onto itself, that would be one of the earliest signs of a coming decline in Amazon’s fortunes. I agree with him. For the same reason I did not think Apple would start building cars.

He’s an author, and so I have bought two of his books and added them to my reading pile on supply chain and shipping.

My Takeaways

  1. Supply chain presents an enormous opportunity for startups to create value through technological innovation.
  2. However, global supply chains will not be “disrupted” . . . Startup founders who approach supply chain innovation with a “we are going to disrupt yada yada” mindset will find the going very hard. This is mission-critical stuff, chaos and general pandemonium is anathema to how the industry runs. Early stage investors will do well to keep this in mind.
  3. Trust is key. Relationships matter. Old systems and new technological innovations have to play well together.
  4. Supply chain industry professionals and tech startup folks should spend more time around one another in order to enable the cross-pollination of ideas and knowledge.

There’s more from my time at #TPM2018 on Twitter.

#ChainReaction: Who Will Own The Age of Cryptocurrencies?

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Brian + His Pencils

Notes:

  1. This blog post represents my opinions only.
  2. My first blog post in the #ChainReaction Series is #ChainReaction: Notes on Centralized, Decentralized, and Distributed Systems.

As I read The History of Money, I have started understanding the monetary and currency systems of the past. It is becoming clear to me that we are inevitably going to transition from the current age of paper money and into the age crypocurrencies. It’s just a matter of time. I also think, the move towards a decentralized cryptocurrency regime will give way to a more centralized system because the alternative would lead to socioeconomic chaos and disorder which would be too destabilizing to society. So fiat cryptocurrencies are the future. This still leaves plenty room for privately issued digital tokens that are used to fulfill various other functions in global trade and commerce, just not as a decentralized substitute for what we consider money today. The social engineering behind money is a centralized function. To get to the age of fiat cryptocurrencies we need cryptography that is so easy to use that “even a caveman” could use cryptocurrencies without even having to think about it. So regulations, social psychology, and technology have to move well beyond the current state of the art. I am thinking a lot about this because trade finance is a massive pain-point in global supply chain networks, and distributed ledger technology offers a promising way to attack some of the issues that cause trade finance to be a choke-point for global trade and commerce.

If the history of commercial banking belongs to the Italians and of central banking to the British, that of paper money issued by a government belongs indubitably to the Americans.

– John Kenneth Galbraith, From The History of Money

Who will own the age of cryptocurrencies?

#ChainReaction: Notes on Centralized, Decentralized, and Distributed Systems

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Brian + His Pencils

This blog post is the first in a series of blog posts I will write as part of my effort to take an inventory of what I am learning about supply chains, digital tokens, and distributed ledger technologies.

I expect these blog posts to be frustrating for most people to read because I suspect they will come-across as disorganized, and confused. That is a reflection of the complexity of the topics I am trying to learn.

If you feel I have got something completely wrong, please do not hesitate to let me know. As Marcus Aurelius puts it;

If anyone can refute me—show me I’m making a mistake or looking at things from the wrong perspective—I’ll gladly change. It’s the truth I’m after, and the truth never harmed anyone.

First, some context; I am a seed-stage VC who has been studying supply chain for sometime. I believe that the greatest technological shifts of the next 3 or 4 decades will happen at the intersection of supply chain, industrial processes, data and analytical decision-making. I believe this shift will transform the way global supply chains function in many different industries.

If you follow technology and business news then you know what some of the trends are that will lead to the kind of shifts I believe we are about to witness. They are; increasing efficiencies in industrial automation, exponentially faster, more powerful, and cheaper computing technology, the proliferation of electronic sensors capable of capturing large amounts of data in almost any industrial or non-industrial setting one can imagine, software that is capable of analysing huge troves of data in order to aid people in making decisions about complex processes and systems, and ubiquitous computing. The list goes on. A more recent addition to any list of ground-breaking technological developments is Bitcoin and its related technologies, including the Bitcoin blockchain, as well as other cryptocurrencies and their accompanying blockchains or distributed ledger technologies.

There is currently a lot of ongoing enthusiasm, and perhaps, even hype, about Bitcoin, the Bitcoin blockchain, other cryptocurrencies or digital tokens, and their accompanying blockchains or distributed ledger technologies. Mainly, the excitement is around the belief that this group of technologies has the potential to “disrupt” any number of existing business or social structures. Personally, I agree with the following statement by Marco Iansiti and Karim R. Lakhani;

True blockchain-led transformation of business and government, we believe, is still many years away. That’s because blockchain is not a “disruptive” technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. Blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems. But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure. The process of adoption will be gradual and steady, not sudden, as waves of technological and institutional change gain momentum. ((Iansiti, Marco, and Karim R. Lakhani. “The Truth About Blockchain.” Harvard Business Review. February 17, 2017. Accessed February 04, 2018. https://hbr.org/2017/01/the-truth-about-blockchain.))

If you agree with the preceding statement, then you should also agree that, perhaps, before one dives into the intricacies of digital tokens and distributed ledger technologies it is useful to study centralized and decentralized systems in a broad, general sense. Therefore, though I will ultimately migrate to discussing centralized systems, decentralized systems, and distributed systems in relation to information technology systems, at the outset I am thinking more broadly in terms of social structures that exist in economic, political, and cultural organizations.

At the end of this process, I hope to have developed a good frame of reference for understanding why and how digital tokens and distributed ledger technologies will combine with other prevailing advancements in technology to cause the transformation in global supply chains that I believe is upon us. I hope this helps me see what is coming next – in a manner of speaking, and that the knowledge I will develop in the process helps me make better investment decisions.

If you have read any articles that discuss Bitcoin and its accompanying technologies, then you will recognize the recurring themes of centralization versus decentralization. So perhaps the place to start is in understanding when centralized structures should be desired and maintained versus when decentralized structures should be desired and maintained.

The following discussion is motivated by, and borrows heavily from, “Centralization and Decentralization: The Compunications Connection” by Stephen H. Lawrence. ((Lawrence, Stephen H. “Centralization and Decentralization: The Compunications Connection.” Accessed February 4, 2018. http://www.pirp.harvard.edu/pubs_pdf/lawrenc/lawrenc-i83-2.pdf. I am basically paraphrasing pages 6 – 26.)) In that paper there’s a quote from “The Computerization of Society”, a report prepared for the French Government by Simon Nora and Alain Minc;

It allows the decentralization or even the autonomy of basic units. Better still, it facilitates this decentralization by providing peripheral or isolated units with data from which heretofore only huge, centralized entities could benefit. Its task is to simplify administrative structures by increasing their effectiveness and improving their relations with those under their jurisdiction. It also allows the local municipalities more freedom. It reinforces the competitiveness of the small and mid- size business vis-a-vis the large enterprises.

Centralized Systems

A centralized system is a system in which a master-node makes decisions or performs systemwide functions on behalf of all the other nodes within the system – subordinate-nodes. Subordinate-nodes only follow instructions issued by the master-node. It should be obvious that centralized systems depend on a reciprocal relationship of trust between the master-node and every subordinate-node. Centralized systems are also described as command-and-control systems.

Advantages of Centralized Systems

  1. Returns to Scale: Centralized systems generally benefit from increasing returns to scale, meaning that the system generates outputs at a rate that is proportionately greater than the rate at which it consumes inputs. More specifically, the value of a centralized system’s outputs should be proportionately more than the value of the inputs consumed by the system. This happens because resource-intensive decisions and functions can be performed by the master-node only, without burdening the entire system with performing those same functions. As a result, as the system grows, the per-capita system costs can decrease substantially. Increasing returns to scale are generally closely associated with increasing efficiency.
  2. Optimization: It is easier to optimize the outputs of a centralized system given a set of inputs because the effort that goes into optimizing the system’s output need only be expended by the master-node and not by every node within the system. As a result, in a centralized system optimization contributes to the system’s overall efficiency.
  3. Standardization or Uniformity: The hierarchical structure of centralized systems makes it easier to maintain standardization or uniformity within the system. Such standards are determined at the level of the master-node, and then they are implemented and enforced at each subordinate node according to rules established and maintained by the master-node. Standardization and uniformity ensures that the entire system operates as one unit, rather than as a collection of disparate, non-uniform, non-standardized entities. In certain instances, standardization and uniformity may be especially useful qualities if the system is to serve its intended purpose.
  4. Criticality or Importance: A centralized system is preferred when there is a disproportionately high cost associated with the commission of errors or mistakes at the level of a subordinate node. In other words, centralized systems are prefered when the weight of responsibility for avoiding mistakes is high, and the costs of this responsibility are borne by the master-node.
  5. Coordination & Interdependence: Centralized systems perform better when one must account for economic externalities. An economic externality is a positive or negative consequence that is borne by an entity which did not participate in taking the actions that led to that outcome. In other words, it is easier for the master-node in a centralized system to also account for systemwide externalities before choosing an action that is implemented by all the subordinate-nodes in the system.

Disadvantages of Centralized Systems

  1. Information Overload: Centralized systems can experience breakdowns in systemwide performance if the master-node experiences an information overload.
  2. Compulsion: Centralized systems are associated with bureaucracy and lack of freedom – from the perspective of subordinate-nodes. For example, centralized systems do not freely admit new nodes to the system unless such nodes are first approved by the master-node.
  3. Lack of Flexibility: Centralized systems are characterized by an inability to respond with agility and flexibility in the face of changing conditions. This can make centralized systems more fragile in the face of threats to the entire system.

Decentralized Systems

By contrast, a decentralized system is one in which there is no single master-node issuing systemwide instructions that subordinate-nodes must follow. Rather, in a decentralized system every node is responsible for its own decision-making and, is capable of taking whatever actions its independent decisions require it to take relative to agreed systemwide goals. It should be obvious that the trust-relationship in a decentralized system differs from that in a centralized system in an important way.

A decentralized system is one which requires multiple parties to make their own independent decisions.

– Rohit Khare

Advantages of Decentralized Systems

  1. Impartial Standards: Decentralized systems are better suited when the emphasis is on effectiveness rather than efficiency. As a result decentralized systems tend to exhibit standards that stress the results that each node in the system produces and how those results contribute to overall system wide goals rather than how each node accomplishes the desired results.
  2. Initiative/Innovation: Since each node in a decentralized system is free to independently experiment with an eye towards maximizing system wide outputs, there tends to be a higher degree of innovation within decentralized systems. Once a superior method of accomplishing systemwide goals has been identified by one node within the system, other nodes will quickly copy that method if it increases their wellbeing. All else equal, this will lead to a higher level of system wide output.
  3. Responsiveness: In decentralized systems, individual nodes are more responsive to local conditions. This is because each node in the system is free to determine local priorities on an ad-hoc basis given information available to that node even if this information is not available to other nodes within the system. It is not difficult to see how this quality of decentralized systems contrasts with the standardization/uniformity quality that is present within centralized systems.
  4. Simplified Decision-making: Decentralized systems exhibit a simplified decision-making relative to centralized systems. This is because for a given situation, decisions can be made by only the relevant subset of nodes within the system while  non-relevant nodes conserve system resources. In such a situation, simplified and localized decision-making is an advantage of non-relevant nodes are not adversely affected by the decisions that have been made, and the resulting actions that have been taken, by relevant nodes.
  5. Minimize Information Resource Requirements: A decentralized system could be designed such that each node only processes information relevant for its role within the system. This way, systemwide resource requirements can be minimized since each node conserves resources by focusing only on information and activities relevant to its specific functions and does not concern itself with matters outside that sphere of relevance.

Disadvantages of Decentralized Systems

  1. Duplication of Effort: Decentralized systems can be designed such that each node within the system attempts to solve similar problems as other nodes in the same system – leading to duplicated effort. It is easy to see how this can lead to more waste than one would observe in a similar, but centralized system.
  2. Suboptimization: In decentralized systems, a single node or a subgroup of nodes, might decide to pursue activities that increase their own well being at the expense of the well being of the entire system. Trade-offs have to be made within a decentralised system to ensure that suboptimization is minimized by keeping incentives between all the nodes within the system aligned with one other, and with the entire system as a whole.
  3. Less Amenable to Standardized Change: Since each node is responsible for making its own decisions and taking actions independent of a master node, standardization takes a much longer time to diffuse through, and become adopted by the nodes within a decentralized system. As a result decentralized systems characterised by a lack of uniformity, whereas centralized systems are characterized by systemwide uniformity.

In a quest to find examples of decentralization in action within organizations that I am somewhat familiar with, I went looking for a book that discusses the topic. I found that in The Starfish And The Spider: The Unstoppable Power of Leaderless Organizations, a book by Ori Brafman and Rod A. Beckstrom, where they  introduce us to the major principles of decentralization; ((Brafman, Ori, and Rod A. Beckstrom. The starfish and the spider: the unstoppable power of leaderless organizations. Portfolio, 2006.))

  • When attacked, a decentralized organization tends to become even more open and decentralized.
  • It is easy to mistake a decentralized organization for a centralized organization because we are far more accustomed to centralized organizations. It is also easy to vastly underestimate the power of decentralized organizations.
  • A decentralized system does not have central intelligence; the intelligence is spread throughout the system. As a result the best information and knowledge is located at the edges of the organization, close to where things are actually happening.
  • Decentralized, open systems can easily mutate.
  • Decentralized organizations can seemingly appear out of nowhere because they can mutate so quickly, and because they are easily overlooked at the outset.
  • As decentralization takes hold within an industry, overall profits decrease.
  • The power of decentralization comes from the phenomenon that when people are put into a decentralized system they automatically want to contribute, and their contributions are usually remarkably of a high quality relative to what one might find in a centralized system.

So far I have not said much about distributed systems. Think of a distributed system as a hybrid between a fully centralized system and a fully decentralized system. Businesses that blend the best of both types of organizational architecture in their business model are not that uncommon, and when they do so successfully the results can be overwhelmingly successful . . . But, we can discuss that another time.

In my next post, I will more directly delve into cryptocurrencies and distributed ledger technologies. Till then, you may delve further into this topic by reading Chris Dixon’s “Why Decentralization Matters“.

Update #01 | Towards A MaritimeTech Innovation Hub in New York City

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Maritime Global Technologies Innovation Center (MGTIC) to be hosted at SUNY Maritime College. Image Credit: SUNY Maritime College.

Note: This post updates #UnderConstruction | Towards A MarineTech Innovation Hub in New York City.

The group that met on Friday, October 6, 2017 met again for a follow up on Friday, November 10, 2017. This blog is a summary of the discussion at took place at that meeting, and the resulting outcome.

The Bottomline: Dr. Christopher Clott, ABS Chair of Marine Transportation and Logistics at SUNY Maritime College and Dr. Richard Burke, ABS Professor of Naval Architecture and Marine Engineering have announced the formation of the Maritime Global Technologies Innovation Center (MGTIC) to be hosted at SUNY Maritime College.

The people for whom this post will be most relevant are founders building software for the ocean freight shipping industry, for whom relevant resources are often sorely lacking. It will also be relevant for early-stage investors like me, who want to engage more fully with the shipping industry as we assess startups serving the maritime market.

Please note that the following descriptions are based on my interpretation of the conversations we’ve had over the course of the meetings in which I was a participant. I could be wrong. Ultimately, SUNY Maritime College and Drs. Clott and Burke will determine what will work best and I am happy to support them in bringing their vision to life.

What is the Maritime Global Technologies Innovation Center? Think of MGTIC as a hybrid between a startup incubator, a startup accelerator, and an early-stage venture fund. Obviously, these elements do not yet all exist today. The goal is to have each of these elements in place in the near future.

  • Startup ideas that originate from faculty, staff, and students of the SUNY system will be incubated at the center.
  • Startups whose founders have no ties to the SUNY system will benefit from the center’s ability to help them accelerate customer development as they search for a repeatable, profitable and scalable business model. I expect that such startups might also find employees from the SUNY Maritime College community.
  • As the center matures, we expect that it will establish a venture fund to complement its activities. Ideally, this fund will invest alongside other early stage investors in startups that have been incubated at MGTIC as well as in startups that have been accelerated at the center. Details on this will be hammered out later. For now, we think the center should replicate one of the following existing models; MIT’s The Engine, or the Iowa Global Insurance Accelerator, or Texas Capital Factory. Perhaps, MGTIC will take the best elements of each of those models and combine them into something wholly unique.

What will The Maritime Global Technologies Innovation Center do? SUNY Maritime College is an educational institution, so that characteristic forms the foundation on which MGTIC exists. That said, the global maritime industry confronts numerous headwinds such as; artificial intelligence, autonomous vehicles, increasing issues around regulatory compliance, offshore sources of renewable energy, safety, connected devices, cloud-computing, cybersecurity, and blockchain and other distributed ledger technologies present challenges the shipping industry must grapple with sooner or later. Maritime Global Innovation Center’s goal is to lead the effort towards turning these perceived challenges into profitable opportunities for incumbent players in the industry AND for technology startups developing innovations that the industry can adopt. As an early-stage investor who has been studying startups building software for the maritime market, I can’t express how excited I am to be able to collaborate with an entity like MGTIC.

Nice! What’s Next? At our meeting on November 10, we agreed to plan a kick-off event on Thursday, March 15, 2018 at SUNY Maritime College. If maritime technology holds any interest for you, please save that date. We hope to convene a group that represents each of the stakeholder communities that MGTIC is being established to serve. It will coincide with the Connecticut Maritime Association’s Annual Conference and Exhibition. We’ll have more specific details about the kick-off later.

For more info:

  • You can email the crew at SUNY Maritime College that’s working directly on this via the MGTIC’s website – see link above.
  • If you’re an early stage VC interested in staying abreast of how things are progressing, you can reach me via email/Twitter/LinkedIn, and I’d be happy to answer any questions you have about this – to the best of my ability. I’m also looking for angel investors and VCs with whom we can co-invest.
  • If you’re a startup founder who wants to hear what other founders think about this “thing” – Brian Wilson from Duro UAS, Fauad Shariff and Petere Miner from CoLoadX have attended both meetings so far and can give you their take about where they feel things are heading.

Other initiatives focused on maritime technology, or supply chain technology more broadly – Leonardo Zangrando of Startup Wharf has a more complete listing here;

Last, I’m gonna plug related work I have been doing with a team of 7 other supply chain enthusiasts in New York City; We launched The New York Supply Chain Meetup with a minimum viable launch on Thursday, November 16, 2017 at Work-Bench. We hope to do much more in 2018, and we hope you will decide to join us, after all “The world is a supply chain.” and as a result, there are things to discuss.