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Jotun 09/11/2016

Bentley Systems 10/11/16

A cruel mistress

Smart Ships:  January 2016

Everyone’s talking about digital disruption. There’s a widespread appreciation that things are changing, but the true magnitude of what we’re facing is hard to put into context. Of course we’ve always had technological development, but what’s happening right now is different in a very important way. In order to appreciate how, it’s key to understand the difference between the linear growth of technology that we’re used to and the exponential growth in technology we’re seeing now.

Ernest Hemingway described going bankrupt as happening ‘gradually, then suddenly’. It’s a good way to describe how exponential growth works too. By now most people are familiar with Gordon Moore, responsible for the eponymous Moore’s Law which states that the power of computing will roughly double every eighteen months. Moore has been proved correct, but what we’ve come to realise in recent years is that his law doesn’t just apply to computing. In fact any domain, industry or discipline which becomes information-enabled and powered by information flows will see its price or performance begin to double approximately annually. And once that doubling pattern starts, it doesn’t stop.

For a world which is based on linear growth, that’s very disruptive. It means that extrapolating the past to project the future ­ something every business, government and individual has always done ­ can easily lead to dangerous miscalculations.

A good example is the project to map the human genome. Estimated to take around seven-10 years and with a budget of US$10m, when after a few years only 1% of the genome had been sequenced, analysts queued up to point out that the project was a disaster and it was likely to take over 600 years to complete. In fact the project came in just ahead of time and budget.

So how could all those respected experts get the end point wrong by six hundred years? Because the technology being used to sequence the genome was moving exponentially, and 1% doubling seven times is 100%.

Exponential growth is exceptionally difficult to model. Technologies tend to bump around under the radar for years and then suddenly explode and take over the world, because as the technology races ahead the costs also drop like a stone, driving widespread take up. The cost of sequencing one whole human DNA profile in 2007 was US$10 million, today that cost has come down to US$1,000, and it’s still falling. That’s a fall of 10,000 times in seven years.

Biotech is one example, but there are plenty more. The kind of drone that you’ll pay US$700 for this Christmas you would have had to pay US$40,000 for in 2007 in order to get an equivalent level of functionality. That’s scaled at 142 times in six years. 3D LIDAR sensors ­ used on the prototype autonomous cars ­ cost US$20,000 in 2009 and now cost around US$79 for equivalent functionality today, a scale of 250 times in five years. And an industrial robot which in 2008 would have cost a business US$500,000 now costs US$22,000 ­ a scale of 23 times in five years.

The truth is that we’re likely to see more change in the next forty or fifty years than we have done in the last three hundred, and when you appreciate the impact of exponential growth you begin to understand why. The exponential technologies also have a combinatorial effect ­ convergence of platforms and combinations of new technologies operating together are fuelling growth, change and development in new and unexpected ways. But it isn’t just these breakthrough technologies that are the catalyst for such profound change.

These technologies are colliding head-on with a range of global megatrends. The shift of power from the G7 to the E7 emerging nations, resource scarcity, rapid urbanisation, the demographic time-bomb the world’s sitting on top of and ­ critically ­ the generational mindsets in the ascendency. We might like to think that people don’t really change, but there’s strong evidence that the Millennials or Gen Y’s, and the next generational cohort behind them, the Gen Z’s, have profoundly different attitudes to life and work than the generations which have gone before. These digital natives expect transparency, instant connectivity, prefer access over ownership, value collaboration and sustainability, and have radically different expectations of the relationship between people, planet and profit than we Gen X’ers do.

The disruptive technologies in play do operate combinatorially, but you can isolate meta-trends which are going to be particularly important for us. One is connectivity and another is autonomy. And underlying those are Big Data, analytics and algorithms.

For a traditionally ‘conservative’ industry, shipping has been leveraging some pretty cutting-edge technology for decades. The formation of Inmarsat in the late 1970s brought rocket science to shipping in the form of reliable deep sea connectivity. But satellites were always going to be expensive, so ­ almost uniquely for an industry ­ maritime communications suppliers spent the next thirty years working out ways for ship operators not to use the service unless they absolutely had to.

I think it’s wrong to underestimate the consequences of that for technology adoption in shipping. There is a tendency to equate ‘technology’ with ‘engineering’ in maritime, so as long as new innovations were coming in the shape of ship designs, engines and equipment onboard it was easy to miss the fact that the industry was beginning to fall behind in the implementation of the kind of digital technology that was becoming commonplace shoreside.

It wasn’t until the advent of Time Division Multiple Access (TDMA) VSAT networks in the late 2000s that the landscape of connectivity in shipping started to change. For the first time connectivity was being positioned as something that wasn’t just for basics like crew welfare and safety, but could deliver other benefits to the organisation. VSAT providers and Inmarsat with its IP FleetBroadband solution began closing the air-gap, offering operators the chance to treat ships more like remote offices with always-on connection to the shore and the corporate network.

The new high throughput satellite (HTS) systems like Inmarsat’s Global Xpress and Intelsat’s EPIC are about to deliver another step-change in that connectivity. They will bring previously unheard of speed and bandwidth to the shipping industry, but they’re going to do far more than that.

Put simply connectivity is the foundational gateway to what we call shipping 3.0. It’s also the world’s gateway to shipping. Inmarsat’s Global Xpress Service Enablement Platform (SEP), Intelsat’s FLEX and even KVH’s IPMobileCast are going to provide the platforms where shipping can access new, vast ranges of applications and solutions. Connectivity eco-systems are going to evolve rapidly, embracing a whole new range of stakeholders from equipment providers to technology companies that aren’t domain specialists, but are attracted by an information-enabled market hungry for operational efficiency, cost savings and competitive advantage.

Information-enabled means data, Big Data, the sort which classification society DNV GL admitted earlier this year had really taken it by surprise. At Futurenautics we’ve been pointing to Big Data as transformative for maritime since late 2013, and 2015 has been the year it’s finally broken through into the mainstream.

With newbuilds routinely fitted with large numbers of sensors, and retrofitting them affordable for older vessels, one ship could conceivably generate up to 60GB of data per day. With figures like that it is understandable that some operators feel overwhelmed, but the reality is that pre-qualifying data onboard can significantly reduce the amount which needs to be transmitted ashore to form part of a Big Data initiative. VDR manufacturer Danelec has demonstrated that judicious pre-qualification of data can allow an operator to perform Big Data analysis for as little as US$1 per day.

Monitoring and condition based maintenance is grabbing the headlines, but Big Data is about more than technical, engineering applications. Failure to recognise that now could be a major error for the industry. We have to get out of the mindset that says technology is engineering, because Big Data isn’t an engineering wave, and it isn’t a technology wave either. Big Data is a business transformation wave that’s going to shift the way that companies make decisions, operate their assets and find, train and keep their people.

Big Data’s real value lies in its ability to answer questions that were previously unanswerable. And in order to extract that value we need to be mashing up everything from technical, engineering data to enterprise data, social intelligence, employee, commodities and market data, wind and weather. Whether they decide to silo Big Data with the engineers, or give it a seat in the c-suite, it will most likely be a key long-term differentiator for maritime and shipping companies.

Making sense of Big Data takes algorithms and it’s sobering to realise just how much of our daily lives are already subject to them. Every Google search, every Amazon recommendation and every social network relies on them, but so do physical world activities too. Using ATMs, travelling on public transport or taking an aeroplane feeds algorithms everywhere which are learning more and more about the world we live in.

The power and sophistication of algorithms lies behind terms like artificial intelligence, artificial neural networks, machine learning, and deep learning. Shipping and maritime already has its own pioneering algorithms and has done for some time. ShipServ’s E-procurement platform ShipServ Match operates in a similar way to Amazon’s recommendation engine. Based on 15 years of trading data from thousands of maritime purchasers the ShipServ matching engine selects the best available supplier based on a user’s RFQ from within their purchasing system. On average Match saves its users around 10% on their procurement costs, and it’s learning all the time.

It’s algorithms like these that are central to that other metatrend ­ autonomy. Automation and autonomy is fed by data, via sensors, and enabled by intelligent algorithms operating actuators to remove the human being from the loop. The most high-profile autonomy projects are the Google cars and Daimler’s autonomous trucks, and in maritime the pioneer is Rolls-Royce.

When its VP of Innovation Oskar Levander announced early in 2014 that Rolls-Royce was planning on having a prototype autonomous ship by around 2018 there were howls of derision. My, how things have changed. Since then DNV GL has unveiled the ReVolt concept ship, unmanned and battery powered, together with a report predicting that by 2025 fully automated ships will be entering the market; within ten years many types of ship will be delivered with autonomous operation capabilities, and by 2050 segments like container shipping could be fully automated and unmanned.

The Industrial Internet of Things (IIoT) means that smart ships are the next frontier and according to a report by ESRG (now part of Cat Marine) value creation per ship simply from connecting it to the IIoT could be up to US$1 million. What Rolls-Royce calls ‘ship intelligence’ is the heart of what will become the unmanned ship, an opportunity as Oskar Levander says, to redefine what a ship is. It’s an inexorable direction of travel for maritime as it is for every other industry. The fact that we still have so many voices calling for it to stop is a concern because to do so fundamentally misunderstands the world today, let alone what the world will look like tomorrow. We already have autonomous, unmanned surface vessels and not just operated by navies ­ just take a look at Singapore-based Zycraft to see them in action.

I’ve had the pleasure of spending time with Oskar and Rolls-Royce’s innovation team so allow me to disabuse you of any notion that they are a bunch of dangerous, wild-eyed loons who are ignorant about the shipping industry. When they say they’ll have a prototype within a few years you’d better believe them, because there are already classification societies, flag states and ship operators working with them. In fact, rather ironically for an unmanned ship, the project has plenty of people onboard.

Standing in Rolls-Royce’s control room at its impressive technology centre in North Norway, or looking at ABB’s recently launched support centre it’s not hard to see how autonomy and automation is already changing shipping.

Unmanned ships are emotive and they’ve stirred up a lot of heat in the industry, but to focus solely on the manning issue is to miss the really big challenge. The fact is that we will have autonomous ships well before we have unmanned ships. Shipping has always had a fragmented fleet with differing levels of technology onboard, but we are entering a transitional period now where the gap between the oldest vessels and the newest will be so great it will force us to reassess everything from how we regulate our vessels and our oceans, to what competencies seafarers really require, and where responsibility for the operation of the ship actually lies.

To understand one part of that challenge we need to look not at the Google cars, or Daimler, but at an industry where to all intents and purposes we already have autonomous vehicles, and that’s aviation.

When it comes to automation the mantra has always been to automate whatever you can wherever you can and in aviation that’s led to a situation where planes are flying themselves. What’s defined as ‘machine-centred automation’ means pilots are finding their skills degrading as their actual flying experience diminishes. ‘Automation addiction’ or ‘Skill fade’ are serious problems for airlines and it’s exactly where maritime is going unless it learns the lessons of aviation and uses new technology to avoid the trap.

Human-centred, adaptive automation utilising haptic feedback technology could allow the seafarers of tomorrow to genuinely interact with a ship. Rather than taking control the algorithm could sense the level of engagement of the user, shifting control back and forth to keep an operator engaged and their skills intact.

And I use the word ‘operator’ advisedly. The crews onboard may not be shrinking that quickly but the crew ashore will be growing apace. That’s likely to be driven by the fact that skillsets in shipping will be changing, and the Millennials and Gen Z’s who have them won’t be prepared to spend long months at sea. Whether we like it or not shipping today relies on low wage labour, but smart ships are going to demand smart operators, those with skills that every other industry is desperate to get its hands on.

Creative problem solvers with an aptitude for maths, science and technology will become some of the most valuable employees ever to walk the earth, and our industry isn’t geared up to attract them. The likelihood is that ships will start to become unmanned not because we don’t want people onboard, but because the people with the new skills needed to sail them will increasingly not need to be onboard to sail them, and don’t want to be.

Perhaps one of the most interesting areas though is how regulation responds to this tricky transitional era. Technology is moving exponentially whilst the bureaucracy that seeks to regulate it is taking a linear track in response, and that’s likely to lead to what’s termed the Bureaucratic Singularity. Essentially technology is set to outpace the ability of regulators to regulate, and whilst that issue isn’t unique to the maritime industry, it is a serious one we need to address.

Arguments about the shortcomings of IMO and the burden of regulation in shipping are well-rehearsed, but there’s little doubt that with autonomous ships on the horizon, and enhanced connectivity driving transparency and new data flows, the current model of ‘one-size-fits-all’ regulation isn’t going to be fit for purpose much longer. You can look at the bureaucratic singularity as a disaster, but actually it’s a once-in-a-generation opportunity. The same connectivity, Big Data, analytics and algorithms can be used to create next-generation regulation, based on real-time data and transparency delivered to a range of stakeholders in new ownership ecosystems. Ships could earn their right to operate on a minute-to-minute basis, delivering data on their compliance with everything from the emissions coming out of the stack to paperwork, reinforcing the positive behaviours we all want to see and exposing and driving out the bad.

What seems inevitable is that the idea of a ship on the ocean being the sole responsibility of the owner, or indeed the Master is going to be challenged more quickly than we realise. As that new ownership ecosystem develops and equipment manufacturers, lenders, insurers, Flag and class demand more and more transparency and interaction with the vessel, the extent to which an asset is really owned is going to become questionable. Couple that with the increasing numbers of ‘crew’ ashore and algorithms plotting the best course, optimising the speed and trim and even the most time and fuel efficient way of getting onto the berth, and it’s not hard to see that the whole hierarchical system with the Master at its head, may not be fit for purpose much longer either.

There is, however, one thing which could act as a brake on technology-adoption in the maritime industry and threaten the gains it can offer. Fear of cyber attack and its impact on technology-adoption was identified at the World Economic Forum in Davos in 2015 as potentially costing the world economy US$3 trillion. As the evidence of maritime and shipping’s vulnerability grows cyber security and ­ as importantly ­ cyber resilience has to become a priority.

According to the 2015 Crew Connectivity survey conducted by Futurenautics Research with the support of InterManager, BIMCO, PTC, ISWAN and Crewtoo, 43% of crew have sailed on a vessel that has been compromised by a cyber incident, yet almost 90% of crew have never received any cyber security or hygiene training or guidelines.

Cyber security is not an IT risk, it is an inevitable downside risk of the industry’s increasing dependence on technology and it has to be managed by boards and a culture of cyber awareness embedded throughout organisations across the sector. It’s essential that ship operators acknowledge the fact that cyber attacks now target users rather than infrastructure, and our greatest threats have become our employees, crew and suppliers.

However, as the 2015 Crew Connectivity survey demonstrated, crews at least are a highly-IT literate workforce, so the opportunity to harness that capacity and leverage it across organisations is clear. But whilst cyber is front-of-mind in most other industries, in shipping we’re woefully underprepared. Focusing on the so-called ‘kinetic’ threat to our ships and control systems is important ­ particularly when the cyber exclusion clause in virtually every insurance policy specifically excludes any loss or damage related to a cyber incident ­ but it is just one part of an organisation-wide risk. Mitigating that risk will be one of the greatest challenges for our and every other industry in the years to come.

There is an acronym that’s been coined to describe this new world of exponential technologies and disruptive global megatrends, and it acts as both guide and warning to those who wish to navigate it successfully. Volatile, Uncertain, Complex and Ambiguous (VUCA) is the new normal, where the comforting certainties of the past ­ linear projections and the security of scale and incumbency ­ become threatening in themselves. It is here I think we in shipping and maritime have an advantage, because that acronym and its warning could equally be applied to the sea and those who have always sought to navigate it.

It’s said that the sea is a cruel mistress, and the future’s one too, but that’s never stopped those who go down to the sea in ships before. And I hope it won’t now. “To reach a port we must set sail,” said Franklin D Roosevelt. “Sail, not tie at anchor. Sail, not drift.” The future, like the sea, has the potential to swallow us up, but unlike the sea the future isn’t somewhere we go, it’s something we create. And the time has come to start in earnest.

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