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Start-ups and innovation in a time of uncertainty

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The world has been brought to a standstill as strict lockdown measures have been enforced across the planet. Resilience and action are required if businesses are to remain relevant in a rapidly changing world.

Innovation is inevitable.

Adaptation is key and online or digital opportunities are abound. Not only do these innovative opportunities offer new ways to engage and create value, but they can also offer non-geographical specific reach – the world could be your oyster.

We sat down with Leonardo Zangrando, Founder & Managing Director at Startup Wharf, to discuss how getting a better understanding and working with start-ups in the maritime sector can be a productive way of doing innovation – making innovation more accessible and decreasing turn-around times.

Innovation & Funding

Access to funding can be complicated with the current processes grants and loan schemes have in place, and the categories which they assign as a part of a traditional innovation development pathway. Not to say these checks and balances are not necessary, but start-ups often have bottom-up, flexible strategies – mapping a traditional funding process to the growth of a start-up can often prove particularly difficult.

“This doesn’t match the real process of developing a start-up - And this is a serious problem in innovation. When we use the word innovation in a public setting, the meaning is it is always related to research and development (R&D) lead innovation, and this R&D manifesting into a product – technology transfer,” notes Zangrando.

“This process worked perfectly fine 20, 30 or even 40 years ago because these were the only processes which people knew of – a very traditional perspective on innovation,” Zangrando continues, “However, scaling growth is not necessarily aligned with how the grant process wants it to be aligned.”

Typically, grant processes still view R&D as “physical” innovation. Developing an app, system, or business model is not something physical.

“You cannot force this process on a start-up that is dynamic, and it has some very different specifics or characteristics from the traditional innovation process. You cannot force it into the model of traditional innovation processes,” notes Zangrando.

When a company is working towards business innovation, it is not necessarily technological innovation, it is also something that is missing from traditional innovation. He believes that companies looking to engage with start-ups need to understand how they work and give them what they need, not the other way around.

Zangrando notes, “Uber’s innovation was not in the technology as we always had the ability to call a cab from a mobile phone. Yes, one could now call a cab with an app, but Uber disrupted the business model.”

Zangrando believes that it is important to note that Uber’s innovation/ disruption came from outside of the taxi industry. The founders of Uber had no experience in driving or operating a taxi business. For taxi operators what would become their biggest direct competitor, came from a completely different sector and industry.

In this case, states Zangrando, “…you're disrupting the business model by using technology. Technology is not the disruptor, but one can use technology to disrupt.”

What Uber did was proposition-simplifying. What the company did really well was to simplify the booking process, gave transparent pricing, made payments easy, and provided status updates, amongst other things. As the experience of using a taxi in most countries around the world had not changed in over 50 years, this customer experience was nothing short of a revelation.

Ability & Execution

In most cases, execution is more important than the idea. This allows for testing and critical analysis which builds towards better focus and improvements.

“We need to start ups to know the process,” says Zangrando. “Sometimes they don't understand the processes of their potential customers, but on the other side, to be able to execute you need to have a counterpart that is the client.”

Zangrando continues, “It will also be crucial for start-ups to learn how to engage with the industry it might be. I’ve had a number of people feedback to me and say that start-ups don't know how to engage. In my opinion, this does go both ways.”

In Europe and Asia there are a large number of start-ups but Zangrando believes the US is a far more start-up friendly environment as the market is less risk averse and more receptive – not just for the maritime sector. He also believes that not everyone will be interested in a start-up product or service, but there is someone who is open to that risk.

On the other hand, Zangrando says that Europe is far more risk averse than the US and there is a greater concern when it comes to failure. With this in mind, he believes that start-ups operating outside of the US need to be more aware of this kind of mindset, and to be better prepared when pitching ideas. Conversely, companies or organisations looking to engage with start-ups to innovate need let go of their “everything under control” mindset and allow for more “controlled uncertainty.”

“There are ways to do it and it is a cultural change. One will need to allow some unstructured behaviours – characteristic of start-ups - to creep into your perfect machine or you run the risk of not being able to innovate. And I totally understand that fear.”

A working business is like a machine with many cogs that engage and work with each other. There are processes and workflows which keep this well-oiled machine in motion, and “you don’t really want to mess with that,” states Zangrando.

“Now you have this start-up or piece of innovation which sets to replace two, or more, of these cogs and there is hesitancy to disturb the machine.

“As whole, the maritime industry has tight margins and I do understand the resistance to change. Interfering with one cog could destroy your margins as they are so small. Understanding, and streamlining, the taxonomy of your business is critical – you need to understand what every cog in the business is doing and its relationship with other cogs in the business.”

One of the key factors in keeping a business lean and agile is knowing when to outsource and when to build in-house. Do you have the skills in house to support your innovation initiative? What are the costs of seeing this project to fruition? These are key elements to success and value, but another often overlooked factor is time frame.

“In general, start-ups are very fast at iterating, changing, and trying new things till they get to convergence of value and valid product or service. If you want to start building innovation today, the typical cycle is about three years. That is three years from idea to rollout and in the world today you cannot wait 3 years. In the past you had the luxury of time to develop and launch an innovation. Today, you don't have this luxury the environment around you - business, society, technology - changes at a much faster pace.”

Zangrando continues, “Start-ups can compress this time frame dramatically. There will be much faster iterations, validation, and flexibility.”

Adaptation and Leadership

Langdon Morris wrote in an article on innovation and leadership that, "Top management’s role in innovation is as much a matter of attitude as it is of expectation; a matter of strategy as it is of policy; and a matter of enabling innovation while simultaneously eliminating the obstacles that impede it."

Zangrando notes that embracing a bottom-up approach is also key to successful adoption of a culture of innovation, and that unless top management is prepared to truly lead innovation, it will more than likely lead to failure.

“Often we see CEOs or innovation leaders believe they have a big innovation plan for their business but fail to investigate feedback from the market. The risk of failure in these projects is very high,” says Zangrando.

Zangrando says that companies, “… must understand that what was fit for purpose in the past, will more than likely not be fit for purpose in the future. Winners in the race to embrace innovation will be those that really understand this faster process and are able to adapt to it so that they become faster at testing innovation, validating, and incorporating it in their business processes so that they become competitive against those who are not.”

“I’m a firm believer in collaboration to find opportunities on common projects”, notes Zangrando. “Not just because two or more start-ups can offer a more interesting offering, but together they can create new solutions they may not have thought of before. Partnerships will be key and will play a big part in the future of the maritime industry.”

Change in the maritime industry has been slow and very seldom. Companies who will lead the future of the maritime industry will be those who learn how to engage with start-ups for an and bring this innovation into their operations.

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