How long-established port operators can avoid stagnation and drive innovation

How long-established port operators can avoid stagnation and drive innovation

The port industry, dominated by long-established firms (incumbents), is undergoing rapid change as innovation, automation, digitization, and energy transition become increasingly critical. In this dynamic environment, how can incumbents mitigate inertia within their organizations to remain relevant and competitive?

Many incumbents have operated in the port industry for decades, but they are at risk of becoming too fixated on the strategies that once made them successful. While these approaches worked in the past, new market conditions may require a different strategy. This phenomenon is known as inertia: the tendency to resist change and cling to past methods of creating value. Familiar phrases like "That's just the way things are done here" or "We've always done it this way" reflect the challenge of breaking from the past, even when old strategies no longer serve the business.

Inertia develops gradually and can be divided into three main categories: strategic frames, routine rigidity, and resource rigidity.

1. Strategic frames represent how managers perceive the world. Leaders who have held the same roles for many years often develop decision-making frameworks based on past successes. While these frames were once useful, they may no longer be suitable. It can be difficult for managers to recognize that their well-established approaches need to change.
2. Routine rigidity arises from established procedures within the organization. Initially, companies experiment with various methods to complete new tasks. Once an efficient process is found, the focus shifts to perfecting it. While these routines benefit the organization through operational efficiency, they also become difficult to change over time.
3. Resource rigidity refers to the tendency of organizations to continue investing in resources that helped them gain a competitive advantage in the past. In the port industry, where long-term investments are common, incumbents may hesitate to allocate resources to new technologies that have yet to prove their worth, ignoring their potential importance in the future.

To embrace innovation without being held back by strategic frames, routine rigidity, or resource rigidity, two strategies can help: (1) separating operations focused on new technologies from core business activities to encourage gradual innovation, and (2) incorporating external input to stay on the cutting edge of technological advancements.

These strategies can be translated into several concrete solutions. For example, incumbents can establish separate business units dedicated solely to innovation, allowing them to test new technologies without disrupting existing operations. Another option is to adopt open innovation, drawing on external advisors to infuse fresh ideas into the organization. Finally, forming strategic alliances with other companies can allow incumbents to combine strengths and collaborate on new products or services. A clear example of this strategy is a company specializing in autonomous driving solutions partnering with a terminal tractor manufacturer, to develop an autonomous terminal tractor together.

In conclusion, incumbents in the port industry are at risk of succumbing to inertia in the form of strategic frames, routine rigidity, and resource rigidity. Fortunately, these forms of inertia can be overcome through various approaches: establishing separate innovation-focused units, adopting open innovation, and forming strategic partnerships. By embracing these strategies, incumbents can remain agile and competitive in an increasingly fast-paced and technology-driven environment.

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