(Reposted from my blog, BullishData.)
Fifty years ago, the notion that it would be possible – let alone cost-competitive – to produce enormous quantities of consumer goods in far-flung corners of the globe, ship them thousands of miles, in bulk, to their eventual consumers and then sell them at razor-thin margins would have been rightly laughable. “Globalization” is the term we’ve adopted to describe this system today, but that hugely simplified term obscures the incredibly intricate and interlocking systems of manufacturing, shipping, trade and infrastructure that developed over decades to bring us to today, when I can walk into any Target or Wal-Mart in the land and interact with supply chains touching almost every country in the world. (More after the jump...)
A few nights ago, I finished “The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger” by Marc Levinson. Through the history of the basic, standardized shipping container, Levinson (a former editor at The Economist) tells a much larger story about the integration of the world economy and emergence of globalization in the last half of the twentieth century. In doing so, the book is also a case study in how the innovative application of new ideas, combined with the right leadership, can be transformative to industry and the world. After mulling it over, I’ve come to some first thoughts about how these lessons also directly apply to the marketing function and analytics industry – so follow along and let me know what you think!
While I actually find the minutiae fascinating, all you really need to know is that prior to the 1960s, most global shipping was done in “break bulk” cargo, which must be manually loaded and handled as individual units (as opposed to in standardized containers). For many reasons, this kept the price of shipping very high, and accordingly, the total level of long-distance shipping was dramatically lower than it is today, in relative terms.
So what changed, and how is it relevant for us?
1 – A new adaptation of an existing idea
When intermodal containerization for shipping was adopted by an entrepreneur named Malcom McLean (who owned a trucking company right here in North Carolina!) in the mid-1950s, it was not at all a new idea. The idea of containerization had been around for quite some time, but was largely dismissed as a wholly impractical means of general transport (for a variety of good reasons). Most of the focus at the time was on applications of automation and mechanization to the existing system – for example, bigger palletization, conveyor belts, and better ways to move break bulk cargo, not changes to the nature of that cargo itself.
If you ever get to see a major port in person, go. You’ll never look at a Wal-Mart the same. (This is the Port of Rotterdam.)
McLean operated from a key insight, however, which was revolutionary at the time: that the shipping industry was primarily in the business of moving goods cheaply, by whatever means were easiest. By developing a system of value around the central container concept – including building the company’s own cranes at non-traditional ports with cooperative unions, custom-rigged ships and intermodal facilities – McLean was able to practically apply the idea in a way that dramatically lowered his cost of shipping per container.
Why do we care? While the “brilliant new idea” approach is popular, often the most valuable innovations are just new or better applications of existing ideas. As a PM, one of the things I always try to keep in mind is that we shouldn’t just build better versions of what we’ve got (like better mechanization of break bulk cargo), but rather we should also be exploring whether we can solve our essential problems in a fundamentally better way.
In the digital analytics realm, we’re constantly working on ever more sophisticated analysis and reporting features, for example – but at the same time, it’s common knowledge that the vast majority of analytics users in industry aren’t at all taking full advantage of the ones they have. I suspect that the future lies in more firmly embedding the essential data we collect and analyze into actual business processes – in marketing, certainly, but also finance, sales, procurement, operations, executive leadership, etc. That’s a business and cultural evolutionary step, but it’s driven by technical advancement. (For what it’s worth, I think IBM is doing a very good job of adapting to this evolution with its Smarter Commerce initiative.)
2 – Industry standardization
Intermodal and international shipping is obviously a multi-player game. Yet since containerization of cargo was virtually insignificant before the mid-1950s, there had been no incentive for any of the major players in the main modes of transport (rail, trucking or shipping) to develop common standards for their handling. Different container dimensions, construction, connectors, locks, rigging, etc. could easily prevent Company X from handling Company Y’s containers. Once the value in containerized shipping was evident, industry interest in standardizing it soared. McLean soon made his company’s valuable patents on standardized containers available royalty-free, helping to ease the way to broader international standards adoption.
Why do we care? The technology world has generally done a pretty good job with developing standards, and the analytics industry is no exception. Within our world of digital analytics, the digital tag layer standardization initiative from the W3C is an extremely valuable first step towards greater ease of use and less vendor lock-in for consumers of analytic data. More broadly, vendor enthusiasm for giant initiatives like the Industrial Internet Consortium, founded by IBM, AT&T, Cisco, GE and Intel, for engineering standards for object sensors (think “Internet of Things”) is an excellent indicator of the direction the technology world is going in. (For a better idea of what I think this will look like, see my older post on Our Shared Digital Future.)
3 – Unforeseen consequences will accelerate change to the traditional model
The containerization of shipping was so economically successful that by the mid-70s, it was quickly becoming the global standard. Shippers quickly realized that ever-bigger ships, which could carry ever-increasing numbers of containers, could increase profit in a favorable proportion with the increase in fuel costs – so bigger ships begot even bigger ships. McLean himself made a critical error when he commissioned five of the enormous SL-7 class vessels, the largest and fastest of their kind at the time, right on the eve of the 1970s oil crises.
More broadly, no one could have possibly foreseen how dramatically the huge drop in shipping costs would geographically decouple traditional manufacturing bases from their end consumers. In the last half of the twentieth century, basic manufacturing shifted overwhelmingly out of high-wage wealthy countries and towards developing ones; today, 26% of containers shipped globally originate in China alone. This economic shift has contributed, if not led directly, to the megatrend of globalization, the effects of which are still reverberating around our world today.
Why do we care? All the unforeseen changes caused by the internet to our society, business and technological innovation are probably too numerous to mention, but I’d call out two recent examples that are particularly relevant to us in the digital analytics industry: the new popular attention to privacy, and the multi-device user.
Bottom line: while the book delves into some numbing detail in a very few parts, overall Levinson has written a compelling historical narrative that weaves in an important set of lessons about business and innovation as well. If only for the background of the development of globalization, The Box is worth a read. If you think innovation is kinda cool too, then you’ll really learn a lot here.