Logistics Innovation: It Ain’t as Easy as It Seems
Innovation is all about taking risks. Once a problem or inefficiency in the market has been identified, innovators begin to introduce solutions. Of course, not all of them can or will (or even should) succeed. Many will fail -- and therein lies the risk.
Most of the attention, though, is garnered by the success stories. We all pay attention when a startup raises hundreds of millions of dollars or when a corporate giant introduces a blockchain initiative.
That can provide a misleading picture of the innovation landscape. Plenty of these initiatives fail, and when they do, we either never hear about them or momentarily bow our heads and move on. But you could argue that there’s as much, and sometimes more, to be learned from the failures as from the successes. When an innovation doesn’t work, we all get to learn from their mistakes.
The types of failed companies and initiatives in the logistics and freight industries are surprisingly broad. They are not limited to startups. So let’s examine a quick sampling of the companies of all sizes that have gone by the wayside:
The Big Dogs are Not Immune
There is perhaps no better example of a corporate belly-flop than DHL’s billion-dollar bet on modernizing freight forwarding. In 2011, DHL announced plans to update its legacy software systems in its freight forwarding branch. Called the “New Forwarding Environment,” the plan aimed to modernize and digitize DHL’s forwarding branch by implementing an SAP-based enterprise software system. DHL + SAP = guaranteed success, right? What could possibly go wrong?
After spending nearly $1 billion on the initiative, DHL cancelled it. Although the company (understandably) hasn’t released much details, Flexport’s CEO Ryan Peterson, citing a conversation with an unnamed DHL senior exec, suggested DHL struggled with adoption and implementation of their new platform. Moral of the story? It’s not enough to build powerful technology. Too many companies skimp on stimulating adoption. If your customers aren’t willing to implement your solution, then it doesn’t matter how much money or time is spent on innovation.
Emerging Giants Struggle Too
Uber is a commonly-cited example of a startup that has achieved juggernaut status just a few years after its founding. But what began as a ride-sharing service has expanded -- and sometimes over-extended -- its ambitions. In this case, Uber is trying to reposition itself as a logistics company, and one key initiative was UberRush -- which shuttered last week.
UberRUSH was supposed to demonstrate how the company’s on-demand fleet of drivers could carry more than just passengers. Uber’s contract drivers could use their downtime to transport small packages instead of people. Great idea, right?
There are many theories as to why this initiative failed, but most stem from the muddled branding and value proposition. Even while consumers primarily thought of Uber as a car service, Uber also launched Uber Eats -- applying a similar concept to food delivery. Suddenly, Uber was offering a mashup of services with vastly different user experiences. It was a recipe for confusion.
As with DHL, the success of a logistics effort was undermined by the failure to consider the consumer’s point of view. No one can deny that Uber’s ride-share success stemmed from its logistics savvy. It is necessary but not sufficient to apply that expertise to other applications which consumers may not understand or want.
Logistics is a Tempting Trap for Startups
Logistics is hard, as those of us in the industry know. Nailing it as a startup is particularly difficult. Witness the most recent example of a logistics-startup nosedive: Shyp. Launched in 2014, Shyp aimed to make parcel delivery simple enough to complete on a smartphone. They focused mostly on solving pain points for the individual consumer: They would come to your home to pack up your shipment and get it to its destination quickly and affordably.
But flush with venture capital, they flew too close to the sun and expanded recklessly. They tried to serve more and more cities and added corporate services. Execution faltered and consumer demand started to dry up, so they pivoted to focus on business services. But it was too late.
Last week, the coffers ran dry, and Shyp delivered its last package. Once again, technology and operations were necessary, but not sufficient, for success. Shyp tried to serve too many business segments in too many locations, and consumer satisfaction -- and therefore demand -- suffered. In this case, fatally.
But Don’t Panic! The Future is Bright
Even though individual efforts may fail, the overall trajectory of logistics innovation is surely pointing upward. We wrote about the path to innovation in a popular recent post. In the first stage, many new companies try to solve a diverse array of problems in a space like logistics. Experimental efforts are fueled mostly by venture capital. Lots of good ideas -- and some terrible ones -- emerge from this stage.
Then comes the consolidation phase, when the weaker players fall by the wayside and the stronger players either get big fast or are acquired by even bigger companies. Today, we are beginning to see signs of consolidation (the big failures we’ve just described...alongside some notable acquisitions) … while still enjoying the robust innovation coming from the startup world.
As a startup ourselves, of course we are optimistic about the role of new companies in logistics (and particularly in our own focus on ocean freight). We’re honored to have been included among the most promising logistics startups here and here.
As our own company grows, we’re committed to following the advice we’re offering here. We study the failures as much as the successes. Startups need to be simultaneously bold and humble. They need to recognize that “no company is an island.” We live in an ecosystem of innovation where successes and failures are all data points we cannot ignore.
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By: CoLoadX on April 5, 2018, 1:47 p.m.