Flexibility vs Inclusion

Flexibility vs inclusion refers to the number and type of actors involved in the standardization effort. It represents a trade-off between focusing on flexibility and speed in decision-making by involving only a small number of actors with a high level of available resources and interest in standard provision, and the inclusion of additional stakeholders that would provide additional credibility to the standardization effort and expand the potential size of the adopter population. A number of interviewees noted the relevance of this trade-off, although different respondents advocated different approaches to how it can be addressed. The Digital product manager at Mærsk, for instance, highlighted the benefits of flexibility: “Driving a new product or a new offering by a few strong partners is not a problem […] because someone has to bring it to life.

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And maybe that’s easier with few select parties who really want to drive that agenda, as compared to saying to the world:”Let’s build something brilliant, who wants to join?”. Then you end up in endless discussions about this or that feature”. Global Head of Integration at APM Terminals, on the other hand, emphasized the need for inclusion: “Big customers such as IKEA, Nestle, use many different carriers, so they drive standards along with the carriers. The odds of success are higher if you engage stakeholders from the beginning”.

While excluding a broader variety of stakeholders from the standard development phase may allow for higher flexibility and speed in decision-making, it can also hinder subsequent diffusion, as requirements of other relevant actors may not be met by the proposed solution. An example was given by Chief Digital and Information Officer (CDIO) of the Mediterranean Shipping Company (MSC): ”If we use a standard that we've agreed [only] between us... It's basically not a standard, it's proprietary. So standards are created by adoption. Nothing else. Either by an option or because you have no choice. The difficulty is that if you take the shipping industry and you draw the supply chain [...] you'll see [that] there's a lot of partners. So of course, as a shipping line, we're only a portion of that supply chain. Therefore, whatever we agree between ourselves is not sufficient. And then when you try to attract other parties, it's quite, quite complex, because everybody has an interest”.

Even though both INTTRA and TradeLens espoused comparable goals of eventually becoming a standard in the shipping industry, the two initiatives started on the opposite ends of the flexibility/inclusion spectrum. While INTTRA was started by some of the world's largest ocean carriers, TradeLens was started by only one carrier, albeit the largest (Mærsk), and a technology provider (IBM). INTTRA’s foundational contract stated that every ocean carrier can only have one vote in the decision making process, and could only hold up to 25% of the ownership shares of the platform. The contract further stated that each member carrier held veto rights on decisions regarding the platform's development. By 2005, however, Mærsk held 65% of the ownership shares of INTTRA³³, which the company accumulated over time through acquisition of other ocean carriers. Despite holding the majority of INTTRA’s ownership shares, the governance model still treated Mærsk as a single carrier, meaning that it only carried a single vote. Former Mærsk representative at INTTRA highlighted the governance issues as one of the main

33 A.P. Møller - Mærsk A/S Annual report 2005

https://investor.maersk.com/system/files-encrypted/nasdaq_kms/assets/2012/06/14/4-20-39/Annual_2005_uk.pdf

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impediments to INTTRA ultimately becoming a true industry standard: “At some point, Mærsk owned 65% of INTTRA. Since it could only sell [shares] to other carriers, no one wanted to buy.

But despite having 65% it still got only one vote. INTTRA missed the boat. Because of the ownership structure between carriers, it was impossible to achieve anything”. This was just one glaring example of governance issues that have hindered the continuous development of INTTRA.

Another challenge came with the financial crisis in 2008, when monetary concerns overshadowed the discussions regarding further updates and extensions to the standard that would accommodate emergent industry needs. As a former member of INTTRA’s board of directors recalls: “Then came 2008, and there was a big crisis. And in 2008 INTTRA ran out of money. And the carriers didn't have money to put back in the venture. And the board meetings we were having were all about money and revenue, but not about products. And so for many years we didn't develop the products. I think everybody was trying to continue to sell the same products or maybe to bring some new products, but nobody could agree on how to do that”.

In contrast, TradeLens was initiated by a single ocean carrier, and a technology provider. In that sense, Mærsk and IBM had the flexibility to quickly proceed with the development phase, but concurrently ran into problems with the diffusion of their solution. In mid-2018, this meant that Mærsk and IBM were struggling to convince other ocean carriers to join their platform. Rival industry players cited the rights to intellectual property to which Mærsk and IBM have full and equal claim as the main impediment to joining TradeLens, with some going as far as labelling TradeLense as “unusable” (Allison, 2018). The decision to develop a solution without the initial involvement of other ocean carriers was described by the Vice President of Blockchain Solutions at IBM. Similarly to several others, this interviewee implicitly pondered the trade-off between flexibility and early inclusion:“Now, one of the big lessons that I learned is, in retrospect, maybe we should have gotten the buy-in from the top six carriers upfront before building the platform, because [there is] a lot of delay in trying to bring the ecosystem together […] However, somebody has to build a platform, [and] it's always easier to build a platform with a small group rather than with a committee of 10 or 12. But you’ve got to talk about the platform and get some buy-in before engaging. Otherwise, here right now, we go through many challenges trying to explain why we made certain decisions in building the platform”. After facing problems to attract crucial partners TradeLens moved away from the initial joint venture structure, establishing a third-party entity, called GTD Solution in order to limit the level of control Mærsk had over the platform.

Furthermore, the TradeLens Advisory Board was established with the dual aim of incorporating

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inputs from a diverse set of industry actors which would thereby partly shape the continuing development of TradeLens, as well as building on the benefits of higher inclusion to drive the diffusion. In essence, our findings suggest that the trade-off between flexibility and inclusion entails the necessity of developing the ability to harness market forces to the standardization process (Jain, 2012) while simultaneously preserving control and decision-making benefits of narrower committee-like structures involving key standard sponsors.