Paper 2: Standardization as collective action: Evidence from the Shipping Industry
4. Research context
compared to prior data in terms of categories and hypotheses (Browning et al., 1995). This process was repeated until theoretical saturation was reached, meaning that no new categories were emerging from the data (Strauss and Corbin, 1990; Glaser and Strauss, 2017). Initial coding produced fifteen first-level codes about factors that influence standardization efforts. We then further examined identified first-level empirical themes to find links and patterns between them (Gioia et al., 2013).
Subsequently, these codes were aggregated into three high-level dimensions. We then iterated between emerging findings and relevant literature to determine whether our analysis yielded novel concepts (Corley and Gioia, 2011; Dattée et al., 2018). Consequently, we combined concepts from extant literature with our findings (Dattée et al., 2018) to propose three novel collective action trade-offs critical to the standardization efforts we examined. We constructed our narratives for each identified trade-off and included selected quotations from interview transcripts to illustrate our findings. These narratives form the analytical scaffolding for the findings presented in this study.
Before presenting our findings, we describe the research context and provide a brief overview of both cases.
dramatically42. According to 2020 figures, the top 10 biggest ocean carriers hold an 85 percent market share43, corresponding to $170 billion in yearly revenue in a $200 billion industry44.
INTTRA was founded as a joint venture of the world’s largest ocean carriers45 in late 2000, collectively representing 28 percent of the industry46. These shareholders collectively made the initial investment of $85 million, with Mærsk holding the largest stake of 35 percent, with some other members like Hapag-Lloyd and Hamburg Süd holding as little as 5-7 percent. The board of INTTRA was made up of the directors of the founding ocean carrier shareholders. The governance structure of INTTRA stipulated that all shareholders had equal voting rights. Each member carrier could only carry one vote and held veto rights.
INTTRA aimed to create an EDI-based information exchange platform that supports standard electronic bookings for the shipping industry. A catalyst for creating INTTRA was the rise of the internet. One of our respondents, a former Mærsk representative at INTTRA, noted:
“INTTRA was created during the dot-com bubble. Carriers were afraid someone else would build a portal. And if that becomes successful, whoever owns that portal, suddenly owns the customer relationship. That would be disastrous for carriers. So a number of carriers got together and said:
“Fine, if that is the threat, let’s build a portal ourselves.”
The initial idea behind INTTRA was to create a “hub-and-spoke” solution, which would simplify the container booking process, as customers would only need to set up and maintain a single EDI connection (i.e., with INTTRA) instead of having to manage separate EDI connections with several different ocean carriers. INTTRA’s ambition was also to standardize shipping instructions and eventually move to standardize other documents, which would ultimately create value for the entire shipping industry. A former member of INTTRA’s board of directors recalls:
42 There are several major examples of this trend directly related to the INTTRA and TradeLens cases. P&O Nedlloyd
was acquired by Mærsk Line in 2005. Similarly, Hamburg Süd was acquired by Mærsk Line in 2016. Sources:
https://investor.maersk.com/static-files/39ddda94-f68b-45c3-9e27-de79da86b2a1. United Arab Shipping Company merged with Hapag-Lloyd in 2016, source: https://www.joc.com/maritime-news/container-lines/united-arab-shipping-uasc
43 Source: https://alphaliner.axsmarine.com/PublicTop100/
44 Sources: https://www.statista.com/study/13992/container-shipping-statista-dossier/ and annual reports of the top 10 ocean carriers.
45 INTTRA’s founding members were Mærsk Line, P&O Nedlloyd, Mediterranean Shipping Co., CMA CGM, Hapag-Lloyd, Hamburg Süd, and United Arab Shipping Company.
46 Source: https://unctad.org/system/files/official-document/rmt2000_en.pdf
“The idea there [behind INTTRA] was to bring some collaboration between the carriers,[...] to try to bring some standards to the basic shipping transactions. And so we did that, but it was really
limited to the technology side. Let's create some EDI messages. Let's try and talk the same language, use the same codes.”
Five years after its inception, INTTRA processed roughly 28 percent of global container bookings.
Its membership in terms of participation in the platform steadily grew over the years to include 20 of the top 25 ocean carriers in 2008, representing roughly 74 percent of the global container capacity.
Similarly, INTTRA saw an increase in revenue of 1372 percent from 2002 to 2006. By 2008, however, platform development reached an impasse. To move forward, INTTRA needed to adjust and expand its product offering to satisfy the needs of its existing clients and attract new ones.
However, the efforts to further develop the product offering were crippled by INTTRA's ownership and governance structure and further exacerbated by financial difficulties caused by the 2008 financial crisis. Although INTTRA is still used for creating roughly 25 percent of global container bookings, our respondents repeatedly noted that the platform was ultimately unable to live up to its envisioned potential of becoming an industry standard.
TradeLens is a more recent attempt at creating a shared information infrastructure in the shipping industry, launched in early 2018. It is a supply chain platform underpinned by blockchain technology and jointly developed by Mærsk and IBM. TradeLens was designed to decrease transaction costs, allow secure exchange of inter-organizational information, and create transparency across global supply chains. In practical terms, TradeLens has a broader scope than INTTRA, which is apparent from its basic structure. Namely, TradeLanes consists of three major components. Firstly, the foundation of TradeLens is its business network or “the ecosystem”. This entails that TradeLens aims to integrate a population of partners that is more diverse (i.e., including ports and terminals, intermodal operators, customs authorities, financial service providers) and more numerous than the exporter-carrier oriented INTTRA. Secondly, “the platform” is based on Hyperledger Fabric blockchain technology and IBM cloud and enables parties to share operational information securely.
The platform is further accessible via open-source APIs and leverages the existing standard UN/CEFACT data model and access control scheme. Thirdly, the open applications and services marketplace allows TradeLens as the platform sponsor and the third-party complementors to publish fit-for-purpose services atop the TradeLens platform. Existing applications developed by TradeLens include TradeLens Core and TradeLens electronic bill of lading (eBL). TradeLens Core is a digital
freight management tool that can track shipments, develop dashboards that aggregate data through visualization tools, and enable document sharing between parties on the platform. TradeLens eBL enables a secure process for the issue, transfer, and surrender of original bills of lading, a key trade document, in a digital form among the platform members. Figure 1 illustrates the TradeLens architecture.
Figure 1: TradeLens architecture. Adopted from Jensen et al. (2019)
After announcing the platform in August 2018 and launching a commercial product offering in December 2018, Mærsk and IBM initially envisioned it as a joint venture between the two firms. This idea was quickly met with resistance from rival ocean carriers, who did not want to share their data through a platform created by one of their biggest competitors. Consequently, Mærsk and IBM moved away from the initially planned joint venture and positioned TradeLens as a platform developed through collaboration between IBM and GTD Solution, a subsidiary of Mærsk Group established specifically for this purpose. Additionally, the TradeLens Advisory Board was established to ensure that the decisions regarding platform development are transparent and aligned with other ecosystem members. Although the advisory board has no formal decision-making power, it provides a channel for ecosystem members to influence the future technical and governance direction of TradeLens (Jensen et al., 2019).