It is the combination of formal and tacit knowledge that produce excellent results in the shipping industry, writes Torger Reve.

KNOWLEDGE @BI: Torger Reve on the Shipping Industry

I grew up in Farsund, a small sleepy town at the southern tip of Norway.  Farsund specialized in shipping, and there were not much else.   We used to say that Farsund was the largest shipping town in the world, measured in terms of tonnage per capita. Young people went to sea early, often as young as 14, with no further education.

 Those who succeeded in these early formative years at sea, came back some years later to study at the local maritime school to become maritime officers.  Their career goal was to become machine chiefs or sea captains.  The sea captains ranked highest socially, only ship owners were their superiors.  The most experienced captains often returned to work for the ship owners, to provide the technical and commercial skills needed at the shipping office.

Shipping almost 50 years ago was solely based on tacit knowledge, transferred by apprenticeship, experience and practice.  You started at the bottom of the hierarchy at young age and advanced by discipline, learning and hard work.  Then you added a minimum of formal knowledge, but college degrees were seldom required.   Maritime was the industry of practice, not theory.

Shipping in transition

Modern shipping is totally different from what we had 40-50 years ago.  Former shipping towns like Farsund, have little or no role to play in global shipping.  Almost no young Norwegians start to work at sea, unless we speak about working at the small advanced offshore vessels where Norwegian ship owners still dominate. 

The Asian seafarers have taken over at sea. The shipping companies have moved to Oslo, London, Singapore and Shanghai, run by highly educated executives with MBA degrees from Harvard or London Business School.  There are still a few self made shipping tycoons, but more and more the shipping industry resembles the financial industry. 

Have we lost something valuable in the transition from practice industry to professional industry? I think we have. The practical knowledge learned through experience is a basic component of all well functioning industries.  At the same time, all industries need professional, formal knowledge to handle the complexities of technology and markets, not the least to match the financial industry that funds and evaluates so much of what we are doing. 

Success in business

In my own research on the competitiveness of global industries, I have identified three types of competences that are required in order to succeed in international competition. 

  • 1. We need research-based knowledge and advanced technology as a platform for operations and innovation. 
  • 2. We need commercial and market knowledge to make sure firms stay competitive and remain profitable. 
  • 3. And we need practical experience-based knowledge to run it all.

You cannot run ships safely and efficiently from skyscrapers in Manhattan.  You need qualified people both at land and at sea to run ships and manage people. Good and well managed teams produce results that reach all the way to the board room. 

Excellent organizations have excellent management, all levels of the organization. This is why we train people in people skills, not only in technical skills. Sometimes we need to train the whole organization.

Competence challenge in modern shipping

The competence challenge in modern shipping is to preserve all the three major competences in the same organization, combining technological, commercial and operational experience. 

In the traditional shipping world of small organizations, each shipping organization had all these competences combined in the experienced captains (like the ones I remember from my child home town of Farsund).   

Modern shipping requires highly educated specialists, and oftentimes specialists do not communicate so well, and they not always work so well together.  The three main skills of business need to be in constant interaction, and each should be treated with mutual respect. This respect extends across vertical levels of the organization and across cultural and ethnical boundaries.

It is the combination of formal and tacit knowledge that produce excellent results in business. Formal knowledge can be transferred by educational programs, given that we invest in people. Tacit knowledge requires years of experience and are much more difficult to transfer.

This also means investing in people. Excellent firms manage both processes in a systematic way.  Only firms with excellent results will be able to meet the brutal forces of global competition. This is why we have to go “From Good to Great”.

Reference:

This article is published in HELM Magazine Issue No. 1/2014. HELM Magazine is a customer magazine published by Wilhelmsen Ships Service.

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