The Estonian maritime cluster can grow with IT – start-ups

The concept of maritime cluster varies a lot in different countries. In most countries in Europe, the largest sector of the maritime cluster is coastal tourism – in particular in Mediterranean counties. Thereafter comes shipping and port operations and marine equipment.  The next biggest sectors of European maritime clusters are fisheries and navy followed by shipbuilding and offshore supply.

Estonia has taken its own share of maritime sectors. Based on a study of Estonian Maritime Academy, the main sectors of maritime cluster in Estonia in 2016 were maritime and transport haulage, shipping, port operations and shipbuilding. The share of maritime sector in national GDP is around 4 per cent. –  Only.

There is a lot of room for Estonian maritime sector to grow. But how to grow, to which direction and actions to take? In 2012, Estonian maritime policy 2012 – 2020 defined the following actions as priorities:

  • The business environment in the maritime sector is business-friendly and internationally competitive.
  • Maritime safety is safe, secure and the marine environment is improved.
  • Public sector activities support maritime development.
  • Estonian maritime education and research and development are at a modern level.
  • The coastal living and visiting environment is attractive, promoting maritime tourism and the development of local businesses and the transfer of maritime cultural heritage.

Under the first priority, the competitiveness of the sector is improved by improving the following areas: Competitiveness of maritime shipping, shipbuilding and repair and increasing cargo flows and number of passengers.

But what next? Where should Estonian maritime sector focus on? To be able to compete in this tightening maritime world and even to grow and prosper, there has to be a unique competitive advantage. To be able to attract future talents in maritime sector, we have to first look at what are present inherent potential of Estonian economy.

First of all, innovation should be raised as the major focus area in Estonia’s maritime strategy. There is already significant world-class research and development done in Estonia in in shipbuilding, marine energy systems, port operations and navigation and safety systems. However, continuation and further development of this work is  to be guaranteed by national strategy.

Furthermore, Estonian maritime sector should focus on Estonia’s special „superpower“, namely IT-expertise. Estonia is one of the most advanced IT-nations in the world, in particular in the start-up sector. Nine unicorns is founded by Estonians and/or in Estonia. They have taken the country to Europe’s (and probably the world’s – depending on methodology for counting) top in number of unicorns per capita. Unicorn means a privately held start-up company valued at over $1 billion.

In my previous blog (Meremees 4/2021), I wrote that  there is hardly anything in logistics and maritime transport that has had so rapid development last decades, as digitalisation. Big data, cloud computing, blockchain, autonomous shipping, IoT (Internet of Things), robotics and Artificial Intelligence (AI) are transforming maritime into something we have not seen before.

For a long time, major innovations in maritime industry were born inside large corporations. Shipping and shipbuilding companies were places were people worked for decades with long experience and knowledge of their sector. Competition was hard, but it was able to be answered by in-house experience.
Today the traditional closed innovation systems are not any more capable of competing with new open innovation ecosystems, where professionals of various disciplines come together to solve problems of one industry. Present innovations in maritime industry are influenced by car manufacturing, air traffic operations and shopping centres to name but a few. Academic science is not anymore only in separate disciplines, but multidisciplinary research is coming as a norm.

Latest in January Maersk announced that it releases all historical and future ocean weather observations into the public domain for free use by the scientific community around the globe. Several new ICT-based innovations and solutions have already found their innovations by using the open data and multidisciplinary research and innovation.

In recent report by Inmarsat (Trade 2.0), it is said that the shipping industry is at the beginning of a fundamental transformation. The combination of the rise of connectivity and digitalisation, and the need to move away from traditional fossil fuels, means that every aspect of the industry’s operating model will change over the next three decades.

Their analysis shows that the current value of the maritime start-up market is over $100b dollars today, and is set to grow to be worth $278b by 2030. Start-ups and investors should see the maritime sector as one of the greatest future market opportunities to develop over the next ten years.

Inmarsat continues, that the most successful accelerators in any industry are positioned in geographic hubs. Clustering related businesses together is a well-established practice for enabling business growth: it is partly what has enabled Silicon Valley to dominate the tech space throughout the end of the last century. When businesses are clustered together, they benefit from sharing expertise, capital, and infrastructure. Clustered businesses grow on average 1.4% faster than non-clustered businesses.  In high-growth tech, the effects are compounded over decades, with successful entrepreneurs who have had large exits often reinvesting in the next generation of local start-ups and offering their expertise and experience. As well as benefiting from the proximity of capital,  technology clusters can leverage local academic institutions to provide a steady stream of talented employees or new research which could be commercialised.

Until recently, aside from some limited initiatives by industry giants like Maersk and Wartsila, there were no dedicated programmes aiming to drive long-term start-up-driven innovation in maritime. PortXL (from Port of Rotterdam) changed this dynamic when it launched in 2015, creating the world’s first start-up accelerator dedicated to the maritime and ports sector. In the years since, they have expanded into Antwerp and Singapore, accelerated 36 start-ups, and facilitated the signing of 81 pilot contracts.

Since PortXL’s launch, there has been an exponential growth in programmes around the world. There were ten programmes operating worldwide by 2017 and 25 operating worldwide by 2018. The most prominent programmes operating today are PortXL, the publicly funded PIER71 in Singapore, CMA CGM’s zeBox in Marseille, theDOCK in Haifa, Rainmaking’s Trade and Transport Impact programme in Hamburg, and the Lloyd’s Register Safety Accelerator in London. To date, the global maritime start-up accelerator community has collectively graduated 226  start-ups.

In its report Inmarsat presents 12 different start-ups in areas of ship operations (navigation, remote monitoring), port operations (robots, cargo handling, security), ship management (cloud services, drones, mixed reality, crew training) and trade facilitation (shipbroking, insurance, blockchain). All of them have in common that their business advantage is based on rapid data interchange and computing.

There is no reason why Estonia could not start competing with in this sector. What we need really is a nation-wide open innovation maritime strategy. Furthermore, the lively Estonian start-up community should be guided towards potential of the maritime sector. This all requires new innovations and also new innovation strategy of the Estonian maritime sector.

One of the first steps towards it,  Taltech MarineHäkk, will be organized in April. It brings talented minds to work with maritime challenges of the own. But this is only a start, there is a place for Estonian maritime start-up accelerator programme.

Photo: Baltic Workboats

This article has been published in Estonian in Meremees- magazine 8.3.2022.

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