Maersk betting on blockchain

the digital transformation, not just of the container industry, but of global trade in its entirety. — Vincent Clerc, Chief Commercial Officer at Maersk Mike White, head of global trade digitization at Maersk, strolled through the port of Rotterdam in the Netherlands. It was March 2018, and he was visiting the port to check in on the status of a new project. White took in the chaotic scene around him. Large cranes hurriedly unloaded shipping containers off of massive cargo ships. The containers were packed to the brim with all kinds of goods, everything from flowers to flat-screen TVs. Customs authorities shuffled through thick stacks of papers as they inspected the incoming cargo. White noticed a long line of trucks idling at the port’s entrance waiting to haul the goods to destinations across Europe. At the far end of the port, tugboats towed the Madison Maersk into the terminal. The vessel was one of the biggest container ships in the world. The ship was longer than three football fields and capable of hauling more than 18,000 standard shipping containers, the equivalent of 1,200 Boeing 747s (see Exhibit 1).1 Watching the flurry of activity reminded White of the litany of problems in global trade. The industry was rife with inefficient paper-based processes. Companies had little visibility into the status of goods as they moved through the supply chain. Communication between firms was often complicated and expensive. The administrative costs involved with transporting a shipping container were shockingly high. Maersk was the largest container shipping company in the world. The company’s senior management had selected White to run a new project they hoped would address the difficulties in the industry. Maersk had partnered with IBM on a new global trade digitization platform that was intended to act a utility for the industry and lower the barriers to trade. Blockchain, a technology associated primarily with Bitcoin and other cryptocurrencies, would power part of the platform. The team at Maersk felt that blockchain could help deliver clarity to an often confusing supply chain. Blockchain would act as a distributed ledger, giving all the players in global trade access to a single source of truth. Maersk and IBM decided to launch this new platform as part of an independent joint venture. Once regulatory approvals went through in a few months, White would become the new CEO of the firm. He wondered if the joint venture was the right organization to operate this new blockchain platform for global trade. What challenges would White face along the way? Professor Rajiv Lal and Research Associate Scott Johnson prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HB S cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only in SP20: E733 taught by Broc Pittsford, Indiana University - Bloomington from Feb 2020 to May 2020. 518-089 Maersk: Betting on Blockchain Background on Maersk In 1904, A.P. Møller and his father Peter Maersk Møller, collected enough money to purchase a used steamer in Denmark.2 They named their company A.P. Moller Maersk (Maersk). Over time, the company expanded its fleet.3 Maersk’s original operations centered on tramp trade, which involved ships that had no fixed schedule and moved cargo on an on-demand basis.4 5 Eventually, the firm moved into liner service which used vessels traveling on established timetables and routes. 6 In the early 1960s, Maersk moved into oil and gas exploration and founded Maersk Oil. 7 Maersk’s energy division would ultimately also include Maersk Drilling, Maersk Supply Service, and Maersk Tankers.8 During this period, Maersk began heavily using the standard shipping container. The container format substantially reduced the expense for transporting goods. 9 In the 1960-70s Maersk expanded its operations into a wide range of business including an airline, IT services company, a chain of supermarkets, and medical device manufacturing.