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Ferry operator Stena Line has set an ambitious goal to become the world’s first ferry company powered by cognitive computing by 2021.
This is a big step for a 55-year-old company in a traditional industry, but one its head of digital transformation, Jari Virtanen, said is essential.
“Many of our managers say we are as efficient as we can be, and yes, we are as efficient as we can be with the tools available today,” he said. “But we absolutely are not as efficient as we can be if we look at the new tools available, such as artificial intelligence and machine learning, and where we can be [with them] in just two to three years’ time.”
In 2016, Stena carried 7.3 million passengers and two million freight units on 21 routes in the Baltic countries, Scandinavia and the UK. But the driver behind its digital push is straightforward: greater competition.
Ten years ago, car ferries were the only economical option for taking a holiday abroad, but cheap airlines have changed the market. At the same time, market entrants are introducing new ways to package transportation products.
Now Stena Line believes it can differentiate itself by making its processes more efficient with digital tools, particularly in freight transportation.
“If you look at the passenger side, most transport companies already have a very high number of consumer-facing digital services,” said Virtanen. “The big question is what is happening on the freight and logistical side of our business.”
To answer this question, Stena Line has set up a small digital innovation team under Virtanen’s leadership. As well as developing new services, it is tasked with predicting technological developments and how the company could use these for competitive advantage.
The team already has several ongoing projects. Stena Line has deployed software robotics to automate more than 100 manual internal processes and is tracking potential new use cases.
The company is also taking its cognitive capabilities significantly further. It is preparing for the full launch of its chatbot, Stina, after six months in a public beta. Stina can adapt its communication style according to a customer’s mood and is built primarily around IBM Watson’s natural language capabilities to help Stena’s customers on the web, by email and SMS.
The ferry operator is also testing the use of predictive analytics in its customer pricing and capacity management.
“This means we can move from mostly manual ways of pricing our products to more automated pricing,” said Virtanen. “We will put more time into analysis to understand what people are willing to pay. In our world, if we lose only 1% in the average price, it has an impact of hundreds of millions of [Swedish] crowns on our net results, so you have to be sure things are working when you launch [analytics].”
Another critical activity is connecting Stena Line’s port equipment with its databases and monitoring how freight cargo moves around the port. “Port operations are expensive, so we can gain a lot of efficiency by understanding movement in the ports,” said Virtanen. “We are trialing this in a couple of ports at the moment.”
Virtanen’s background is in business, but he has worked in digitisation for the past 15 years. In fact, he helped build Swedish online travel agency Sembo, which was sold to Stena Line in 2012. Now he heads the ferry company’s travel sales, customer experience and digital transformation teams.
This includes working closely with Stena’s IT operations, which are concentrated in a separate company, Stena IT, which in turn is owned by the ferry operator’s parent group, Stena Ab. Virtanen estimates that Stena Line accounts for more than 70% of the IT firm’s business. The ferry company also works with multiple suppliers to boost its cloud credentials.
“We are increasingly moving from traditional solutions to cloud-based services,” said Virtanen. “We use pre-packaged solutions that we modulate into our business areas. For example, we are using some Facebook algorithms when predicting volumes because they are very good and have open source solutions. We don’t pretend we develop all these algorithms and other cool things ourselves.”
A growing number of such services also come from startups. Stena Line has spent the past year scouting startups in the Nordics to understand what kinds of technology are available to its business from less conventional sources.
“If you want to make some money in this business, you can’t just rely on traditional solutions,” said Virtanen. “We have had some good runs, particularly in Finland, when it comes to small, cool companies we are using. This area is moving quickly at the moment in Finland, because there are a lot of ex-Nokians out there who are creating their own companies and working as consultants.”
But not everything has run smoothly in Stena’s digital transformation push. It has not been easy to introduce a digital focus and a culture of trial and error to a traditional, asset-heavy business, said Virtanen.
“Getting the next level of management on board is a bigger challenge for many companies than getting their boards involved,” he said, “because you then start to come into contact with the existing power structures and who is responsible for what.”
At Stena Line, this is addressed through a “turntable programme”, which was introduced a year ago and turns the traditional mentorship model upside-down. Young mentors are paired with the ferry company’s managers to educate them on what digitisation means and what the opportunities are.
“They meet in an organised way, discuss these topics and educate each other,” said Virtanen. “It is a cultural challenge to get them on the same level, but it has turned out to work well.”
An important factor for the programme’s success was finding the mentors outside Stena Line to bring in a fresh perspective – so Virtanen turned to startups. “Some of the startups are very interested in getting access to a big company like Stena,” he said. “We have had a lot of interest in this.”
Virtanen also spends a lot of time talking with Stena’s employees about the digital transformation. He wants them to understand the real business opportunities it brings.
“Many companies, ourselves included, were in a hurry to participate in the first stage of digitisation a couple of years ago and had the attitude that it is about gadgets and cool technology,” said Virtanen. “But the ones who will win are the ones who have the best ability to use these technologies to improve their results and understand how they affect their business, not the ones with the coolest gadgets.”