JACK MIXNER STRATEGY

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If I were to ask you what shipping technology innovation in the last fifty years was truly disruptive I'll bet that many of you would say "FedEx" and Freddie Smith's innovations related to fast shipment. You'd be wrong.

The big innovation was the creation of the container, the big steel or aluminum box that allowed trucks to easily transfer their cargos to trains or ships. Total disruption of an industry - actually the creation of an industry - occurred in the fifties and sixties. Innovations continue to solidify the strength of the innovation.

Previously, a shipper called a forwarder which picked up its products, commingled them with other shipments, delivered them to a warehouse to be commingled again with hundreds of other truckloads, literally hand-carried them aboard a ship going essentially the correct direction, and, months later, your shipment arrived (hopefully in one piece) at your destination.

The container changed all that. We all know about containers and what a container load of product speeding across the Pacific from a manufacturer to a retail operation in the US has done for the level of commerce - and profits - for all the companies involved. There's a case to be made that containers, by speeding the delivery time of final goods and raw materials, cut inventories and spawned the whole just-in-time manufacturing successes of the eighties and nineties.

Applause is in order at this point. By now, all this is pretty obvious.

So, let's say that the container was disruptive. What were it's characteristics?

• The first container shipments were highly risky as rapid interactions between trucks, trains and ships didn't exist.
• The container itself didn't exist. There were no standards on size or strength. All that came later.
• Regulations were so strict that most shippers didn't want to know about the innovation as they were willing to accept the level of profitability that the government dictated in trade for protection from competitors.
• Prices on shipping came down so low that they became, essentially, commodity-like. Lots of container shipping companies went out of business, were bought or were strung together in some sort of roll-up.
• Bigness became the goal as did speed. Peripheral innovations in dock cranes, truck and railroad access to docks and traffic patterns created ancillary new businesses in manufacturing, inventory control and forwarding.
• Since no one knew how to control growth, growth got out of hand and almost killed the industry until governments and coalitions formed to regulate prices and routes.

One man, Malcolm P. McLean, dreamed up the container business. He went near-bankrupt several times during the growth of the industry. He was lucky as the Viet Nam war required the effective shipment of goods to a location that had no organization to receive the incredible bulk of shipments that the war required. He was able to take care of government pricing and the fact that, since no one had ever done what he was doing before, he could innovate on the fly. His biggest risk was an interesting one, especially when dealing with the government: he bid all his deliveries to Viet Nam on a fixed-cost basis meaning that if he got it wrong, he lost big-time. Luckily for McLean, he figured out how to make money at containerized deliveries before he went bankrupt.

Strategically, mission became crucial. McLean realized that his business was moving cargo, not sailing ships or driving trucks (Levinson, 53). Early on, containerized shipping was a niche business (Levinson, 161). As growth occurred, the evolution from niche (with its greater profitability) to mainstream (with its lower profitability and greater volume) followed curves we are all used to. McLean survived the shift - mostly - and created a new industry, an industry that allowed much of the global growth we see today.

Reference

Levinson, Marc. The Box. How the Shipping Container Made the World Smaller and World Economy Bigger. Princeton University Press. 2006.