Leadership Matters

Perspectives on the key issues impacting senior leaders and their organizations

Rethinking Transportation and Logistics Leadership in an Age of Digital Transformation

For many, the current pandemic has rapidly accelerated digital transformation. We’ve seen brick-and-mortar retailers quickly set up ecommerce capabilities, restaurants shift to delivery-only models and healthcare providers offering virtual appointments. The current environment highlights the changes already in motion within transportation and logistics — and how the old modes of leadership and organizational culture will need to change in this increasingly digital-first world.

The landscape

According to Hans-Jörg Bertschi, executive chairman of Bertschi AG, platforms will dominate the future of the logistics industry, accounting for at least 50 percent of volume within five to 10 years versus just five to 10 percent today.

Instafreight founders Philipp Ortwein and Maximilian Schäfer are even convinced that digital logistics companies will outperform traditional logistics companies in standard road freight within the next five years.

Disintermediation will have a profound impact on everything from streamlining data entry and booking procedures to the creation of standardized platforms that cut out the “middle man,” such as digital payment processes, potentially including blockchain.

Digital-based solutions will offer greater choice for businesses that have previously been locked into logistics contracts and have had few alternative options. And how these businesses buy these services is changing dramatically: Developments in AI are making it easier to approach potential customers in a highly targeted way and offer bespoke services. We’ll see further automation of operations increase across the value chain. As a result of these advances, customers will expect better services and experiences from providers and transportation and logistics organizations will need to adopt a far more customer-centric attitude (and skillset).

Additionally, global competition is accelerating. China is proving more agile in the digitization process, content to move forward with solutions that are 60 percent complete vs. the 90-percent done mentality that tends to drive decision-making (and sometimes, delay progress) in Europe. The Chinese are also more open to innovation, partly due to more ubiquitous use of digital products and services among consumers there. The U.S. is also ahead of Europe in logistics digitization.

What this means for leadership

Digitalization is more of a leadership challenge than a technology one. Ultimately, it is likely that the logistics industry will split into two: platforms and specialized (i.e., sector-specific) business models. Each will demand different knowledge, experience and skillsets. It will be critical to find the right people to build up new processes rather than buying off-the-shelf products for digitalization.

Digital transformation will demand a new kind of leader with different skillsets from those typically seen in traditional logistics companies — similar shifts in leadership capabilities can be seen in other industry sectors, e.g., financial services adapting to fintech upstarts. The transportation and logistics industry will need to be open to hiring leadership talent from other sectors where platform-based business models are well-established.

Demographics alone dictate that the industry will be led by digital natives who will revolutionize business models and ways of working. “The business will rapidly accelerate its transformation into digital as soon as today’s generation get into decision-making positions,” said Richard Forson, CEO of Cargolux. As a generational shift infuses new talent into the industry, recruitment will have to move away from the “old boys’” network. There will be a premium on attracting talent with high levels of education versus the industry’s traditional approach of learning on the job. And digital-first companies will have an advantage over legacy logistics companies in the battle for scarce talent.

The seven capabilities of the successful logistics leader of the future

Traditional logistics knowledge may very well become a second priority.

A strategic, long-term vision: Looking beyond cost-cutting and sales increases, with a focus segmenting the market and applying the right business models.
An eye for operational efficiency: Clustering the future logistics process into the right steps, understanding where the biggest drivers for improvement and profitability are in the process.
Digital expertise: Drawing from previous experience at a digital-focused company or as a change agent in a digital role. As Prof. Dr. Stephan Wagner, chair of logistics management at ETH Zurich observed, “Social media and other digital skills will become key — these are not kids’ toys anymore.”
A customer-first orientation: Recognizing that the customer experience is not about presenting your products (old digital view) but about offering what the customer wants (future digital philosophy).
Ability to build multidisciplinary teams: Creating and building teams with the right digital (data, AI, etc.) and traditional logistics expertise.
Openness to disruption: Receptive to new ideas and an understanding of when to push for reinvention versus maintaining existing processes.
Ability to inspire: Bringing the entire organization along on the digital journey.

However, it is not enough to bring great people into the business. A holistic approach to digital transformation is needed. The organization needs to understand the challenge, prepare itself for a very different future, build new capabilities and allow a new culture to evolve that contains executives with non-standard profiles with different expectations and different ways of working. Traditionally, there was a high degree of hierarchy in these organizations, with a focus primarily on previous roles, the connections of an insular network, and the “bread and butter business” instead of innovation. Culture change — with a greater emphasis on learning, curiosity and innovation — will be essential if this transformation is to succeed.

Martina Fohr is a member of Spencer Stuart’s Industrial and Supply Chain practices, with deep expertise in logistics, supply chain management, purchasing, transport, storage and distribution. Reach her via email and follow her on LinkedIn.