Transcript #03 Entrepreneurship and Technology Part 1 – Industry Trends with Paul Bradley CEO at Caprica International

Radu: We are happy to have together with us today, Paul Bradley, Chairman & CEO of Caprica International. Paul is a long-serving supply chain professional having worked for many years for large logistics companies around the world, including Li&Fung and Arshiya in India, as well as shipping lines like NYK, APL. Paul is an entrepreneur and industry influencer, and a globetrotter. He sits on the board of supply chain Asia. He’s an independent director of OpenPort; serves on the executive leadership council for the Thunderbird Business School; is a CEO mentor to several SMS & tech startups and a very interesting guy. So Paul, welcome and it’s a pleasure to have you here.

 

Paul: Thanks Radu. A pleasure to be here.

 

[01:26] Radu: And also for our listeners, a very interesting fact about Paul is that he was selected by the World Economic Forum as one of the forty new Asian leaders which is a very select club, as well as he was part of the B20 task force which is actually a part of the G20 heads of state summit that was held in Germany early this year. So definitely the one person that I know in that position. So Paul, even further, happy to have you with us here today. So for today, we’ll have a series of questions. So broadly first and foremost, we’ll talk about industry. Secondly, we’ll talk about talent and skills questions and thirdly we’ll talk about a few personal advice that Paul might share with our listeners. So Paul to deep-dive, you’re a man of incredibly diverse background. How would you introduce yourself in two minutes to people?

 

Paul: Well I guess the first thing is, our industry is a humbling experience and we’re all learning throughout our career. And so I’m still at the learning stage of an infinite knowledge experience. Interestingly, I started in campaigns of politics when I was young, already in high school and college. I spent a little bit of time in politics. At a young age, I worked at the US Senate and British House of Commons. And then I loved international business and international trade. So after graduate school when I got my MBA at Thunderbird in global management, I decided logistics and shipping was a way of connecting the whole world, right? Money connects the world and so does physical flow of goods. So I entered APL’s management training program in California, Seattle, New York and just had a tremendous learning experience about the shipping industry – hands, arms, touching everything. And then I realized how important every role of everyone in the organization is, right? – from lashing the containers to planning the trains, to doing the bills of lading. For me, that was a valuable way to enter the industry to appreciate every step by having to do it even loading containers and changing chassis tires. And then I went strategic and then from APL, I’ve set up taxes for NYK, came to Asia heading Far East Management Center out of Hong Kong. And then in those days we have a cartel called NTWRA. And the 9 main shipping lines;  we would actually meet together in Hong Kong, kind of like in a movie, and we would determine the rates for all the products going in both directions of the Pacific.

 

So just a phenomenal way to learn and being in Asia, seeing China, ASEAN. And then I came to Singapore, set up a JV for BDP and Havi group. And then one of the great experiences of my life was working for Dr. Victor Fung and the Li& Fung group, putting together the first 4 PL model, running a few businesses there and I just learned so much from this incredible human being and a great mentor in our industry. So it was one of the life-changing experiences for me. And then I went to India with Mr. Aghai Mithal and we started logistics parts – free trade warehousing zone, railroad and technology company and we took it public on the Bombai stocks exchange. So I’ve been really blessed to come out to Asia with a Japanese, experienced a US JV, working for a mentor and an amazing human being – Dr. Victor Fung, and then with Mr. Mithal giving me a chance to learn about India during this really informative stage of direct economic exchange.

 

And so it’s just a constant learning experience and from that I came back and I realized the entire supply chain is going to be disrupted just like every business. So I’ve also been spending more time now to helping evolve SME and startups, not only to help them build a future but actually to learn from them. So I would say this whole experience is a constant learning curve and the more I learned the more I realize there’s so much more to experience.

 

[06:08] Radu: To carry on questions that in terms of the future, related to the future, we talked about supply chain 4.0, 3.0 depends. What’s the supply chain of the future to you?

 

[06:28] Paul: That’s a good question. I guess one of my frustrations in our industry is that we’re still talking about a supply chain. I think the supply chain phrase is something from 10-12 years ago, if not further, you know. And then we evolved to the demand chain which Dell started and many other companies followed and even Wallmart. And then we’ve been evolving already beyond the demand chain into what I called knowledge network orchestration and dynamic valued networks. So when you look at Amazon, they’re already using big data, advanced algorithm. They’re starting to introduce early stage of AI. That is a completely different business model. They already know what you’re going to buy before you go to the computer to think about buying it. The way that distribution network has evolved and that’s just one example.

 

What is iTunes? It’s a type of supply chain in a value network because they have over a million programmers around the world developing products for them for free but any of those applications that get to enter the iTunes network, they take 20-30%. So these are all the new models that are rapidly evolving and I think the industry is still moving too slow in terms of forwarding and letters of credit and just monitoring and tracking product.

 

In reality, the next 10 years would be the largest economic transformations in the history of the world because of AI, robotics and IoT. One of the things I learned over the last 10 months being a part of the B20 task force on employment and education which included supply chain and entrepreneurship, if for some interesting reason. And we just realized the speed of this technology is faster than anyone has imagined it. And therefore every business leader in every level has to change their expectations and I believe our supply chain industry is changing very fast. So the first stage where we are now is advanced algorithms and we’re looking at the first stage of big data and we’re digitizing the supply chain.

 

This is already changing everything. And you can have fixed and virtual manufacturing. Li& Fung manufactures in 20,000 factories without owning them. You can have fixed and virtual assets. You can also warehouses. You can take space from you competitors as long as they’re visible through IT. And now you’re moving to the second stage where AI, internet of things and robotics really come into play and that’s just going to start and it’s going to move very rapidly I believe. And again Amazon is a great example of that transformation and others.

 

And then what is the third stage? I think that would be fully integrated artificial intelligence and the block chain going from the ledger, the virtual ledger structure, linked to artificial intelligence is going to completely disrupt and redefine the industry dramatically beyond anyone’s expectations. I’m an optimist. I believe all these will happen in the next 8-10 years. So are we really prepared for it as an industry? How do we change the leaders of these companies to think beyond freight forward and beyond shipping? And then how do we groom the next generation of talent to really be prepared for this kind of exciting future that’s going to happen in the next decade?

 

[10:27] Radu: Excellent question and excellent sharing, a very good structure of the stages. And I could not agree more with you that indeed the transformation that we are already witnessing and the transformation that we will witness is probably unparalleled to anything we’ve seen so far, even as humanity if you want to put it. The speed through which things are happening is definitely very fast. It always takes time but it takes a lot shorter than it used to.

 

[10:56] Paul: Let’s just look at a couple of basic things from the old economy, right? Freight forwarding, doing a bill of lading – this can already be automated with new technology, but if I don’t do the bill of lading, then how do I get to build this spreads on freight and if a do the freight, then I get to touch the warehouse, then I get to touch the tracking.

 

But today the bill of lading can be automated with new disruptive technology. The shipping rates are being opened up with companies that are exposing that, taking out that component. The warehousing is much more transparent on cost and product visibility. And then other companies, like OpenPort and others, that are attacking the tracking space. So already, every part of the traditional supply chain is under attack by small aggressive startups. And then even the banks that have made billions on letters of credit – that is all automated already. That is going to come under huge risk in the next few years and ultimately that will become fully integrated through block chain as well.

 

[12:11] Radu: Absolutely. You mentioned block chain a few times.  Actually there was a very good question. I think it’s on a lot of people’s in supply chain lips, you know blockchain. David Weaver, one of our listeners had a question around block chain and he actually asked you know block chain – is it high for real value. If real value, when will we see widespread adaption into everyday processes? So maybe we deep-dive a little bit further into it.

 

[12:38] Paul: I think it’s fair to say all of us are going to a really steep learning curve to figure this out because this is all new technology that just came out of nowhere. I’m mentoring two startups actually right now and we’re actually looking at an ICO instead of an IPO which basically is raising money through the crypto-currency structure.

 

[13:01] Radu: Wow! Alright, I didn’t know the term.

 

[13:39] Paul: I didn’t know what it was 8 weeks ago and then I have to read up on it because we’re actually thinking of executing with a couple of the startups. So in ICO is a crypto-currency way of raising funds instead of the traditional method and at the center maybe it’s the investment banks.

 

[13:23] Paul: So we’ve see Bitcoin go to 2,000 then down to 1500 and now over 4,000 dollars all in the last 6 weeks with projections that it could go way beyond that over the next few years. There are about 4,000 crypto-currencies already. So, you know, we really are just trying to figure out what it means. And then you have a Ethereum which is basically creating a crypto-currency but it actually has validation point such as LCs and everything else. So I don’t think any of us can define when block chain will really move across our industry.

 

But first it’s moving through the finance and banking industry at dramatic speed that will validate the process and then it will break out into other industries including logistics and supply chain. With the virtual ledgers and the ability to monitor the products as they move across, so there are already 3 or 4 experiments in that space. I know IBM is doing one and several companies. Maersk is doing this. Wallmart is already playing with it. But as soon as those are tested and validated, again the disruption will move across. So I’m guessing it’s starting now. It will get traction in about 3 years and it will be very aggressively positioned across the industry in about 5-8 years would be my guess. But it’s all guess work because it’s so evolving and dynamic.

 

[15:11] Radu: Yeah, exactly. It was all over the news – the breakthroughs and the new partnerships. IBM is really leading the way at the moment.

 

[15:22] Paul: And they have Watson for AI.

 

[15:24] Radu: And they have Watson and they’re doing a lot of good things. And I think in Merskel obviously is doing a lot of good things as well and they’re really going digital all the way and the new COs has a very clear direction and platform to do that. And as you said, this question comes again and again – block chain – a lot of questions around block chain. David is just one of the many people probably in supply chain that are asking the same.

 

[15:46] Paul: Yesterday, I had the CEO of a startup AI company but with a tremendous background and he’s already deployed his AI device into banking. And he gave me an example yesterday that he ran into a major bank I will leave out the specifics, and they have a whole team of incredibly talented experts and had spent over a year trying to analyze a finance solution. And to download his product, he plugged it into their database, and once it was integrated into their database, 4 hours later it solved the problem and identified 300 million dollars of savings.

 

[16:24] Radu: Wow!

 

[16:25] Paul: So, you know, just being able to plug in an AI device into a database, whether it’s financial, manufacture or logistics, it’s really going to be transformational.

 

[16:36] Radu: Yeah, and I mean, again the scale, the speed, capability.

 

[16:44] Paul: And then look at the shipping industry. The shipping industry has already been ripped apart, forced into mergers and we’re not done with that. The next one will be freight forwarding.

 

[16:53] Radu: Yeah, I would tend to agree to that. Of course I won’t touch up on this today but we will need to be very careful with AI as humanity again to the dangers of it of course as well. We don’t want to end up in a Terminator movie kind of scenario.

 

[17:10] Paul: I can tie that discussion at the end of the interview because I think it’s worth talking about.

 

[17:15] Radu: Okay, cool. Thanks for the clarification on block chain. Let’s go back a little bit to the G20. Tell us more, I mean I am personally very interested. A lot of people, obviously not a lot of us will ever have a chance to sit in a G20 meeting in a committee. What happened there? What are some of the topics? What are the people discussing about? What are the world leaders thinking about? Give us some more details.

 

[17:38] Paul: It was really an amazing experience. I don’t even know how I got pulled into it frankly. I got nominated and submitted some forms, and then I was appointed to one of the committees. There were five task forces made up of members from the 20 countries and some beyond that and our task force was employment and education. But it was quite wide, so it included supply chain; it included on entrepreneurship, around that piece. And then these different five task forces meet over 10 months on a voluntary basis in Europe. And then we basically put together a policy paper with specific strategies and recommendations. We then meet for 2 days. We met Chancellor Merkel who is very impressive.

 

[18:34] Radu: She was leading the discussions, right?

 

[18:36] Paul: She was hosting the G20 this year. It rotates. And then Minister and others and then basically these documents are presented to her. They synthesized it into a tighter document and then she presents it to the G20 countries who then peel off and negotiate to form the final documents. It’s just a really cool process to be part of and again you’re dealing with all the different cultures from South Africa, China and Korea, the US and England, France, Germany, Saudi Arabia, Brazil, Argentina, Russia. So it was just a beautiful opportunity to connect cultures. But what we really look at was the impact of AI and robotics. It was just a driving theme and I’m speaking today on my own behalf, not on behalf of G20 task force. But we just see the speed of AI and robotics moving faster than most CEOs can realize, or most political leaders can realize. And therefore we need to change the whole thinking of business strategy because of the disruption. And we need to seriously take a look at redefining the whole education process for the next generation. We literally have to train people for jobs that don’t exist yet.

 

[20:01] Radu: Yeah. And this is more training. I mean, it boils down also to training more on mindset, then on actually hard skills because that will change.

 

[20:08] Paul: Absolutely.

 

[20:09] Radu: And it’s also a matter of a third element, based on my opinion that needs to be looked at. This is quite serious – it’s policies, government policies. That’s going to be incredibly important because a lot of jobs are built, reshaped or disappear and we’ll need to see what we do about that.

 

[20:29] Paul: So now we’re looking at 6 million jobs that are at risk just in transport in the United States alone. How do we protect people? How do you protect their dignity? How do you give them opportunities to have purpose and exciting jobs in the future? The human element becomes more important actually. You know, even programming, most programming will be automated within 8-10 years by AI. It will be programming itself. So even programming only has a temporary window. And therefore we really have to think of what are the human skill sets that allow adaptability.

 

And then we seriously focus on the importance, more than ever, of entrepreneurship, of new thinking, of collaborative teamwork, instead of individual leadership styles. Collaborative team sharing knowledge becomes much more important as a management style and also enabling SMEs to connect and collaborate on a global platform. So it’s just a fascinating experience and I feel really privileged to have a chance to be part of that.

 

[21:41] Radu: And let’s talk very pragmatically, very realistically – now. What do you see at zero moment today some of the biggest challenges of companies in Asia? Let’s talk about Asia for a moment. In Asia, facing their supply chains, what are they most struggling with? We’ve talked a little bit about some elements but what do you see as the main element that they’re struggling with to make that transition towards the future?

 

[22:14] Paul: We’ve seen in the past (that) infrastructure was a differentiator. So Singapore built Changi Airport and the amazing port that Shanghai sets up the biggest port in the world. These become powerhubs that give them advantage over other countries, right? Regardless of population, the infrastructure has driven that advantage within the Asian region. Now we’re going beyond the physical infrastructure to the technological infrastructure and architecture.

 

Now the critical thing is like Singapore’s smart city initiative from the Prime Minister, right? And China’s launching this as well. And that is how to use technology to integrate all the different activities across cities and countries. So the countries that are now moving into that space, are going to have a significant advantage in logistics and supply chain as well. It’s just reality. And so it can create further gaps from the countries that are slow in building infrastructure and then are extra far behind in seeing the technological breakout. It could further differentiate the powerhubs across Asia.

 

And then the second stage is (that) we needed a TPP, right? Frankly, the integration of the main Asian countries with the US, Mexico, Canada, Chile into this integrated trading architecture and the same with North America and Europe – these kinds of advanced rules enable a faster movement and efficiency in the supply chain. And the fact that that broke down and then you see Brexit, these are reminders that with all the exciting changes that pulled the supply chain or what I would call the dynamic value networks forward, we’re going to have increased political risk. And that political risk, most leaders in our industry aren’t prepared for.

 

So whether it’s the South China Sea disputes or the issue in North Korea, suddenly diverting cargo movements – those kinds of political risks are going to happen, I think a bit more in Asia than in the past and while we’re transforming technology and infrastructure, we also have to build more contingencies for political risks. And as Maersk and others just learned…

 

[24:56] Radu: Look, Hanjin caught a lot of people by surprise.

 

[25:00] Paul: Yes, but what I was saying is, Maersk which is such a well-run company – they have a cyber-attack. So the one thing that we’re not prepared for is a dramatic increase of lethal cyber-attacks and I think that’s going to be the Achilles heel that we really have to build a much stronger safety net around to enable this breakout with technology. And I think in many ways, Asia will be a leader in a lot of this breakout technology, the biggest consumer market in the world is going to really give Asia the chances to experiment and evolve new models in logistics.

 

But at the same time, we just need to be aware of some of these breakout things. And in our industry, in the old days, no matter how well we think we’re doing, we always going to get hit by surprises. When I was in the shipping side, we had the Kobe earthquake and none of our ships could go to the Kobe port. And we have to reroute ships with 12 hours’ notice with no place to go. How do you deal with that? I had a charter ship once. It was charter ship it was light but from major chemical client . And it sank near the Hong Kong harbor area.

 

[26:22] Radu: It sank? Wow!

 

[26:24] Paul: It sank. How do you deal with that? It’s a risk – potential chemicals. Fortunately, it was salvaged and the damage was there. In India, we worked with a major client in retail. We took over the warehouse for APL model and then the monsoon hit and the warehouse flooded 3 meters high. So the traditional challenges will always going to be there in our industry. But now we’re going to have the cyber challenges and the political risk a little bit more. I think with all the exciting positive things coming, we’re going to also have to build a more safety architecture in the process.

 

[27:06] Radu: Yeah. Plan B basically. Maersk – I was reading – it cost them 300 million dollars. It’s a pretty hefty bill and definitely, you’re absolutely right and we’re going to see more and more of that type of security.

 

[27:23] Paul: But I’m always an optimist long term. So I think human talent is so amazing and with technology, I think we’ll turn these challenges into new opportunities ultimately.

 

[27:37] Radu: Last question regarding the industry. Again from David, what advice to tech startups in the supply chain space would you give? Where do you see an innovation deficit or not enough startups addressing a particular need? Pick one.

 

[27:57] Paul: I’m going to answer a little differently because one of the challenges I see in Asia is too many startups are literally taking things that are already been done in the US side or Europe especially the Silicon Valley and they’re basically replicating it here. And so you’re taking something that already exists but you’re replicating it out here as a quote startup and you’re getting capital and you’re building it. And what is the real agenda of that? The real agenda is you’re hoping the big US or European companies is going to buy you out later, right? Or even within Asia now, you know Ali Baba is going to buy you at some point. Is that really startup entrepreneurship?

 

So what you really need to do is to create a much more dynamic entrepreneurial culture. I made a lot of interesting startups from fin tech, med tech in the logistics space specially. And the first thing I’m looking at is – are you different? Are you creative? Are you building something that’s trying to find a unique solution that you can test at scale with case studies? And then you have real value? Or are you doing something that already exists? So it’s very easy on Google to validate. Are you doing something that already exists? So first, I want to see in our logistic supply chain space which was to your question, I want to see the real entrepreneurs who are thinking about the new solutions, new radical breakthroughs.

 

We have one startup I’m working with. They have EPOD. So wherever you deliver in other areas, there’s a validation system – electronic purchase order delivery, right? And then they’re integrating different trucks with live visibility into full dashboards but you can do it on your phone in 4 different languages. So these are cool things that are evolving within Asia. And then they’re tested with some Asian customers and then they have scalability. A company from Israel come out to Asia and created a company looking up transparency of shipping routes. So I still like to find those companies and I know the Singapore government and other countries in Asia also are trying to create a bigger ecosystem that will inspire the more radical entrepreneurs who can really make an impact in technology.

 

[30:29] Radu: The real innovations actually and not just copycats.

 

[30:32] Paul: That’s the most important.

 

[30:32] Radu: We need copycats. It’s not bad to be a copycat necessarily. I mean,  Lazada; it’s not a new idea and we need them.

 

[30:42] Paul: So what they do is, they build a footprint in a copying mode. They differentiate with some new pieces around it and then when they’re required later it allows for faster traction. But you know, here’s an example. What did Amazon do in February of 2016 I believe, they filed a patent for 3D printing trucks and they’re already testing them. They’re already deploying them and what they do is, they go to a warehouse and load with chemicals and then they figure it’s 30 minutes to deliver these toys to a certain house and therefore it’s 28 minutes to production process and then they start 3D printing, in the truck, the actual item and then it’s done 2 minutes before they arrive. That is a really radical solution.

 

[31:36] Paul: So these are the things – even here locally, Robert Yap is using drones now to do his inventory starting in his new supply chain city warehouse. So the drones are flying but they’re actually counting inventory and I remember what we used to go through, finding the label and shutting down the whole warehouse.

 

This has been done by drones now. So we’re really looking for technology that can be applied in different ways and then basically the most important thing having done 7 startups for myself – I’ve been involved with 2 IPOs – is we need to build case studies, something Victor Fung taught me as a mentor is, when you start a new business, build case studies. Get a few clients, touch the technology, prove that it works, then scale and as you scale, then more investment capital will come on board. And then you can breakout with many more customers. So don’t go too wide; go deep, deep with a few customers, deep with a few markets because each market has a different political and economic and regulatory issues. Just go deep with a few places where you find the technology, prove that it works, then capital will come to you. Then you can really scale and breakout. So I think that’s a general rule for everyone.

 

 

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