Learn from past mistakes

26 Mar 2016
Double vision: interaction can be just as important as analysis.Credit: Helen Cook

Double vision: interaction can be just as important as analysis.Credit: Helen Cook

By Peter de Langen and Jonas Mendes Constante highlight the top five strategy errors made by ports

After many years advising companies from different sectors about creating and executing their strategic plans, we have witnessed both good and bad decisions - not necessarily in equal order. Here, we outline the five most common mistakes that port authorities and terminals companies make.

First up, it is important to remember that the strategic plan is a document, not a process. A strategic plan can only create results if its goals are widely shared and incorporated by all departments, and if the goals, performance indicators and actions are monitored and updated periodically. The final report needs to be a based on an inclusive process and regarded as the key ‘deliverable’.

State-owned companies tend to see a strategic planning process as a formal procedure that they are required to develop, and as soon as the strategic plan is completed, business continues as usual and development is ‘opportunity driven’ rather than ‘strategy driven’. While it is certainly good to be responsive to opportunities, that does not mean that a clear strategic direction is not needed.

Secondly, spending more time analysing than interacting will not bear fruit. It certainly makes sense to analyse markets and competitors and make forecasts, but it is more important –and complicated - to involve relevant companies and other stakeholders in the port cluster in the strategic plan. However, that does not mean the plan process has to turn into an exercise of keeping everybody happy. Dialogue on strategic choices leads to better acceptance of choices, even if stakeholders do not fully agree with them. 

Thirdly, infrastructure is not always the most important element. Port managers like the topic of infrastructure. It is part of their DNA and many could not think about creating a strategy without asking: “What shall we build?” Obviously, it is necessary to consider port infrastructure, but it is also important to consider other elements, such as institutional context and environmental aspects. Therefore, taking infrastructure as a starting point may best be avoided.

Government buy-in

Fourthly, commitment from government entities needs to be firm. In the port sector, governments deeply influence development prospects. Port authorities need to address problems/bottlenecks that are outside their scope, but road/railway accesses to the port, planning regulation, border processes for cruise passengers, customs procedures, labour regulation and education are generally the responsibility of (other) government entities. Thus, these stakeholders need to be deeply involved before they sign the final vision document. Some port authorities take the approach of first developing a vision, and then communicating/selling it later. However, that may lead to lukewarm support and limited ‘ownership’ of the government actions required.

Lastly, too much focus on blueprints and insufficient investments in flexibility will hold back development. While many ports do look into new trends and developments in the planning process, this often consists of extrapolations of past developments (such as larger ships, more concentration of shipping lines, growth of trade flows, to name a few), while potential disruptive developments (such as closing down of coal fired power plants, containerisation of bulk and automotive flows, or supply chain redesign due to 3D printing technologies) are insufficiently considered. As a result, huge uncertainty is downplayed and consequently, the value of flexible port development is underrated. Looking back on port plans from say 15 or 20 years ago is eye-opening: too many of them turned out in hindsight to have been wrong in almost all dimensions (volume of flows, type of cargo flows, required terminal dimensions, and land use).

We advocate a planning approach focused on securing development options. Needless to say, in such an approach, periodic reviews of the strategic plan are called for.

Of course there are other mistakes that could be mentioned here, but by avoiding or overcoming these five as a minimum will put you on a firm footing when you start putting together your strategic plan.

This note was written by Jonas Mendes Constante, a senior strategy consultant in ValenciaPort Foundation and Peter de Langen, owner and principal consultant of Ports & Logistics Advisory, SL and part time professor at Eindhoven University of Technology.