So says Peter Lorange, president and owner of the Lorange Institute of Business, which he bought four years ago with the aim of changing this trend.
“Those students then become real-world leaders, whose lack of understanding can lead to decisions and strategies that make the peaks and valleys of business cycles much more severe. Perhaps such a fallacy of linear thinking might most readily be seen in the ocean shipping business, where timing is all,” he says.
One of the corporate programs that the institute offers is a Shipping and Logisitics Management specialization.
Lorange bought Zurich’s Graduate School of Business Administration at the age of 66, renaming it the Lorange Institute of Business. He had just retired from a 15-year stint as president of IMD, which he had pushed into the top rank of business schools.
This innovator in both the academic and shipping world, believes business schools have been too slow to innovate “in terms of both the content of programs and courses and also the pedagogical process.”
"It is crucial in decision-making to have a better instinct for turning points."
Critical importance of cycles
He feels these schools are to some extent responsible for the present economic crisis “because they did not sensitize managers to the critical importance of cycles in business.” Lorange believes all businesses go up and down and that it is crucial in decision- making to have a better instinct for such turning points.
“It’s very useful to remember people like Mærsk McKinney Møller, who really spent time trying to understand the markets. His father built up the company based on an understanding of the markets and timing. He also developed that instinct very early on. He could handle several market scenarios and seldom made mistakes.”
Of the many powerful shipping personalities Lorange has worked with, McKinney Møller is the one he admires most. He is quick to tell you that: “I’m only one of five people, who were allowed to call him by his first name. And three of those were his daughters.” “A guy like McKinney Møller was on the job all the time and was one of the richest people in the world. He worked very hard to understand those markets.”
Of his own success as the owner of a shipping company that specialized in platform supply ships for the offshore industry, he says: “I had a very detailed understanding of newbuildings relative to ships in the water and I updated that every week. When I saw that fraction of newbuildings had shot up, I sold the company.”
Lorange calls this “top-down” decision-making. Companies that fall into this decision-making group are under the umbrella of commodity shipping.
Appreciate fast innovations
“These companies take a lot of advantage of business cycles. For them, it’s a matter of buying cheap and selling high, as we do with property. When you go in and when you go out is crucial, as is when you go long and when you go short.
“This is one extreme of the shipping industry. At the other extreme, there are industrial companies, which I call ‘bottom up’ organizations. They depend on much more involvement by many people.”
Lorange emphasizes that in “the real world” these two extremes are blurred but they are useful to separate in order to understand shipping cycles.
This ‘bottom up’ niche appreciates innovation and long-term relationships and is more specialized.
“These companies focus on tailor-made vessels for certain industries. For example, you have Wilhelmsen that deals with heavy equipment manufacturers or Oddfjell with chemical companies.
“These organizations are more interested in a steady supply of ships to maintain their market share. They buy vessels come hell or high water.”
“Of course,” says Lorange, “the industrial shippers need to pay attention to ordering new ships when the cycles are right. On the other hand, the market-related companies also need to pay attention to customers.”
So, regardless of what business or segment you’re in, timing and cycles are everything.
