Welcome to strategy+business. Here’s what’s new.
strategy+business: Corporate Strategies and News Articles on Global Business, Management, Competition and Marketing

Bonding with Infrastructure

Management guru Rosabeth Moss Kanter urges the private sector to invest in the U.S. transportation system.

A version of this article appeared in the Winter 2015 issue of strategy+business.

On July 31, 2015, just before Congress broke for the August recess, lawmakers approved yet another temporary cash infusion to keep the U.S. Highway Trust Fund solvent. The fund was established in 1956 to pay for the construction of the United States’ first interstate highway system. Each year, it funnels billions of federal dollars to national, state, and local projects across the country.

The trust fund’s main source of revenue is taxes, mainly taxes on gasoline. But given the relatively flat level of gas consumption in recent years and the rising price of road building, the trust fund has had to rely on short-term “patches,” like the one Congress passed in July, to keep from running out of money. Aside from being inefficient, this approach is insufficient to maintain an ailing transportation system plagued by clogged roads, rail accidents, airline delays, and decaying bridges. Congress’s refusal to develop a forward-looking strategy to fund the U.S. transportation system makes it difficult for ambitious infrastructure projects to get off the ground.

But “continuing to point fingers at a dysfunctional Congress won’t get America moving again,” says Rosabeth Moss Kanter, the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School. “We should stop debating how to save the Highway Trust Fund.… We need a new story about mobility, economic opportunity, and competitiveness.”

That's precisely what Kanter delivers in her new book, Move: Putting America’s Infrastructure Back in the Lead (W.W. Norton, 2015). The author of 18 management books on strategy, innovation, and leading change, Kanter was planning to write another book about leadership “when the infrastructure issue struck me and took me on a detour.”

The average U.S. commuter (an average that includes those living in wide-open states such as Montana) sits in traffic for 38 hours a year.

In fact, she didn’t take much of a detour at all. Applying her knowledge of leadership and management, Kanter makes compelling business cases for the investments in resources, creativity, and endurance needed to rebuild and reinvent the U.S. transportation system. She also writes with a refreshing appreciation for the corporation’s interests in the wider “ecosystem” of commercial and civic objectives. “Infrastructure is important in itself,” Kanter argues, but it is also a good starting point to get moving on many other problems.

Move is threaded with statistics on the human costs and consequences of a formerly world-class transportation infrastructure that is now falling apart. We can all relate. The average U.S. commuter (an average that includes those living in wide-open states such as Montana) sits in traffic for 38 hours a year. Airlines often blame rain and snow for delayed and canceled flights, which cost the economy US$30 billion to $40 billion annually. Kanter takes a different view. “This happens,” she says, “because of aging infrastructure and because we are not using our own technology, not because of weather.”

The Future of Mobility

The most compelling reason to think creatively about infrastructure is not the threat of losing it, or Kanter’s dire dollars-and-cents diagnosis. Rather, it is the hidden opportunities. A compelling call to action with hopeful and informed ideas, Move contains many promising examples of how leaders in the private and public sectors are “building the future of mobility.” Kanter envisions a future in which having fewer vehicles on the roads at any given time leads to less congestion and pollution, in which more corporate leaders from all sectors make investments where good business and the public good intersect, and in which better, more accessible public transport lifts people out of dead-end jobs.

To get to that future, we clearly need to look up from spreadsheets and reports to understand how infrastructure affects our consumption, careers, health, and happiness. Kanter’s idea of a grassroots “mobility movement” of fed-up citizens might seem far-fetched (we’re too busy commuting in traffic to participate), but the emotion that might fuel it is real. “There are plenty of experts analyzing the technical issues,” she writes. “What is needed is a human face and human interest” that might move citizens even if politicians don’t care.

Kanter came to transport when she committed to leading an extensive study of transportation infrastructure as part of Harvard Business School’s U.S. Competitiveness Project. Nearly 40 percent of respondents to the annual competitiveness survey of HBS alumni in December 2013 chose improving public transportation as one of three top priorities out of a dozen options.

In 2014, Kanter chaired a national transportation summit convened by HBS, which brought together government officials, labor leaders, technology entrepreneurs, and CEOs of large companies. “I like to say it takes a cross-sector, multi-stakeholder militia,” Kanter told me during an interview in August 2015 at her home on Martha’s Vineyard.

Kanter notes the strategic challenge of developing infrastructure for businesses. “It is about big unsolved problems, which, by definition, means there is no market yet,” she says. “Or the market is confused, so it is hard to see how it could be profitable.” As a result, she encourages executives to look beyond operational and functional management and strategy. “We know a lot about how to manage companies from the inside, but the factors that are going to make firms flourish are increasingly external,” she says.

This perspective helps produce her most important insights. Infrastructure is, by its nature, a shared resource. The same roads that grocers’ trucks ply are also used by bus lines, garbage collection companies, delivery firms, and ambulances. To function properly, infrastructure networks have to meet the needs of a remarkably diverse range of users. However, a shared infrastructure also lives in a siloed universe of states, sectors, industries, and departments that impede systems thinking and collaboration.

Thus, improving infrastructure forces companies to work together more productively across industry sectors, and to collaborate with state and local partners in government. In the chapter “Up in the Air,” Kanter describes how the business community in Atlanta played a significant role in the modernization of Hartsfield-Jackson Atlanta International Airport. A coalition of business and nonprofit organization leaders developed a $6 billion capital improvement plan aimed at optimizing the flow of people, goods, and services throughout the region. Projects included road reconstruction, new bus and train service to the airport, and a renovation of the passenger terminal. These efforts helped persuade automaker Porsche to buy nearby land, on which it built a new North American headquarters.

Enlightened Self-Interest

Often, companies that rely on infrastructure can help improve the entire system by investing in making their own businesses run more smoothly. CSX, one of the nation’s largest rail transport companies, has invested $1.5 billion over the past decade to improve locomotive fuel efficiency and reduce emissions. Thanks in part to such efforts, U.S. rail freight is one of the most economically efficient surface transportation modes for moving goods and is the most environmentally friendly mode in the world.

Infrastructure can also improve when companies collaborate across industries — again, acting out of self-interest. Because the serious problems of highway congestion and air pollution are largely caused by trucks, leaders in the rail and truck industry have become allies working to find solutions. Michael Ward, CSX’s CEO since 2003, has made his company a first mover in so-called intelligent transport systems that help facilitate the coherent interaction of fixed infrastructure, vehicles, and corporate users.

Even in the absence of an ambitious new building campaign, existing infrastructure can be made safer and more effective through the use of information technology. To cut down congestion in and out of San Francisco, Kanter notes, California’s Department of Transportation has invested in wireless sensors in the roads and under the bridges to replace the old video and radar vehicle detection and routing information. In many areas around the country, toll roads employ high-occupancy toll (HOT) lane technology to reduce congestion and charge fees to solo drivers.

Kanter’s examples show how U.S. infrastructure offers a new opportunity for young entrepreneurs to shine. In 2014, Matthew George, a recent Middlebury College graduate, developed his idea for Bridj, an analytics-based on-demand private urban bus service. With support from MIT and financial backing from Scott Griffith, the former CEO of ZipCar, Bridj runs private buses to public rail and bus lines in the Boston metro area. Griffith calls it “Uber with buses.”

Of course, the country’s transportation woes can’t be remedied by information technology alone — it’s more of a “grand enabler,” Kanter writes. And this area needs work as well. She says we have to regard the U.S.’s poky broadband speeds as a component of infrastructure that needs improving.

One standout innovator in the book is Terrafugia, a manufacturer of flying cars. But before we put wings on our cars, we have to deal with six decades of underinvestment in and neglect of infrastructure. Which brings us back to the question of how to fund the U.S. Highway Trust Fund. “A federal gas tax to pay for roads is a dying or dead idea,” asserts Kanter.

Kanter suggests a rebranding effort. Changing the name from the Highway Trust Fund to the Mobility Trust Fund would open up imaginations and wallets, she argues. Perhaps. More likely, “the will and the wallet,” as she writes, will emerge through the most innovative public–private partnerships, as well as through private equity, pension, and sovereign wealth funds attracted to the social and financial returns that investments in mobility would offer.

Reprint No. 00367

Author Profile:

  • Ann Graham is a contributing editor of strategy+business. She specializes in writing about the role of business in society.

Comments

 
Bonding with Infrastructure