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 / Spring 2008 / Issue 50(originally published by Booz & Company)


On Track for Growth

How the railroad industry is reinventing itself as a customer-conscious business.

Illustration by Daniel Pelavin

As advertising slogans go, the 1984 “We’re getting there” campaign from British Rail ranks among the worst of all time. British Rail was then a long-distance train operator wholly owned by the government of the United Kingdom. The railroad intended the ads to offer an earnest portrayal of slow, steady improvements being made to a service known for its decaying infrastructure. But for a skeptical public forced to endure overcrowded train cars and frequent delays, it sounded as though British Rail had simply given up.

At that time, this dismal outlook — ever-lower expectations and diminishing service — was fairly typical of government-run railroads around the world. But today, the story has begun to reverse. Railroads from North America to New Zealand are becoming customer-centric, service oriented, and quality focused. The current state of British rail transport is emblematic of the industry’s transformation. Formerly disgruntled rail passengers can now ride faster, more modern, more reliable trains from London to Manchester, Birmingham, Glasgow, and other U.K. cities. Travelers going to the continent can take the Eurostar, the high-speed passenger rail service between London and European cities that has commissioned interior designer Philippe Starck to make lounges so stylish that they are the envy of airlines. All of these trains are operated by companies spun off during the privatization of British Rail that took place between 1994 and 1997.

The stakes involved in creating top-quality rail ser­vice are high, and they are getting higher. People are traveling more, and increasing amounts of freight need to be shipped speedily. The skies and roads are plagued by congestion; furthermore, planes, trucks, and cars spew carbon emissions. The rails offer a more reliable, lower-carbon alternative (particularly with electric rail). And if rail service can be brought up to 21st-century standards, then it can serve as an operating model for other forms of infrastructure and utilities.

The worldwide revitalization of the rail industry has been attributed to the effect of privatization. But although privatization can make a difference, it isn’t a prerequisite for success in passenger rail service — or even the most critical factor. Discernible, reliable im­provements are taking place under all three forms of governance: public-sector agencies, private-sector rail corporations, and public–private hybrids. In the end, skillful management and a dedication to sensing and meeting the needs of the market seem to matter more than the structure of ownership. Evidence for this assertion includes the impressive results coming from the U.S. government–owned Amtrak (National Railroad Passenger Corporation) and its Acela passenger service; the private Canadian freight railway CN (formerly the government-owned Canadian National Railway); government-owned railway systems in New Zealand, Hong Kong, and Singapore; and public–private partnerships such as metro lines in Beijing and Shenzhen, China.

The rail industry has long struggled with the challenges of managing for growth and customer service. But now, railway organizations like Amtrak and CN are leading an industry-wide transformation. They are escaping from both overly restrictive regulations and the self-imposed one-size-fits-all approach to serving their customers. These companies are responding to the growing complexity of their markets and increasing demand for higher levels of service and reliability. And in doing so, they are mapping out a path not only for other railroads but for any sector that needs to be more market-facing, responsive, and visionary.

Overcoming Ingrained Maturity
Reaching this point hasn’t been easy. Public transport providers — notably passenger railroads — and their closely related postal and freight counterparts have frequently stumbled, often because of government interference. For instance, even though Amtrak has been highly innovative and successful in its Northeast and California corridors, it has been obliged by law and political pressure to maintain other routes across the country that are not profitable, forcing it into a money-losing position year after year.

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  1. Harry Bruce, The Pig That Flew: The Battle to Privatize Canadian National (Douglas & McIntyre, 1997): An overview of CN’s history and illustrates its progress and growth as a company.
  2. Viren Doshi, Gary Schulman, and Daniel Gabaldon, “Lights! Water! Motion!s+b, Spring 2007: Forward-looking view of expansion of transportation, energy, and water infrastructure, which are all linked together, with rail systems particularly important for travel within and between cities.
  3. Edward Landry, Andrew Tipping, and Jay Kumar, “Growth Champions,” s+b, Summer 2006: Survey data from Booz Allen Hamilton and the Association of National Advertisers identifies marketers who drive growth by leading product innovation and new business development.
  4. Geoffrey Precourt, ed., CMO Thought Leaders: The Rise of the Strategic Marketer (strategy+business Books, 2007): Insight from 15 top marketing leaders on the current and future direction of their field.
  5. National Association of Railroad Passengers (NARP) Web site: Includes a helpful overview of the U.S. Passenger Rail Investment and Improvement Act of 2007, with regular updates.
  6. For more business thought leadership, sign up for s+b’s RSS feed.
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