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This blog was authored by Giselle Hodgson, Nathaniel Young and Ben Tonges.
Congestion in our cities is worsening and was estimated to cost the Australian economy AUD $16.5B in 2015, with predictions that it will reach up to AUD $37B by 2030 if nothing is done . Moving one person from road to rail can create congestion cost savings of up to AUD $9 per journey in our largest cities and moving nine tonnes of freight by rail instead of road between Melbourne and Brisbane saves around AUD $250 per journey in accident and emission costs .
To help tackle this, over the next few years Australia will spend approximately AUD $15B a year on transport infrastructure , with rail consisting of up to ~50% of this spend . This is three to four times the average annual spend of a decade ago and double that of just a couple of years ago . High levels of investment brings with it high community expectations that this public infrastructure will deliver on the future of mobility premise of improving liveability, unlocking economic value and social prosperity, enhancing sustainability, and boosting safety. It also promises a world of connected services, increased frequencies, real time information and seamless integration between transport modes regardless of whether you are moving people or goods. Passenger and freight operators, federal and state planners, and regulators must clearly and tangibly define how they are going to deliver on these expectations during this golden age of rail infrastructure investment.
Australia’s total tax last year was AUD $488B, AUD $288B of which was income tax. This means 3c in every dollar of tax in the next few years will be spent on new transport infrastructure (5c if only looking at income tax). We think that’s a big deal – and worth caring about – worth knowing where and what the community can expect from this level of investment.
Where is this investment taking place?
Planned investment in rail covers two key areas: new physical infrastructure and upgrading existing infrastructure with new digitally enabled technologies.
Building new infrastructure: Sydney - Northwest Metro, CBD and Southeast Light Rail, CBD and Southwest Metro; Melbourne - Melbourne Metro; Perth - Airport Rail linkURL, MAX Light Rail; Brisbane - Cross River Rail; Canberra - Capital Metro; Intra-state - Inland Rail; and
Upgrading existing infrastructure to maximise its utility to enable increased services, frequency and reliability. New infrastructure offers an opportunity to grow the transport network but there are space constraints in already congested cities and so there is a need to optimise the existing footprint. Examples include, signalling (e.g. European Train Control Systems, Automatic Train Protection), autonomous trains and the supporting technology required to enable improved operations (e.g. digitally enabled traffic management systems, NOCCs).
So, where to start?
There are a variety of key questions that transport planners, infrastructure deliverers, rail operators, regulators, and ecosystem partners should be considering if they are to successfully take advantage of this golden age in rail infrastructure investment.
1. Do you have clarity on your future network and organisational configuration?
The scale of investment and pace of change demands rail organisation re-consider their strategies. It is easy to be a passenger when the future isn’t certain, but it is vital to understand how this investment will impact your organisation and the timeframes over which this impact will be felt. Being really clear on the role you want to play, what your aspirations are and how you’re going to win in your ecosystem is key. These ecosystems are changing, evolving – and the Future of Mobility will challenge the status quo. Creating a focus for your business that you can grab hold of and use as a baseline to make investment and strategic choices has never been so important. We believe rail organisations require two key strategies:
A future rail network strategy – this action-orientated strategy should clearly detail what the long term rail service plan needs to be to meet customer and community needs and how the rail network should be configured to efficiently and effectively deliver the service plan (e.g. above and below rail infrastructure; rollingstock volumes and stabling; traincrew volumes, formal and informal rostering rulesets, depots; customer service staff; train controllers). The strategy needs to take in to account the end to end value chains and multi-modal solutions required to deliver on customer and community needs and the transition plan on how to get there.
A digital railway of the future strategy – this strategy should focus on the internal capabilities required to deliver the railway of the future and the configuration of those capabilities within the organisation and with ecosystem partners. With the continued convergence of IT/OT and expected seamless integration of transport networks as part of future of mobility and Industry 4.0, it is imperative of rail organisations to clearly articulate the transformational capabilities required to meet customer and stakeholder expectations.
2. What capabilities do you need, now and into the future? How will you configure them?
These two strategies will no doubt raise questions as to which capabilities are required for now, the transition period and the future operating state. Crucial to the design of these new capabilities will be answering a few fundamental design questions including:
What partnerships will you create? How will you collaborate?
Whether to establish strategic partnerships is not a new question for railways, however in the face of delivering on these infrastructure projects and meeting stakeholder expectations there is a need to revisit previous choices. The shifting railway ecosystem has introduced new capabilities that railways need to consider whether they want to build in house. For example, digital technologies will continue to change at a rapid pace, is it worth building up this capability or is there greater value for the business in a strategic partnership that will deliver this for you? A good example of this is Deustche Bahn’s push to “digitise their entire rail operation value chain”  with DB Cargo partnering with GE to digitise 250 locomotives and more recently their partnership with 3D printing agency 3yourmind to build a digital spare parts warehouse. Balancing cost vs value continues to be at the heart of that decision but strategic partnerships around your non-core capabilities could offer a key avenue for delivering value.
How are you going to harness data and technology to support your aspirations and provide an improved customer experience?
Major investments in ETCS and rail management systems will be the main vehicles through which genuine shifts in greater service frequency and reliability will be achieved. These backbone technologies are a game changer for operators and will introduce a new way of thinking and working. In addition to this customers expect more data at their fingertips than ever before and the sophistication of data scientists and the size of their data sets grows daily. How are you meeting the expectations of these customers? How are you harnessing data and empowering your employees to make better, more informed decisions – whether that be as managers, in the rail control centres, or frontline customer service staff? The ability to leverage and integrate new internal and external sources of data to predict and prevent issues will be critical to success. Importantly, there should be a clear line of sight as to how these technologies and data sets support your aspirations and strategic choices.
More than just the use of data though, how rail and transport operators look at the customer has shifted over the last decade. Customer centricity and experience design capability being the most notable. We believe that retaining a strong customer focus and investing in these capabilities will only bring positive outcomes for you and your customers.
How do you bring this all together to ensure effective roll out and seamless service delivery?
Cohesion between your choices, your long-term plans and frontline service delivery whilst positioning to take advantage of this rail investment requires robust internal capability. Our view is that integrated strategic planning needs to be at the heart of your business to achieve this. This capability focusses on how to manage a variety of often competing forces around customer demand, supply, Capex & Opex, pricing, safety and stakeholder expectations. With the level of change that this investment golden age will deliver, investing in your operational readiness capability will also be an important consideration. Capitalising on your investments early will be critical if you are to retain your customer’s faith.
How are you going to win the war for talent that will come with this wave of investment?
Compete hard and strategically to retain and attract the best talent, success in this space will be one of your biggest success factors. As discussed above partnerships offer a genuine option but as a priority conscious choices around your critical talent is a must.
We have a vision of Australia that includes smart cities that are connected via digitally enabled technologies and modes of transport that are integrated and talk to each other. We envisage this future to deliver improved liveability for the inhabitants and unlock economic value, with it all being achieved in a sustainable manner. Railways have a significant role to play in this with projects such as Sydney Metro West doubling existing rail capacity and reducing commuter travel times by up to 20 minutes and Crossrail 2 in the UK aiming to reduce crowding by 20-30% and improve transport network integration and connectivity.
Has there been a more exciting time for the sector?
 Road Congestion in Australia, Australian Automobile Association, October 2018
 Value of Rail: The contribution of rail in Australia, Deloitte Access Economics, November 2017
 Macromonitor – Australian Construction Outlook Overview, January 2018
 ARA Skills Gap Capability Study, BIS Oxford Economics, 2018
Giselle is the lead Partner for Monitor Deloitte's Strategy and Business Design practice in Australia and an expert in strategic transformation and business design. She is at her best when solving our clients’ most complex problems, navigating their strategic choices, and delivering their aspirations and goals through transformation. She is a specialist in the transport industry, working with freight and passenger transport organisations across the end-to-end supply chain to transform the movement of people and goods.
Ben is a partner within the Australian firm's strategy consulting practice - Monitor Deloitte - which helps organisations’ make and execute the winning choices that grow enterprise value and create societal impact. Ben's passion is working hand-in-hand with clients in the development and execution of strategies through establishing and embedding strategic integrated planning capabilities and accelerating transformations successfully.