Heroic stories of arduous organisational change abound among the fast-paced public companies. Shareholder expectations, competitive pressure, and demanding customers commonly provide the pressure and impetus for change. The skilled few that successfully pivot their business models often cite fast-moving markets, speedy recognition of the need for organisational change, and the drive to lean, efficient processes. These stories are well-chronicled and dutifully studied by business students and practitioners alike. However, one might question whether or not you can turn around an organisation that is more than 165 years old, employing nearly 1.3 million people, that has not been able to raise passenger fares (51 paise per passenger km for suburban class and 21 paise for non-suburban passengers) in more than 15 years, and is a public agency. Surprisingly, that is exactly what is happening in Indian Railways (IR) today.
The management of IR has faced monumental challenges. Over the past 40 years, the track network has increased roughly 30% to approximately 69,000 route km; during the same period, traffic on the network had increased more than 17x. More telling is perhaps the stress on high density routes as roughly 34,000 km of the track carries more than 96% of revenue. Simply stated, the track expansion that had taken place was less than purposefully based and the entire network was facing great stress. Perhaps more a social than a commercial organisation, IR’s inability to raise passenger fares for 15 years made investment in creation of infrastructure a continuous challenge. Couple all of this with an organisation that is over 160 years old, complete with a highly tenured workforce, the challenges are even greater.
Great change often comes with a clear strategy that provides the guiding hand to even the most-simple actions. In the case of IR, better asset utilisation, technology adoption, engaging human resources and small experiments that lead to evidence-based decisions were key to unleashing the transformation engine.
HUMAN RESOURCES: In many ways, the South Central Railway, headquartered at Hyderabad, served as the key test lab for many innovative yet measured undertakings. One of the key steps to better asset utilisation was to improve track maintenance. Key to that effort were the trackmen; the proverbial foot soldiers that patrol the rail network on foot repairing damaged tracks and sending alert messages to avert any unsafe situation. The railways redesigned their toolkits, clothing, and work boots to make them lightweight. It was also mandated that shelter be provided at least every 5-6 km, and for the first-time ever, bottled water was supplied to the trackmen. The costs were trivial but the impact on morale and performance was extremely positive.
Training programmes were initiated in the earlier years for high-potential candidates. The next generations of Divisional Managers were brought in for capacity and competency building. Additionally, the delegation of decision authority was pushed downward and toward the field units by the Transformation Cell of the Ministry of Railways to fast-track execution of infrastructure works to improve service delivery to customers.
TECHNOLOGY: Bringing the digital age to a company over 100 years old is a challenge, but today IR claims that nearly 100% of project management and management of project drawing is online. Employee records for more than 1.3 million are already more than 40% online, including training, evaluations, certifications, and performance. E-office and e-approvals have sped up projects, brought down vendor complaints, and allowed for more rapid remote assessment of cost over-runs and potential abuses. More than $25 billion worth of goods/works are being procured through e-procurement process (Indian Railways Electronic Procurement System, or IREPS, portal). Transparency and remote monitoring have been at the heart of the decision making to allow greater control at the divisional level.
Perhaps the most stunning use of technology is the real-time updating of operating performance and infrastructure creation. Each division has an up-to-the-minute update of their freight and passenger operation on a KPI-oriented dashboard. These are compared to previous performance and ranked across all the 68 divisions within the organisation. Thus, at every moment, the Divisional Manager knows his/her performance relative to others. Every month, over 4,000 employees can attend a video conference and connect with the chairman of the Railway Board for a direct communication conference call.
This aspect may be a bit less glamorous, but important nonetheless, locomotives are now being fitted with GPS tracking devices to monitor train movements. A recent tie-up with the Indian Space Research Organisation (ISRO) provides for a Real Time Train Information System (RTIS) that updates the location of trains every 30 seconds. This allows the Section Controllers (responsible for train movement) to better schedule trains to improve efficiency of train operation, punctuality of passenger trains, and monitoring movement of freight trains.
One of the potential revenue pools that had consistently lagged and attracted complaints was onboard catering. Surveys have indicated that customers did not believe the food was produced in a hygienic manner. Today, any consumer can get a live view of the food preparation in any IR kitchen 24x7, greatly reducing quality complaints. Station facelifts, upgraded restaurants and restrooms, and the ability to make food preparation transparent are key steps along the journey to customer centricity.
ASSET UTILISATION: Key to the turnaround would be better utilisation of both track and the locomotives and rolling stock that rode upon it. The improvement in the performance of trackmen coupled with GPS technology (Rakshak--a GPS enabled device worn by trackmen to alert them about approaching trains and save them from accidents) allowed for better track utilisation, greater safety performance, and more efficient scheduling. This was especially important in some of the highest density traffic routes such as Delhi-Mumbai and Delhi-Kolkata.
Key to asset utilisation, however, was the locomotive and its technology platform. In the past, IR had licensed and imported technology from MNCs and provided the licence to local producers. At the root of this decision was the trade deficit that occurred if multi-million-dollar locomotives were imported each year. Unfortunately, local production did not lead to the improved reliability and more asset uptime. A typical locomotive that would operate 95% of the time in Europe was only operational about 85% of the time in India. Additionally, spare parts were expensive (often two-three times the original purchase price) and asset reliability lagged world standards. IR management partnered with GE and Alstom (a joint venture company of the railways and GE/Alstom) to localise production and servicing in India in a public-private partnership model. Through a mix of assured off-take, local support for electricity, land use and co-investment, IR was able to upgrade their electric locomotive technology from 6,000 HP to 12,000 HP (which provides a paradigm shift in asset reliability and energy efficiency) and obtain 100 locomotives per year for the next 10 years at known prices from each supplier. Additionally, prices for servicing and spare parts were known and capped for more than a decade, by tying them to the original purchase price. These predictable capex and opex expenditures provided greater clarity to IR and put the risk of producing and servicing with the parties (GE and Alstom) which are in the best position to manage it. Approximately $7 billion worth of contracts were awarded; this represented the largest FDI in the rail sector in India to date.
This thinking and contracting expertise, paired with improved track maintenance and scheduling performance, has triggered IR to plan for entering into agreements with private passenger-train operators to up service levels. Allowing these private firms to operate on the IR network with upgraded passenger rolling stock at market prices provides an opportunity to offer an enhanced experience to those wishing to pay for it. The government-mandated fixed price policy (passenger fares) of the past 15 years did not allow IR to adapt or upgrade their passenger services to a changing India. Third-party firms with greater pricing flexibility will be able to offer differentiated services on the same rail network.
DEMONSTRATE THE IMPACT: The initial successes of numerous initiatives undertaken, often as experiments in the South Central Railway, were critical to adoption across India. These experiments provided the “show me” evidence needed to change the nature of work as well as the way IR does business. Railways are vital contributors to a nation’s competitiveness. Their impact is not just economic, as they are much more eco-friendly than road transport. Railways help match supply and demand at roughly one-fifth of the carbon footprint of trucks. Having a viable and resilient railway system is critical for the economy and society.
As India surges into the second decade of the 21st century, IR will continue to transform. Already plans for new track, dedicated freight lines, 160 kmph-fit tracks on Delhi-Mumbai, Delhi-Kolkata and continued upgrading of signalling technology with European Train Controlled System (ETCS) or Train Collision Avoidance System (TCAS) are underway. Speed, trackability, asset utilisation, and customer centricity may be the next generation innovations for IR, and without this recent transformation, would remain an elusive buzzword.
Views are personal. Zerrillo is deputy dean and professor of marketing strategy at the Indian School of Business. Joshi is head of communications and dissemination, Centre for Management Practice, at Singapore Management University.
