RAILWAY AGE, AUGUST 2020 ISSUE: Precision Scheduled Railroading (PSR), as we know it today, is rapidly reaching an inflection point. Escalating trade disruptions, rail strikes, blockades, weather events and the COVID-19 pandemic have highlighted the urgency to make supply chains more resilient. Weaknesses in international supply chains have been exposed, and escalating domestic transportation turmoil demonstrates the need for end-to-end approaches, standards, solutions, and greater service level accountability and safety. PSR has been applied to some Class I’s and has yet to be applied widely to Class II, Class III, tenant and passenger railroads in North America. This gap represents 40% of North American route-miles.
The current version of PSR, which we refer to as “1.0,” has produced measurable financial, operational and service improvements. Yet, some internal growing pains continue, accompanied by shock waves absorbed by shippers, non-PSR railroads, industry partners, advocates and policymakers.
This three-part Railway Age series introduces PSR 2.0, which will take PSR to the next level, within individual railroads and across railroad and transportation “ecosystems.” It demands an entrepreneurial culture, and is geared toward increasing relevancy in a world rife with existential economic threats, increased competition and urgency to embrace the tail end of the digital age while preparing the foundation of the new era of breakthrough innovation.
In Part 1 (June 2020), we presented the case for mainstream adoption of PSR 2.0. It is a reliable, scalable, and high-gain approach for delivering sustainable financial results safely and securely, while building reputational equity. PSR 2.0 calls for people and the organization to make changes in how they think and operate. It differs from 1.0 by embracing entrepreneurship and partnerships across an integrated transportation ecosystem. It provides for a shared platform—a voice at the table—for the parties, ensuring integrity for delivering service propositions, one where shock-absorbing assets and disproportionate cost are replaced by aligned service, balanced asset costs and smoothed operational flows. PSR 2.0 allows for responsiveness and resiliency to competitor moves. (Listen to the Rail Group On Air podcast about Part 1.)
In Part 2 (July 2020), we discussed key considerations that accelerate business and customer value realization, with lowered PSR 2.0 implementation cost and effort. This requires embracing the ecosystem view of the transportation supply chain, where benefits are realized for all the participants. We have provided a toolkit for leaders to succeed in the marketplace, by enabling them to invest in order to responsively support the needs of customers. We recommend certain cultural and capability considerations, provide tools for assessment of current state, and supply recommendations for implementing and scaling PSR implementation. With a focus on effectiveness, organizational process waste is reduced by 20% to 80%. (Listen to the Rail Group On Air podcast about Part 2.)
In Part 3, we step through a systematic and modern approach for delivering value while taking precision railroading to the next logical steps in its evolution: Precision Scheduled Transportation. Pushing the envelope now and in the future toward a major shift in thinking and delivering an integrated transportation system. (Listen to the Rail Group On Air podcast about Part 3.)
Systematic, Modern Approach
When you share objectives, your overall value increases; taking a shared systematic approach for implementing PSR 2.0 ensures low risk, high gain and least cost. Start with the end state in mind, in this case, the future vision of PSR 2.0. Then assess the current state to establish the starting position. In well-defined value-added iterations, the journey to the future vision progresses. It’s an iterative journey, with new discoveries or entry of new forces that could not have been predicted. Knowing when to pivot—and having the organizational capability to do so—are key, as progression on the familiar, comfortable path is self-limiting and counterproductive. Each railroad and ecosystem partner must follow this progression according to their respective timing and pace of adoption (Figure 1).
PSR 2.0 Implementation Levers
There are many levers that can be used for closing the gap between the current state and the PSR 2.0 target. Current-state assessments and on-going progress checkpoints would include these levers, plus any Key Performance Indicator (KPI) that is being tracked (Figure 2).
The journey into PSR 2.0 and any of its initiatives or projects, while they should begin at the C-suite and senior executive levels, can only be successful when it permeates into the entire organization. Similarly, the links to strategy, business objectives, people development, and risk tolerance must be explicitly communicated. Ecosystem partners cooperatively participate and contribute to projects. Balanced distribution of value among the ecosystem partners is also key. These three levers are cornerstones and predictive indicators for the success of the endeavor.
A current-state assessment would reveal an organization’s types of leaders and personnel. Transformational programs such as PSR 2.0 requires highly experienced, high-performing “transformation leaders” and specialized subject matter experts. Typically, such resources are required when companies go through complex transformations. When they move on to their next mandate, a company is not always in a state of complex transformation or turnaround. Leadership and personnel capabilities are developed to focus both on deriving maximum value from up-to-date investments and the yet-to-be-realized improvements defined within the business plan.
PSR 2.0 requires an innovative, entrepreneurial and collaborative environment. Personnel (insourced and/or outsourced) should possess a rich set of playbooks and best practices that enables them to perform exceptionally in a railroad environment and effectively pass it on to those that are learning.
Processes must be aligned and adaptable. They must be capable and predictable. These characteristics are measurable and statistically assessed. Processes must be professionally architected and high throughput technologies can streamline, standardize, and efficiently execute routine tasks.
The strategic plan should drive OT/IT (operational and information technology) projects. Assuming that processes and organizational change management will catch up after the fact is a fallacy. OT/IT must also be well-versed and well-connected with the functions they serve, such as operations and engineering.
In order to derive full value and return on invested capital, infrastructure and assets must be right-sized. Over capitalization and under capitalization have risks. Deriving full value of capital value demands leveraging the direct experience and market knowledge of the broader ecosystem. Operations needs to be integrated, lean and safe, as should marketing, product management, business development and procurement. Tying it all together is the unified platform supported by reliable data and practical standards. It is governed for business performance, adherence, and service quality.
Roadmap and Strategies
PSR 2.0 can be implemented in parallel and interacting streams. One stream is internally focused, where the PSR 2.0 competency is built within a railroad or ecosystem partner. The other stream is ecosystem-focused, where the PSR 2.0 unified platform is built. Both streams go through the same stages: plan, beachhead, early successes, scale-up, and operating (Figure 3).
The linchpins are strategy and business objectives. They provide the criteria for prioritizing the various gaps and opportunities in the pipeline. The beachhead project, which is directly tied to the strategy and business objectives, provides the opportunity to successfully mobilize the first value-added element of PSR 2.0 in a key area. Use it to solve a problem that closes the gap on a specific business objective. Then, a series of low-risk/high-success projects follow that are directly tied to the strategy and business objectives. Once the early successes are proven, scaling up follows. This can include similar areas where the same playbooks can be replicated, or new areas can be embarked upon to develop those playbooks. Once a fully closed loop is established, where the operation and processes are regulated by constant feedback, continuous performance improvement with new capabilities proceed as the operating norm. Considering the nature of the PSR 2.0 endeavor, the roadmap could be multi-generational.
Going deeper, the detailed roadmap would include actions and milestones that carry out the strategy moves and pivots. Key “swim lanes” are market segments, products/services, platforms, operational effectiveness, technology building blocks, and regulatory. Other swim lanes can be added over time, such as alliances (Figure 4).
The platform swim lane is worth calling out here. For a particular railroad, this would be specific to internal product and service lines. The “product platform” is used as the leverage base for spawning off new product and service offerings to customers, a competitive advantage for the organization. In the context of the ecosystem, the platform is the Unified PSR 2.0 Ecosystem Platform.
Adoption by railroads and ecosystem partners could follow the typical adoption pattern of innovators, early adopters, early majority, late majority and laggards. Regardless, each would follow the roadmap stages. Their content may be different, depending on when they engage. For example, where later adopters can replicate proven solutions from early adopters. Their culture and capability maturity, in addition to their baseline assessment, are other factors.
For the innovators and early adopters, a prudent point for engaging with building the ecosystem platform is after some early successes have been achieved by individual railroads. At this point, sufficient information would be on hand for formulating realistic strategies and objectives for building the PSR 2.0 platform. Beforehand, there could be fluidity of exchanges and ideas, though at this point there needs to be an explicit effort to launch from an ecosystem perspective and proceed systematically.
In the early adoption stage, a Class I and Class II railroad may join forces to solve a business problem they experience, such as hand-offs between the two. Currently, this is quintessential for PSR 2.0. However, in parallel, each railroad is internally building up their PSR 2.0 competency.
Some early adopters (Class I’s, for example) may choose to explore building linkages to existing transportation supply-chain platforms, possibly through vertical integration. Alternatively, they may be incented to place themselves in positions as chief orchestrators of the ecosystem, or they may own a vested interest in the platform. There are many possibilities and proven examples from other industries that can be tapped into or used as stimuli for creating a new paradigm.
It is worthwhile to consider “future proofing” the ecosystem platform installation decisions so that it is made up of components that can be readily used without requiring replacement of the onboarding kit. Closed source vs. open source strategies must be vetted. Should alliances emerge—that is, competing groups of ecosystem partnerships vying for their platforms (think Mac vs. PC), interoperability strategies and solutions must be in place.
The temptation to rush through or skip critical steps or deliverables in the roadmap is an important consideration. When you realize gains early on, the gains will grow as you progress through the entirety of the implementation. It may be tempting to stand on the immediate gains, as opposed to seeing it through. This limits the full positive impact of PSR 2.0 there by limiting the full expansion and ecosystem. It may also limit the scope of influence and setting the pace and tone of the change.
This includes treating strategy as an artificial exercise, skipping baselining assessments, making unsubstantiated assumptions on value propositions, building upon ambiguous or incomplete requirements, moving ahead without having properly completed and tested deliverables, engaging in mergers and acquisitions or joint ventures without requisite due diligence, etc. Each step and its deliverables in the roadmap are explicit building blocks, adding tangible value at each step of the journey.
Ignoring an opportunity to pivot is a risk. PSR 2.0 allows you to realize that people in positions of leadership are your assets. It takes experience, support, and managerial courage to declare a pivot and to carry it out. We create an entrepreneurial environment that provides employees the tools to succeed. Leaders are not solely focused on the broken pieces within their department. A benefit allows you to see which sections of the end-to-end are weaker and need improvement vs. just looking at things individually and compartmentalized. This allows for the development for a shared purpose within the shared entities and business objectives PSR 2.0 encourages an innovative and “speak-up” culture where problems can be identified and then mitigated.
Finally, PSR 2.0 and supporting technology advances such as advanced analytics and decision automation must be embraced. All projects must be closely tied to business objectives and receive constant, consistent support from executives. There are methodologies (e.g. design thinking) and support mechanisms (e.g. exploration framework) to properly conduct early-stage exploratory work that are far more effective. The importance of a cohesive tie to strategy and business objectives is extremely important here.
Realizing your Vision
PSR 2.0 is the breakthrough. It is the driving force of change and is also the link that mitigates risk.
Implementing PSR 2.0 is a necessary, complex and transformative journey involving many independent parts of transportation systems. If we want to keep moving forward in the development of rail, then to just continue to tweak or revise existing systems does not go far enough. We must consciously look for the next break through. Thinking outside the box and stretching our visions is the only way that we can take precision railroading to the next logical step in its evolution.
This can only be accomplished through developed alliances which allow the sharing of objectives and thereby increasing overall value and overall growth. Our holistic focus and time-to-market strategies increase the likelihood of success and growth within the rail and transportation industry. The more you know about the industry and culture, the better the overall global advances: It’s a 360-degree strategy to healthy growth and synthesis, to allow full potential and growth to be reached.
Broader engagement and commitment reduce the temptation to rush through or skip critical steps. Just continuing to tinker and tamper with the problem only minimizes the deliverables. While it is tempting to stand on the short term and immediate gains, doing so could thwart transformational growth and value creation from occurring.
PSR 2.0 broadens the scope of influence and sets the pace and tone of expansion and innovation, both necessary right now. Business strategies become better aligned and enriched exercises for business modernization. Baseline assessment replaces assumptions on value proposition. The richer the contextual story the stronger the global advances. PSR 2.0 creates real insight into current and future markets and emerging competition. A shared purpose and an “overall synthesis” allow for full potential and growth to be reached.
Sonia D. Bot, chief executive of The BOT Consulting Group Inc., has worked at the forefront of technology, media, and telecommunications companies worldwide, and was instrumental in PTC implementation on CN’s U.S. lines. John F. Orr, a top-level operations executive for railroading and transportation ecosystems, is a fourth-generation railroader who rose through the ranks and became CN’s Chief Transportation Officer. With E. Hunter Harrison and his successors, Orr delivered PSR operations, and continues the mission today throughout North America, Europe and Asia. For more information, contact Sonia D. Bot at [email protected] and John F. Orr at [email protected].