Transport must embrace a digital future

How can transport attract the investment it needs to provide smart, integrated efficient services? Smart networked places are growing rapidly across the world. Managing movement and connections within them requires considerable transport and technology skills to make the most of the resources available. One of the debates at the Confederation of Passenger Transport Scottish conference last month was about how get the investment and support needed to make these changes.

Most operators want to provide faster, cheaper, more popular services, but most currently observe continuing trends for slower, more expensive, less popular services. Contrast this with the rapid growth of technology companies such as Uber and Deliveroo and it is no surprise that the smart money follows the growth of the companies able to make better use of existing resources.

If transport companies and authorities don't focus on the under-utilised resources in the system then somebody else will. The analysis and investment culture in transport remains focused on a few assets like road space and vehicles, rather than making more of the capabilities of people and places.

Matching the aims of investors to the capabilities of businesses can be challenging. Investors remember 2000 when British Petroleum launched a high-profile public relations campaign under the slogan "Beyond Petroleum" in a bid to show how the company was modernising. The logic of an oil company evolving into a broader energy company made a lot of sense, but the move quickly turned sour because investors were concerned that the company was saying one thing and doing another. The investors doubted whether BP had the skills or capabilities needed to make the transition. BP was then, and remains, largely an oil business. Greenwash to rebrand itself as a future energy company just did not work.

Like BP, many transport businesses are asset-heavy and the focus of senior management is on these assets: the roads, railways, trains, buses and lorries. Transport operators are right to be cautious about how far and how fast they can change.

Nevertheless, internet-based technology is transforming the world of connections, and with it the value chain for the transport sector as manager and provider of connections. Over the last 10 years the evidence has become clearer about when digital connections will substitute for physical movement and where they complement movement leading to more travel. There are rich prizes for the companies able to co-ordinate physical and digital connections.

At the CPT conference, Chris Yiu of Uber suggested that the company may be the fastest growing business the world has ever seen.

However, the economy of smarter connections is evolving rapidly. In late October, an employment tribunal in London ruled that although Uber was branding and marketing itself as a technology service, it was behaving more like a traditional transport employer in the way it recruited drivers, managed its operations and fulfilled promises to customers. Future key players will be the companies which are able most effectively to calibrate their offer to changing needs and opportunities, combining transport and digital connections. If transport operators believe that they are undervalued relative to technology companies, they are not powerless to do something about it.

About five years ago, the underperforming and undervalued Domino's rebranded itself as a technology company that also made pizza. The company recognised that customer relationships rather than food were at the heart of the value chain and that new technology allowed it to manage value creation across its activities. Ordering a pizza by speaking into a smart mobile device when travelling home now makes people's lives more convenient.
It will not be long before Uber, Deliveroo, Lyft, Drive Now, Moovit or even Domino's are fulfilling more optimal and convenient travel between people and shops, restaurants, leisure facilities and other destinations.

The rights and responsibilities of these technology providers do not currently fit neatly into current transport legislation, but one of the strengths of our legal system is its ability to evolve through the precedents set by case law. The winners will not be those who try to use current legislation to block new types of transport, but those who manage customer and provider relationships best.

If transport is short of investment, perhaps it needs to work harder at building relationships with its customers. The investment could come from transport operators managing technology services, or from technology companies managing more transport services. Technology and transport companies start from different foundations, but the future lies in the shared goals of customers for better connections.

How long will it be before a traditional transport operator is rebranded as a technology company that also runs buses and trains, following the successful path taken by Domino's?

Reference: Transport Times November 2016 Issue

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