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2 May 2018updated 09 Sep 2021 4:18pm

Why transport operators must invest in innovation

Customer demands are evolving alongside technology. The transport industry must adapt its approach.

By Chris Lynch

From the Wright Brothers’ first flight in 1903 to today’s possibility of commercial space travel, transport plays a pivotal role in shaping the world. In fact, many of Fortune’s “companies that changed the world” were based in transport – Pan-American Airlines, Suez Co., McLean Industries, United Fruit. Yet most of these organisations came into existence at the turn of the 20th century. So where are the world-changing transport giants of today?

Candidates to be this century’s game-changers are flourishing. Uber is testing flying taxis in Dubai. Virgin Hyperloop One is set to build the world’s first hyperloop between Mumbai and Pune. And Amazon is testing delivery drones to replace trucks. Yet many of today’s disruptors proudly refer to themselves as technology companies, rather than transport companies.

If you look for traditional transport organisations in the Fortune 100, or Forbes’ “Most Innovative” lists, the brands we know and trust are few and far between. With this new competition, traditional transport organisations need to think about what’s coming next and how they can secure the profile that’s landing the new kids most of the recognition – and financial backing.

Long-standing modes of transport are being challenged by these disruptors, who seek to revolutionise the way we think about transportation using technology. Such emerging businesses and transport systems are changing how we move ourselves and our products from A to B. And these are the types
of companies that now feature on the Forbes “Most Innovative” list, along with Tesla and Expedia.

It’s unsurprising, then, that a survey of 201 European transport leaders by PA Consulting Group found that 68 per cent are worried about the future. But there’s no need to fear the future if transport incumbents can heed the three trends that look set to shape the sector:

1. Increased connectivity
Complex, integrated and intelligent transport systems that support “mobility as a service” are already in development. In Hamburg, Germany, for example, a new on-demand electric shuttle service has launched alongside the existing range of car-sharing, bike rental and traditional public transport schemes. The majority of transport leaders believe seamlessly integrated, one click transport across any mode will be reality by 2030.

2. New modes of transport and increased competition 
Autonomous vehicles are in testing and drones are already a reality for maintenance and logistics in certain sectors. These new modes of transport establish what’s possible, and existing transport operators will have to invest wisely and innovate to keep pace and continue to deliver valued services to an increasingly expectant customer.

3. Improved capacity 
Successful disruptive businesses meet customers’ demands through personalised responses to individual consumers on a mass scale. Those unable to do this will lose customers who increasingly want flexible transport on demand.

Those who are able to deliver on these visions of the future will be propelled into the history books. The challenge rests on whether or not today’s transport heavyweights can be innovative enough to compete. Often we synonymise innovation with technology. Tech is important to remaining competitive,
but today’s technology is more than capable of meeting the demands of the future, and is already being harnessed by these new companies.

Becoming a company that changes the world, therefore, is actually more reliant on the investment secured to drive and deliver innovation. PA’s research shows that over 40 per cent of transport leaders believe investment is the biggest challenge to delivering the “future of transport” within their organisation and for the sector at large.

Developing the right profile for private funding is increasingly contingent on demonstrating an innovative or cutting-edge approach. Just look at Uber for proof – it reported losses of $3.2bn in the first three quarters of 2017, yet a Softbank-led consortium invested around $10bn in December 2017. So, to make the leap into tomorrow’s history books, the transport industry needs to channel pioneering thinking to secure and spend capital investment effectively.

Promisingly, over two thirds of transport leaders believe that innovating operating models is key to delivering
the future of transport. Both internal models (breaking silos, agile working and sharing resources) and external models (revenue sharing, mergers and acquisitions, and open data) are in scope in the quest to create transformational change in transport.

In the UK, public funding has taken on new vigour in recent years. The current government says transport is the “cornerstone of our prosperity,” and has committed £61bn of capital investment until 2020/21. So there is money coming into the UK transport network, but a mix of private and public funds will be needed to shift from “keeping the lights on” and incremental improvements to “changing the world of tomorrow”.

While progress is being made in these areas, a shift to innovative investment strategies and commercial operating models is needed, along with a change in mind-set. Securing investment wisely can change the future for both individual organisations and the wider transport market by setting the tone and pace for change. Without it, getting into the history books may well become a significant challenge.

Companies need to break the shackles of early 20th century infrastructure. Following the same path as world-changers from 100 years ago won’t shape the future of tomorrow. Instead, transport organisations need ingenuity, vision and innovative investment strategies so they can secure their place in Fortune’s 2018 list of companies that changed the world.

Chris Lynch is global transport, travel and logistics lead at PA Consulting.

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