Strategy Redefinition of a Transportation Company

Strategy Redefinition of a Transportation Company

Erik No Comment
Innovation

Over the past few years the Dutch train operator Nationale Spoorwegen (NS) was not performing as was expected from them.

For example, they ordered high-speed trains which fell apart during a snow storm, they have a shortage in trains (and seats) that led them to some ‘creative‘ solutions as they like to call them and they played an unfair game for a tender in the south of the Netherlands.

All together this led to part of the top management leaving the company and the need for a revised strategy. This week they presented this revised strategy and there are some interesting things (and some open doors) in it.

The revised strategy builds on three parts:

  • Better performance on the main lines (open door, there is still room for improvement and there will probably always be so they should always be striving for optimal performance)
  • Taking care of the stations (interesting, they want to improve the total journey by making the stations more attractive)
  • Contribute to a better door-to-door journey (interesting since they are cutting away almost all of the transport that is not related to the main lines)

This is quite a shift from the previous strategy, where it was mainly about being the biggest and being in control everywhere, either through their main name NS or through one of their subsidiaries such as Qbuzz or Abellio.

With the new strategy they adopt a more open strategy, focussing on co-operating with the other partners such as the network operator and the competitors instead of trying to do everything themselves.

Quite a bold move, since it also means that they are saying goodbye to certain parts of the company and so a large part of the staff. Not very surprising that not everybody is happy with this, including the work council.

Still, I think that it is a wise decision to step back and focus only on what they can do best and leaving other parts of public transport to other companies. Only by leaving it all to them the trust between them can grow, since it can be hard to work together and trust a party which is also bidding on a tender you’re involved in in another part of the country. The added trust can then be used to create the better door-to-door journey

So all together I think it is a wise move.

One final thing which is out of their zone of influence and which I believe is a bit weird is that their shareholder demands that 7% of the profit is paid to them each year as dividend. This is not so special for normal companies and maybe a bit low, but it’s different when you consider that the only shareholder is the Dutch State (in the form of the Ministry of Finance) and that they also see that the NS has a social function (so making sure that the Netherlands has an affordable public transportation system).

My personal opinion on this point is that I believe that the largest part of the profit could better be used by NS to reinvest in their company, for example by buying more trains or by not raising fares, instead of money flowing to the state which can them maybe invest it in the railroads. Or maybe not. Depends on where the money is needed according to the State.

I am specifically not saying here that there should be absolutely no dividend payments, but I personally think that a little less could also be fine, and that the NS should use most of their profits to improve their company.

Nevertheless I still think that the strategy is a wise move and I’m curious about what the future will bring for them, as
 the first changes are already happening.