Strategy

A Privatisation Success Story? How Breaking Up Japan's Rail System Made It Stronger

Japan is renowned for its rail network, especially the Shinkansen (bullet train). However, the story of success is full of ups and downs. This YouTube video provided an interesting historical overview.

Key Takeaways

• Although Japan is famed for its high-speed rail, conventional rail does much of the heavy lifting, catering to everyday needs.
• The system is very reliable (with average delays of just 1 minute), frequent and has a comprehensive network, fostering confidence in the system and making it competitive with driving for many trips.
• Despite the success of the Shinkansen, Japanese National Railways soon found itself in a financial mess with huge debts. It was widely believed to be overstaffed, inflexible in its strategy, and bloated in bureaucracy.
• The financial mess led to the privatisation and breakup of JNR in the 1980s into nine separate entities.
• The privatisation was based on several principles, including:
  • Division by region.
  • Balanced inheritance across operating entities.
  • Government subsidies for islands.
  • A separate freight company.
  • Separate Shinkansen ownership
• Privatisation led to the removal of 90,000 employees, but despite this, the frequency of service increased, serious accidents halved, and improvements were made to stations and rolling stock.
• The improved financial position led to lower subsidies and a lower rate of fare increases.
• The private rail operators also began leveraging land around stations for retail, hospitality and residential developments, now providing around 20% of revenues.
• However, the system faces challenges with a declining population, leading to declining patronage and higher subsidies.
• The video believes that the success of the railway system is not just due to privatisation itself, but also to the particular structure of privatisation.
• The article concludes by arguing that the foundation of Japanese rail's greatness was the government's initial willingness to invest a tremendous amount of money to develop the network.

What next?

Can you draw lessons from Japan’s rail experience in reducing bureaucratic bloat, leveraging land and the system's structure that can be replicated with or without privatisation?

Governance

When Estimates Go Off the Rails: Lessons from Chicago's Red Line Budget Disaster

Unfortunately, transport infrastructure project cost estimates frequently blow out. Here is an example from Chicago. What went wrong, and what lessons can we learn?

• The Red Line Extension (RLE) is a 5.5-mile project with four new stations, a multi-story parking lot, a new rail yard, and a heavy-rail maintenance facility. In total, it is projected to cost US$5.75B.
• The RLE will be the most expensive transit project per mile and most expensive per new passenger gained in North American history. Following the national average, it would cost as little as $2.4B
• The Chicago Transit Authority's (CTA) cost estimates have skyrocketed. In 2016, the project was estimated at $2.3B. In 2022, it shot up to $3.6B. In July 2024, it was $3.9B. In August, it was $4.3B, then 12 days later, it was $5.3B, and finally, in October, it reached $5.75B. A 60% increase in seven months!
• The worst error appears to be in the estimates of engineering costs. CTA had only budgeted for $280M in March 2024. Seven months later, the cost was up by nearly a billion dollars to $1.23 billion.
• The agency also did not factor in contingency and financing costs until the October 2024 revision of its estimated budget.
• If all the budgeting failures are totalled, 85% of the cost increase is due to administrative oversight failures.
• Meanwhile, Chicago still has an urgent need for other rail improvements. For example, 77% of the Forest Park branch of the Blue Line is under a slow zone for needed track, power, or structural improvements.

So what can we learn?

The CTA has a significant issue in the way it estimates the costs of projects and in the price that projects cost. It needs to be taking two actions:

Firstly, it needs to improve its governance around project costings to ensure it includes all costs, with independent scrutiny built into the process to stop the system from being abused to initiate projects.

Secondly, it needs to examine what is driving its inherently high construction costs and what can be done to bring them down. A good place to start would be CTA’s State Capacity. Does it have the right people and expertise to efficiently procure and manage this project? So far, the answer appears to be no.

What next?

How good is your governance for estimating the cost of projects? How are the inherent costs of your projects stacking up against benchmarks, and are you confident in your capacity to manage large projects?

Technology

Smart Infrastructure vs. Sound Infrastructure: Balancing Innovation and Fundamentals

In the past few weeks, many articles have been published about the future (and present) of transport facilitated by new and existing technologies. While some of these articles rightly focused on improving public and active transport, there was also a lot of noise around the potential of shiny new technologies (e.g., flying taxis) or ones that make driving more attractive, conveniently ignoring the problem of induced demand.

Unfortunately, the problem is exacerbated by the new technologies' greater excitement in the media, which tempts leaders to jump on the bandwagon.

So, as transport leaders, how do we separate the snake oil from the gold nuggets?

It is useful to agree on priority objectives with political leaders with an overall vision of improving the transport system and the key pillars that will deliver it. Here are a few key pillars:

Building solid infrastructure foundations. To have smart infrastructure, you need to have infrastructure. Many jurisdictions lack good infrastructure for public and active transport. By all means, we should have smart infrastructure, but we should not lose focus on building the infrastructure needed.

Service quality. For public transport to be successful, it needs to be accessible, quick, frequent, reliable, and resilient so that it competes successfully with the car. By all means, use technology to enhance service quality, but don’t invest in technology at the expense of providing high-quality services.

Efficient operations. Technology provides the opportunity to make public transport more efficient, e.g. autonomous trains, freeing up money to invest in things like improving service frequency.

Efficient construction. Many jurisdictions are looking at ways to reduce the cost of new infrastructure. Technology that supports this goal may have a good cost-benefit case.

Efficient asset management. Many jurisdictions still have immature asset management practices, resulting in increased maintenance costs and deteriorating services. Technology can help to inform better asset management decisions.

In addition to ensuring these pillars are in place, robust decision-making processes can ensure the proper evaluation of new technologies. Not only does a new technology have to stack up on its own merits, but it also needs to stack up against alternative investments.

What next?

Are we in danger of getting distracted by flashy new technologies? Should we focus on getting the foundations right - good active and public transport infrastructure with frequent and reliable services? Should we use new technologies to prioritise public transport efficiency, delivery, maintenance and decarbonisation?

Research

From Policy to Practice: What do we know about zero-car households?

In a world where we are trying to reduce car use, increasing households without a car is seen as a panacea to aim for. This literature review into zero-car households looks at the evidence for what works.

Key Takeaways:

There is a research gap. Few studies differentiate between "car-free" (by choice) and "car-less" (by constraint) households. More research is needed on voluntary car-free households.

Geographical Differences. Significant variation exists in car culture and research focus across regions:

• Northern Europe: Emphasises sustainability benefits
• Car-centric nations (e.g., US): Focuses on negative social impacts of car-lessness

Theoretical Weakness. There is no single, unifying theory of car ownership and zero-car households in particular.

Micro-Level Factors of zero-car households:

• Consistent predictors: Lower income, younger age, and earlier life stage
• Pro-environmental values showed NO correlation with zero-car households
• Personal benefits (convenience, cost) outweigh environmental concerns

Meso-Level Factors:

• Social norms vary by context but are influential

Macro-Level Factors:

• Compact, walkable neighbourhoods are associated with more zero-car households
• Younger people self-select urban centres with alternative mobility options
• Restricted on-street parking increases zero-car households in urban areas

Effective Interventions:

• Car sharing significantly supports those contemplating zero-car living
• Policy interventions like reduced parking standards, increased parking charges, and car use restrictions work but may be unpopular
• Combining parking reductions with quality-of-life street improvements increases acceptability

What next?

Do you have comprehensive strategies for car sharing and parking?

Blog

The State Administrative Capacity Crisis: Reimagining the Public Service of the 21st Century

My blog this week looked at state administrative capacity and why it is in decline.

Key Takeaways

State administrative capacity is in decline due to structural and systemic issues:

• A lack of interest in administrative capacity from the public or political leaders.
• Political workarounds that mask underlying systemic inefficiencies.
• Short-term cost-cutting measures that undermine longer term performance.
• Employee protections that protect poor performers while driving away high-potential staff.
• The high turnover of senior public servants.

These issues create a number of symptoms of decline in administrative capacity:

• Outdated organisational hierarchies.
• Weak performance management.
• Bureaucracy imposed on staff.

Traditional approaches to reform are not working.

• Governments should consider more radical reforms by removing poor performers and replacing them with far fewer high achievers alongside flatter organisational hierarchies and streamlined bureaucratic processes.
• This approach will deliver significant savings and increase administrative capacity for the long term.
• The main resistance to reform will come from the unions, making this a reform centre-left governments are unlikely to pursue. However, the potential savings and capacity improvements make it an attractive reform for centre-right governments.

What Next?

How can you support better administrative state capacity?

Leadership

Leading Without Layers: Creating Nimble Transport Organisations

In my blog this week, I discussed the need to reduce organisational hierarchies in large government departments, including transport departments, to improve state administrative capacity. Therefore, this week, I focus on some ideas to achieve this:

• Distribute decision-making authority based on expertise rather than position. In transport, many decisions are often made by senior people who lack the understanding to make fully informed decisions.
• Make cross-functional collaboration the norm rather than the exception
• Reduce management layers while maintaining accountability by:
• Expanding spans of control (more direct reports per manager)
• Implementing robust performance measurement systems that focus on outcomes
• Creating clear escalation paths for decision conflicts

Practical Implementation Steps:

1. Start with a comprehensive analysis of your current decision flows

2. Identify which decisions truly need senior approval versus those that can be delegated

3. Pilot new structures in specific departments before scaling

4. Invest in leadership development at all levels

5. Develop robust communication systems to replace information that previously flowed through hierarchies.

What next?

Is there one thing you can delegate immediately?

Innovation

Dual-Power Progress: How Hydrogen Cells and Battery Capture Are Greening Freight Rail

There is a lot of research going into decarbonising freight rail. This article looks at progress in Canada, where they have begun using hydrogen cells and batteries simultaneously. Starting with a 35-year-old train, the diesel engine was removed and replaced with hydrogen fuel cells and the fuel tank was replaced with batteries which captured energy from regenerative braking. (Thanks to my former colleague John Garrad, for sending through the link).

Tool

The 33 Indicators: Mapping Milan's Pedestrian Experience in Detail

​This tool is a Multi-User Walkability Route Planner. It focuses on assessing the level of walkability in the city of Milan (Italy) according to the unique experiences and needs of different users. A total of 33 indicators provides a detailed description of the urban environment and the characteristics impacting walkability, such as physical features of pedestrian pathways (e.g., quality of footpath, pedestrian crossings, presence of furniture and greenery), social and behavioural aspects (e.g., social interaction, driving behaviour, street life), environmental quality and other quantitative parameters that describe the urban pathways.