Digital Transformation in the Rail Industry

The core value proposition for rail around convenience and active time is rapidly shrinking. Alongside ongoing competitive pressures from the airline industry, low-cost and long-distance bus offerings are now putting heavy pricing pressure on rail operations. Bus operators offer fast and cheap alternatives to train travel, especially for long distances, and boast first- and last-mile advantages over rail as well.

As passengers are demanding door-to-door multimode travel solutions as compared to traditional modality products, competition from the likes of ride- and car-sharing entities offer ultrafast and inexpensive demand response compared to rail options. Electric vehicles, too, hold the promise of more environmentally friendly alternatives, while self-driving autonomous vehicles (robo taxis and “swarm cars”) with dynamic routing capabilities based on commuter destinations are serving to reduce the costs of road travel when compared to those of rail.

Internet giants, OEMs, and digitally savvy startups are all pushing multimode transportation platforms, and offer easy-to-use digital customer interface options that cater to customer demands for seamless integrated planning, booking, payment, and onboard conveniences.

Further, the industry is seeing new collaboration models emerge, with partnerships being forged between new and traditional transportation providers throughout the value chain in both offensive and defensive plays.

Shortened innovation cycles also are adding to the complex mass of pressures facing the rail industry. Here, cross-modal and functional innovation is taking place in a matter of months, not years.

To compete, rail operations need to transform and acquire new digital competencies and talent, as market liberalization has broadly opened the competitive playing field to formidable, digitally savvy incumbents that are foundationally quicker to react and adapt.

The blueprint for transformation draws upon three key digital actions: develop new business models and offerings, digitalize core operations, and build a robust internal digital foundation. For rail organizations, the success model requires the following:

1. Develop New Business Models and Offerings