Back on the rails

DSB CASE

Few consulting reports have created as much attention in the Danish public space as Analysis of Efficiency Improvements in DSB (Analyse af Effektivisering af DSB). The report was the work of QVARTZ, and concluded that the Danish state-owned train operator could reduce costs by as much as DKK 1.2 billion without impairing the quality of the train product. The report was published in 2011, at a time of significant turmoil for the company, which struggled with unprofitable business in Sweden and delays in the delivery of new IC4 trains from Ansaldo Breda. These issues, the resulting financial turbulence and the mostly unfounded sentiment that train delays were the rule rather than the exception translated into significant image issues for DSB alongside substantial political pressure.

million passengers travel with DSB every year

are employed in DSB

billion DKK is the approximate annual turnover for DSB

One Healthy DSB

Based on the findings in the report, DSB’s management team committed to realise combined savings of DKK 1 billion over the following few years and vowed that the cost reductions would not affect the passengers. The Ministry of Transportation as well as the transport spokespeople from most political parties accepted this ambition, but also signalled that their patience with the troubled train operator was wearing thin.

Shortly after, in May 2012, Jesper Lok became the new CEO of DSB. He and his management team almost immediately launched the audacious plan One Healthy DSB (Ét Sundt DSB), aiming to realise the announced savings while not only keeping operational performance constant, but actually improving the product. Public faith in DSB had to be restored, and it had to happen by delivering better train services at a lower cost to the taxpayers. One Healthy DSB became the rallying cry for one of the most remarkable turnarounds of a Danish company in recent times.

On a fast track for change

One of the most tangible signs of change came quickly: DSB’s posh headquarters close to The King’s Garden in Copenhagen, the operator’s home base since 1926, was put up for sale. In its place, DSB gathered its 1,200 administrative staff in a less prestigious but more functional domicile in Taastrup. It was a new start. Other visible changes were a more modest branding profile, the closing of DSB’s travel agencies and outsourcing of IT services.

Next, Jesper Lok and his team set out to define The Contract with Denmark (Kontrakten med Danmark), creating a systematic and detailed breakdown of the ways in which DSB contributed value to the Danish society, as well as the associated costs. This work led to a fundamental revamp of the performance management set-up of the company; each organisational unit had to demonstrate how they contributed to DSB’s main priorities, and each investment had to be linked to one of the key performance indicators that the management team had identified as most important. Of special interest were improvements that led to both lower costs and improved reliability.

This meticulous work resulted in sound operational improvements. Between 2012 and 2013, productivity was boosted by 9%. Elaborate efforts were made to encourage the passengers to use DSB’s digital ticketing solutions; an evident example of an initiative that couples increased traveller convenience with lower costs for DSB. Improved collaboration with Rail Net Denmark (Banedanmark), who is responsible for tracks, signals and safety systems, resulted in significant reliability improvements, which in turned reduced costs related to expensive unplanned auxiliary recovery activities, such as interim bus services.

In addition to these noticeable initiatives, DSB addressed a number of cultural areas as well. The municipal rail network in Greater Copenhagen, DSB S-train, was merged with the InterCity train division, creating one brand and one organisation. The management team was reorganised and new talent brought in at a pace that was unprecedented in a company with a tradition of life-long employment.

Better train services at a lower cost

By the end of FY2014, DSB could declare that the objectives of One Healthy DSB had been met. The Danish staff had been reduced by more than 1,200 employees. The result before taxes ended up at a healthy DKK 670 million, an improvement of more than DKK 1 billion compared to 2011. In three years, DSB had reduced its interest-bearing debts by almost DKK 2 billion. DSB had, in other words, become a more competitive train operator, standing on a more stable financial platform.

The other promise from One Healthy DSB concerning operational improvements had been met in an equally impressive fashion. The punctuality for 2014 was the highest ever for the S-train services: 97.3% of the trains arrived on time.

With 94.1% punctuality, the InterCity/regional traffic experienced its second-best year ever. This brings DSB into a league with the best national operators in Europe, so fellow Danes; we might as well quit grumbling about trains being late.

The improved operations, together with infrastructural improvements, have led to consistent passenger growth and significantly improved the corporate image. In 2011, DSB seemed to be heading towards disaster, but in three short years, the company shows clear signs of being back on track.

%

of long distance and regional trains have a max of 5.59 min. delay

%

of S-trains have a max of 2.29 min. delay

What’s in store for DSB?

Jesper Lok took many by surprise when he announced his resignation from DSB after the summer of 2014. He has been acknowledged for the impressive results created in such a short period of time.
There are certainly still challenges ahead for DSB: The IC4 train situation has not been fully resolved, DSB is operating on a temporary contract with the Danish state and negotiations with the authorities are challenging. DSB has promised large contributions to the public goal of doubling doubling of public transportation passengers by 2030. There is significant track work planned for 2015-17, leading to loss of revenue and unhappy passengers. And in the not-so-distant future, DSB will go through the procurement of new electrical trains, a complicated process with little room for error.
These are some of the challenges faced by Flemming Jensen, Jesper Lok’s successor and former EVP and COO at SAS, together with the management and employees of DSB. However, we hope that they can find comfort in the fact that the company is in many ways already back on the rails and in better shape than it has been for a long time.