The “Guiding mind”
If the newspapers are to be believed, we’re finally going to see the Williams Report on Thursday; or - at least - a heavily re-written version of it.
A White Paper is, we’re told, going to recommend the creation of a new “Guiding Mind” public sector arms-length organisation, to be led by the existing Network Rail leadership team Sir Peter Hendy and Andrew Haines.
The Guiding Mind will take commercial risk and will be responsible for appointing operators to deliver tightly specificied management contracts, along the lines of the London Overground.
Network Rail will also be folded into this new organisation.
On Friday, we’ll report on what the report actually says but before we do so, let’s just have a think about the principle of such a Guiding Mind.
What was meant to happen
Before looking to thef future, it’s worth reminding ourselves of the original plan. Back in the 1990s, when the railway was privatised, customers were meant to be in charge through the simple mechanism of payment. Passengers paid train companies for travel. Train companies then bought services from all their suppliers, including Railtrack - originally a private company. In theory (though not in practice), this simple mechanism would ensure that Railtrack delivered a railway that suited passengers; as mediated by train operators.
Something like this:
In theory it worked brilliantly!
In theory, the customer was at the top and thoroughly in charge.
Now, of course, this didn’t work. Train operators had such short franchise terms that they didn’t get involved in the long-term thinking that railway engineer requires; and the contractual framework mandated by Government meant train operators never had the leverage that a buyer ought to exercise over a supplier.
And, anyway, it was bollocks - Railtrack was a monopoly supplier, and they knew that their ‘customer’ had legal obligations to run trains. So it didn’t work - but at least it made theoretical sense. It was a starting point that could have been improved.
What then happened was that Railtrack was nationalised. Suddenly, the fiction that Network Rail were suppliers to train operators was completely negated. Network Rail worked for its paymasters, the Dft. So did train operators (operating to every tighter franchise obligations; as described in this article). As a result, the industry looked more like this:
How it actually works
The passenger was squeezed and DfT took charge.
Alternative models
In a nationalised business with clear political accountability, the passenger is in charge not as customer but as voter.
The obvious model for this is TfL, and it is reported that part of the inspiration for Williams is the success of the London Overground.
TfL serves customers only as a function of the Mayor’s Transport Strategy. The Mayor stands for election on a policy programme, which gets codified into the Mayor’s Transport Strategy. This then gets implemented, explicitly, by TfL. Sadiq Kahn stood in 2016 on a platform of low bus fares and more bike lanes, so that’s been the priority for the last five years. If you want something different, you can vote for it.
That model looks a bit like this:
Accountability flows through votes not cash, but it’s clear - and passengers are at the top.
Sir Peter Hendy, now Chairman of Network Rail, turned TfL into a customer-focused powerhouse by utilising the political power of the Mayor to do so. The fact that every single poster ever printed by TfL has said “Mayor of London” on it has always been a powerful internal motivator: everyone knows to whom they’re responsible, and he knows he’s responsible to the electorate.
It works particularly well in London as the Mayoral election is virtually a transport referendum, as the Mayor has virtually no other powers.
Who guides the guiding mind?
So, roughly speaking, there are two models of successful accountability: commercial and political.
Where does the new guiding mind fit in?
Well, it’s a tricky one.
As far as I can tell, passengers are to be encouraged to continue to hold train companies to account. There will be no equivalent of the “Mayor of London” sign-off on the posters; train companies will have various brandings that give the impression that they are commercial businesses. But will train companies really be able to deliver for customers when key decisions are made by an organisation that is not close to the customer?
Close to the customer
I’m going to repeat that phrase. “Close to the customer”. OK, I’ll do it again. “Close to the customer, close to the customer, close to the customer”. It’s so important.
Organisational structure (privatisation, nationalisation, franchise, concession, blah) is a lot less important than how effectively a message can be transferred from the customer (the person who pays) to the decision-maker. If you look at successful companies, that communication line is treated as mission-critical.
At Snap, I put a lot of effort into automating this process, so it is instant. You can read more about that here.
At Chiltern Railways, we didn’t have the luxury of an entirely online customer base so we needed to use old fashioned techniques. As an exec team, we had a recurring debate about head office location. The finance director, obviously, wanted us to move into cheap rented offices. Myself and many of my colleagues felt passionately that it was critical we were based in Marylebone station. The result was that feedback from customers, relayed to the station barrier staff, would typically reach the directors within a matter of hours as we passed through those barriers most days.
The most valuable company on earth is Apple. Worth more than $2 trillion, Apple obviously cannot be based in a location where its managers can physically see most of its customers every day. But the stores are all operated in-house and employed by Apple teams; with direct management lines to Steve Cook, the CEO. By contrast, the actual making of the iPhones and iPads (i.e. the staggeringly complex, almost miraculous, nanotechnology in which processing chips are packed with 12 billion transistors) is outsourced. Why? Because while the engineering is the most important thing that Apple does, the feedback loop upwards is much less critical. If Apple loses touch with the customers in the stores (even if it retains the relationship with the engineers), it will very competently build the wrong technology and fail.
If Apple restructured themselves based on the forthcoming white paper, the factories would be taken in-house, while the stores would be delivered under short-term, rotating subcontracts.
Who’s in charge?
Being truthful, I’m a tad nervous.
So here’s a very simple test I would like you to check on Thursday when the white paper is published.
That test is this:
Where will the complaints go?
Every, successful, CEO I’ve worked with has made sure that they’ve personally read a sample of customer complaints. It has kept them grounded and enabled them to make better decisions.
Currently, the complaints go the train operators because - as per the first diagram - the original idea was that the industry was to be structured on commercial lines and the operators would be responsive to customers and have the tools to respond.
It’s reported that the new contracts are to be modelled on the London Overground contracts.
That’s fine.
But remember, in London Overground, the complaints go to TfL. If he wants to, Andy Byford can stroll into 14 Pier Walk and flick through a pile of gripes and grumbles about the Overground (along with every other mode, whether operated in house or by private operators) - and have those in the back of his mind when he’s shown a proposed contract variation that comes in from the operator.
If the complaints are to go to the Guiding Mind, then this new structure has a fighting chance of working.
But if the way the White Paper works is that complaints about, say, Thameslink are sent to the contractor for Thameslink - but that contractor has no revenue risk and no meaningful locus over fares, timetables and customer service standards, then it’s highly unlikely this structure will work.
So the thing I’m going to be looking out for on Thursday is where the complaints go, and I suggest you do the same.
What do you think? Is this a reasonable test? What will you be looking out for? Tell me on LinkedIn
LINKS TO OTHER RELEVANT ARTICLES
Williams (p)review part 1 - the issues with the current approach
