Mind the gap: transport firms want new skills

The 2015/16 Barometer on Change reflects some key trends emerging across the transport sector, with the three key themes resonating across the sector:

  • Cost reduction programmes continue to prevail. However, while cost reduction remains a priority in slimming down corporate back-office divisions, and in more general terms for transport operators, the additional cash flow (from, for example, the disposal of non-core assets) is increasingly being used to facilitate growth.
  • Acquisition and consolidation are achieving economies of scale that will help to position for growth. The growth agenda reinforces a focus on critical challenges, including operational efficiencies for repeat delivery of “commodity” products or services, and harnessing customer data for personalisation of services and revenue “upselling”.
  • Building delivery capability remains vital, with most organisations seeking to achieve more consistent delivery of infrastructure and change, supported by clearer prioritisation and alignment of initiatives to business plans. 

Cost reduction is still a priority for many transport firms, but the focus is changing

Whilst revenue for operators was constrained through the recession, longer term public sector capital investment has generally been protected (albeit with a lower than desired delivery throughput). Existing cost bases continue to be consolidated – not just to protect profit, but to free cash for greater investment in new products and services, or to enhance the quality (operational efficiency or customer value) of those that already exist.

For parts of the market, acquisition and consolidation are key enablers of growth

Across industry, 15% of all respondents expect to further acquire or consolidate in the coming year, which is up from 9% in 2014. This increasing appetite and favourable market conditions are clearly reflected in the transport sector. Most visible in aviation operators and Tier 1 infrastructure providers, this has led to increased market share, synergies through integrated or new service offerings, and delivery efficiencies with economies of scale. The collapse of some logistics providers is likely to be followed by further consolidation due to the overcapacity that remains in the market.

However, the sector’s drive for growth is placing renewed focus on the barriers to growth – such as the skills shortage, and the need to harness data

There continues to be a low degree of confidence that firms have the skills to achieve their strategies; 97% recognised they needed new or additional skills. The transport sector clearly reflects this gap, where huge demand exists for engineering and change skills. Particularly in a time of rising demand, coupled with the need for “continuous change”, this will increasingly prove to cap on delivery throughput.

This is already visible in rail and surface infrastructure providers, with visible de-scoping or delaying of capital investment portfolios, whilst aviation operators are seeking to prioritise their transformation activity more robustly.

Meanwhile, the 2015/16 Barometer on Change identified that only 11% of businesses believe they are harnessing big data to its full effect in understanding their customers. Many organisations are trying to leverage customer data to yield returns faster than is possible through new capital investment. For infrastructure providers and operators, this often means delivery efficiencies through increased output from existing assets. Where customer choice and competition is fierce in aviation and logistics, there continues to be a focus on “upselling” to drive revenue with a low cost of sale, thus also protecting profit.

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Jason Byrne Partner