There is a spectrum of innovation. At one end of that spectrum there’s micro-innovation, which you might call kaizen or continuous improvement, where everybody has little opportunities to make small improvements to the way that they work. The power of that is enormous but it’s accumulative. It needs deployment across the entire organisation as it’s more of a way of working than a ‘big light bulb’ type of idea.
And at the other end of the spectrum there are transformational interventions, such as digital communications. Usually those are technology driven, or at least technology enabled. So, for example, I would describe this as a macro- innovation, something like just-in-time delivery systems.
You may say, “Where’s the technology in a just-in-time delivery system?” But the way you implement that system relies, to a certain extent, on technology – particularly with certain supply chains.
The more obvious macro-innovations are things like electrification, new approaches to rail and switch designs and, of course, the impending signalling changes. Those are transformational macro-changes.
So how is Network Rail going to deliver changes in CP5 and beyond? I think a lot of what we have to do in CP5 is to put the foundations in place for the good things that are going to happen in CP6. It’s absolutely about innovation, but it’s about micro-innovation as much as about macro- innovation.
At route level
The headline-grabbing ideas are always macro- innovations. However, a huge amount of the improvements we’ll make are the ones that don’t attract the headlines but are more about people working on improving how they work every day.
Innovations, of course, offer plenty of opportunities but also offer risks, and so one of the challenges with innovation is how you manage the risks. How do you manage the risk in such a way that you can spot the potential failure modes in advance of you implementing them? You have to put corrective actions to the potential failure modes and controls in place, protection controls and assurance controls, so that as you make those changes, you’re doing it in a controlled way.
It’s very much this movement into the direction of actually capturing and harnessing more of
the employees brain power as well as their hand and muscle power to contribute to the business. Many of our routes are already starting down this journey.
Phil Verster (route managing director LNE), for example, is championing this in the North East. It’s all about getting down on the shop floor, giving people the tools and encouraging them
to figure out ways of how they can improve the efficiency and the effectiveness of their business. Sometimes they can go so far with everything that’s inside their control, but then they discover actually there are things that they rely on from other parties that are causing them not to be able to make the next available improvement.
What’s really important is that the management then steps into the space and says, “Thanks for the update, that’s great, you’ve done this and that, I can see this is a problem, I’ll take it on to help you go and fix it.” That way, you generate a huge belief that we mean this because they can see management taking action to help them, and that’s really important.
The other thing that’s really important is that management spends time to promote good practice. Sometimes it’s easy to talk about innovation but if leaders then go off and do something else then the workers are very depressed and will quickly work out that management doesn’t mean it. But when we spend time on it, we’re telling people we think it’s important. So the leaders that are doing this work are role-modelling the importance of innovation.
I went up to Manchester recently to judge Martin Frobisher’s innovation competition day. He’d put up a few prizes and organised a big marquee. There were individual stands with two or three people round each. I walked around them all. They each had five minutes to get their point across – we timed them.
Martin (area director LNW) helped me judge and we went around all the displays and there was a fantastic fund of ideas. The best ones, in many cases, were the simplest. For example, one of them came up with a special kit containing everything to make temporary, quick fence repairs so that, when you’re out there, you’ve got all the right tools in place to get the temporary repair done – you can always do a more permanent job later. He developed it for his own use and now he’s sharing the idea.
There were other ones that were a little bit more technical but still fairly simple. One was an ultrasound sensor on two plastic poles and a lamp. As well as having a lookout, you put these two poles up to mark the boundary between the safe and unsafe parts of a site. If anybody breaks the ultrasound beam, all hell breaks loose with lights and sirens. It’s all very cheap, all off the shelf parts, and has no big lead time. It’s a great idea.
This just happens to be one of the more high profile examples but I think we are making huge progress on realising that the next step of this journey has to embrace this innovation across the spectrum.
The pace of change
We’ve got to be very careful, though, that we don’t flip from being too slow to too fast. There are some reasons why we are very cautious, which I don’t need to explain, and I think actually that the record we’ve managed to achieve in the UK railways demonstrates that we haven’t got it all wrong by any means.
If you do the international comparisons on efficiency, on punctuality, on safety and so forth, we’re in pretty decent shape as a railway system and as an innovative operator. Therefore I’m very careful not to say that what people have been doing is all wrong – it isn’t. But I do think we can do better. While we want to accelerate the pace of innovation, we need to make sure that we complement that by putting in place the right set of controls, so that we are able to innovate faster but without increasing any level of risk that we take in terms of what the customer faces.
We can take some business risks, but we always protect the customer from the consequences of those risks. Yes, we might spend a bit of money on a project or two that doesn’t work out but, if you look at the portfolio of things we undertake, because of all the positive outcomes, we are willing to take some risks and have a few unsuccessful projects. We understand that is one of the overheads of being innovative.
But you have to put in place introduction protocols, and criteria, and good judgement on the part of the people doing that, to make sure that those risks are contained. We understand them, and we deal with them before they get deployed to the point where they impact on our customers.
Internal or external innovation
I think innovation from outside is really successful where there’s partnering going on, collaboration, with somebody at the operational level.
A really good example is micro-piling. We’re working with a fantastic supplier on this. We’re working on it together, developing it together, and so there’s ownership inside the company from the team that’s using it and sponsoring it. There’s a really good understanding of what’s needed, both from the clients’ side and from the supplier, so by the time it’s got some traction in the first applications, it’s a lot easier to absorb into and get broad deployment.
So we’re open to partnering. I think that David Higgins, in his time here, did a terrific job on putting in place the whole attitude of the way forward is collaboration. It’s not about: we know what we want, put it out for a bid, choose the cheapest supplier and off we go. That is not the modern way of working. The modern way of working is here’s a broad outline of what we want, talk to us about how you can solve our problem and tell us what price you want to offer for it.
This is really true, of course, of the major infrastructure projects because we can see huge proficiency savings if we allow the people to come in early in a project and help us co-design it. But that applies right down to micro- innovation, if people collaborate then the path to implementation is a lot smoother.
I heard a tale of a bridge replacement job which a contractor was tendering for a couple of years ago. They said, “Well, we’re naturally going to put in an offer in accordance with the specification. However, we can think of an alternate way of doing it that could to save half a million pounds. But then it becomes a non-compliant bid and they just won’t accept non-compliant bids.” Their opinion was that our mind was closed to the non-compliance, even if it saved money.
That’s the process that used to exist before the early supplier selection and then collaborative development of design specifications which we’re now following. Simon Kirby led the implementation of this in Infrastructure Projects. I’m not saying it would never happen now, because we’re a very big organisation, but I think the model that we’re pursuing today is very different.
One of the areas where we are doing a lot of work is in the modular construction of hardware, the transition from everything being built in-place to modular pre-fabricated solutions, the so-called ‘plug and play’. The economics have shifted very much in favour of doing that because, even if it’s more expensive than the traditional route, it’s quicker. With the problems we have getting access to the railway, these types of construction methodologies are going to be hugely attractive from a financial point of view.
So I’m very excited about that, and I think we’ve got lots of examples of where we’re using more pre-fabrications, and those really come about by working together. It only started to come in towards the end of CP4 so we are still at the beginning of that journey.
The other big thing is, of course, the high output machines – whether you’re talking about plain line renewal or whether you’re talking about the overhead lines that we’re going to do on the Great Western electrification. Again, these are big innovations. Some of them are not easy to implement and it’s a tough learning journey.
These machines are big investments. They are the right way forward, but you have to build into the plan sufficient time to debug, develop, fine tune, refine. For example, in my previous life (at Ford motor company), when we started manufacturing a new model, it took us about five minutes to produce each car. So we thought: “How are we ever going to make money producing a car every five minutes?” The answer was, we had six weeks to improve our production methods and get it from one every five minutes to one every 52 seconds.
We’re on the same journey here, it’s just over a longer timeframe. I think Steve Featherstone is doing a nice job for us on renewals on raising the productivity and the output of our machines. He has come up with lean methods and is looking at better ways of working, as well as machine reliability. He looks at all the root causes, what’s causing us lost output, planning, getting the machines on site, access for the trains, all the things that can wrong and working diligently on every aspect of it to grind out waste.
For example, and again this is all about innovation, the approach is a mixture of two strategies. One is where we can get longer possessions to get better productivity and to get better outcome, to reduce the overhead of the setup and takedown, as we did at Warrington and on Wessex. But we’ll never get enough long possessions to do all the work we need to do.
So, at the same time, the team is figuring out ways of working in parallel rather than sequentially so that we can get more pre-work done before we actually open up the site for doing the work.
Once the machine is up and running, we can make it go a bit faster but that’s not where the big opportunity is. The big opportunity is making sure that, when we get access, everything’s in place. All the materials are in place, all the people are there, all the machines are there before we start threading new rail. So we cut out five or six sequential operations and make them parallel.
For example, we can put in temporary devices a week in advance then, when we’re actually on site, we just throw a switch. We’ll tap into the knowledge of people who’ve been doing this for a long time, and then bring a few experts in to help them do things. That’s a good example, actually, of the combination of micro- and macro-innovation.
We’re essentially on the path of increasing mechanisation and automation, and the reason for that is not dissimilar to what’s happened in the manufacturing sectors. By applying technology to the design of machines and to the control of machines, we can get higher productivity, we can get higher output, and often we can get a better quality outcome, a more repeatable better quality outcome.
Looking after our people
Of course, I don’t personally believe that any of this will ever replace workers. Instead, it moves workers higher up the value chain so that the machines are doing more of the basic work, and the workers are doing what humans are really good at which is the dexterity work and the work that requires human intelligence.
We’ve got to reduce the amount of time people are doing a particular operation. Over the length of their career, they’ll probably need to move on to a less arduous physical job at some point because of the physical stress involved. So what can we do? Well, for example, we’ve got some very nice little fixtures now that takes some of the back-breaking work of actually holding grinding machines and that provide more precision to the grinding operation.
So those are early examples, we are still working on others.
Research and development
This kind of research is important for our future. When I first started in this job, I campaigned for
a research and development fund. We weren’t successful in getting all of the money we asked for, but I’m not surprised and I’m not disheartened. For CP5, we have a fund of £50 million so we’ve got sufficient money we can get started. It does require us to match the funding, but there are plenty of opportunities for us to do that. We’ve got a project portfolio assembled to spend that money on.
I think it’s really important, if we want to have a sustainable railway, to invest in R&D. If you look at the amount that we were investing as an industry in R & D, it doesn’t really compare with the benchmarks. We are at a very low level, well below 1% of revenue.
In the automotive industry, we’d typically spend 3.5% of revenue and that’s because we were a very big company indeed. We were approximately 15 times bigger than Network Rail, so we had economies of scale. In the aerospace industry and in the higher value industries, and I think railways is a high-value, technically-intensive industry, the benchmarks are typically somewhere between 3 and 6%.
So the conversation I started was: let’s have a big argument in a few years’ time whether it should be 3 or 6%. But can we at least move it from 0.3%? And make a start before we have that big argument?
So we have made a start, we have good support from the ORR and from the DfT. We also have a lot of interest from BIZ because, as we’re spending all this money on the railways in the UK, there’s a real opportunity for the UK if we invest wisely.
Now, there’s no way Network Rail can fulfil its duty of responsibility by favouring UK suppliers, causing the railway to be inefficient compared with the choices we have for international suppliers. Of course we can’t do that, but that doesn’t mean we can’t look at ways of encouraging UK suppliers to be competitive and to be successful in those bids in a fair and open way. So we are supporting initiatives such as the transport Catapult, which has been set up by BIZ and by the TSB, by co-funding projects using the money that we have to help bring in more government money and other partners’ money.
We’re also bringing in the SMEs, because one of the great things about the catapults is the lovely catalyst for academia, the SMEs and the big tier- ones and OEMs to work together.
We also have innovations outside the catapults and other spaces. We have academic partners, we’re continuing to build those up, and we’re gearing up to benefit from European funding.
The European railway industry tended not to talk to us very much, but that’s changing quite a lot. We’ve had people coming to the UK to learn about our rail interface expertise for quite a long time but, interestingly enough, we’ve got people coming to talk to us now about our asset management approaches.
People have discovered that we’ve actually got quite an innovative approach to asset management that is much more scientific rather than based on some very simple intervention intervals or ‘find and fix’ which is the alternative method that some companies use. We still use find and fix, but we also have an overlay of monitoring degradation rates and looking at how we predict when we will have to intervene. Remote condition monitoring (RCM) and deployment is a part of that, but it is only the beginning of harvesting the benefits. After the beginning of RCM, you find out where your problems are and you intervene before they fail. But as you build up all the data, you start to see the characteristic curves so that you can actually see what’s happening long before you reach the threshold of failure and you can then design your maintenance intervention techniques.
When you’re doing renewals or enhancements, you can feed that information forward to the supply base and say, “Actually we want to change the design spec because now we know a bit more about the degradation rates.”
I think that we are leading the European railway industry in this. I don’t have the data to be certain, but the empirical evidence is that people are coming to us to learn, and that’s a good sign.
We are able, with our very small consultancy company, to win contracts against significant and very competent international bidders, again demonstrating at least some evidence that we’ve got a position of commercial advantage to some of our clients.
The best customer a supplier can have is a demanding customer. So, for us, the best customers we can have are demanding train operating companies, because ultimately they make us better. The more demanding customers are, the better you become. You may curse them at the time, but they make you better.
And so if we become a more and more demanding customer to our supply base, we’ll be a bit of a nuisance and there will be lots of challenges although, to be honest, the Brits like a challenge. We have lots of great engineering companies in the UK and we will help them win business not only with us but around the world, so that’s the opportunity for UK plc with this innovation agenda.
Even when the equipment is not made in the UK, such as high-output plain line machines, we have a possessions and access regime that these machines are not designed for. They’re designed for much longer possessions, so we are having to be very innovative about where we deploy them to get the value out of them. At some point in the future I would like us to be in a position where we are more influential in the design of some of these machines, and are able to shape their specification in a way that is helpful not only to the UK, but also to the rest of the European industry.
I’m interested in discovering ways of changing the spec that they can not only sell to us on a customised basis, but also sell to all our other customers. Why am I interested in that? Because then everybody shares the overhead of the R&D, tooling and development work on that machine. So we’d enjoy lots of economies of scale by buying machines from Germany, Austria and Switzerland because they’ve been designed for use across the European railway network, and we’d get much cheaper machines as a result.
Also, if we can continuously improve those machines and adapt them to our more restricted access environment, they might be more interesting for other rail networks as they become busier.
As to who operates this expensive equipment, I think that depends on the business case and on the length of our relationship. We are moving more and more towards longer-term relationships with our suppliers, both for renewals as well as for enhancements. We went to a lot of trouble to make sure that there was good continuity and visibility moving from CP4 into the beginning of CP5, and that has worked out very well.
This forward visibility isn’t just for five years. The control period process gives us a high degree of certainty over five years, but doesn’t mean we know nothing about the next five years. Of course it doesn’t. We know quite a bit about the following five years because many of the projects that are approved for CP5 are ones that will not be completed until CP6. So we can be reasonably sure when we submit the initial plans for CP6 that many of those projects that are in the middle of implementation will continue to be funded.
Alongside this, we have a long-term technical strategy that is shaping our view of how innovations should develop. The work that we did on the initial industry plan for CP5 went way beyond five years – it was a forward-looking plan of which CP5 was merely the first tranche.
Richard Parry-Jones, chairman of Network Rail, in conversation with Nigel Wordsworth.