Digital transformation is all about delivering change, so how do you do that in an industry that’s traditionally associated with largescale infrastructures and embedded operational processes?
Danny Gonzalez, chief digital and innovation officer (CDIO) at London North Eastern Railway (LNER), says the answer is to place technology at the heart of everything your business does.
“We firmly believe that digital is absolutely crucial,” he says. “We must deliver the experiences that meet or exceed customers’ expectations.”
Delivering to that agenda is no easy task. Gonzalez says the rail journey is “absolutely full” of elements that can go wrong for a passenger, from buying a ticket, to getting to the train station, to experiencing delays on-board, and onto struggling to get away from the station when they reach their destination.
LNER aims to fix pain points across customer journeys, but it must make those changes in a sector where legacy systems and processes still proliferate. Gonzalez says some of the technology being used is often more than 30 years’ old.
“There’s still an incredible amount of paper and spreadsheets being used across vast parts of the rail industry,” he says.
“Our work is about looking at how things like machine learning, automation and integrated systems can really transform what we do and what customers receive.”
Gonzalez says that work involves a focus on the ways technology can be used to improve how the business operates and delivers services to its customers.
This manifests as an in-depth blueprint for digital transformation, which Gonzalez refers to as LNER’s North Star: “That gives everyone a focus on the important things to do.”
As CDIO, he’s created a 38-strong digital directorate of skilled specialists that step out of traditional railways processes and governance and into innovation and the generation of creative solutions to intractable challenges.
“It’s quite unusual for a railway company to give more permission for people to try things and fail,” he says.
Since 2020, the digital directorate – in combination with its ecosystem of enterprise and startup partners – has launched more than 60 tools and trialled 15 proof-of-concepts.
One of these concepts is an in-station avatar that has been developed alongside German national railway company Deutsche Bahn AG.
LNER ran a trial in Newcastle that allowed customers to interact in free-flowing conversations with an avatar at a dedicated booth at the station. The avatar plugged into LNER’s booking engine, so customers could receive up-to-date information on service availability. Following the successful trial, LNER is now looking to procure a final solution for wider rollout.
The company is also working on what Gonzalez refers to as a “door-to-door” mobility-as-a-service application, which will keep customers up to date on the travel situation and provide hooks into other providers, such as taxi firms or car- and bike-hire specialists.
“It’s about making sure the whole journey is seamlessly integrated,” he says. “As a customer, you feel in control and you know we’re making sure that – if anything is going wrong through the process – that we’re putting it right.”
When it comes to behind-the-scenes operational activities, LNER is investing heavily in machine-learning technology. Gonzalez’s team has run a couple of impactful concepts that are now moving into production.
One of these is a technology called Quantum, which processes huge amounts of historical data and helps LNER’s employees to reroute train services in the event of a disruption and to minimise the impact on customers.
“Quantum uses machine learning to learn the lessons of the past. It looks at the decisions that have been made historically and the impact they have made on the train service,” he says. ”
It computes hundreds of thousands of potential eventualities of what might happen when certain decisions are made. It’s completely transforming the way that our service delivery teams manage trains when there’s disruption to services.”
To identify and exploit new technologies, Gonzalez’s team embraces consultant McKinsey’s three horizon model, delivering transformation across three key areas that allows LNER to assess potential opportunities for growth without neglecting performance in the present.
Horizon one focuses on “big, meaty products” that are essential to everyday operations, such as booking and reservations systems, while horizon two encompasses emerging opportunities that are currently being scoped out by the business.
Gonzalez says a lot of his team’s activity is now focused on horizon three, which McKinsey suggests includes creative ideas for long-term profitable growth.
He says that process involves giving teams quite a lot of freedom to get on and try stuff, run proof of concepts, and actually understand where the technology works.
Crucial to this work is an accelerator called FutureLabs, where LNER works with the startup community to see if they can help push digital transformation in new and exciting directions.
“We go out with key problem statements across the business and ask the innovators to come and help us solve our challenges – and that’s led to some of the most impactful things that we’ve done as a business,” says Gonzalez.
FutureLabs has already produced pioneering results. Both the Quantum machine-learning tool and the “door-to-door” mobility service have been developed alongside startup partners JNCTION and IOMOB respectively.
LNER continues to search for new inspiration and has just run the third cohort of its accelerator. Selected startups receive mentoring and funding opportunities to develop and scale up technology solutions.
Gonzalez says this targeted approach brings structure to LNER’s interactions and investments in the startup community – and that brings a competitive advantage.
“It’s not like where I’ve seen in other places, where innovation initiatives tend to involve ‘spray and pray’,” he says. “The startups we work with are clear on the problems they’re trying to solve, which leads to a much greater success rate.”
Gonzalez’s advises other professionals to be crystal clear on the problems they’re trying to solve through digital transformation.
“Know what the priorities are and bring the business along with you. Its really important the business understands the opportunities digital can bring in terms of how you work as an organisation,” he says.
“We’re fortunate that we’ve got a board that understood that rail wasn’t where it needed to be in terms of its digital proposition. But we’ve put a lot of work into creating an understanding of where issues existed and the solutions that we needed if we’re going to compete in the future.”