The Case 2015
Following New Tracks
DSB Today
For almost two years, Stig Pastwa has been the CFO and part of the Executive Board of
one of the most important companies in Denmark. DSB is the backbone of the Danish
transportation system, and a company that is vital for providing society with the necessary mobility to enable a dynamic and efficient job market. Mr. Pastwa has experienced
a rough period and during the next couple of years, DSB will face one of the most challenging periods of its 130-year-old history. The political demand for passenger growth
is extremely ambitious, the customers’ demands are ever increasing, and the reputation
of DSB in the Danish population is less than perfect.
From chaos to turnaround
It has been three years since a radical shift occurred in DSB. At that time, DSB was in a
deep crisis after economic chaos, which ended with a replacement of almost all of its
top management. Fixing the bottom line was the number one priority. Therefore, the focal point was on recovery and re-establishing profitability. The recovery strategy included cost cutting as well as reductions in the number of employees. After two years, DSB
achieved profitability again, and posted profits of 483 million DKK in 2013. Therefore,
today, with DSB “in balance”, the focus has shifted from turn-around to future profitable
growth through improving the customer experience.
Net Profits of DSB (in DKK million)
483
338
50
2009
2010
2011
2012
2013
in the rail infrastructure in Denmark, which will result in disruptions in scheduled traffic,
and this will further increase the importance of managing customer expectations.
Operating a railway in today’s Europe has the unique feature that it is typically, when
viewed alone, a bad business case for the actual railway company. However, railway operation has some very significant synergies, which make it very beneficial for society as
a whole. An efficient railway system is crucial for a modern European society, and therefore European governments typically subsidize the railway companies heavily. This has
resulted in a complex ownership structure for DSB, which means it must navigate within
the limitations of a highly political environment, while remaining focused on operational
efficiency and customer satisfaction.
With profitability reestablished, Mr Pastwa’s focus has now shifted towards growing the
topline instead. Therefore, the challenge that lies ahead is how to take the initial steps
towards getting more people to take the train. DSB believes the key to getting more
people to take the train is to keep the consumer in focus at all times and continuously
improve the customer experience. Stig Pastwa – now acting CEO – therefore wants your
help to answer the following question:
How can DSB increase the amount of passenger kilometres in Denmark through
focusing on improving the customer experience while remaining profitable?
You are asked to formulate a three-year business plan that will result in a total increase in the amount of passenger kilometres of 7.5% after three years, and serve as
the first step on the journey towards supporting the political ambition of doubling
passenger kilometres by the year 2030. A successful business plan solution needs to
impact DSB and Danish society on a triple bottom line: The economic, the political and
the reputational.
DSB passenger kilometers (in million)
-577
-698
Source: DSB Annual Reports 2009-2013
6267
6246
2012
2013
6063
Back to basics – the customer as the centre of attention
In 2010, the Ministry of Transportation in Denmark published an ambitious report, which
highlighted a political ambition of doubling the use of public transportation by 2030.
DSB plays a vital role in reaching this goal, which would entail growth rates of a scale
never seen before in a European context. In order to achieve this growth, DSB needs to
put the customer experience more in focus. In other words, DSB needs to get back to basics. This is a major challenge as customers have a dreary picture of DSB as a company.
A large gap exists between the cold, hard facts of operating trains efficiently, and the
expectations of the customers. Moving forward, this discrepancy can lead to increased
dissatisfaction among customers, unless the expectations of DSB and its customers are
better aligned in the future. Over the next three years, heavy investments will be made
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DSB - CBS Case Competition 2015
5798
5659
2009
2010
2011
Source: DSB Annual Report 2013
DSB - CBS Case Competition 2015
3
Company Background
Strategy of DSB
130 years as a socioeconomic and political important organization
Regaining trust among Danes
In 1847, the first railway track opened in Denmark between Copenhagen and Roskilde.
It was built by the private company “Sjællandske Jernbaneselskab”, and started out as
more of an amusement than an important part of the transportation system. Around the
same time “Det Jysk-Fynske Jernbaneselskab” started operating railways in Jutland as
well. In 1867 the government took over the operations of the railway tracks in Jutland
and Funen, and in 1880, it also took over the railway operations on Zealand. Five years
later, the government merged the two regional companies, and established what we today know as DSB.
In 2014, DSB launched its new overall strategy program named “Win Confidence in
DSB”. The main goals for the strategy is that DSB will return to focusing on the customer, through enhancing the ability to work while traveling, improving its public reputation, and making transportation as integrated and seamless as possible.
However, the main purpose of DSB going forward will still be delivering reliable passenger trains and ensuring a high level of integration throughout the entire public transportation system. The future is expected to bring further demands for liberalization from
the EU, increased digitalization of all links in the value chain, transfer of maintenance responsibility from operators to producers of trains and finally more standardization of
railway operation across borders.
In 1934, the first S-train lines, which operate in the Greater Copenhagen area, and connect
the majority of the Copenhagen suburbs with the city center with frequent train departures,
were established. The InterCity train that connects cities at different regions in Denmark (for
instance from Århus in Jutland to Copenhagen on Zealand) was established in 1974.
The railway industry is very unique in some ways and is often very dependent on various national socio-economic considerations. The mobility gains that arise from having
an efficient railroad result in very large and significant benefits and synergies to society
as a whole.
In the mid 1990s, a liberalization process occurred in many European countries for their
telecommunication, energy and transportation sectors. In 1997, ownership of the infrastructure (rail tracks, signaling systems etc.) was separated into a different and completely independent company, BaneDanmark. Further, in 1999, DSB became an independent state-owned company, which means that the company basically can operate as a
private company with its own financials, board and management team, but still has certain public obligations as it is still owned by the Danish state.
This is especially true in Denmark, which has the third highest rail modal-share in Europe. Therefore, the responsibility of DSB to provide a reliable and efficient railroad service in Denmark is of huge importance for Danish society.
As an attempt to grow their customer base, DSB started an internationalization process
in 2002 with attempts to enter the English, Swedish and German markets. However, the
internationalization strategy did not prove a success and DSB abandoned most of its foreign ventures again in 2011. Therefore moving forward, the focus for DSB is not on
growing internationally, but on increasing its penetration rate in Denmark. Following the
failed international attempts, DSB posted large losses in 2010 and 2011. In order to restore the company to profitability, the company introduced a tough cost-cutting program in 2012, which slimmed the organization and turned the company around. This
also means that today, the focus of the future is on increasing the topline at a steady
margin — in other words, growing profitably.
“We now have a viable, long term strategy
with the aim being substantial passenger growth while
remaining focused on profitability and operational efficiency.
The next step is the difficult part: Execution”.
Jesper Andersen - Chief Strategy Officer
Milestones in DSB’s history
The first line opens between Copenhagen and Roskilde.
The Little Belt Bridge opens.
DSB introduces the first
high-speed diesel trains.
InterCity trains are introduced with
fewer stops and a fixed timetable.
The Great Belt Fixed Link opens for trains,
reducing the travelling time between Zealand
and Funen by about one hour.
DSB is established. Prior to this,
railway operation was organised locally.
1847
1885
The number of railway lines and train stations
reaches an all-time high with 5,296 kilometres
of rails and 534 ticket outlets for DSB alone.
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DSB - CBS Case Competition 2015
DSB initiates the rationalisation programme
“A Healthy DSB”, the objective of which is to
reduce operating costs by DKK 1 billion.
One thousand employees are laid off. S-tog
A/S operating the urban rail network in the
Greater Copenhagen area and DSB merge to
become one corporation.
The organisation is simplified.
DSB reaches the objective of the rationalisation
programme “A Healthy DSB” and enters 2015 in
profit and with a new strategy up to 2030.
DSB relaunches itself with the campaign
“The Greater Context”.
1930
1935
1963
Locomotive Series MA, popularly known as Sølvpilen
(The Silver Arrow), is commissioned. It becomes the
most iconic DSB locomotive.
1974
1989
The first IC3 trains are commissioned.
Over the years, the IC3 has become the
most popular and reliable train in Europe.
1997
1999
DSB is divided into two. DSB becomes responsible
for the trains and train operation, while Banedanmark becomes responsible for the rails and signals.
2000
DSB becomes an
independent public
corporation.
2012
2014
The Øresund Bridge opens, connecting Denmark and
Sweden. More than 20,000 Danes currently live in
Malmö and commute to Denmark every day.
DSB - CBS Case Competition 2015
5
The Political Dimension
Strong political interest and influence on the railway industry
DSB is a state-owned company, and is governed by the Danish Ministry of Transportation.
DSB is operating as an independent state-owned company, and the Danish government is
subsidizing DSB with more than 4 billion DKK each year to support its operations.
Revenue per passenger kilometer
The business of operating a national railway system
The reason for DSB being subsidized by the government is that on its own, operating a
national railway system is an unprofitable business. From a pure business perspective,
only a few urban routes are attractive, while the majority of the routes operate at a loss.
However, the national railway system plays an important role in society as a whole, and
is necessary to ensure a functioning and effective infrastructure. An efficient and highly
developed public infrastructure system is vital in order to increase mobility in the job
force. As a result of this, railway transportation is subsidized all across Europe.
Share of subsidies in selected countries
62%
49%
42%
42%
36%
38%
51%
58%
58%
64%
United Kingdom
The Netherlands
France
Denmark
Germany
Passengers
Subsidy
Source: BCG Analysis (2010)
DSB and the ministry of Transportation
The contract between DSB and the government outlines the responsibilities and requirements of DSB. Specifically, it describes what DSB is allowed to do in terms of pricing,
which routes it must operate, and the frequency of the routes. This means that DSB cannot adjust its prices based on supply and demand. DSB has the option to give discounts
to specific groups or for specific departure times; however, they cannot increase their
prices beyond a specific maximum defined in the traffic contract. In terms of frequency,
DSB can increase the frequency if demand is high, but they cannot decrease the frequency below a defined threshold if certain routes are unprofitable.
”DSB has a triple bottom line: The economic,
the political and the reputational.
As we are not a public traded company,
we view our reputation as our share value.”
Lars Kaspersen - Director of Communication and Branding
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DSB - CBS Case Competition 2015
Political agenda - The case of the tip-up seats
Even though DSB is technically run as an independent company, the distance to the politicians is sometimes very short, and it becomes very clear that DSB is still a state-owned
company. An example of this is the case of tip-up seats for students. DSB offers very
cheap tip-up seats for students, who are traveling across Denmark in off-peak hours. In
September 2014, DSB announced that it wanted to terminate this offer in order to increase room for bikes and baggage on longer routes, and also because the cheap tip-up
seats only accounted for only 0.1% of travel on regional trains. The next day, the minister of transportation went out publically and told DSB to keep the tip-up seats, as they
served an important role for society. DSB then had to keep the seats. This is a good example of how what is best for business and what is best for society do not alway align,
showing the sometimes conflicting bottom-lines of society and DSB.
DSB - CBS Case Competition 2015
7
Infrastructure
Complex infrastructural factors set out constraints
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The Danish Parliament has recently agreed to invest more than 100 billion DKK in the Danish
rail infrastructure in order to increase the network capacity so that it will be able to accommodate the future growth of rail passenger traffic. However, these investments are scheduled
to span over the next 15 years. In addition, DSB and BaneDanmark have scheduled a comprehensive track maintenance and new signaling program over the next three years.
Overall, understanding the limitations set by the infrastructure is important when it
comes to evaluating strategic proposals and ideas.
n
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All of these infrastructural factors set a number of constraints for railway operation. For
example, one constraint is the tracks, which limit where the trains can go and how fast
they can go, and another is the number of available trains, which determine the frequency and capacity of the different scheduled train departures. Taken together, all the different infrastructural factors determine the total network capacity. Today, it is difficult to
add more frequent departures because the network capacity is limited by a number of
traffic bottlenecks, such as bridges, low numbers of passing loops, highly trafficked key
stations and outdated signaling systems.
Equipment
M
This means that it is also DSB’s role to purchase new trains to meet future traffic demand on the Danish railway; however, procuring trains is a long, expensive and highly
complicated process, sometimes taking up to as much as 10 years from the beginning of
the process to the time the trains are delivered.
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The activities connected to operating a railway system can be divided into a number of
different categories, such as building and maintaining the track infrastructure, running
train stations, selling tickets, providing traffic information, buying and maintaining
trains and, finally, actually operating and driving the trains. In Denmark, DSB is responsible for almost everything except the construction and maintenance of the railway
track infrastructure.
Overview of the responsibilities of DSB and BaneDanmark
Op
at
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i
Source: DSB Internal Data
“While we always focus
on improving our operations,
we are currently
at a level of punctuality
where the majority of the
improvements will come from
better coordination with
BaneDanmark and
technological development
in the signaling system”.
Anders Egehus - Executive
Vice President, Operations
8
DSB - CBS Case Competition 2015
DSB - CBS Case Competition 2015
9
The passenger transportation industry
Motor coaches,
buses and trolley
buses, 9,7%
10
Trains, 10,1%
8
Passenger
cars, 80,2%
DSB - CBS Case Competition 2015
0
1995
2000
DSB’s
development
CAGR
2003-2011
2005
2010
2015
2020
2025
2030
Source: DSB Internal data, Trafikstyrelsen: “Trafikplan for den Statslige Jernbane 2012-2027” (2012)
In order to support the political ambition on passenger growth, it is necessary for DSB
to get more people to use the train in the future. Currently 10.1% of all public transportation in Denmark is by train, which is among the highest penetration rates in Europe.
This underlines the challenges within the political growth targets.
Rail modal share EU comparison 2012
20%
15%
10%
Greece
Lithuania
Turkey
Macedonia
Croatia
Bulgaria
Portugal
Norway
Luxembourg
Latvia
Poland
Finland
Romania
Italy
Spain
Belgium
Slovakia
European Union
Czech Republic
United Kingdom
0%
Germany
5%
Austria
In order to achieve the passenger growth targets set for DSB, it is imperative to understand the alternative offerings in the market, and to recognize that different modes can
be seen both as competitors and as complementary services. Multi-modal journeys and
better integration across different means of transportation are ways to improve customer experience, and therefore represent a significant growth opportunity.
CAGR
1996-2003
2
Denmark
Drivers for change
The main drivers for changes in modal shares between trains and cars have historically been availability of cars, development of highways, door-to-door speed of cars
vs. trains and the number of train services operated. In the future, the key drivers for
growth in the modal share of rail transportation is expected to be investments in railway infrastructure, continuous improvements in business performance and customer
experiences, and technological changes that advance door-to-door connectivity.
1,5%
2,2%
4
Switzerland
In order to understand the value proposition of train travel and in order to improve
the customer experience, it is also important to understand the main alternatives and
competitors that DSB is up against on the passenger transportation market. As can be
seen on the graph, the biggest competitor by far is passenger cars. This mode of transportation has become more popular with the introduction of “micro” cars available at
very cheap prices of less than 100,000 DKK. These micro cars are small and very fuel
efficient, which makes them relatively cheap, compared to other transportation modes.
A key advantage for the cars is the flexibility they bring, as the driver decides when to
depart. Additionally, the driver can often complete the journey in one leg, rather than
having to go through multiple legs such as is often the case with public transportation. However, the cars also have certain drawbacks — for instance, with the increased
number of cars on the roads, traffic congestion is increasingly becoming a hassle, and,
similarly, parking spots are becoming more difficult to find within cities.
Historic
development
6
Source: Eurostat Modal Shares 2004-2012
10
CAGR
2011-2030
Political Ambition
Netherlands
Passenger
cars, 79,3%
3,4%
12
France
Trains, 9,3%
RailwayTraffic
(Passenger kilometre pr. year in billions)
Sweden
Motor coaches,
buses and trolley
buses, 11,4%
14
Modal transportation shares
Denmark 2012
Hungary
Modal transportation shares
Denmark 2004
Growth in the Danish Railway Industry
Estonia
The different modes of transportation have very unique characteristics and each has its
advantages and disadvantages. In 2012, trains (all operators) had a share of 10.1% in Denmark in terms of passenger kilometers traveled, while passenger cars constituted more than
80% of total passenger kilometers traveled. This has been fairly stable over the last 10 years;
however, trains have managed to gradually increase their share from 9.3% in 2004.
Ireland
As the biggest railroad company in Denmark with the responsibility to operate passenger
trains on most of Denmark’s railways, DSB’s main market is the market for passenger
transportation. This market encompasses all passenger transportation in Denmark and
includes all different modes of transportation, such as bicycling and driving.
Political ambitions for growth in public transportation
It is the ambition of the Danish Parliament to increase the modal share of rail in Denmark because a higher share of public transportation is a key component in the government’s sustainability strategy. Compared to historical growth of the railway sector in
Denmark, the political growth targets are highly ambitious, and require an industry
CAGR of 3.4% from 2011 to 2030. This growth rate is for the entire railway sector, including regional operators, metro expansion and light railways, as well as DSB, meaning
that DSB will not have to deliver the entire industry growth targets alone.
Slovenia
An industry dominated by passenger cars and trains
Source: Eurostat Modal Shares 2012
DSB - CBS Case Competition 2015
11
Integration across different modes of transportation
DSB as the backbone of the Danish transportation system
DSB has an ambition to be the backbone of the Danish transportation system. This
means that they will play an ever more important role in further integrating the public
with the private transportation system. This goal requires taking responsibility for the
customers’ journey from A-Z, and ensuring that the travel experience is as seamless as
possible. In order to achieve higher levels of integration, critical factors include improving the traffic information provided to customers, making ticketing easier, and accommodating other transportation modes such as busses, the metro, cars and bikes.
Facilitating other transportation vehicles:
A way of making the train more attractive is increasing the reachability of the stations.
The figure shows that distance to the stations is very important when people choose
their mode of transportation. By increasing parking facilities for cars and bikes, the train
can become a more attractive alternative.
% that uses public transportation
to and from work
60%
Public Administration workers
Consulting engineers
40%
Traffic information between
different transportation methods
Informing customers about how to get from point A to Z in an
easy, available, fast and reliable way across different transportation forms is a task DSB has undertaken to ensure connectivity for the customer, thereby providing one focal point (one
point of touch) to customers and giving them a better travel
experience.
Rejseplanen.dk
Insurance companies
20%
Rejseplanen.dk is a portal
that contains all scheduled
and current departures and
arrivals within the Danish
0%
0
200
400
600
800
M
Distance from nearest
station to workplace
public transportation system.
It contains running times for
Source: By- og Landskabsstyrelsen, Fingerplan 2007
all operators and transport
Rejseplanen.dk is an example of a digital solution that integrates the different public transportation systems; however,
the system still faces challenges in giving fast and reliable updates in case of delays. Generally, improvements are necessary to proactively inform customers about potential delays
upfront, and to inform them of alternative ways of reaching
their destination.
modes, and users can find
travel information from/to
all addresses in Denmark.
Scheduled maintenance and
cancelations are also shown
on Rejseplanen.dk. Rejse-
The development of car and bike sharing can provide new opportunities for integration
with the train. In Paris, for example, rental cars, city bikes and trains have been so closely integrated that you are able to pre-book cars, train tickets, bicycles and even parking
spots from one app on your mobile phone. This enables a seamless travel experience
across different means of transportation.
planen.dk is available both
online and as an app.
Rejsekortet
Rejsekortet was introduced
in 2011 as an electronic
ticketing card. It is a collaboration among all public
transportation operators in
Denmark. It works similar to
the Oyster card that is used
in London. Passengers ”check
in” with the Rejsekort when
they start a journey, and
”check out” when the journey is completed, and the
price of the journey is automatically calculated and paid
by the account holder.
12
DSB - CBS Case Competition 2015
Easier ticketing across
different means of transportation
Purchasing tickets needs to be a one-stop shop, which
was attempted with the introduction of “Rejsekortet” in
2010. Originally, the plan was that this card should replace normal tickets and be the only way to purchase
tickets, but it is now used as a supplementary product.
With Rejsekortet, the Danish transportation system has
taken a big step to integrate the ticketing of different
modes of transportation. However, “Rejsekortet” still faces challenges with a highly non-transparent pricing system for customers, a software capacity issue, and a complex ownership structure.
DSB - CBS Case Competition 2015
13
Train systems of DSB
Map of F&R and Øresund trains
S-trains (greater Copenhagen)
Three key train systems in Denmark
Skagen
DSB operates three rail systems in Denmark. The S-Trains, which operate in and around
greater Copenhagen, the regional and long distance InterCity trains, which serve and
connect the different regions in Denmark, and the Øresund Trains, which connect Copenhagen with southern Sweden. The different train systems of DSB also cater to different
customer types. Commuters going to and from work primarily use the S-Trains and the
regional trains, whereas the long distance InterCity trains in the “East-West” segment
are mostly used by leisure travelers visiting friends and family, and business travelers
going to meetings.
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Øresund Trains
The Øresund Trains is a regional train network serving the Øresund region. It runs from
Helsingør in Denmark and goes to Malmö in Sweden, from which point trains continue
to Karlskrona, Kalmar or Gothenburg.
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S-Trains
The S-Train is an urban city-train system operating in the Greater Copenhagen Area.
There are 84 stations on the S-Train network, and at several of the stations you are able
to change to local and regional trains that serve the rest of Zealand, as well as long distance InterCity trains that connect Copenhagen with Jutland and Funen. At most stations, you are also able to change to the local busses in Copenhagen. The S-Train stations are typically placed fairly close to each other, especially in the city center.
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La ejb
ve æ
Bø ejn
R
k
n
y
rk ing
Fr
A
ed op
lk
er
en
ic
ia
er
g
Tim
Hornslet
Løgten
Skødstrup
Hjortshøj
Hovmarken
Lystrup
Torsøvej
Vestre Strandallé
Østbanetorvet
Skolebakken
Aarhus H
sv
ed
tr
up
Bj
Bur
Ulfborg
Skjern
Source: DSB Annual Report 2013
U
Holstebro
Vemb
H
West
13%
Randers
ls
Hjerm
S-Train
28,9%
rd
gå
up a
ke m ind tr na
ør yo ol rus re
M R K T G
Hobro
gb
ro
øj
sl
ev
St
oh
ol
m
V
ib
or
g
Rø
dk
æ
rs
b
Struer
H
de
ru
p
Sk
iv
e
Humlum
V
in
East
12,7%
Arden
ni
ør
East 12,8%
S-Train,
59,0%
East-West
38%
H
East 18%
West
9,1%
Ydby
Lyngs
Hvidbjerg
Uglev
Oddesund Nord
um
S-Train
21%
West
16%
Others 7,4%
Others 0,5%
DSB Øresund
13,8%
Aalborg Vestby
Aalborg
Skalborg
Svenstrup
Støvring
Skørping
bj
DSB Øresund
8%
Lindholm
Thisted
Sjørring
Snedsted
Hørdum
Bedsted Thy
Hurup Thy
Thyborøn
East-West 4,9%
East-West
35%
Share of DSB’s
total revenue 2013
Brønderslev
A
ul
Others 2%
Share of DSB’s total
number of travels 2013
Vrå
V
ild
Share of DSB’s total
passenger kilometres 2013
Hirtshals
InterCityLyn
Nykøbing F
Nakskov
InterCity
Regionaltog Regional trains
Andre togselskaber Other railways
40
35
30
25
120
32,7 32,4 32,3 32,5 32,7 33,1 33,8
31,0 32,3
28,5 29,4
27,5
26,9
25,7 26,3
DSB - CBS Case Competition 2015
110
105
Car
Bus
Flight
Train Index
2014
2013
2012
2011
2010
2009
2008
2007
2006
80
2005
85
0
2004
90
5
2003
95
10
2002
100
15
2001
20
DSB
14
115
Index compared to the previous year
East-West - number of passengers, annual level
2000
It is expected that the East-West segment will be impacted heavily by track maintenance
during the next three years. During the maintenance period, it will be difficult to sustain current levels of punctuality and customer satisfaction. Additionally, it is also the East-West
segment that has been affected the most by the increased competition from cheap micro-cars. This is a key challenge for DSB, because the East-West segment is at the same
time also DSB’s most popular service, as measured in passenger-kilometers.
S-tog S-train
Standsning. Se køreplan Stop. See Timetable
Number of journeys across the Great Belt
bridge (mio. travels).
F&R Trains (Regional and InterCity Trains)
The F&R Trains are DSB’s main train system, which connect various cities and regions of Denmark. This system is made up of regional trains and long-distance InterCity trains. It can be
segmented into the following three areas: “East”, which covers local and regional travel on
Zealand and Lolland-Falster; “West”, which covers local and regional travel in Jutland and Funen; and finally the “East-West” segment, which covers the long distance InterCity trains that
run between Copenhagen-Odense-Århus- Ålborg as well as various other locations in Jutland.
Rødby Færge
Flensburg
Car Index
DSB - CBS Case Competition 2015
15
Experience of the customer
Increasing passenger growth through bikes – Case of the S-Train
Denmark is a nation of bicycles; therefore, as an attempt to increase passenger growth,
DSB began to offer free bike transportation in the S-Trains. Passengers must still purchase
a ticket, but they can now bring their bikes for free, while it used to cost around 10 DKK.
The project started in 2010, and has resulted in significant passenger growth in an otherwise stagnating market. The amount of passengers using the S-Train has boomed since
the introduction of the free-bike initiative. Additionally, the majority of the new passengers in the S-Trains are bringing a bike. Before the initiative was started in 2010, 2 million
annual travels included a bike, and already in 2012, this figure was up to 9 million.
Drivers for customer satisfaction and customer experience
An important part of reaching the political goal of growth in passenger kilometers is understanding the customers’ needs and priorities when they travel. Some factors carry
more importance than others, and it is especially punctuality and frequency, comfort,
and traffic information that drive customer satisfaction.
Drivers for customer satisfaction (% of total customer satisfaction)
This is a strong indicator that the option of bringing a bike for free in the S-Train has resulted in more people using the S-Train, and this is an example of how the company can
create growth by improving the customer experience. However, these improvements
also came at a cost, in terms of modifying existing train cars and other operational difficulties that resulted from the increased number of bike passengers.
Safety, Stations
& Cleaning
17% .
Puntuality &
Frequency
27%
Product, Price
& Service
15%
Traffic
Information
21%
Comfort
20%
Number of Bikes in the S-train per year
Source: DSB Internal Data, 2014
12,000,000
Punctuality and Frequency
DSB has improved its level of punctuality during the last four years, and the current level
is among the highest compared to its European peers. Often the root cause for delays
involves signaling or planning errors, which are out of the hands of DSB as they are
BaneDanmark’s responsibility.
10,000,000
8,000,000
6,000,000
However, since DSB is driving the trains, it often gets the blame for the delays.
4,000,000
Punctuality of DSB
2,000,000
0
2013
90%
2014
Passenger Growth in the S-trains
2010
8.0
Passengers with bikes
Passengers without bikes
2.5
1.0
4.0
1.3
0.0
2013
40%
20%
20%
0%
0%
Source: DSB Internal Data, 2014
16
DSB - CBS Case Competition 2015
S-Trains
2014
DSB
BaneDanmark
YTQ
2014
2012
40%
2013
Source: DSB Internal Data, 2014
2011
60%
2012
2010
60%
YTQ
2014
3.6
2.8
80%
2013
1.0
3.6
0.3
F&R
S-Train
100%
80%
2011
2.0
F&R Trains
100%
4.0
2012
2.3
3.0
2013
Responsibiliy of delays
3.0
5.0
2012
2011
6.0
2010
Growth in mil of Passengers
7.0
2011
Punctuality is defined as the relative number of trains that arrived at the platform with a maximum delay
of 5.59 minutes for Long-distance & Regional Trains (F&R), a delay of 2.29 minutes for S-Trains
Source: DSB Annual Report 2013
Q3
2014
2012
97%
Q2
2014
2011
93%
Q1
2014
2010
96%
94%
2010
2009
Q3
2014
2008
95%
Q2
2014
2007
91%
Q1
2014
2006
94%
External Factors
DSB - CBS Case Competition 2015
17
Comfort:
The Danes have high levels of expectations regarding their experience with using the
train. They expect a high level of service, clean trains and stations, and the ability to sit
in the train at all times. A high level of service also means being able to utilize the time
spent in the train most efficiently. This could mean the ability to work while sitting in
the train, which is a feature that differentiates the train from other modes of transportation. Increasing the ability to work in the train is a way to improve the customer experience significantly. DSB has branded this efficient working time as “+time”.
The expectation of always getting a seat has proved to be a challenge, as there are
times during peak hours where high demand means that the trains are full and some
people have to stand. This is not very different from most European countries, but the
difference is that Danes expect to always have a seat, even in rush hours. If more people
are going to use the train in the future, this will increase the pressure on capacity, meaning that dealing with customer expectations becomes necessary.
“We need to be better
at giving fast and
correct information
to our customers when
unforeseen events occur”.
Susanne Mørch Koch
- Executive Vice President,
Commercial and HR
Customer’s satisfaction on a scale from 1-10
9,0
9,0
8,5
8,5
8,0
8,0
7,5
7,5
7,0
7,0
6,5
6,5
6,0
6,0
5,5
5,5
2011
2011
Source: DSB Internal Data, 2014
2012
2012
2013
2013
2013
Q2
2013
Q2
2013
Q3
2013
Q3
2013
Q4
2013
Q4
2014
Q1
2014
Q1
On Time
2014
Q2
2014
Q2
Delayed
Traffic information
Generally, traffic information is functioning well, with a combination of different methods to inform customers about their travel arrangements that range from updated monitor screens on every station, to speakers on the stations and in the train, to digital solutions such as the DSB app and the rejseplanen.dk app, where people can get information
about how to most efficiently get from one destination to another across different
modes of transportation.
Traffic information works relatively smoothly when there are no delays in the system;
however, once unforeseen delays occur, the quality of traffic information decreases significantly. Due to the complicated and interconnected nature of the railway infrastructure, the delay of one train affects several other trains in the system. In these cases, it
becomes a challenge to communicate alternative routes to the passengers, and so when
these unforeseen delays occur, the customer satisfaction rate drops significantly.
The upcoming track maintenance projects that are planned for the next three years again
underline the importance of being able to provide fast and accurate traffic information in
cases where unforeseen delays occur. This communication will provide a way to improve
the customer experience when the delays occur, as well as minimize the impact and hassles that track maintenance inflicts on passengers. Providing traffic information is carried
out jointly between DSB and BaneDanmark, and therefore cooperation between the two
is very important. However, as DSB and BaneDanmark have different success criteria, their
goals are not always aligned, and this has in the past created some conflicts of interest.
In many cases, the train is not the only mode of transportation the passengers are using
to reach their destination. Solutions such as rejseplanen.dk help passengers get a more
seamless travel experience across different transportation modes. However, the customer experience can still be improved by better integration between using the train and
a car, bike, bus or other forms of transportation.
18
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DSB - CBS Case Competition 2015
19
Customer segmentation
Customer segments
Key characteristics of DSB’s customers
Every day, 500,000 customers are traveling with DSB; out of these travels, 300,000
take place in the Copenhagen area. DSB’s customers differ a lot in terms of travel purpose, motivation for using public transportation as well as the frequency with which
they use the train. Some people need to take the train every day to work or school,
while others only use the train occasionally. As the national train operator of Denmark, DSB effectively regards the entire Danish population as its potential customers.
In order to better understand these customer groups, DSB has divided its customers
into three different groups based on their travel purposes: commuters, leisure travelers
and business travelers.
Travel purposes
Motivated heavy
users
Motivated medium
users
Motivated light
users
Motivated non users
Young persons and
Women and singles.
Elder and married
singles. Lives in the
Lives in the capital
persons. Lives in larg-
than 2 kilometers away
capital region, and uses
region and Aarhus, and
er cities outside the
monthly train passes.
uses different public
capital region. Have a
Believes that taking
transportation types in
high income and are
the train is efficient
their spare time. Cares
wellestablished. Likes
and flexible.
about environmentally
relaxed social sur-
friendly transportation.
roundings.
15 % of DSB’s
customers
15 % of DSB’s
customers
33 % of DSB’s
customers
9 % of Danes
9 % of Danes
19 % of Danes
13 % of Danes
Unmotivated heavy
users
Unmotivated
medium users
Unmotivated light
users
Unmotivated non
users
Lives in the capital
Creatures of habit, that
Lives in smaller cities
Men and pensioners
region, uses monthly
lives in the capital region
more than 2 kilometers
that lives in Jutland.
train passes and are
and Aarhus. Finds it
away from the nearest
Would never consider
digital savvy. Finds it
difficult to travel with
train station. Finds
taking the train.
stressful to travel with
train and gets annoyed
public transportation
trains and need their
by waiting time. Believes
limiting in general, and
personal space.
in the prejudices about
love their car.
Commuters
Leisure travelers
Business travelers
People who are traveling to
Leisure travelers include peo-
Business travelers are people
and from work or school.
ple traveling to visit friends
traveling with work related
People with this travel purpose
and relatives in other parts of
travel purposes, that do not
typically travel using a month-
Denmark, as well as people
directly include traveling to
ly commuter card ticket. In
traveling to go to concerts,
and from the regular place of
addition they travel relatively
to go shopping or for similar
work. Travel purposes include
short distances, typically from
purposes. This group often
meeting with clients or going
smaller cities to larger nearby
travel longer distances using
to congresses or seminars. The
cities. Commuters use the train
the InterCity or regional trains.
business travelers normally
5 % of DSB’s
customers
5 % of DSB’s
customers
28 % of DSB’s
customers
almost every day.
Leisure travelers use the train
have a lower frequency for
3 % of Danes
3 % of Danes
16 % of Danes
with medium frequency.
using the trains.
Lives in Jutland more
from the nearest train
station and work. Take
the car or the bus.
DSB, for instance that
they are always delayed.
28 % of Danes
Source: DSB Internal Data, 2012
Commuters account
Leisure travelers account
Business travelers ac-
for 56.2% of journeys
for 37% of journeys
count for 6.8% of jour-
on the F&R trains and
on the F&R trains and
neys on the F&R trains
58.3% on the S-Trains.
38.5% on the S-Trains.
and 3.1% on the S-Trains.
Key figures for customer segments
Share of revenue
Source: DSB Internal Data, 2014
In addition, DSB has also divided the entire Danish population even further into eight
segments. Six of these segments contain DSB customers, while the last two segments
contain non-users. The segments are based upon the frequency of usage (ranging from
heavy users to non-users) and on their motivation for taking the train (motivated and
unmotivated users). The motivation of users is determined by their predisposition towards public transportation with train, as well as how they experience traveling with
public transportation.
Share of travels
Motivated heavy users
= 52 %
Unmotivated heavy users
Motivated medium users
Motivated light users
Unmotivated light users
Unmotivated medium users
= 20 %
= 11 %
=8%
=5%
=3%
Total Passenger Revenues: 4.771 million DKK
Motivated heavy users
Unmotivated heavy users
Motivated medium users
Motivated light users
20
DSB - CBS Case Competition 2015
= 23 %
=8%
=8%
Unmotivated light users
Unmotivated medium users
=4%
=2%
Total travels: 182.595 (in thousand)
Business travellers
The figure shows that motivated heavy users and unmotivated heavy users have 79% of
the total travels, and constitute 72% of the revenue. This shows that the heavy users are
using the train considerably more often than the other groups, and it also shows that
heavy users pay a lower average price per travel than medium and light users. Further,
motivated users are using the train more frequently than unmotivated users across the
different groups, and the travel purpose varies across groups as well. Possible solutions
to increase passenger growth can therefore be to: 1) Motivate the unmotivated users to
increase their frequency, 2) Get medium and light users to use the train more frequently,
and 3) Get non-users to start using the train.
= 56 %
Leisure travellers
Commuters
Source: DSB Internal Data, 2012; DSB Annual Report 2012
DSB - CBS Case Competition 2015
21
Product portfolio
A large and complicated product portfolio
is non-transparent and inefficient
DSB Revenue Breakdown (2013)
DSB solves an important task in society by providing frequent and reliable transportation in all regions of Denmark. DSB is required to ensure a certain number of departures
at all stations, even the small and unprofitable ones, and for this service they are compensated from the government with an annual traffic contract payment. This again
shows that several bottom lines exist in railway transportation. It might not be profitable for DSB to stop at a certain station, but when seen from the perspective of society
as a whole, it can still be beneficial, and therefore DSB is subsidized through traffic contract payments. The biggest contributors to DSB’s revenue are passenger revenue and
traffic contract payments from the government.
DSB Revenue Breakdown (2013)
Leasing of trains
2%
Repair and
Maintenance of Trains
3%
Passenger
revenues
44%
Sales from shop
7%
Traffic contract
payments
44%
Source: DSB Annual Report 2013
DSB has a large product portfolio, and offers everything from regular tickets, to a youth
card, to a “65 ticket” for people over the age of 65. In total, DSB has had around 200 different products, which created a rather non-transparent ticketing system for customers.
It carries high administrative costs to maintain a large number of products, and DSB has
therefore initiated a process of limiting the number of product types. They removed 90
product types from 2012 to 2014, and expect to continue to reduce the number of products by removing additional products within the next couple of years.
The figure shows that 92% of the revenue comes from nine product types, which indicates
that DSB has a lot of products that don’t generate significant sales. Therefore, moving forward, DSB needs to figure out which products are necessary to foster future passenger
growth, and how they can simplify their product portfolio without compromising important target groups such as the elderly or students. Additionally, this is an area in which the
political influence is sometimes high. An example of this is the case of the tip-up seats.
Other
Orange 3% 5%
DSB 1' ticket 5%
Standard
28%
Reserved Seat 5%
65+ticket 5%
Rejsekort 9%
Youth ticket
12%
Commuters 9%
Youth Card
9%
Vouchers
10%
Source: DSB Internal Data, 2013
Digitalization of Sales Channels
DSB has traditionally sold tickets mainly through manned ticket booths at the stations.
DSB has since 2008 focused both on improving the user experience and reducing costs
through increasing the degree of self-service. Today, passengers can pay for their tickets
online or through a ticket machine, a manned ticket booth, the DSB app, text-messages,
or by Rejsekortet. While mobile purchases account for most of the transactions today,
manned ticket booth sales still constitute a significant amount of the transactions.
DSB expects that the degree of self-serving customers will increase drastically in the future. This will happen through increased sales through digital solutions, and result in a
gradual closing of manned ticket stores.
Revenue split on sales channel transactions, 1H 2014
Rejsekort,
10%
Mobile,
27%
Online,
13%
Vending Machine,
25%
Ticket store,
25%
Source: DSB Annual Report 2013
22
DSB - CBS Case Competition 2015
DSB - CBS Case Competition 2015
23
Rush hour capacity limitations
Large demand fluctuations throughout the day
In addition to being subject to infrastructural constraints, DSB also has a difficult challenge in handling the peak capacity demand that occurs during the morning and afternoon rush hours. The morning rush hour is the point during the day with the highest demand; therefore, it is this peak demand that defines the total capacity requirements of
trains that DSB needs to own and operate.
15
80
14
60
13
40
12
20
11
Utilization (%)
100
0
The second solution is price differentiation, where tickets for the trains in the rush hour are
more expensive. This leads to price-sensitive passengers moving away from these departures, which again reduces demand and leads to less crowded trains. Price differentiation
is already used heavily in Sweden and UK and to some extent in Germany as well. The difficulty in Denmark, however, is that the government so far has restricted the amount of
price differentiation that DSB is allowed to do, with the exception of the DSB 1st class
tickets, which can be sold at a 60% higher price. In the future, though, it is expected that
DSB will be given more leniency in using price differentiation to influence passengers’
choice of trains. This will be done through requiring that passengers not only have a ticket,
but also a seat reservation in order to board specific trains during rush hour.
Revenue per passenger (DKK)
In addition to this, the marginal capacity used during peak hours can only be utilized
during those peak hours, and is therefore excess capacity during the rest of the day. This
results in extremely high marginal costs for operating additional trains during rush hours,
as they can only generate revenue during a small portion of the day. Therefore, the solution to reduce overcrowding during rush hour is not to schedule more trains.
Possible solutions to reduce capacity issues
Two overall solutions have been identified to mitigate the rush hour capacity issue, and
they are as follows. The first thing is doing nothing and staying with status quo; this will
result in an increasing number of passengers having to stand up in the trains. The big challenge here is that passengers in Danish trains expect to be seated, even though they are
traveling in the peak periods, and therefore this solution entails a large gap between the
level of service customers expect and the level they receive.
10
0
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour of the day
Revenue per passenger
Utilization
Source: DSB Internal Data, 2012
Another issue that is connected to the peak demand spikes is the revenue per passenger
generated during this time. The majority of passengers using the trains during rush hours
are commuters on their way to and from work; these commuters typically pay a very
low price per train ride through a monthly commuter card, and, additionally, they receive tax deductions for commuting. Therefore, contrary to what you should expect, the
lowest average price per passenger is actually during periods with the highest demand.
Consequently, the cheapest tickets are sold to the trains that are the most costly to operate (the ones with the highest marginal costs). This is illogical and completely opposite to what can be seen in the airline industry, for instance, where tickets are much
more expensive for peak departure times. This is because it has been politically decided
not to price-differentiate on different departures during the day, and therefore this is a
factor that DSB just has to accept for now.
24
DSB - CBS Case Competition 2015
DSB - CBS Case Competition 2015
25
+Time
Travel time as efficient working time
A key advantage that train travel has over other forms of transportation is the fact that
travelers can work comfortably and efficiently. In a train, travelers have a table, Wi-Fi access, plenty of legroom and access to power outlets for charging laptops. This is a huge
advantage over for instance cars and even airplanes.
In a train, work can occur from the moment a traveler sits down in the train until the train
arrives at the destination, while in a plane, because of restrictions during travel, waiting
time and boarding procedures, it is not possible to get as much efficient working time out
of the same amount of travel time. Train transportation has this very unique competitive
advantage, and it is one that DSB is actively trying to promote to its customers. However,
plenty more work can be done in this matter.
Today, the Internet connection in the trains is still not good enough to ensure a seamless
and trouble-free connection throughout the entire duration of the travel, and this is especially true in lesser-populated areas. This is an area that DSB has focused on; however,
this factor is dependent on the underlying telecommunications infrastructure being developed, and it will cost up to 400 million DKK, depending on the degree of investment. This
process will require significant negotiation with the telecommunication companies regarding how much they must invest in access networks, and would take at least two years to
implement. Therefore, other initiatives to increase the quality of “+time” onboard the
trains should be thought out as well.
This “+time” advantage is very unique for trains, and there is a large potential to use this
further in the positioning of train transportation.
Previously, DSB had a sales cart that went through the trains, where customers were able
to purchase snacks and drinks. However, this ended up being a very unprofitable service,
as it was too costly to operate compared to what DSB earned in revenues, and therefore it
was abandoned in 2014. DSB still serves breakfast to its first class customers.
”Basically you have to ask yourself the following question
— what would make you take the train more often?”
Susanne Mørch Koch - Executive Vice President, Commercial and HR
26
DSB - CBS Case Competition 2015
DSB - CBS Case Competition 2015
27
The stations
The stations as focal points
It is not just the trains and the tracks that are an integral part of the railway infrastructure;
the train stations also play a huge role in serving the customers, even though this role has
changed in recent years.
Traditionally, train stations served as waiting rooms, cargo storage and ticketing venues;
however, this stems from a time when train schedules were unreliable and trains were frequently delayed. Today, passengers expect the train to arrive according to the schedule,
and thus plan to arrive at the train station just a couple of minutes before scheduled departure times. Furthermore, tickets are currently purchased online or through apps and
ticket machines. This has reduced the demand for waiting space and manned ticketing
booths at most stations throughout Denmark, and therefore it has also rendered the station buildings largely empty and without any role to fill.
However, the stations are a still part of the overall travel experience when traveling with
trains, and therefore the train stations also remain a heavy factor in determining customer
satisfaction. DSBs stations vary a lot in terms of design and maintenance and there is a
high degree of local adaption and customized solutions on the stations. This makes it
more difficult to operate them in an efficient manner and to use a one-size-fits-all solution
in developing the stations.
Commercialization of stations
Another key question to answer is how DSB can commercialize the now empty space in
unused station buildings. Previously, DSB has tried to commercialize some of the areas
in the buildings by renting space out to shops such as 7-Eleven and other convenience
stores; however, this has only proved feasible in the largest of DSB’s many stations.
Elsewhere in Europe, commercialization is a lot further than it is in Denmark. For example, the Dutch national train operator, NS, has created an independent company solely
to operate and maintain the train stations in the country; this has led to a higher degree
of commercialization.
Therefore, DSB has much to learn from comparing themselves to other European rail operators. Commercializing the stations is complicated by the fact that 101 of DSB’s stations have preservation status, and cannot easily be modified or torn down. Another
complicating factor is that ownership of the stations is shared with BaneDanmark and
local municipalities. This complicated ownership structure inhibits development of the
stations, as no one has the clear overall responsibility.
Responsibility of the stations
Currently, DSB has 298 stations located throughout Denmark, and they differ a lot in
terms of size and urban location. The 20 biggest stations, for instance, account for more
than 50% of the total number of passenger departures, and the two largest — Copenhagen Central Station and Nørreport — alone account for 18% of all boardings.
Boardings per day (2011)
80.000
The two largest stations, Nørreport and Kbh. H,
account for 18% of all boardings
The 20 largest stations account
for 50% of all boardings
60.000
The 20-100 largest stations account
for 40% of all boardings
40.000
The remaining 200 stations account
for 10% of all boardings
20.000
0
Banedanmark
Other: Municipality, Regional
traffic companies, ect.
Source: DSB Internal Data, 2013
1
50
Source: DSB Internal Data, 2011
28
DSB
DSB - CBS Case Competition 2015
100
150
200
250
298
It is important to consider how to continuously increase the customer satisfaction of the
stations; for instance, through increased safety, improved traffic information systems, access to wireless internet and other comfort measures that increase the ability to work at
the stations.
DSB - CBS Case Competition 2015
29
Reputation
Reputation as an obstacle in a world with constant dilemmas
Every year, more than 18,000 articles about DSB are published in the Danish media,
making DSB one of the most discussed and talked about companies in Denmark. Additionally, a lot of attention comes from politicians and other participants in the public debate actively commenting on the management and the operation of DSB. Combined
with the fact that almost everyone uses DSB from time to time, this has the result that
everyone in Denmark knows and has an opinion about DSB.
DSB is also in the paradox situation that they are among the top three operators in Europe
when it comes to accuracy and timeliness, and DSB’s customer satisfaction, contrary to its
image, is high compared with DSB’s European counterparts. However, more than 75% of
Danes still want more liberalization of the Danish railway system, which is higher than in
countries where customer satisfaction of the national railway company is lower.
Satisfaction with railway system
Therefore, the image and the branding of DSB is also hugely important, as this has been an
area in which DSB has been facing some tough challenges. There is very little understanding
in the general public about DSB and how the company operates, and what it actually takes
to operate a national railroad system. People tend to blame DSB every time something goes
wrong with the trains, though 65-70% of delays are caused by either unforeseen events or
by errors on the tracks or the signaling systems, which are managed by BaneDanmark.
Positive
A top-of-mind survey of the Danish population reveals that many people associate DSB
with delays and other things that negatively impact reputation. However, data also
shows that the image of DSB is better among the customers who regularly use DSB than
among the people who only use DSB occasionally.
Trains / Operating Trains
23,8%
17,6%
Train Travels / Public Transportation
10,7%
Expensive Tickets
DK
70%
20%
NL
64%
23%
DE
75%
18%
FR
59%
22%
EU
71%
21%
UK
55%
27%
UK
71%
21%
EU
46%
36%
FR
66%
27%
DE
45%
34%
NL
46%
52%
DSB is in the position in which the customer satisfaction among its customers is at par or
better compared to other European operators; however, at the same time, the image of
DSB in the general population is suffering compared to other Danish companies.
90
3,4%
80
Red Trains / S Trains
2,9%
70
Old / Worn Down / Maintanance
2,9%
60
52
44
2012
Source: RepTrak: Tracking af DSB’s Omdømme Q3 2014, DSB Internal Data
51
49
39
2013
47
2014
User
Non-user
BP
Danske Bank
Telia
McDonalds
Aldi
Saxo Bank
3
DSB
TDC
Superbest
ISS
Telenor
Berlingske Media
PANDORA Group
Danish Crown
Shell Denmark
JP/Politikens Hus
H&M
Nordea
JYSK
Vestas
Arla Foods
Microsoft
Dansk Supermarked
IKEA
Coop
Coloplast
The Coca-Cola Company
Source: Reptrak Pulse 2013
Siemens Wind Power
Reputation on a scale to 100
0
Apple
Source: RepTrak: Tracking af DSB’s
Omdømme Q3 2014, DSB Internal Data
3,0%
Bang & Olufsen
Others
10
Matas
1,4%
Novozymes
Monopoly
20
Falck
1,6%
Carlsberg Group
Pleasant Experiences
30
Google
1,9%
Grundfoss
Comfortable Transport / Good Customer Service
40
Danfoss
2,0%
A.P. Møller Mærsk
Trains on Time
50
Lego
2,0%
Novo Nordisk
State Owned
DSB - CBS Case Competition 2015
21%
100
5,2%
Bad Image
30
64%
Reputation Score (RepTrak) of selected companies
5,6%
Scandals / IC 4 / Rejsekort
2011
Negative
DK
7,1%
Bad Quality / Poor Customer Service
48
Positive
8,7%
Troubled Economy / Economic Chaos
53
Negative
Source: “Rail Competition, Special Eurobarometer 388” European Commission (2012); BCG analysis
Top of Mind - When you think about DSB
what is the first thing that comes to your mind?
Delays / Waiting time / Slow
Attitude towards increased liberalization
As if this was not enough, DSB also has a set of built-in dilemmas in its operations,
which often result in bad publicity situations and a worsening of its image. For example,
if DSB has to wait for passengers who are arriving late for a train, delays for the next 10
trains in the chain can occur; however, if DSB does not wait and instead leaves right in
front of a person who is on the platform, it is perceived as indifferent and inconsiderate.
Therefore, ways in which DSB can improve its image among the Danes are important to
consider, because an improved image would likely also result in higher passenger growth.
DSB - CBS Case Competition 2015
31
Closing statement
On track towards the future
At the moment, DSB is emerging from a successful turn-around, and the focus now has
to be on growing the top line. DSB is the national railway operator of Denmark, and as
such it carries a huge responsibility of always providing reliable and efficient rail transportation. DSB launched a new strategy in 2014. The core of this new strategy was getting back to basics, putting the customer experience in the center of priorities, as well as
rebuilding DSB’s image.
However, this challenge is complicated by a series of factors that characterize the environment in which DSB has to navigate. The infrastructure sets out certain limitations of
operation, and the political ownership also plays a large role in determining the possibilities of DSB. With the strategy in place, it is now time for execution, and Mr. Pastwa is
now focused on how to achieve the political goals for passenger growth in the future.
“I see DSB as the main pillar of the Danish
public transportation system, now and in the future.
In order to reach the political growth ambitions, DSB needs
to continue to grow its passenger base in the future, while still
navigating within the political and operational constraints.
I believe the key to this growth is focusing on
continuously improving the customer experience”.
Stig Pastwa - Acting CEO
It is in this context that you are asked to develop a three-year business plan for how
DSB should increase its passenger growth and, in a higher extent, become the backbone
of the Danish public transportation system. This goal could be achieved by either focusing on a few key elements within the case, or by encompassing several elements and
connecting them in a large and holistic business plan. Just remember that it has to fit in
with the overall strategy of DSB and the context of the Danish market.
Good Luck!
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33
Appendix 1: Glossary
Appendix 2: Company overview
Passenger kilometer: Unit of transportation measure. Calculated by multiplying the
number of travels by the average distance traveled.
A complex organization
DSB Youth Ticket: Discount ticket for people aged 16-25 and students
DSB is divided into the following nine divisions: Strategy, Safety & Environment, Corporate Secretary and Legal Affairs, Communication and Branding, Finance, Commercial,
Human Resources, Operations, and Maintenance.
65+ ticket: Discount ticket for people aged 65+
Board of Directors
DSB 1’ ticket: Tickets for people who want extra service, complementary access to the
internet, and access to a designated area. Up to 60% higher price than regular tickets.
Remuneration
Committeee
Orange tickets: Discounted tickets for people traveling the East-West route at nonpeak hours, and excluding Fridays and Sundays. Must be reserved in advance, and has up
to 60% discount compared to regular tickets.
Modal share of transportation: Percentage of travelers using a particular mode of
transportation.
Audit
Committee
Chief Executive Officer
Customer ambassador
Safety, Emergency Management,
Occupational health & Environment
Corporate Secretariat
& Legal affairs
Strategy
Communication & Branding
BaneDanmark: Independent company responsible for the Danish railway infrastructure
and partly responsible for the stations.
Arriva: Denmark’s largest bus operator with city and regional busses throughout Denmark. Also operates local trains in the western part of Jutland. Owned by Deutche Bahn.
Train and component
Committee
Internal Audit
Finance
Commercial
Operations
Maintenance
Human Resources
Copenhagen Metro: Operates Copenhagen’s metro in the central Copenhagen Area.
Movia: One of Denmark’s largest traffic companies and operates busses and local trains
in the Greater Copenhagen Area.
Strategy: This division works as a cross-sectional unit, and deals with the corporate
strategy and business development of the company. The key challenge for this unit is to
figure out what strategy DSB should follow to reach the goal of passenger growth in
2030, and how the different divisions should interact to reach that goal.
Midttrafik, Sydtrafik, NT: Local traffic companies.
Nordjyske Jernbaner, Lokalbanen, Midtjyske jernbaner: Local train operators.
Safety & Environment: Potential train accidents can cause tremendous damage due to
the speed of the trains, and the many people they carry. Ensuring that the trains are as
safe as possible and potential safety mechanisms are in place in case of an accident are
therefore very important. The main challenge for this division is to ensure that safety is
not compromised when the number of passengers is growing towards the 2030 goal.
Corporate Secretary and Legal Affairs: The political interests still play an important
role for DSB, and this division discusses and negotiates the traffic contract between DSB
and the government. The traffic contract determines the role of DSB, what they can legally do, and what obligations they must follow. This division must manage the relationship with the government, and ensure DSB can operate as effectively as possible
given their ownership situation.
Communication and Branding: DSB has a less-than-perfect reputation and it suffers
from a series of widespread misperceptions among the general public — an example of
this is the myth that DSB is “always late”. Factually, DSB has a punctuality that is well in
line with contractual obligations, and is on par with European peers. The main challenge
for this division is therefore to improve the image of DSB.
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35
Appendix 4: Financial Highlights
Finance: DSB returned to profitability in 2013, and it is important to ensure that while
new initiatives must be put in place to gain passenger growth, the company still stays
profitable to satisfy the owners. It is also Finance that handles the large property portfolio (e.g., maintaining stations), and IT/digitalization.
Commercial: The commercial division must figure out how to get more people to use
the train, and more specifically which segments to focus on, how to reach them, and
with which tools. The challenge is to find out what services people find valuable, and
how much they are willing to pay for these. It is also the role of Commercial to continuously find ways to improve the customer experience. In addition, Commercial has the responsibility of developing the stations of tomorrow.
Human Resources: Gearing the organization for the new strategy is important, and the
Human Resource division’s main challenge is to ensure that the organization is suited for
implementing the new strategic initiatives.
Operations: Managing a railway system is a complex task. This is further complicated by
the fact that it is not DSB who owns the tracks, because the ownership of the infrastructure was separated into a different company, BaneDanmark, in 1997. Coordinating with
BaneDanmark is therefore important moving forward, especially because the expected
passenger growth will require even better integration. Today, DSB’s operations are basically split into three different train types: the S-Trains (S-Tog) - a suburban train in the
Greater Copenhagen Area, and the regional trains (F&R Tog) - which are trains that connect different cities in Denmark, and the Øresund Trains. This division is also responsible
for purchasing new trains. The process of purchasing trains is complex, and takes up to
10 years from the time the need is identified to the time the trains are ready and have
passed all safety checks.
Maintenance: Maintenance is important to ensure the longevity of the trains, and therefore a key task is to ensure that all trains, both new and old, are kept in good condition
at all times. A main challenge is to ensure the new IC4 trains are up and running, and
ready to take on the expected passenger growth, as it is not possible to purchase new
trains in the next couple of years.
Appendix 3: Price examples
Distance
Travel Time
Copenhagen - Århus
2t49m
Price
DKK 382
Copenhagen - Odense
1t15m
DKK 276
Copenhagen - Aalborg
4t19m
DKK 431
DKK 96
Copenhagen - Roskilde
25m
Copenhagen - Nykøbing Falster
1t43m
DKK 171
Copenhagen 2-Zone Ticket (1hour)
N/A
DKK 24
Copenhagen 2-Zone Monthly Card
N/A
DKK 365
Copenhagen - Roskilde Monthly Card
N/A
DKK 1.195
Source: DSB Annual Report 2013, p. 20
Source: rejseplanen.dk
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Case Writers
Abel Chernet
Mads Schou-Andreasen
Thanks to
On behalf of the CBS Case Competition 2015, the case writers wish
to thank the following people for their invaluable inputs throughout
the case writing process:
The Case Company:
Everyone at DSB, and especially:
Stig Pastwa, Acting CEO and CFO
Susanne Mørch Koch, Executive Vice President, Commercial and HR
Steen Schougaard Christensen, CEO of DSB Vedligehold A/S
Anders Egehus, Executive Vice President, Operations
Lars Kaspersen, Director of Communications and Branding
Thomas Thellersen Børner, Vice President of Corporate Secretariat
and Legal Affairs
Jesper Andersen, Chief Strategy Officer
Clarissa Eva Leon, Strategy
Søren Damm, Communication
Jesper Lok, Former CEO of DSB
Mentoring:
Mads Peter Langhorn, The Boston Consulting Group
Mads Wadstrøm Christensen, The Boston Consulting Group
Case Testing:
Theis Malmborg
Katja Eberhardt
Andreas Justsen
Jannika-Maria Graff
Finn Jannick Schmidt
Sarah Landsted
Inspiration and support:
The Organizing Committee 2015
Case Video:
Copenhagen Film Company
Graphic Design:
MindMovers
Disclaimer:
The information presented within this case is the responsibility of
the writers alone. DSB is subsequently not responsible for any
statement regarding its business put forward in this case. This case
cannot be used as a supporting source outside of CBS Case Competition 2015 and may not be publicly quoted without the written
consent of the authors.