Shifts in automobile technology and ownership will have consequences for public transit.

TechBy Joseph M. Giglio and Charles Chieppo

The rise of shared electric self-driving cars and the transition from a world of ownership to one of consumers purchasing transportation as a service holds the promise of significant economic, environmental, and quality-of-life benefits. But it will also pose an existential threat to public transportation in general and commuter rail in particular.

The first recommendation in the December report from Governor Baker’s Commission on the Future of Transportation is “Prioritize investment in public transit as the foundation for a robust, reliable, clean, and efficient transportation system.” In broad terms, the commission is right. But maximizing potential benefits from the unprecedented disruption of surface transportation that lies ahead will also require fundamental change at the MBTA and a hard look at which transit modes are positioned to compete in a brave new world.

The commission’s charge was to look at the Commonwealth’s needs and challenges over the next 20 years. But if that horizon is extended to 40 years, station-to-station service to the suburbs is unlikely to be very attractive in a world where shared electric self-driving cars will offer much faster door-to-door service at a price that won’t be much higher.

Drivers are normally the largest expense for any transportation business. It currently costs about 55 cents a mile to operate a vehicle with a single occupant. But it’s estimated that the cost could fall to 15 cents a mile for autonomous vehicles carrying two or three passengers, which would significantly reduce public transit’s price advantage.

Connected vehicles will also dramatically reduce human error, resulting in big increases in throughput thanks to variables like higher travel speeds, less space between vehicles, and less frequent braking in response to accidents and other travel events.

In the future, agencies like the MBTA will probably subsidize trips that are currently taken on commuter rail rather than operate them. Even with the transportation transformation in its infancy, Florida’s Pinellas Suncoast Transit Authority, which serves the St. Petersburg/Clearwater area, eliminated some bus routes further from the urban core, after it experienced an 11 percent overall drop in ridership, and replaced them with subsidies for Uber and Lyft rides. Since then, over 25 US communities have established similar partnerships — and the disruption caused by ride-hailing services is minuscule compared with what is to come.

MBTA commuter rail ridership has declined. Nonetheless, it will remain with us for the next couple of decades. It still needs to be improved, but massive investments in new lines like South Coast Rail or, even worse, Springfield, would be a fool’s errand.

The biggest challenge for the future will be making transit work in congested downtown areas. One Boston traffic simulation model showed that while shared autonomous vehicles would reduce travel times and the number of vehicles on the road even as total miles traveled rose by 16 percent overall, downtown travel times would be 5.5 percent longer because the vehicles would substitute for transit use.

Rising to this challenge will require focusing more investment in the urban core. But success will require something more: changing the MBTA’s top priority from providing jobs and pensions to serving its riders.

During a three-year exemption from the Commonwealth’s costly anti-privatization law, the T dramatically improved performance in areas such as cash collection and reconciliation and warehousing and logistics, and saved millions. Despite this success, there was nary a peep about extending the exemption or making it permanent.

Few would argue that the MBTA is skilled at putting customers first. The question is whether — in the face of an existential threat to public transit and with far less margin for error — political leaders, bureaucrats, and unions can change the authority’s culture and begin to lay the groundwork that will allow the T to perform the way we’ll desperately need it to in the future.

Part of that culture change will be recognizing that commuter rail is poorly positioned to compete over the long-term. When the Patriots win the 2060 Super Bowl, stories about a suburban rail network overwhelmed with riders are likely to generate the same reaction as when we tell our kids about having to get up and walk to the television to change the channel.

Originally Published: February 15, 2019.

Joseph M. Giglio is a professor of strategic management at Northeastern University’s College of Business Administration. Charles Chieppo is the principal of Chieppo Strategies.


Automakers face a challenge in managing the future

When businesses are initially established, their success largely depends on their value proposition and unique offering to the market. This success enables companies to grow and expand. But then what?

Large organizations often become so focused on current revenue streams that they lose sight of priorities like imagining the future, identifying innovations and making smart strategic choices about where to invest. Instead, they move into survival mode, trying to maintain their current positions rather than taking the risk of transitioning into new ones.

Put differently, the challenge for companies is how to deliver on this year’s goals while simultaneously trying to position themselves to be successful in the future. This dynamic is playing out big time in the transportation industry. There is perhaps no better current example of this dilemma than traditional automakers. These companies are facing disruptive technologies such as electric vehicles, connectivity, autonomous vehicles, a change from vehicle ownership to purchasing transportation as a service, and the global emergence of subcompact vehicles. They also face an unexpected wave of new competitors such as Waymo, Tesla, Uber, Lyft and others from Silicon Valley, as well as BYD and LeEco from China.

The great challenge for senior industry executives is how to manage the decline in traditional vehicle sales until the return on new technology investments fill the void. In this way, auto executives are facing a situation similar to what traditional entertainment companies faced with the switch to streaming, or brick-and-mortar retailers with the rise of e-commerce.

The challenge presented is what strategic bets should automakers make going forward and how can they modify current business models to maximize positive outcomes for all stakeholders? Companies are having to reengage fundamental questions such as where and how they should compete.

Automakers aren’t the only one faced with challenges by a changing transportation industry. For those born since the 1980s, owning a car and getting a driver’s license aren’t the life milestones they once were. Younger buyers are more interested in ease of transportation and mobility, and with often crippling student loan debt they are thrilled not to have car payments. Students graduate college with an average of about $37,000 in student loan debt. It all adds up to $1.5 trillion across the country.

Millennials are also killing the motorcycle industry. For instance, Harley Davidson is struggling with declining sales and an aging demographic that is increasingly hanging up its boots. Being an “Easy Rider” is no longer easy for an aging customer base, and younger consumers are more interested in less expensive bikes that generate lower margins for manufacturers. To attract younger customers to the brand, Harley Davidson is setting up riding schools around the country and is releasing an electric motorcycle called the “Livewire,” which will be priced at just under $30,000. The manufacturer’s suggested retail price for the entry- level Toyota Prius is about $23,500.

In the unlikely event you are not clear on this, everyone – individuals and institutions – are living in an age of disruption. The growing challenges of globalization and the rapid spread of digital technologies and artificial intelligence offer existential threats as well as new opportunities. The younger generation will experience the consequences of these disruptions for many years to come and will witness industries in transformation through their own daily experiences as they change the way Americans live and work.

It once again shows that the late, great author V.S. Naipaul was right when he said, “The world is always in movement.”

 Originally Published: February 9, 2019