Sunday, April 18, 2004

The £10bn rail crash:
A superb piece of investigative journalism by James Meek for the Guardian about the mis-management of UK West Coast main line modernization. A project that was supposed to cost £1.5bn will now cost £10bn (more than the new US mission to the moon) and be 2 years late.

Though not spelled out, there is a strong thread running through the tale of apalling knowledge management and the dangers of unamanaged downsizing leading to the eventual collapse of Railtrack. At its heart seems to be management arrogance - a contempt for engineering expertise, a fixation on the city and shareholders, and some dubious hiring choices of executives and consultants.

For example:
"Railtrack was led to privatisation by two men, its chief executive, John Edmonds, and its chairman, Robert Horton. Edmonds was a former senior British Rail executive, Horton the former chairman of BP. Far from being loyal to BR's way of doing things, his experience on the state railways had inspired in him a scepticism towards in-house engineers and safety experts bordering on contempt. They were, he considered, overcautious, conservative, stuck in the mud. It was this which led him, at Railtrack, to shed the nucleus of in-house expertise that left the company unable to understand what its myriad specialist contractors were up to." (my emphasis).

[On Horton] "'He wasn't close enough to the railway to know what was going wrong,' said one rail industry source. 'So he was great at privatising, great with the City, good at getting private investment into industry. He didn't understand that he'd lost all his key operators, lost all his key engineers, and was chasing technology that wouldn't work.' "

A secondary effect of this loss of expertise was a loss of contacts to the outside world. Its plan relied on an ambitious new technology that had never been proven. When Railtrack should have heard alarm bells ringing, it was too isolated to pick them up:

"in January 1995, most of Europe's state-owned railways - 19 of them - came to the joint conclusion that [the new technology] was not ready to be used in the real world, and a simpler, transitional form of new technology should be the next step. Again, Railtrack ignored the warning. In fact, Railtrack may never have heard it: at this time the firm had barely any contact with Europe."

Even if connections had been made, it didn't even have sufficient knowledge to learn from them:
"Railtrack did not have its own sufficiently strong in-house knowledge and expertise to be able to use industry for what it was good at, to gather their views in and make a judgment."

The klesson, then, is to downsize with care, and be very careful about the inherent limitations of outsourcing.

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