Sunday, July 12, 2009

A miracle in India !

"Bankruptcy to Billions - How the Indian Railways transformed" - by Sudhir Kumar & Shagun Mehrotra

Can you imagine a mammoth 100 year old Government organization in any country (let alone India) with 1.4 million employees transforming itself from a near bankruptcy situation to $6 Billion in cash surplus over just four years! And that too without privatization, layoffs or price increases! To cap it all they improved service levels significantly and actually managed to reduce prices (over 40%) for the poorer customer segments !! I am sure that everyone will agree that this qualifies as a miracle.

Well, that is the story of the Indian Railways from 2004 to 2008, and it is clearly told in this book “Bankruptcy to Billions” by Sudhir Kumar and Shahgum Mehrotra. Sudhir Kumar, a Government employee in the Indian Administrative Services was deputed on Special duty to the Minister of Railways (Lalu Prasad Yadav) and played a key role in this miracle story. Keep in mind that India has one of the largest railway networks in the world - daily running 13,000 trains (including 9000 passenger trains) over 63,000 km of routes and carrying 17 million passengers.

How did they do it? For an in depth understanding one needs to read the book. But I would summarize the management strategy as follows:

(a) Re-conceptualizing the Railway’s business - realizing that they are not a monopoly if they see themselves being in the Transportation business competing with buses, airlines, shipping lines for passenger traffic and trucks, ships and pipelines for the freight business (b) Innovation and Asset optimization - running faster longer and heavier trains, coordination and cooperation among the thousands of internal departments (c) Strategic investments for increasing utilization of existing assets by filling gaps (d) Alliances with private companies to meet soaring demand and co-opt competition (e) A deliberative and calibrated approach to make small changes and then learn, revise and scale up in a phased manner.

The book explains step by step on how the strategy was executed and it is an excellent case study of what can be achieved when politicians, bureaucrats and technocrats collaborate and innovate. It is also an example of how political compulsions can be reconciled with commercial objectives and produce a win-win situation for all. The book also dispels the notions that were spread by some in India that the turn around was more though accounting jugglery and just leveraging the vast real estate that Indian Railways owned. Further it also shows that the success was not just by plucking low lying fruits, but by making fundamental changes which should continue to propel Indian Railways forward. I hope that this story is used as a case study for MBA students world wide.

The book has some drawbacks though - the most critical being the lack of visibility in the book, of the key players who achieved this miracle. The team is just mentioned as ‘reformers’ - perhaps the author himself being one of them, was reluctant to project his role. Some more background of the railways from it inception at the time of the British, and its growth since independence, pictures of trains, stations and employees, would have been useful for non-Indian readers. The challenges that the team must have gone through are downplayed - the authors themselves don’t seem to have fully realized the scope and impact of their achievement!

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