dsb denmark - CBS Case Competition

DSB DENMARK
ON TRACK TOWARDS THE FUTURE
Thammasat University
Wasin | Siwawong | Nichamon | Vibhu
Danish brand perception towards the nature of business and the core fundamentals
results in DSB poor brand image
1
Danish perception towards state-owned company
DSB’s bad reputation is
largely caused by
association with
government
2
DSB brand association
DSB’s brand perception is also
attributed by business
fundamentals
Source: CBS Case Materials
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
DSB poor brand image can be attributed by Danish perception towards the nature of
business and the core fundamentals
1
Danish perception towards state-owned company
DSB’s bad reputation is
largely caused by
association with
pure perception
and
government
DSB reputational problem is rooted both in
business fundamentals
2
DSB top-of-mind brand association
DSB’s bad brand perception is
also attributed by business
fundamentals
Source: CBS Case Materials
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
DSB is politically pressured to significantly outperform its past performance
1
Political ambition on growth in public
transportation
2
Mandated to help deliver
industry growth
3-year 7.5% increase in
passenger km
These are the key focus the company
must also address…
ü  Improving core customer experience
ü  Creativity and innovation
ü  Long-term perspective
Source: CBS Case Materials,
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
On the other hand, DSB is expected to outperform its past performance
in economic term
1
Political ambition on growth in public
transportation
Mandate to help deliver
industry growth
2
3-year 7.5% increase in
passenger km
DSB must improve its brand perception while also deliver
These are the key focus the company
its performance accordingly
has to address…
• 
• 
• 
Improving core customer experience
Rigidity of price differentiation
Conflicting political benefits of society
and business
Source: CBS Case Materials,
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
Overview
Reputation
Experience
How can DSB change
What valuedthe negative
experience can DSB
perception?
offer to customers?
Challenges
Solution/
impact
Improving
performance
OVERVIEW
STRATEGY I
Enhance train
experience
STRATEGY II
Future Outlook
How can DSB build the foundation for
future growth?
Continuation of
experience enhancement
and performance delivery
FINANCIALS
CONCLUSION
Overview
Reputation
Experience
How can DSB change
What valuedthe negative
experience can DSB
perception?
offer to customers?
Challenges
Solution/
impact
Improving
performance
OVERVIEW
STRATEGY I
Enhance train
experience
STRATEGY II
Future Outlook
How can DSB build the foundation for
future growth?
Continuation of
experience enhancement
and performance delivery
FINANCIALS
CONCLUSION
Punctuality and traffic information contributes highly to the seamless
flow and overall satisfaction
Drivers for customer satisfaction
(% of total customer satisfaction)
Punctuality
&Frequency
27%
Traffic
Information
21%
BaneDanmark
Punctuality:
Highly involve with technical issues
such as signaling and planning
Danske Statsbaner
Frequency
Controlled by DSB, limited by
high marginal cost
Customer
Traffic Information:
Jointly provided from DSB with
BaneDanmark
Overall satisfaction
Source: Case material
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
Seamless information flow
Operation Flow
Current products & services do not fully satisfy consumers’ needs
Current Platform
Functionality
Issues
Inconsistency between site and
app in terms of ticketing
DSB Site
Information and
ticketing
Rejsekortet
One-stop ticketing
card for all modes
of transportation
Does not
provide traffic
information
One-stop traffic
information touchpoint
No ticketing
Inaccurate information
Rejseplanen
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
The current offering does not fully satisfy the consumer need
Current Platform
DSB Site
Functionality
Information and
ticketing
Issues
Inconsistency between site and
app in terms of ticketing
Does not
One-stop ticketing
provide traffic
card for all modes
Rejsekortet
DSB should consolidate
its
current
products
&
services
information
of transportation
to provide a superior one-stop solution
One-stop traffic
information touchpoint
No ticketing
Inaccurate information
Rejseplanen
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
The ERTMS system will significantly improve delay issue
BaneDanmark
Danske Statsbaner
Customer
Issue: Faulty signaling system causing late train delay notification
European Rail Traffic Management System (radio-based control system)
Initial roll-out period: 2015-2017
ERTMS Benefits
ü  Real time signaling system
ü  80% less delays causing from faulty signaling
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
DSB can simplify the information and ticketing process by centralizing
the existing platform
BaneDanmark
Danske Statsbaner
Customer
Issue: Trip hassle and Information inaccuracy from decentralize
Functionality: One-stop trip plan
Integrated across all platforms emphasizing on
seamlessness and user friendliness
ON THE GO
Start Rejsen
Trip Information
Ticketing & Payment
Follow-up
•  Modes of
transportation
•  Route selection
•  Physical/Online
•  Choices of payment
Notification
•  Time & platform
•  Delay
•  Destination
Information accuracy controlled by ERTMS
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
DSB must communicate the new value by leveraging on state-owned
collaboration and grabbing on digital opportunity
DSB: Less hassle, more heads-up!
Goal
Creating positive brand perception
Increase in DSB train users
Increase in public transportation use
Key
points
Convenience,
Real time, More time
Touch points
Mass Advertisements
Digital Advertisement
Leverage on other state-owned mode
Internet penetration growth opportunity
Potential collaboration
• 
• 
• 
• 
Fynbus
•  Metroselskabet
Sydtrafik
•  Midttrafik
Moviatrafik
•  BAT
North Jutland Transport
OVERVIEW
STRATEGY I
STRATEGY II
Video & Top visited sites
FINANCIALS
CONCLUSION
Overview
Reputation
Experience
How can DSB change
What valuedthe negative
experience can DSB
perception?
offer to customers?
Challenges
Solution/
impact
Improving
performance
OVERVIEW
STRATEGY I
Enhance train
experience
STRATEGY II
Future Outlook
How can DSB build the foundation for
future growth?
Continuation of
experience enhancement
and performance delivery
FINANCIALS
CONCLUSION
East-West line is the focal point of passenger kilometer growth
TOTAL INCREASE IN THE AMOUNT OF PASSANGER KILOMETERS
OF 7.5% IN THREE YEARS
Current obstacles facing East-West trains are limited service & customer experience
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
DSB should improve service & comfort in order to enhance customers’
experience and satisfaction
Drivers for customer satisfaction
(% of total customer satisfaction)
Punctuality
&Frequency
27%
Traffic
Information
21%
Nature of East-West Line
Intercity + Regional
Railway Lines
OVERVIEW
Train Rides Last 1-4 Hours
STRATEGY I
STRATEGY II
Used by Business (6.8%),
Leisure (37%) and
Commuters (56.2%)
FINANCIALS
CONCLUSION
DSB should improve service & comfort in order to enhance customers’
experience and satisfaction
Drivers for customer satisfaction
(% of total customer satisfaction)
Punctuality
&Frequency
27%
DSB should further expand its service offering and customer experience for
Traffic
customers on East-West lines
Information
21%
Nature of East-West Line
Intercity + Regional
Railway Lines
OVERVIEW
Train Rides Last 1-4 Hours
STRATEGY I
STRATEGY II
Used by Business (6.8%),
Leisure (37%) and
Commuters (56.2%)
FINANCIALS
CONCLUSION
Reposition DSB (East-West) to focus on connectivity through the
improvement of Wi-Fi and work/leisure facility
CONNECT
DSB CONNECT is the repositioning of EAST-WEST Lines to focus on
the concept of connectivity through enhancement of services and
comfort
Improved On-Train Wi-Fi
Stay Connected
ü  Innovative vehicle-based
internet technology
ü  Full access to internet
throughout the ride
ü  Successful
implementation in
Sweden, England,
Dubai, Scotland, etc.
ü  Guaranteed connection
OVERVIEW
Work & Leisure
ü  Business Travelers:
(+Time): More personal
space, onsite printer/fax
ü  Improved bandwidth and
stability
STRATEGY I
STRATEGY II
ü  Leisure Travelers: collective
seating, screens with live
updates, shows, concerts,
etc
FINANCIALS
CONCLUSION
Enhancement of Wi-Fi Networks on East-West lines by partnering with
Icomera
MoovBox M800 Technology: Multi Cellular Router/Wi-Fi controller designed for complex railways
Track back-end through
real time GPS
monitoring
Moovbox switches seamlessly
between networks, offering
consistent connection
Icomera is a partner with many
network operators throughout the
Nordic Region, which offer high
speed internet + wider coverage
Successful
Case Example: Icomera & SJ (Sweden) 4% increase in customers + 25% increase in satisfaction
Case
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
Stakeholder Proposition
Value for Icomera
Value for DSB
§  Offers a more seamless
customer experience
§  More reliability from train
commuters
§  Targets a wide group of
consumers
Value for Customers
§  Offers a more seamless
customer experience
§  Faster & More reliable
Wi-Fi connection on the
train
§  Effective use of time
OVERVIEW
STRATEGY I
§  Perfect Business
Opportunity
§  Increase of
Revenues
Value for Carriers
STRATEGY II
§  Opportunity to utilize
excess signal at cell
towers
§  Increase of
Revenues
FINANCIALS
CONCLUSION
Timeline & Implementation
2015
Q1
Q2
2016
Q3
Q4
Q1
Q2
2017
Q3
Q4
Q1
Q2
Q3
Platform Enhancement
Arrangement with Software developer
Software development & Testing
Launch of the new DSB On-the-Go platform
Marketing Planning
Marketing Campaign Launch
DSB Connect
Partnership Negotiation with Icomera & Carriers
System Integration & Installation
First Pilot Program
Continuous Expansion of Services
Marketing Campaign Launch
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
Q4
Key Figures
Contribution to Passenger Kilometers
DSB
Øresund
8%
S-tog
21%
DSB
Øresund
8%
East
18%
Other
2%
S-tog
19%
West
16%
2013
East
17%
West
15%
2017
Other
2%
East-West
39%
East-West
35%
InterCity Utilization
Connectivity
500 millions
more passenger
kilometers in 3 years
OVERVIEW
STRATEGY I
11 millions
users with guaranteed
internet connection by 2017
STRATEGY II
Satisfaction
7.1
7.7
Increased satisfaction on
long-distance traffic
information
FINANCIALS
CONCLUSION
Revenue Forecast
Passenger revenue
(DKK millions)
Key Assumptions
ü  Focus on InterCity passenger for faster
passenger kilometers growth
6,600
6,400
406
6,000
ü  Increase InterCity journeys by 2 millions
in the next 3 years
ü  870 DKK average revenue generated
per passenger kilometer
203
Future Outlook
5,480
81
5,864
5,627
5,200
7%
with recom
5,830
5,800
5,400
ü  Increase passenger kilometers by
7.5% (470 million passenger kilometers)
by the next 3 years
6,270
6,200
5,600
CAGR
5,400
4%
base
More leniency on pricing will allow
DSB to generate more revenue per
passenger kilometer
5,000
2015
Base Revenue
OVERVIEW
2016
2017
Recommendation
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
Investment & Cost Structure
Key Investment (2015-2017)
Recurring Cost
Traffic Information System Improvement
System Cost
Marketing Cost
70 million DKK
14%
Cost of Raw Materials &
Consumables
31%
Other external expenses
32%
Staff expenses
20 million DKK
InterCity Train Repositioning
Sources of Funds
Train Renovation
23 millions DKK
Short-term Debt
Branding &
Marketing
10 millions DKK
WiFi Improvement
200 millions DKK
TOTAL
OVERVIEW
Long-term Debt
Internallygenerated Funds
323 millions DKK
STRATEGY I
through core business
STRATEGY II
FINANCIALS
CONCLUSION
Net Income Forecast
Total Net Income
(DKK millions)
Key Assumptions
ü  Historical cost assumption
700
6,270
CAGR
650
600
550
500
450
5,830
5,480
137
14%
with recom
ü  Potential high-value service
monetization in the future
ü  Profitability still dominated by passenger
revenue in the first 3 years
68
Future Outlook
27
495
ü  Low marginal cost due to the utilization
of existing assets
508
523
3%
base
Increase popularity and future
expansion of the network will
improve profitability
400
2015
2016
2017
Base Net Income
Recommendation
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
Final Note
Sustainable strategic direction for DSB
TRIPLE BOTTOM LINE
Economic
Remaining profitable through asset utilization and low investment
Political
Still complying to regulations and political ambition
Reputational
Improving brand perception by delivering satisfactory performance
OVERVIEW
STRATEGY I
STRATEGY II
FINANCIALS
CONCLUSION
On Track Towards the Future
Reputation
Experience
How can DSB change
What valuedthe negative
experience can DSB
perception?
offer to customers?
Challenges
Solution/
impact
Improving
performance
OVERVIEW
STRATEGY I
Enhance train
experience
STRATEGY II
Future Outlook
How can DSB build the foundation for
future growth?
Continuation of
experience enhancement
and performance delivery
FINANCIALS
CONCLUSION
Q&A