McKinsey: Innovation lacking at state DOTs

Technology can help state transportation departments improve planning, but many states are not equipped to take advantage, according to a McKinsey report. (Photo: Virginia Department of Transportation)

Platooning commercial trucks are being tested in several states and could be a viable solution to reduce costs and improve efficiency by 2018. Drone deliveries are underway in countries like China, but in the U.S., they have been slowed by state and federal policies. The U.S. has a long history of technological achievement, but unfortunately, the history of technological delay due to government entities that don’t move as fast as innovation is just as long.

With all the advances being made in technology – from autonomous vehicles, to drones, to smart highways, electrification and the Internet of Things – it’s time for state transportation departments to be innovative and forward thinking, but that is not the case, according to the latest edition of McKinsey & Co.’s Voices on Infrastructure report.

In an article entitled “the department of transportation of the future,” McKinsey’s Steffen Fuchs, partner in the Dallas office, and Rafat Shehadeh, association partner in Washington, DC, argue that transportation will change dramatically in 10 years, and department of transportation leaders need to act now to keep pace.

“These changes are imminent—and they have sweeping implications for the entities that govern transportation infrastructure,” the authors write. “If the face of transportation will change in just a decade, and large transport infrastructure projects can take more than a decade to complete, then departments of transportation (DOTs) have little more than three to five years to adapt.”

They argue that DOTs focused on legacy models and slow to adapt to new datasets will be unprepared. “Conversely, those that proactively embrace change have the opportunity to shape the future of transportation as well as urban, suburban, and rural development,” they note.

Agility will be critical to adapting to the rapidly changing culture, they say, and with so many DOTs focused on reducing risk and ensuring compliance rather than encouraging experimentation, adapting to change will be difficult.

“No blanket solution exists, as each DOT is organized and governed differently,” the authors point out, “however, we see a shared vision and set of guiding principles that all DOTs can aspire to follow in paving their own path.”

Some DOTs are already innovating, but many are focused on simply finding funds to repair existing highways and bridges. “These DOTs may not have the capacity to invest in new innovation,” the author write. “Similarly, public stakeholders such as metropolitan planning organizations (MPOs) are just as central in the overall planning process as the states and often have different priorities.”

One reason for this current focus is the sheer number of civil engineers working in DOT departments. “While this talent will always be critical to the success of large civil works organizations, there is always a risk of groupthink when an organization is mostly composed of people with similar training and problem-solving approaches,” the authors point out.

Also, many projects are linear in nature with little cross-function integration. To develop the DOT of the future, McKinsey’s experts suggest five steps.

Strategy: DOTs must develop a strategy that funds priorities and enable innovation. This means closer work with partners, educating and informing the public to potential changes, and collaborating with public and private entities on innovative ideas.

Portfolio planning: DOTs must include scenarios for all potential transportation solutions, not just conventional roads and bridges. Planning should include not just wider roads to ease congestion, but how autonomous vehicles, bicycles and ride-sharing can factor into the overall solution. “DOTs would benefit from an integrated portfolio that allows stakeholders to see, track, and understand all the work being funded, enabling real-time decision making. This portfolio could improve scenario planning, allowing funds to be used more efficiently to find the best solutions to current and future problems,” the authors write. Doing so can help other sectors of the economy, such as logistics, achieve their goals.

Resources model: DOTs need to evolve, moving from engineering-focused entities to “human engines” that integrate classical engineering, new engineering skills, technology capabilities, general problem solving and financial acumen. “To succeed, they’ll need a talent acquisition and development plan that speaks to a generation of innovators interested in making a positive impact on their communities,” the authors say. “Of course, these innovators will still need traditional engineering teams. But DOTs of the future will rely heavily on data scientists that analyze disparate information streams and develop solutions that incorporate AVs and other emerging mobility trends.”

Project planning and delivery: Project planning needs to be quicker to deliver solutions. By using data to more accurately predict costs and schedules, DOTs will be able to more effectively utilize resources. “Technology will change this process with digital solutions that develop more accurate cost and schedule estimates, incorporate data analytics from hundreds of other similar projects, and codify on-the-ground experience into true organizational knowledge,” the authors say. “Digital tools can also monitor equipment and crew efficiency, which in turn will transform contractor management and boost productivity. Embracing these technologies may seem daunting for some of today’s DOTs, but those that do so will reap significant value.”

Performance measurement: DOTs need to move from performance measurement that focuses on errors, cost overruns and delays to measurements that focus on achieving the broader goal. “For example, DOTs should be evaluated against the efficacy of their solutions, not the money they disburse, and chief engineers should be rewarded based on their improvements to road networks and other transport solutions. A number of DOTs are already at the forefront of this evolution, but much more needs to be done,” the authors write.

Making these changes can help the DOTs of tomorrow more readily develop and implement important changes to transportation systems that take advantage of rapid changes in technology, the authors conclude.

“DOT leaders should acknowledge that the imminent changes to transportation are about to redefine their existing structure and models,” they note. “They should be visionary, pragmatic, bold, and courageous in the years ahead, and stakeholders must coalesce to support them in their transformation. With these measures firmly in place, DOTs can act today to establish a sturdy foundation for the future.”

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Brian Straight

Brian Straight covers general transportation news and leads the editorial team as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler.