On June 2, 2023, Bloomberg published an interview with Norfolk Southern President and CEO Alan Shaw. The column highlighted the company’s new strategy that will help enable it to be a more customer-centric, operations-driven railroad by building a resilient workforce and delivering reliable service.
The interview is available on Bloomberg.com, and key excerpts from Shaw’s interview include:
Taking a long-term view for Norfolk Southern
“When I became CEO, I thought to myself, ‘There’s got to be a better way to do this,’” Shaw said in an interview at Norfolk Southern’s intermodal rail terminal in Austell, Georgia, just outside of Atlanta. “I want to take a longer-term view of things. The traditional rail model has been really focused on near-term operating margins. That drives your behavior. If you see a downturn in demand, you start cutting wherever you can. Crews would be the first place you would cut. And then you get behind when the economy recovers because it always does.”
Continuing to invest in critical assets
The model of cutting costs in a downturn and building operations back up again in an upturn makes sense in theory, but the timing has to be close to perfect for a railroad…. “I’m not going to get it right as to exactly when the economy is going to take a downturn or when it’s going to recover and certainly not without enough lead time to get the assets in place to be ready to handle that recovery,” [Shaw] said. “There are strategic assets we know we’re going to need over time. Just acknowledge we’re never going to get the timing perfectly right and let’s invest in those.”
Adding customer value
But Shaw’s rethinking of Norfolk Southern’s operating ethos also reflects a realization that even industrial companies that get their revenues exclusively from other businesses need to adopt a more consumer-oriented mindset. “It’s a different railroad than it was 20 years ago when we were just handling a bunch of heavy bulk stuff” like coal and steel, he said. Much of the cargo Norfolk Southern carries today “can go via truck really, really easily. So, you’ve got to figure out where can you add value.” That means investing in digital enhancements so customers can track a container full of BMWs just as easily as they can an Amazon.com Inc. delivery to their homes. It also means rejiggering the company’s communications strategy.
Customer experience feeds the strategy
Before ascending to the CEO post, Shaw served as Norfolk Southern’s chief marketing officer and as head of the company’s intermodal operations (this category of freight involves goods that can be transferred from ships to either rails or trucks, meaning the two industries compete aggressively for this business). Those jobs gave him a front-row view to the toll that cost cuts and underinvestment take on both the railroad’s network and its customer service.
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