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Is strategic thinking necessary at the U.S. Department of Transportation (USDOT)? Its 118-page National Freight Strategic Plan (NFSP), released on Sept. 3, suggests that it is.
NFSP, as a national multimodal plan, fulfills a mandate set out in Section 8001 of the 2015 Fixing America’s Surface Transportation (FAST) Act. Of course, the federal government is constitutionally mandated to oversee both interstate commerce and international trade. Each of those activities is facilitated by transportation. In this sense, it would be better to say that NFSP is designed to facilitate the strategic goals of consignors and for-hire carriers. After all, a publicly provided highway or bridge is not in itself strategic; however, how it is used may fulfill strategic gains.
If NFSP can help the private sector achieve new types of operations that are hard for other countries to imitate, then we have a true national strategy that would achieve a sustainable competitive advantage. This is strategic thinking along the proactive lines exemplified by Michael Porter. Simply put, good planning in the right areas can achieve a better future of an organization. A counterpoint to this is what Henry Mintzberg calls emergent strategy. This is a more reactive and flexible approach to strategic thinking. In this case, strategy emerges as events (some of which are unforeseen) unfold. The trick is to be ready for them.
Carrots and sticks
Standing above any strategy is the mission statement or vision. NFSP’s states: “The freight transportation system of the United States will strengthen our economic competitiveness with safe and reliable supply chains that efficiently and seamlessly connect producers, shippers, and consumers in domestic and foreign markets.” It is hard to disagree; but it is not exactly visionary or aspirational. This vision basically highlights the tactical nature of transportation in the economy. Forming a supply chain to meet some organizational/financial goal is a strategic decision. Managing the flow of information, tangible items and people along a supply chain is tactical. Keep in mind that strategy is not superior to tactics. Both work in a symbiotic way since one does not exist without the other. Strategy is a pipedream if tactics are not accounted for. Tactics are purposeless and potentially wasteful without some strategic guidance.
Most of the transportation taking place in the United States is handled by the private sector. The federal government has programs in place that tax, regulate and subsidize consignors and for-hire carriers. In this way the federal government interferes with the market for transportation. Of course, the level of interference differs across the various modes of transportation.
Building interstate highways, bridges and tunnels for motor carriers covers a lot of their infrastructure needs. Regulating the airspace and coastal waters directly affects air carrier and ocean vessel operations, respectively. Rail and pipeline companies, on the other hand, must build their own infrastructure. In any case, the provision of sizable infrastructure (basically, what economists call “club goods”) is an example of the government’s positive role in the market for transportation. It is a foundation for transportation that the private sector alone would not provide.
NFSP has three strategic goals. One involves improving the safety, security and resilience of the national freight system. Another involves modernizing freight infrastructure and operations to spur economic growth and competitiveness. Of course, these two goals sound a lot like the vision or mission statement. A true goal, in the proactive version of strategic thinking, would define what a “win” looks like. How much improvement and how much modernizing are required to meet these goals? Finally, the third goal involves improving freight system performance by supporting the development of data, technologies and the workforce.
In the proactive model, it is important to have a timeline to reach goals because the people trying to bring them about need to know whether the race is a sprint or a marathon. Of course, it does not help much knowing that governments tend to think in terms of electoral cycles and setting politically expedient goals that are conveniently due to be met well beyond an electoral mandate. The emergent strategy model recognizes that control is diffused. Each party may adjust differently to future events. Differences in government and private-sector approaches to dealing with global climate change are certainly an example of this.
Since the federal government has direct control over only certain parts of the transportation process and its support infrastructure, it needs to work with state and local governments as well as the private sector. To influence those entities, it relies on funding programs (which is the carrot) and taxes and regulations (which are the sticks). Carrots and sticks are about incentives and not strategy because various targeted entities need not share the same goals.
Transportation either facilitates or hinders transactions; but it, alone, does not generate those transactions. Buyers examine the attributes of a product and sellers examine the buyers’ ability to pay. If both sides like what they see, a transaction may take place. Of course, if transaction costs like transportation push the price (f.o.b. destination) above what the buyer was willing to pay, then the transaction will not take place. Happily, if any of NFSP’s three strategic goals were met, they would serve to lower freight rates, barring the complicating factor of increased taxation and regulation.
Demand for transportation only exists for its own sake when it is in the form of consumption (e.g., a cruise, a Sunday drive, etc.). With these caveats in mind, it is now up to consignors and for-hire carriers to build NFSP into their plans, should they decide to be proactive. Alternatively, they may deliberate over how NFSP’s commitments might influence an emerging future. Of course, just like tactics will make or break any strategy, the role of government, as provider of a solid foundation for commercial transportation, cannot be ignored.
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