Canada Post snail mail forced to evolve

When Canadians think of "snail mail," they probably don't think of technology.

Luckily for Canada Post, Philippe Lemay does. He's the executive vice-president for business development for Canada Post Corporation, and he knows letter mail is decreasing every year because of technology. But he has a plan: integrate technology into the postal service, and the postal service won't lose customers.

In fact, that's what Canada Post has been doing, under his leadership, for the last five years. Not only can you now track that gift for Grandma online. You can forgo paper mail altogether, and still use Canada Post. It created the world's first electronic post office, and the world's first electronic postmark.

These services are still unused by most Canadians. But with each year, as the services improve, the customer base grows. And the fact is, if Canada Post doesn't snap up the growing online business, someone else will.

"We don't like to lose letter mail, because that's our business," says Lemay. "But that's reality."

You can take the businessman out of the tech sector, but you can't take the tech sector out of the businessman. In his perch atop the Canada Post building on Riverside Drive, Lemay has a gold-framed certificate, the Gartner CRM Excellence Award. Canada Post won it, Lemay explains proudly, mainly because of the way it has taken advantage of technology.

Then he puts it back on the desk next to a model of a red mailbox.

It's still early enough in the evolution of Canada Post, that the mailbox and the technology award seem incongruous.

When Lemay came to work at Canada Post a decade ago, things were very different. E-mail had just become popular, and the world's post offices hadn't woken up to its significance. Canada Post was using a fragmented and inadequate information-technology system.

Ten years later, Canada Post is advising other post offices around the world on how to integrate information technology.

It hasn't abandoned the little red mailbox, but it isn't chained to it, either.

The Birth of E-Post

Lemay has worked in the computer industry in California and Canada, including for Amdahl Corp., now a subsidiary of Fujitsu Ltd. When he joined Canada Post in 1994, he realized there were two ways to approach the Internet revolution: denial or acceptance. He chose the latter.

"Going into Y2K, we had a complete review of the Canada Post strategy," he remembers. "And that's when we established a number of key strategies for Canada Post, going forward. One of the conclusions we reached back then was the fact that eventually the Internet would replace a lot of letter mail, as we know it today. For reasons of cost, convenience, and speed. So we decided in 1999 that if we were going to lose letter mail to the Internet, we wanted to be there, to be playing a role, so this transformation to the new technology for delivery purposes could take place."

As a result, "e-post" was born.

"It was the world's first electronic post office," says Sarah Frame, a spokeswoman for e-post, a company held by Canada Post. Now four years old, e-post is allows customers to pay their bills online, through Canada Post. There are more than 65 "mailers" — companies that can send mail to a customer's e-post mailbox. The mailers include Canadian Tire Corporation, the City of Ottawa — and, of course, Canada Post.

Frame says that 400,000 consumers signed up to receive more than 100 different types of document in an e-post mailbox, similar to an e-mail inbox. The difference is that all your commercial mail comes in the same way, according to your preferences, and you can pay all your bills on one site.

"When we created the electronic post office, we wanted to replicate what happens in the mail world today," says Lemay. "We felt that as mail would migrate to secure online delivery, the consumer would want to receive all their important mail electronically at a secure, electronic post office box, in one place."

Lemay says five million Canadians go online to pay bills, either through e-post or through other web services. He hopes that e-post can capture more of that market.

Yet, Iain Grant, an analyst with the Montreal consultant firm Seaboard Group, says there isn't a lot of excitement in the e-business industry about e-post — or, for that matter, about e-portals. He says the idea of one-stop shopping for bills has been around for several years, but no one has cornered the market. And no one really knows yet if there's a market to corner.

"Whether it's going to be Bell Canada or the banks or Canada Post itself, the jury's still out. People are still looking at this with some reluctance. Even though we're supposed to be on the forefront of all things 'e,' I still sign more cheques than I make online payments."

On the other hand, Grant says Canada Post may have missed an opportunity to make itself the portal of choice for people looking for that one-stop website. Now, many merchants allow bill payment on their own websites, which removes the need for an intermediary like Canada Post or a bank.

"The need for e-payment portals like e-post may be minimized now that the rest of the world's caught on. Canada Post is not the only alternative, whereas three years ago, if they had been faster, they might have been. There are more options today."

Lemay contends that e-post faced a "chicken-and-egg" problem in its first years, since mailers would only sign up if they knew consumers would use the service, and consumers would only sign up if they knew there were enough mailers to make it worthwhile. But Lemay says the online migration is happening fast, so e-post has to mature quickly to keep up.

"Obviously, we're still in the transition process. We've now seen, since about the year 2000, that letter mail volumes are decreasing by about two per cent, per year. That may not appear to be significant, but when you're looking at four billion pieces of mail, two per cent of four billion every year starts to become an important number."

Securing E-Mail

Once the mail went online, it faced the problem faced by every other online service: security. Paying the bills online may be convenient, but consumers want to know their information is private and safe.

Lemay says security is more than good business for e-post. As far as he's concerned, it's part of its mandate.

"The Canada Post Act refers to the sanctity of the mail, the security of the mail," he says. "That's manifested in letter mail by the postmark, which tells you that this document, this mail was handled by Canada Post, it has not been altered, its contents have been protected. So if you go to the electronic post office, you will see an electronic postmark attached to each piece of mail. That will tell you that this piece of mail has not been tampered with, and it has been protected by Canada Post."

An electronic postmark is a kind of authentication software for documents. Canada Post developed the first electronic postmark that meets the Universal Postal Union's standard.

Encryption alone does not differentiate the postmark from other Internet security software. Canada Post uses 128-bit encryption, which is the current standard. But Lemay says the security advantage of e-post is the fact that all merchants and customers know they're using the same security software. There are many security solutions for merchants, and some for consumers, but by using the post office, both sides of the transaction are on an equal footing.

The elctronic postmark applies a time-and-date seal to an electronic document. Software behind it can detect tampering, so the postmark's presence shows the contents are secure. Canada Post also keeps a record.

A few months ago, Microsoft Corporation integrated the Electronic Postmark into its Office Word and InfoPath software. Other countries, including the United States, now have Electronic Postmarks.

Another digital version of an old idea is Canada Post's e-courier service. Lemay says PosteCS (it stands for "post e-courier service" and is pronounced "postex") can send a document faster than an overnight courier service, more cheaply, and just as securely.

It works like an e-mail. You type in the recipient's e-mail address, a subject line and a message. Then, you attach files. However, those files can be protected by the Electronic Postmark, encrypted, and secured with password protection.

"What we're talking about here is a change of culture in how people use technology to do business," says Lemay. "You would think that with the electronic post office and PosteCS, you would see an overnight revolution and paper would go away dramatically. But people don't behave that way. People have habits, and it takes time to change the way we do things."

Canada Post itself has had to change the way it does things. A few years ago, Lemay realized that better technology could make Canada Post more efficient, inside and out.

As with e-post, Lemay says the change in internal IT structure came as Canada Post readied for Y2K . "I came to the realization that our old IT environment would not carry us forward into the next millennium, or the next century. Obviously, like a lot of large corporations, we had built a number of IT applications over the years, going back 20 years." Those applications, for functions such as payroll and billing, were cobbled together without an overarching structure. They couldn't communicate with each other easily. There were no common databases.

So, beginning in 2000, Canada Post re-engineered its entire IT structure. "This business transformation has allowed us to reduce our administration and management, over the last four years, by some 1,300 employees, which proves the efficiency of what we've been doing," Lemay says.

Searching for efficiency, Canada Post developed self-serve, online systems for customers. Its online business centre won the Internet Commerce category of the World Mail Awards in 2003. You can track parcels, get a website address, look up a postal code, shop, or change your mailing address through Canada Post's website.

Tech Partners

Canada Post hasn't made all these changes alone. E-post, for example, began as a partnership by Canada Post Corporation with Cebra, Inc, a Bank of Montreal subsidiary, and later with TELUS Corporation.

And when Lemay began looking for ways to reorganize Canada Post's systems, he decided to look for creative partnerships.

"I did not think that we could build internally the capability, the know-how," he says. "So I went to the board and made a recommendation that the best way for us to get the world-class IT we needed, going forward, was to create a new company, in partnership with one or two technology partners."

Innovapost Inc., a global collaboration between Canada Post and its suppliers, was born. It is jointly owned by Canada Post Corp. and CGI Group, Inc. Accenture became a preferred shareholder. Innovapost manages all the applications; consultants are still brought in for large projects. Lemay says Innovapost is saving Canada Post money — the corporation reduced its IT costs by 10 per cent over the last year.

Jim McDade, a client partner at Accenture, says Innovapost is better than a simple contract between partners, because it allows for a continuous relationship.

"I really think Innovapost is a pretty unique approach that Canada Post has adopted to bring the expertise from its supplier base to the table."

He says Innovapost exemplifies how a postal organization can develop a new business models as it figures out how to take advantage of new technology.

"I think the posts are going through some big-time change. It really comes down to: How do you continue to maintain universal service with declining usage and revenues?"

McDade believes the wired nature of Canadian society has pushed our postal service to adopt new technologies. "Comparatively speaking, Canada Post has been at the forefront in information technology development and adoption."

It hasn't taken long for other postal services to adopt technology too. The United States Postal Service offers similar online services. But Lemay says Canada Post leads the pack. So much so, that other postal organizations regularly come to it for advice.

To meet this demand, the corporation created Canada Post International Ltd., its international consulting arm. Since the early '90s, Lemay says, Canada Post has executed more than 150 contracts in more than 50 countries, including Belgium, Thailand, Serbia, and Lebanon. "It's a very significant activity, which carries the flag of Canada around the world. We're respected by other postal organizations. Does that mean we're perfect? Absolutely not."

But Lemay says the efficiencies in IT and the new online services have allowed Canada Post to keep the cost of mail — traditional mail — down. He wryly acknowledges that Canadians complain about the cost and speed of mail, but says our mail is actually about 20 cents cheaper than in most G7 countries, and relatively fast, especially considering Canada's geography and climate.

"Snail mail" has new technology helping it along, too. Lemay says the optical reader technology continues to evolve. But unlike online mail, snail-mail technology is an evolution, not a revolution. There's only so much the post office can do to get a parcel from Moose Jaw to Ottawa, says Lemay.

"In the mail system, there's still a lot of hand-holding of the mail. We still have carriers and we still have mailbags."