The US Postal Service saved by two Turks
Çaðlar Göðüþ and Hamit Hamutçu are two young management consultants. The U.S. Postal Service had been losing USD 2 billion a year up until 2001.When the duo were hired, the consultants developed a new business model for the firm, helping it to earn a profit of USD 800 million a year. Restructuring the postal service, which has the status of an autonomous public organization, the duo even managed to have a ruling passed in the United States Congress so that the organization can be freed of its current structure and assume a new identity. With this restructuring, the firm has been able to gain back market share it had lost to giants such as FedEx and UPS. It now operates on the business model that the two consultants have developed in 40,000 locations through the United States. The duo is now working on helping South African and Egyptian telecom operators' profit…
A USD 65 billion company
The U.S. Postal Service is an autonomous public establishment that had been losing money up until 2001. Even though the company is in the category of companies not expected to make a profit, a search for a solution began when the USD 65 billion company's yearly losses reached USD 2 billion. However, as the company was a public entity, it could not employ traditional means of cost cutting such as laying off employees and shrinking. At this point, it was decided to seek the help of a professional organization. The U.S.-based consulting firm Peppers & Rogers was entrusted with the reorganization of the U.S. Postal Service. However, when the business model suggested by Peppers & Rogers Istanbul Office founder Hamit Hamutçu was chosen, the project was given to the Istanbul office. Hamit Hamutçu and Çaðlar Göðüþ were tasked with the management of the project.
Hamit Hamutçu's five-year experience in FedEx plays an important role in the success of the project. Deciphering the business model of one of the postal service's biggest competitors, Hamutçu became one of the architects of the establishment's success.
Customer-based approach
Stating that they have founded their project on a multi-legged strategy, Hamutçu says the two most important elements were competitiveness and increasing market share in prominent categories. Stating that they have found the postal service to be under attack on a number of different fronts, Hamutçu adds, “Companies such as FedEx and UPS have, with time, poached profitable clients from the postal services. With the development of e-communication, credit card and bill shipments, one of the most substantial sources of the company, has dissolved. So the company was under attack in a number of fields. On one hand competition was getting a hold of the lucrative package shipment market, while on the other hand electronic communication was seizing the profitable mailing system. What the postal service was left with were products with high costs but low profits and the great loss this situation brought.”
Hamutçu explains that due to this reason they switched to a customer-based approach from a product-based approach. They have put in practice a number of projects, ranging from renovating call centers to establishing new sales teams for different client groups, from training thousands of postmen to conducting field research about client needs and the situation of the competition, says the consultant. He explains that one of their most substantial projects was the innovation they have brought to the pricing strategy. “The same pricing policy was applied to a person who sent only one letter and to an institutional customer that sent thousands of letters. Under such circumstances, the bigger clients were snatched up by the competition. As it is a public company, the substantial innovations had to be approved by the U.S. Congress. We demonstrated the positive and negative affects such a policy change would have on the American public and the country's economy. After a year of debates in the congress, the organization's adaptation of a customer-based pricing strategy was attained.”
What was lost was gained back
Saying that they faced limitations due to postal service's identity as a public organization, Çaðlar Göðüþ says, “The Company operates in the basic services category. In other words its aim is not to make a profit but to serve. Therefore, you will need to operate even in areas that are not logical in terms of cost and profit balance. It is a company that operates in 40,000 locations throughout the country. You cannot cut costs by closing a post office in a small town.” It is for this reason that they did not base their project on radical measures but on raising profits by using the customer base, explains Göðüþ. He says they have founded various client segments such as institutional clients and small and medium sized enterprises (SME), winning back the direct mailing market, which was once thought to be diminishing.
Saying that, one by one, each client that had left for FedEx or UPS was called, in an attempt to win back the lost clients. Göðüþ says, “After all this, we made a profit for an institution that was constantly making a loss. Moreover, we did this in a country like the United States, where management consultancy is top-notch. In other words, we carried coal to Newcastle.”
They are currently working on the transformation of South African telecom and Egyptian telecom operators as well as a project regarding the Dubai free zone. Göðüþ says their target regarding the project in Dubai is to form a new model that can be exported.
