Creating a leadership position – an interview with Massimo Sarmi, CEO of Poste Italiane
Mail & Express review May 2009 Mail & Express Review recently had the opportunity to ask Massimo Sarmi, CEO of Poste Italiane, about his organisation, and the change process that has positioned the business as a leader in the global postal sector.
CAN YOU PROVIDE SOME BASIC FACTS AND FIGURES ON YOUR ORGANISATION? HOW ARE YOU STRUCTURED? WHAT ABOUT OWNERSHIP?
Poste Italiane handles around 23 million mailings, conducts some 20 million counter operations and delivers 250.000 parcels every day. We have 150,000 employees in total, including 45,000 delivery personnel and 60,000 counters staff. There are 14,000 post offices handling 5.3m post office current accounts and looking after E267bn in savings.
In recent years, Poste Italiane has undertaken a complex process of redevelopment aimed at improving the quality of its services and expanding its product offer: Poste Italiane is the leading operator in Italy in the postal services are by which we meanmail collection and delivery, printed matter and parcels, telegrams, express mail and online services.It is an innovative, competitive operator in the area of financial and payment services (post office current accounts, post office savings accounts, post office interest-bearing bonds, national and international money orders, currency exchange services) and it is the first postal company worldwide to join the mobile telephone sector with PosteMobile.
The current organisational model of Poste Italiane is centred around the customer. Its main features are: two commercial channels (Private and Business Customer markets), four business divisions (Postal Services, BancoPosta, Express Courier and Parcel Service and Philately) and corporate divisions responsible for overseeing and verifying the provision of services to support business processes.
Poste Italiane ended 2008 with net profits of €882.6m (+ 4,6% on 2007) and a operating profit of €1,5bn. Total revenues amounted to €17.9bn (+ 3,9% on 2007) thanks to the good performance achieved in all business areas: financial services (+ 2%) and insurance services (+ 7,7 %).
The Ministry of Economics and Finance holds a 65% interest in Poste Italiane Spa with the remaining 35% interest held by the financial institution Cassa Depositi e Prestiti Spa. There are noplans for private equity or privatisation in the short term.
HOW ARE YOU REGULATED?
As a universal postal service provider in Italy, Poste Italiane is responsible for guaranteeing the collection, transport, sorting and distribution of correspondence weighing up to 2kg and parcels weighing up to 20 kg, as well as for providing services relating to registered and insured mail throughout the country at rates accessible to all users and compliant with previously-defined quality standards.
In order to cover the costs of the universal service even where it is not cost-effective, a reserve fund is provided for, which has gradually been reduced over the last few years. Relations with the State, with regard to the obligation to provide a Universal Service, assigned to Poste Italiane until 2014, are governed by a Programme Contract with the Ministry for Communications, in agreement with the Ministry for the Economy. The contract is valid for three years and determines adjustments to rates, state subsidies to partially cover of the costs of the universal service and quality targets.
WHAT ARE THE MAIN DEVELOPMENTS IN THE ITALIAN MARKET? WHAT PRODUCTS AND SERVICES ARE GROWING AND DECLINING?
The evolution of communication tools has inevitably encroached upon the part of the market share regarding private correspondence. However, this drop in private mail has not led to a decrease in the overall volume of mail in Italy. In fact Poste Italiane has increased the volume of commercial mail, has developed its direct marketing and has launched innovative and integrated services in order to cooperate with the Public Administration (e.g: Poste Italiane manages the injunctions of administrative act)
HOW FAR HAVE YOU DEVELOPED SERVICES EMBRACING THE NEW COMMUNICATIONS TECHNOLOGIES SUCH AS HYBRID MAIL AND END TO END ELECTRONIC?
We have been focusing on hybrid postal products such as online registered mail and telegrams, as well as innovative solutions, such as for example, the EPM, or Electronic Post Mark, created for the UPU.
Poste Italiane was the first postal operator in the world to appear on the Microsoft Office toolbar, making it possible for users to send online registered mail directly from their home or office computer. Letters and telegrams may also be sent directly from a computer and be delivered in paper form. The total correspondence sent from computers has registered an average annual increase of 13% over the last four years.
The EPM is an international standard for digital documents that certifies the integrity of their content, the date on which they were created and the identity of the author, in addition to the practical electronic signature. This product, which was also developed in cooperation with Microsoft, is the first in a range based on DPM technology that will allow us to take on the role of “certifying guarantor” in the exchange of digital and hybrid documentation.
In addition, with PosteMobile, the Poste Italiane Group’s telephone service provider, we have created a telegram that can be sent from mobile phones, and other similar solutions are currently in the pipeline.
HOW WELL PREPARED ARE YOU FOR FULL LIBERALISATION IN THE LETTERS MARKET? DO YOU HAVE ANY SIGNIFICANT DOMESTIC COMPETITORS YET?
Currently we have a monopoly on mail items under 50 grammes or below E1.50 in postage value.
We are well prepared to face the imminent full liberalisation of the mail market since we are already competing with several private mail companies which are operating in the market segments already liberalised.
We have a strong brand, efficient operations, good quality and we provide ubiquitousservices, and we will leverage on these strengths to compete in the new marketplace. Furthermore, we have diversified our business model and this has allowed us to be competitive in every segment of business..
OBVIOUSLY THE PARCELS MARKET HAS BEEN OPEN TO FULL COMPETITION FOR MANY YEARS. HOW SUCCESSFUL HAVE YOU BEEN IN HOLDING ON TO YOUR POSITION IN THE B2B MARKET? DO YOU SHARE THE GENERAL VIEW THAT THE RISE OF E COMMERCE GIVES THE POSTS A POWERFUL GROWTH OPPORTUNITY IN B2C?
Poste Italiane provides a vast array of parcel and express courier products (also through the subsidiary SDA), aimed at both private and corporate customers. However, over the last few years, the Poste Italiane Group has focused specifically on developing solutions in e-commerce, a sector with excellent potential for growth. It is sufficient to consider that, according to research carried out in 2008, e-commerce in Italy in 2007 was worth around €4.87bn, with a 42.2% increase in turnover, and some 23 million orders placed online.
Because we are an integrated services group, we are in a position to deal with all phases of online purchasing for our customers: from the website, which is the virtual store, to the stocking of goods, warehouse management, delivery of products to the customers’ doors, payment and billing management, etc. In addition, we are able to provide direct marketing and packaging services.
DO YOU OFFER A WIDER RANGE OF LOGISTICS SERVICES?
Last year, through the development of Italia Logistica, we created a great logistic centre that will be able to support the growth of enterprises and to compete with major European players.
Italia Logistica (a joint venture between Poste Italiane and Ferrovie dello Stato, the state railway company) has been established as a national, integrated logistic company ranking inthe top ten operators in the sector and seeking to reach by 2010 a position of excellence at an international level
Through the integration between Omnia Logistica (FS Group) and SDA Logistica (Gruppo Poste Italiane), the new business model integrates the railway-road combined transportation over long distances with the last mile delivery, bringing together FS’s handling of large volumes of goods, with Poste Italiane’s capillary retail delivery.
LAST YEAR YOU ANNOUNCED A TECHNOLOGY CO-OPERATION AGREEMENT WITH YOUR COUNTERPART IN EGYPT POST. PLEASE TELL US ABOUT THE BACKGROUND TO THE AGREEMENT. DO YOU HAVE ANY PLANS FOR SIMILAR ARRANGEMENTS WITH OTHER POSTS?
Thanks to the 2007 Postech event in Jeddah we reinforced our relationship with Egypt Post and last year we signed a cooperation agreement. The Egyptian and Italian sides formed five work groups to study means of developing postal and financial services as well as upgrading the logistics infrastructure of Egypt Post, training human resources and raising the value of its assets. We are currently working hard on the assessment of the logistics infrastructure and in a second phase we will proceed to the optimisation of this network.
Egypt is a country of strategic importance for economic and commercial relations with the Mediterranean and Arab world. For this reason, signing the agreement to collaborate with Egypt Post constitutes a particularly significant step for Poste Italiane and its international image and reputation.
The co-operation between our two countries in the postal sector has strong historical roots. During the first part of the 19th century, an Italian, Carlo Meratti, launched a private courier service between Egypt and Europe, and later within Egypt itself. In 1865, one year after Viceroy Ismail ascended Egypt’s throne, this private service was acquired by the state and Giacomo Muzzi, another Italian, became the first head of the Post Office.
Since the deal with Egypt Post we have signed an agreement with the Albanian Post, Saudi Post and soon with Emirates Post. In March,in Tirana. I signed a cooperation agreement with the Director General of Posta, Shqiptare Arqile Gorea, to develop the Albanian national postal system. I also had a meeting with the Albanian Prime Minister, Sali Berisha, to discuss how we can contribute to enhance the post office and logistics networks of their postal operator. The MOU we have signed with Saudi Post goes beyond postal services and focuses more on information technology and how we can make the e-communication network more secure. With Emirates Post we are also discussing financial services, leveraging on our national successes in payment platforms.
The UN organisation, International Trade Center (UNCTAD/WTO), has chosen us as a best practice in payment platforms and we have contributed to their efforts in the past few years in helping small medium enterprises in Morocco, Tunisia and Nepal to increase their exports. Furthermore, Poste Italiane is strongly supporting the UPU in the provision of interoperable electronic services. An example is the plug-in that Poste Italiane has engineered and implemented for the UPU community: an application that will enable the “Electronic Postal Certification Mark” to become an interoperable service at international level.
DO YOU HAVE ANY OTHER COMMERCIAL ALLIANCES, PARTNERSHIPS OR JOINT VENTUREES IN PLACE?
In the international arena, apart from the agreements mentioned above, we have had a strong commercial alliance since 2006 with the best express courier operator in the world, UPS. This alliance has allowed us to provide international outbound services with high quality and leveraging the biggest international network. In the next few years my objective is to leverage on our successes in the national arena to expand our international activities even more.
HOW HAVE YOU MANAGED TO TAKE YOUR EMPLOYEES WITH YOU DURING THIS PERIOD OF SIGNIFICANT CHANGE? AND WHAT HAS BEEN THE REACTION OF YOUR CUSTOMERS? YOU’VE ALSO RECEIVED WIDER RECOGNITION THROUGH PUBLICATIONS SUCH AS ‘FORTUNE’ MAGAZINE WE UNDERSTAND.
During this accelerated process of development and change, Poste Italiane has remained committed to the principles of its corporate mission expressed through its widespread presence throughout Italy,and to its traditional mission of responding to the needs of its customers, whether they be ordinary citizens, businesses, or public administration offices.
A programme for substantial investment in infrastructure and training has allowed the company to raise efficiency standards significantly and very quickly, increase employees’ professional qualifications (2,500 workstations have guaranteed 70,000 days of training and a large number of courses); upgrade post office facilities; and maintain customers’ growing satisfaction.
Thanks to the results it has obtained, Poste Italiane was included for the third year running among the US magazine Fortune’s list of the “World’s Most Admired Companies” positioning ahead of La Poste and Royal Mail, with a total score that places it close behind Deutsche Post and Japan Post. Moreover, Fitch voiced its appreciation for the company, confirming its positive rating (A+ and stable outlook), while in a report on the European postal service in the run-up to liberalisation, Standard & Poor’s placed Poste Italiane among the top runners in the sector for the company’s ability to diversify business.
WHAT WOULD BE YOUR ADVICE TO FELLOW CEOS IN REGARD TO BOTH THE WAY IN WHICH TO DEVELOP AND IMPLEMENT SUCCESSFUL BUSINESS STRATEGIES IN THE LONG TERM, AND TO COUNTER THE CURRENT GLOBAL RECESSION? ANY OTHER FINAL THOUGHTS TO SHARE WITH OUR READERS?
In order to mitigate the impact of the crisis, we have to take measures to face the changes in the postal scenario. We postal operators have to create new services, increase customisation in traditional products, and modernise and expand the access channels to our products and services. We have to diversify and innovatie our business by entering new markets. For example, Poste Italiane was the first postal operator to entere the mobile market as a MVNO (Mobile Virtual Network Operator), making its financial and postal services accessible also through the mobile phone network. For companies which have financial services, it will be crucial to offer a wider range of financial services and payment solutions that integrate technology with innovative channels and services while improving security of electronic payment transactions and solutions based on certification technologies. Finally, it is important to strengthen the postal operator role as partner of Public Administrations in the development of eGovernment services able to facilitate interaction with citizens.
The crisis does not change our long-term strategy. We are strongly committed topursuing our innovation goals, both in service and process development. Poste Italiane will continue to invest in ICT, in network infrastructures and in service innovation,leveraging our physical and technological infrastructures, our capillarity all over the country and a well-known and reliable brand.We are working on positioning Poste Italiane as the Trusted-Third-Party in financial and communication exchanges among Public Administrations, firms and individual customers. The aim is to create new products and services more and more tailored to customer needs, to enter new markets where posts with their capillary networks enjoy a competitive advantage, to invest in innovation and efficiency.
In a few words, we are giving Poste Italiane a new strategic dimension whose lesson is: diversify and innovate to survive.
