Diversifying to succeed: Postal operators becoming service providers
Brian Moran, global industry managing director for Accenture’s Health & Public Services Operations & Management business, discusses the strategic thinking behind successful posts. A climate of financial crisis and continued economic uncertainty, coupled with continuing declines in mail volume, are forcing the postal industry to identify and develop new services and markets to remain viable commercial operations.
The economic recession, coupled with technological advances, has had a dramatic impact on volumes with an outlook that could see further a decline up of to 40% over the next five years. The ongoing shift of transactional mail to electronic channels continues to alter the overall mix and volatility of postal volumes.
Consumers also have changed. Millennials, Generation X, Generation Y and the NetGen use a wider range of channels, have revised senses of loyalty and different buying behaviours.
Posts will sustain their positions as viable organisations by focusing on the fundamentals while embracing new opportunities that include an exploding parcels (packages) market and diversifying products and services to deliver commercial success. Modern postal operators will succeed through innovation and diversification.
Since the publication of our first High Performance Postal Research report in 2006, Accenture has undertaken in-depth research of the postal industry. These studies have shown that diversification is the essential element of all successful postal agency strategies.
Using the Accenture High Performance Business Model, we have assessed the relative performance of postal operators internationally. Starting with an initial population of 13 and extending the scope of the research to include 26 posts in 2012, the study gives a comprehensive review of what drives high performance.
In the market environment of 2012, our study has shown that strategic choice is the single biggest driver of performance in the postal industry. Organisations that have pursued a strategy of diversification—especially where this is focused around broadening services within a core national market—are leading the way for the industry. We call these organisations service providers.
A number of factors distinguish the high performers from the rest:
- Long-term strategic commitment: The ability to clearly identify and follow a multi-year path to sustainable and profitable growth. Poste Italiane has pursued a long-term strategy focused on providing a full range of citizen-focused products and services. This strategy has resulted in a dramatic increase in both revenue and profit.
- Leadership: The ability to challenge regulatory bodies and entrenched cultures to transform and shape the mandate and future of the organisation, to adapt to trends. TNT (now PostNL) operates in liberalised segments across the world. Prior to its demerger, the company became one of the first posts to restructure, transforming itself from a mail operator to global integrator role in logistics while maintaining its mail business in its home country.
- Mindset: The acknowledgement that new revenue streams are competitive, where pricing is based on value creation rather than cost-based and that structural changes are required for survival in this environment. Austria Post and bpost are diversifying into new revenue streams, recognizing the importance of growth in B2C ecommerce and sustained physical mail volume declines, adapting their infrastructures and organizations to perform sustainably in a changing postal landscape.
- Approach to innovation: Having the freedom to experiment and examine new operating models to drive new revenue, to explore ideas fully and execute them well. The willingness to shift from sender-focused to receiver-focused orientation is an essential ingredient. Singapore Post offers flexible delivery options for parcels and hybrid mail along with web-based e-services and digital mail options.
- Efficiency enabled by strategic cost restructuring: The ability to focus on improving overall efficiency to drive down costs and remain competitive. More importantly, the ability to identify what is core to business versus what should simply be cost control. Here, again, Poste Italiane provides an example. The agency has pursued cost-restructuring through workforce realignment, operations and business departments restructuring, adopting energy saving initiatives to reduce transport and facilities-related costs while strategically protecting a core asset: Its postal office network.
- New postal workforce: Employing the right skills (customer service, team work, IT skills) at a cost-effective level aligned with the overall strategic direction. With workforce costs averaging 50 percent of all operating costs, the right employee mix is essential to sustaining the business.
Postal operators must place the accent on choice—making the right choices for both themselves and their customers. It is here where strategic clarity is most important. Being clear about their strategic choices and goals enables postal operators to focus on diversification, develop sustainable operating models and achieve high performance.
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Brian Moran is global industry managing director of Accenture’s Health & Public Services Operations & Management business, which includes work with posts around the world. Learn more about Accenture’s work with postal agencies and delivering Public Services for the Future.