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Results Documentation WORKSHOP DOCUMENT Project Hourglass Strategic Issues and Opportunities Identification Workshop Sunningdale Park, Ascot May 31 June 2, 2006 This document is confidential and is intended solely for the use and
Sunningdale Park, Ascot May 31 – June 2, 2006 WORKSHOP DOCUMENT
Project Hourglass “Strategic Issues and Opportunities Identification Workshop”
This document is confidential and is intended solely for the use and information of the client to whom it is addressed.
Results Documentation
1
Contents
Introduction and Strategic Context Issue Identification Customer Needs Business Opportunities Conclusions and Next Steps Appendix Team presentation (7 teams addressing internal/external factors) Detailed customer needs (brainstorm result) Long-list of 76 business opportunities cross 7 customer segments
2
Introduction and Strategic Context
3
Workshop Participants
Break-out Team ‚Red Rum‘ Room: Rockafella Break-out Team: ‚Nijinsky‘ Room: Felstead
[participants in alphabetical order]
Group leader: Marc Morelli Claire Edwards Erik Maurice Jean Philippe Ducasse John Carter John Harmon Matthias Ehrhard Michael Branchflower Michael Ryba (BAH – Day 1) Paul Johnston Perry Pierce Philippe Dugougeat Russell Hochman Sharon Emecz Stuart Bonthrone (Day 2)
[participants in alphabetical order]
Group leader: Peter Ellis Alain Normand Annet Eeltink Denis Stemmle Gary Dawson Ian Siveyer Jurgen Marr Jurgen Ringbeck (BAH – Day 2) Laurent Deduytsche Linda Nazareth Malcolm Bruce Mark Maresch Stefano Gori Tony Edwards Yves Coue (Day 2)
(1) Vaslav Nijinski, Russian ballet dancer and choreographer 1890–1950
4
Europe is essential part of Pitney Bowes International’s business and future growth
Pitney Bowes Sources of Revenue 2005
74% 26% U.S. Non U.S. 330 110 Canada Non-U.S. 381 Europe 1,375 Asia Pacific 935 254 202 98 Total $US 5.5 billion
Non-U.S. Revenue by Region USD Million
Source: Pitney Bowes, Analyst presentations, Booz Allen Hamilton Analysis
1045
UK France Germany Other
5
The mission for the whole of ‘PB International’ is to double the business in 5 years
$1 billion > $2 billion 2005 2010
≈ 15% p.a.
6
Strategic imperatives and guidelines
Investment Principles for Growth
Invest in core products Invest in Improving Distribution Capabilities Diversify Beyond Meter Related Products Invest in Adjacent Mailstream Spaces
Investment Principles for Growth
Invest in core products Invest in Improving Distribution Capabilities Diversify Beyond Meter Related Products Invest in Adjacent Mailstream Spaces
Investment Guidelines for Adjacent Market
Invest to be a Market Leader in “Blue Ocean” Spaces Invest in Adjacent Markets with High Organic Growth Invest in Small-to-Medium Size Opportunities Invest in High Margin, Recurring Revenue Opportunities Maintain Flexibility Augment Existing Business
Investment Guidelines for Adjacent Market
Invest to be a Market Leader in “Blue Ocean” Spaces Invest in Adjacent Markets with High Organic Growth Invest in Small-to-Medium Size Opportunities Invest in High Margin, Recurring Revenue Opportunities Maintain Flexibility Augment Existing Business
Source: Pitney Bowes – Presentation by Michael J. Critelli
Ambitions
2005 2010 Stretch Goal
+15% p..a.
Revenue EBIT X% Y%
Uncontested #1 in UK, Germany, France
7
This is an ambitious growth challenge in itself – but what if the base business in Europe was at threat?
375 230 300 150 423 313 266 185 370 219 201 97
368 2005 2006 2007 2008 2009 2010
Western Northern Southern AP & ME 814 1628
+15.6% +7.5% +11.1% +6.2%
1260
PB International Revenue (w/o PBMS) Scenario: „Per Strategic Plan“
Percentages = Compounded Annual Growth Rates
USD Million
+9% +15%
G r
t h G a p Strategic Plan Extrapolation
856 2005 2006 2007 2008 2009 2010 PB International Revenue (w/o PBMS) Scenario: „Core Business at Threat“
814 1628 772
+5%
G r
t h G a p Hypothetical
8
Simply put: How sustainable is the PB mailer-carrier interface position in a changing environment?
Mailers Carriers (Postal Operators)
Core Business Europe
Customer Needs Competition Market Liberalization Future of Mail Technology Trends Ongoing PB Strategies Existing PB Solutions
9
At a closer look, the strategic landscape is somewhat more complex and will offer PB both threats and opportunities
Collection Delivery Outbound Sortation Transport Inbound Sortation Pre-Collection Creation Production Finishing, Franking, Pre-sorting, etc. Receive Store, Reply, etc.
Mailers
Bulk volume mailers SME SoHo Consumers
Receivers
Businesses + Consumers
“Intermediaries” Core Business Europe
DMT GMS SBS Permit Mail Metered Mail Stamped Mail
Key Strategic Threat Key Strategic Threat
Carriers seeking more control of mailer interface PB meter dis-intermediation by mailers Carriers moving upstream/in adjacent spaces competing with PB Carriers seeking more control of mailer interface PB meter dis-intermediation by mailers Carriers moving upstream/in adjacent spaces competing with PB
Key Strategic Opportunity Key Strategic Opportunity
Exploit new market dynamics posed by liberalization – Address new/emerging customer needs – Reinvent “interface position” for multi-carrier environment – Move into new spaces in/around the mailstream Exploit new market dynamics posed by liberalization – Address new/emerging customer needs – Reinvent “interface position” for multi-carrier environment – Move into new spaces in/around the mailstream
Carriers (Postal Operators)
National Posts
(Initial project scope: UK, DE, FR)
Incumbent Postal Network Alternative Postal Networks (multi-carrier) NEW
“Upstream access”” “Dowstream access”” C
p e t i t i
f
C u s t
e r s a n d M a i l F l
s
National Posts Operations in foreign markets Private Posts Private Posts Other Private Posts National Posts Operations in foreign markets National Posts Operations in foreign markets
“Own Delivery”
10
It is fair to say: There have been different expectations towards Project “Hourglass”
What would constitute success for Hourglass in your view? What should Hourglass focus on?
“Achieve a level of understanding of the strategic issues” “Identify and detail firm
“Achieve a strategy to meet needs of market place and customers” “Rapid market solutions for quarter 4 2006”
Project “Hour Glass”
Attractive Business Opportunities, Compelling Strategy Research, Data, Ideas, etc.
“Define what PB should be doing in 2015” “Short term initiative
Results of pre-workshop interviews
11
Project Hourglass challenge: Securing and expanding PB’s strategic position between mailers and carriers in a liberalizing market
Capabilities Technologies PB Products/Services/ Solutions
PB Value Propositions for a liberalizing Postal Market Key Strategic Questions How to secure and expand the “strategic linking position” between Mailers and Carriers (Postal Operators)? Which parts of the mail value chain will PB have to control/take part in to do so? In what “flows” (data, payment, physical mail stream)? How to address emerging/changing mailer needs? How to address/exploit carriers needs/intentions (both national posts and new entrants)? What capabilities, technologies, products/services need to be leveraged or build to do so? How would possible “managed” migration paths from the “classic meter” to alternative solutions have to look like? How to capture larger share of the mailstream in addressing all of the above? (e.g. permit mail, letters and parcels,…) What other “adjacent spaces” will help secure/grow the position and fill the growth targets?
1 2 3 4 5 6 7
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How this workshop fits into the overall Project
Project Week 1-2 3 7 8 to 17 18 19-23 Preparatory Workshop 1 Group Team Leaders Workshop 2 Information Leveling and Opportunities Market Research Workshop 3 Post Market Research/ Testing Strategic Planning
April May June/July Mid August September
Clear Objectives Full support and agreement from project board Everybody at a minimum level of knowledge across 7 key areas by UK, Germany and France Initial set of
scenarios identified Refined and prioritized set of
scenarios identified Information on customer response to potential opportunities and scenarios Information on customer response to existing PB products Everybody at a minimum level of Information on customer responses and review against potential set of
scenarios for UK, Germany and France Qualified list of potential strategies Presentation to IMG/ELC members Agreement from Exec Mgmt and Board on strategies Team Leaders buy in and brief Working groups ready to start
Outcomes
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Workshop Achievements and Accomplishments
Workshop Objectives
Understand key changes in PB‘s strategic environment: Level set the Group Derive resulting a) strategic issues for PB b) and customer needs Develop and prioritize
to address strategic issues and customer needs
i.e. key challenges and questions PB faces and hypotheses about what the consequences could look like
Feeds into further market research and validation
i.e. key driving forces, evolving market scenarios, etc . i.e. not only defensive, but offensive moves
14
Participant Feedback
Workshop Overall Work Results
3 97
47 53
Results from 16 feedback surveys
„We are starting to move… this is great!“
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Key Results
16
Kodak: How the evolution of the digital camera significantly threatened the business
“The Moment”
17
Start of Session – Delegate Voting
Where do you think PB‘s strategic business development for Europe should focus on (i.e. where would you put most resources?)
Find ways to secure the classic meter business (i.e. „enable selling more and better boxes“) Find alternatives to replace the classic meter (“i.e. replace the physical box but stay with a meter-type of value proposition”) Identify and enter into new spaces (non-meter related)
57 50 20
Project Hourglass Workshop Result
26 participants cast max. 5 votes
„…but meter is not dead!“
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Other 3rd party mailstream providers Private Posts National Posts‘ foreign domestic
National Posts (domestic incum- bents) Private Consumers SME and SoHo Mailers Large Mailers
Others Carriers Mailers
2 7 22 15 24 13 27 20
Pre Session – Delegate Voting
Which customers segments represent the biggest opportunity for PB Europe‘s growth (i.e. as a source of income) for the next 5-7 years?
60 61 9
Project Hourglass Workshop Result
Note: 26 participants cast max. 5 votes
39 22
19
Break out Session Result:
Key Issues for Pitney Bowes Europe growth in Europe
7 20 22 27 28 31 32 34 44 49 ding & AccountatiblityAccountability Strategic Channel Development Improve time-to-market process Strategic product management cross-LoB Obtain focussed market ncefocusedObtain focussed market intelligence Strategy-driven priority setting Clarify value proposition for Mailers vs. Posts Increase PB’s relevance - fend-off disintermediation Which carriers to serve? What role for PB? Overcome "Kodak Moment" 9 9 9 13 23 24 28 35 51 Other Obtain focussed market intelligence
“Overcome Kodak moment” – move from short-term execution to longer-term planning
Market positioning vis-a-vis mailers and posts Strategic channel development Integration/"one-Firm" - cross LoB Market trends – threat of disintermediation Lacking strategic decision making capability Lack of customer-centricity
Results Group 1 - Nijinski Results Group 2 – Red Rum
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Key Issues for Pitney Bowes Europe – Group 1 (1)
Lacking overarching strategy to guide investments into new products Unbalanced product portfolio Investments in interfaces between customer systems and PB solutions Take choices in product developments for geographies/countries
Strategy-driven priority setting
PB mindset not used to change Not leading the change but being reactive Focus on meter business Dependency on posts
Overcome "Kodak Moment"
Mailer How to offer real value to mailers? Add value to complete business process, not only parts of it (mail creation & finishing) Value of meter as secure evidencing tool needs to be expanded (especially large customers.) Proof solutions for the future Accommodate potentially faster and more complex pricing changes Grow the mail volume of SMEs with PB solutions Identify customer choice as a function of posts strategies for SME and SoHo market Grow value of mail and capture larger share of mail volume for PB channels? Posts Develop meter to meet needs of post Overcome PB’s lack of reputations as provider to posts?
Clarify value proposition for Mailers vs. Posts
Elements Issue
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Key Issues for Pitney Bowes Europe – Group 1 (2)
Strategic postulate by Posts to move upstream for better control of customer interface Thus PB at threat of being excluded at point of choice about carrier Increased investments by posts into technology – i.e. danger of being “road kill” (i.e. getting disintermediated without the posts consciously targeting this) New entrants currently not valuing role of meter/local evidencing Inability of PB to step into flow of funds Being excluded from point of choice
Increase PB’s relevance - fend-
intermediation
Not enough solid data/research for Europe into value proposition of meters to posts and mailers Lack of PB knowledge and contacts with new entrants and 3rd parties Lack of understanding of concrete customer needs Lack of view on how PB’s main clients (SMEs) are going to react to new multi-carrier landscape?
Obtain focused market intelligence
Serve carriers exclusively, selectively or ubiquitously? – How can we provide choice whilst manage national relationships? – How do you partner with players who are competing? – Becoming multi-carrier, cross-border to the benefit of end-customers without antagonizing competing carriers? Posts’ willingness to partner versus build own solutions? PB thinks of ourselves as a partner; posts sees us as vendor? Private operators attitude towards PB (Germany) Relations with Post (France)
Which carriers to serve? What role for PB?
Elements Issue
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Key Issues for Pitney Bowes Europe – Group 1 (3)
Lacking process, rigor in linking ideas to actions Product incubation for Europe not sufficiently funded (to date)
Ensure Funding & Accountability
Change from a product sales pitch to a solutions pitch Limited skill-set in sales force to sell full suite of products/solutions (e.g. software) Effective channel coverage to enable access to data [?] PB channels only reach the mail room, not to the mailers
Strategic Channel Development
Insufficient time to market of critical product introductions (e.g. Price-in-Proportion solutions for UK) Speed and accuracy of decision-making and implementation processes
Improve time-to- market process
Lacking coordination, collaboration between Lines of Business (GMS, DMT) How to leverage existing technology solutions/software across product portfolio and LoBs? Solve technology constraints to o make “full-service “ meters (zonal, format-based, intelligent, pricing, etc)
Strategic Product Management cross-LoB
Elements Issue
23
Key Issues for Pitney Bowes Europe – Group 2 (1)
Business strategy inadequate to respond to changing market structure (7) Confusion over strategic and tactical responses (7) Cross LoB thinking and joint opportunity identification (5) Business strategy process not linked to other PB business processes Need to look beyond 90-day business life cycle to long-term trends Need ability to undertake longer-term planning Lacking understanding of verticals in Europe (sizing, understanding market dynamics, etc.) 2 Develop and implement ongoing PBI strategy planning process 1 Address broader challenges before specifics Do we understand our strengths and key competencies? Develop business development culture Do we believe PB has the stomach to change the culture?
“Overcome Kodak moment” – move from short-term execution to long- term strategy development
PB customers unclear on where we are going and what we do Building/enhancing the right channels to the customer Lack of enterprise approach to mailer corporate accounts Which sales team should sell-to the posts?
Strategic channel development
US centric views inhibiting catering for European market needs Very slow to react to market requirements How to courage to act and take risks Disconnect between what we think we do to earn money and reality of selling boxes Acquisitions only loosely related to previously defined business strategies
Lacking strategic decision making capability
Elements Issue
Bold = not mentioned in Group 1
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Key Issues for Pitney Bowes Europe – Group 2 (2)
Competitor manufacturer develops alternative postal access portal in next 12-24 months Alternative evidencing solutions (e.g. PC-postage) threat to PB Increasing number of operators will lead to simplified payment system (permit, not meter) Posts will change payment systems to contracts: eliminate mechanical solution vs. legal tender 1 Posts want to limit choice - Will incumbent posts regulate our products in an open market? Germany: DPWN will offer permit solutions or in-house metering to smaller and smaller customers Germany DPWN will “kill” meter business by handling all data transactions meter “just” printer Germany: Power of DPAG National posts pull current support for meter channel Partnering vs. competing with posts Selecting the right non-postal partnerships Determining what services PB should offer Acting as industry leader, not follower, shaping the future
Market trends – threat of disintermediation
Elements Issue
25
Key Issues for Pitney Bowes Europe – Group 2 (3)
How do we get PB to really work as “one company” with cross-LoB/coordinated strategy? We need to connect the dots across the company Provide a joint-one face to the market place LoB focus is both a strengths and weakness Improve cross-LoB collaboration to address customer needs
Integration “one- firm” cross LoB
Are our current engineering developments and R&D investments relevant/adquate for the near future? To think more like a customer and less like a mail expert Still tendency to “push what we got rather than develop what customer needs”
Lack of customer- centricity of R&D
Perceptions of PB as hardware vendor not a solutions provider Playing as a neutral party has failed PB in the past (US carrier solutions) Perceived as mailstream competitor though US operations such as PSI/IMEX Become a major upstream player in a a space preempted by the posts Supplier/services provider dilemma with LoB’s vs. PBMS What should PB do if “one stop shopping is what customers are looking for? Who are we: partners, supplier, competitor? Is the intermediary role the right space for PB, eg. Should PB become a carrier?
Market positioning vis-a- vis mailers and posts
Elements Issue
26
Key Issues for Pitney Bowes Europe – Group 2 (4)
High margin on core meter not realistic in other areas Better leverage existing solutions into new markets France: Meter not open to outside world, ie. Web portal access Germany: not able to change pricing model; 40% more expansive on TOL Is one size for Europe workable – if not, how to decide on priorities Lack of commonality of services offered across different countries
Other
Understanding the needs of its customer and getting close due to current channel limits Review customer segmentation Provide deeper market research support to feed into decision making process What do we know about Neopost strategy?
Obtain focused market intelligence
Elements Issue
27
Break-out Session: “From customer needs to Business Opportunities” – 76 opportunities long-listed
“Blue Ocean” Others National Posts (Domestic and foreign ops) Private Posts Large Mailers SOHO SME Con- sumers 3rd Party Mail stream Providers Very Large Mailers
PB experts hypotheses
needs Long list
Business Opportunities
8 10 14 10 18 15
To be validated by research (see appendix for result list) (see appendix for result list) # of Opportunities identified To be validated, augmented by research and internal qualification. Key next task: Filtering and prioritizing to a manageable set of commercially attractive options Σ 76
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Opportunities with most delegate agreement (note, this does not necessarily reflect attractiveness!)
9 9 10 11 11 15 16 20 1 5 1 4 12 Soho Consumers / "Expakita.com" National Post / Meter as a Portal for National Posts 15 17 24 National Post / PB Manages national address database 10 Soho Consumers / Free Stamps ue Ocean / Integrated Networked Mail Management SolutioSolution Large Mailers SME / Standard Private Post Meter 11 Large Mailers / Postal Budget Management Optimization 10 14 Larger Mailers SME / Multi Carrier Meter 1
Votes Participant agreement (“comfort zone”) Participant disagreement (“outside comfort zone”)
Top 8 of 76
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Opportunities with most delegate disagreement (note, this does not necessarily reflect lack of attractiveness!)
6 6 3 3 1 10 11 13 14 14 18 21 9 Very Large Mailers / Credit Card Production Mailing Techn 15 14 22 National Posts/ PB as mail sorting company for posts 21 Large Mailers / SME / Total business centre 17 Very Large Mailers / Polywrapping 13 Blue Ocean / Mail consolidator / Oxford Model 17 National Posts/ Next Generation Mail sorting systems 10 Blue Ocean / Pan-European Hybrid Mail Optimization Model Soho / Soho Consolidation 3rd party network
Votes Participant agreement (“comfort zone”) Participant disagreement (“outside comfort zone”)
Bottom 8 of 76
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Workshop was a start – now further perspectives will have to be integrated into the business opportunity development
Expand viewpoint on customer needs/opportunities brainstorm from current segmentation to other perspectives – Customers we do not serve or engage with today – Industry verticals – Depth of understanding of SME (core PB customers) – Input from PB Sales into project – Needs driven by mail type/mix – Mailstream by type of payment & collection (permit, franked, stamp, other) – Customer business process view vs. mailstream-centric view Elevate bottom-up opportunity discussion to top-down, bold-stroke strategic propositions – Which spaces along or outside the conventional value chain are attractive? – What companies operate there? Whom could be take-out, consolidate? – Role of PB: Equipment provider, solutions provider, technology company, mailstream company, CRM/communications company, postal company, etc.?
1 2
31
Way Forward
32
The way forward (per original plan)
Project Week 1-2 3 7 8 to 17 18 19-23 Preparatory Workshop 1 Group Team Leaders Workshop 2 Information Leveling and Opportunities Market Research Workshop 3 Post Market Research/ Testing Strategic Planning
April May June/July Mid August September
Clear Objectives Full support and agreement from project board Everybody at a minimum level of knowledge across 7 key areas by UK, Germany and France Initial set of
scenarios identified Refined and prioritized set of
scenarios identified Information on customer response to potential opportunities and scenarios Information on customer response to existing PB products Everybody at a minimum level of Information on customer responses and review against potential set of
scenarios for UK, Germany and France Qualified list of potential strategies Presentation to IMG/ELC members Agreement from Exec Mgmt and Board on strategies Team Leaders buy in and brief Working groups ready to start
Outcomes
33
On top, some of the issues and opportunities raised will flow into new, to be set-up streams
Workshop 2 Results Market Research Top-down PBI strategy Internal Issues (PB wide) Quick Hit Business Opportunities Workshop 3 Mid August
New Workstream to take-up workshop findings tbd
34
Opportunity Workshop II – Success Factors and To Dos to keep up Hourglass momentum and enable the change
Linda Nazareth Kick-start market research a.s.a.p. External customer insight External Perspective Enablers Top-down Strategy Program Management and Tracking & Bottom-up Strategy Process Area Patrick Keddy w/ Mark Maresch Develop follow-up and tracking process for initiatives Not-loose momentum Communication and follow-up Core team and project board Develop a set of criteria against which to filter long-list of identified opportunities Prioritize and take choices Core team Core team to raise internal issues to executive/management teams Address internal issues identified in Workshop II Patrick Keddy w/ Mark Maresch Set-up a PBI top-down strategy process (scope, timeline, content, executive group)… …working towards September Board meeting Clarify overall PB target positioning Synchronize with overall PBI Strategy (e.g. currently envisage mailer bias) Elevate bottom-up business development ideas into story on “future business models” and related economics Mark Maresch and Claire Edwards Develop revised work plan with clear milestones and deliverables Provide and distribute meeting results documentation Define Hourglass communication plan to include broader PB community Clearly defined, visible, measurable process to take Hourglass to the next level Responsibility To Do Success Factor
35
Haines (1995)
36
Appendix 1 – Internal Team Findings
37
Project Hourglass - Team
Customer needs & behaviours Linda Nazareth Market Research Agency Linda Nazareth Strategic Consultancy Marc Morelli Execution Lead TBC Project Manager Mark Maresch Barry Jessop Users - Mailer Jim Euchner Joe Wall Patrick Keddy Mike Monahan Annet Eeltink, Philippe Dugougeat, Sharon Emecz, David Logan, Paul Johnston, John Carter, Luis Jimenez, Tim Rossky, Tim Walsh, Erik Maurice Business Plan submitted for a Product and or service to be developed Build or Buy etc? Russell Hochman Users - Postal Ian Siveyer SolutionsOwner Sponsors Project Board Project Management Working Groups
Future of Mail Laurent Deduytsche Market Liberalisation Peter Ellis Project Co-ordinator Clare EdwardsWeeks 1 to 8 Weeks 9 to 18 Wks 19 to 23+
Murray Martin Luis Jimenez Competitive Landscape 38
39
Market Liberalization
Market deregulation is not a big bang approach – new entrant posts are developing footprints and using them as platforms to expand and compete with PB in upstream activities. Markets will consolidate leaving a small number of large players in each market – TNT and DPAG will be 2 of those players with pan –European networks. – We cannot continue to look at Posts just in their home markets. Customer acquisition is primarily in the bulk end of the B to C transactional mail market/niche operations (UK) but it will expand into TOL meters users. New business models and entrants are likely in the B to C (SOHO) and C to C spaces, providing new opportunities in areas where PB has not traditionally played None of the new entrants currently see “metering” or local evidencing as part of their value proposition but business model extension suggests value proposition opportunities. Postal approvals/security has reduced the number of technology suppliers but is unlikely to be an issue for new entrants,
Strategic Implications New entrants
40
Market Liberalization
Will retain significant market share over the next 5 years Are developing new products and services for all market segments. Are investing in new technology to increase automatable mail and develop new products – May marginalize Sortation products – Provides the capability to price and bill by item – Each item becomes (potentially) traceable (Intelligent Mail). Want to own the customer and develop “stickier” relationships. The meter channel is likely to remain a key part of the National posts channel strategy but will need to fulfill a wider and more flexible role – Data capture, new pricing formats,2 way communications, bespoke pricing,cross-selling, customer retention, automatable mail, track and trace……… – And is recognized as an additional cost for customers which new entrants sell against – What would happen to our technology if the postal approvals/security issues changed?
Strategic Implications National Posts
41
42
Changed environment in the mailroom Past
Franking machine as essential system in the mailroom
Today/future
More choice and franking machine is mainly used for daily mail Daily Mail Direct Mail Packages Registered Mail Daily mail Packages Direct Mail
The issues from our customers
Alternative carriers
and invoices
Equipment
easy to change
systems but do not know how to implement in departments.
knowledge in mailroom
The issues from our salesforce
traditional competitors.
is not that easy anymore because of changed environment.
features against cost savings non traditional competitors.
How can we use our software knowledge from MF/MC/DS/DMT to create an integrated mailroom solution which is not limited to the national carrier?
All mail Outsourced to Mailhouse
43
Finance Commerce Human Services Business & Professional Services Personal Services
Verticals
Social Services
Technical Services
Advertising, Administrative * Arts, entertainment, Recreation
Business
businesses & individuals
& social services to individuals & communities
services
services or events, often face-to-face
Customers
with large customer bases
mostly B2B
parents, members
contact
Communications
marketing
dues
direct mail
Characteristics
payment
portals / exchanges
multiple sources of funding
intensive
professionalism
documents are often the "product"
intensive
economy * Affluence & leisure time
Business Household or Individual
Segment by Mailstream Value Chain Needs, Not Value to Posts/PBI
What are they mailing? To whom? Why?
44
Media (Channels) Objectives Measures Cost Reductions
Customer Acquisition
catalogues, unaddressed ad mail)
telemarketing, retail)
* Ad brokering
Order Fulfillment
Bill Presentment & Payment
* Credit / debit cards
debit
presentment & payment
Customer Relationship Management
management
self-service
Focus on Business Processes Not Mail Production Process
Where are our customers’ biggest cost savings, revenue enhancements? How can “meters” contribute?
45
46
Paul Johnston and Malcolm Bruce
47
Competitive Landscape
Liberalization is about the right and ability to deliver mail - driven by those with the scale to do it Control of the original data will determine how and by whom the message will be delivered The high value in the mail value chain lies in the ‘First Mile’ and the ‘Last Mile’. Monopoly Posts controlled upstream activities through mandate
48
The Value Chain in a Monopoly Market
Services
Distribution
Document Services
Production
Response Management
National Post Build Infrastructure to support USO and Next Day Delivery Mandate upstream Activities Co-operate with technology & services companies to promote compliance Traditional Marketplace with mail preparation supported by service providers and technology suppliers depending on volumes Mixture of ‘in house’ and
49
The Value Chain in the Competitive Landscape
Data Services Media Services Physical Mail Distribution Mail & Document Services Print & Production Customer Response Management £1045m £1,640m £1,640m £950m £5,230m £625m
Posts
facilitating choice
50
Competitive Landscape
Data Services Media Services Physical Mail Distribution Print & Production Customer Response Management
infrastructure & develop products to ensure quality volume
downstream capabilities
Mail & Document Services
51
Strategic Options
Data Services Media Services Physical Mail Distribution Mail & Document Services Print & Production Customer Response Management
High Volum e Med Volum e Low Volum e
Create additional value in core business technologies Move in to areas w here value exists but further from the frontline Provide technology and / or services in the high value areas
The greater the control of the value chain geography by ‘super Posts, the more we are seen as competitors especially in the provision of services but also in the supply of technology
Supply strategic value in m ail processing Cham pion the independence of the m ailer Frontline Frontline Create ‘neutral’ I nfrastructure linkages
52
Competitive Landscape - DISCUSSION
Liberalization is about the right and ability to deliver mail - driven by those with the scale to do it Control of the original data will determine how and by whom the message will be delivered The high value in the mail value chain lies in the ‘First Mile’ and the ‘Last Mile’. Monopoly Posts controlled upstream activities through mandate New entrants are going upstream to capture volume and selectively develop downstream capabilities National Posts continue to invest in their core business and infrastructure and need to maintain volume to make it pay Suppliers in the low value middle ground must re-create value by extending capabilities and/or find new areas to supply The owner of the geography becomes the buyer of technology and the competitor for services
53
54
Recent mail volume trends
Known Trends
C&T mail stagnates/declines and 1st class mail
declines because of the recent economic downturn, mailer rationalization, and electronic alternatives (e.g., checks and e- government in France and the U.K.).
Advertising mail and CEP grow in line with the
economic activity and e-commerce development.
The B2C mail flow becomes more and more
predominant as direct mail grows and other flows stagnate/decline in volumes.
PPOs dominate the addressed mail market
because of the reserved area, while CPOs dominate unaddressed mail that has been liberalized for a long time.
PPOs and CPOs are making incursions in
each others’ area to leverage their network and increase their margins.
Hidden Trends
pessimistic as they have a vested interest to do so, but it creates an unchallenged perception.
volumes (PPOs + CPOs) grow in all three countries, even though at a slower pace than in the past mainly because of the recent economic downturn.
terms of delivered mail is less and less relevant as “access” volumes grow and the reserved area (France, Germany) still encompasses most of the addressed mail volumes.
55
Factors influencing mail in a liberalizing postal market
Macro Trends Mail Trends Postal Trends
Economic Activity
GDP growth, GDP / Capita, Consolidation
Demographic Evolution
Population Growth, Demographic Shifts
Electronic Alternatives
Internet & Broadband Penetration, e- Commerce, EBPP
Governmental &
Legislative Landscape
e-Government, Privacy Laws
Regulatory Environment
Reserved Area, VAT Exemption, Access License Regime, Regulator Activism/Power
Competitive Landscape
End-to-End/Access Competitive Postal Operators, Public postal Operators Preparedness & Legal Status
Value of Mail Shifts
Pricing, Quality of Service, Innovation
Mailer Dynamics
Rationalization, Mailer Concentration
Volume Growth
Total Volumes, Volume/Capita
Distribution Mix
Type of Postal Product/Application, Class
Mail Flows, Share of Postal Operators
1. Electronic alternatives have a complex effect on mail volumes, not just a mere decreasing effect. 2. There is no evidence that liberalization will create additional mail volumes.
Challenging the Conventional Wisdom
56
Key uncertainties of the future of mail in a liberalizing environment
CEP: High C&T: Medium
Medium / Low Electronic Alternatives High Very Low Mailer Dynamics
C&T: Medium High Value of Mail Shifts Medium / Low Medium / Low Competitive Landscape Medium / Low Medium / Low Regulatory Environment Postal Trends C&T: Medium / High
Low Legislative & Government Landscape Very High Very Low Demographic Evolution Very High Medium / High Economic Activity Macro Trends Importance Uncertainty
Key Uncertainties
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Scenarios of the future of mail in a liberalizing postal market
“Niche Mail” “Rejuvenated Mail”
for providing more efficient services to mailers.
and high efficiency products.
constrained advertising budgets.
application in key verticals.
rationalizing C&T mail and keep spending their advertising budgets but on carefully selected and focused campaigns.
share/leverage technologies.
differentiated and customized products that appeal to a large number of mailers.
synonymous with modern communication.
mailings and leverage C&T to keep in touch with their customers and cross-sell products.
“Ailing Mail” “Protected Mail”
critical size, or are bought in a concentration wave.
rationalization of C&T mailings and downsize significantly their advertising campaign budgets.
an accommodating regulatory/political environment that prevents the creation of a level playing field.
liberalized markets.
grows but are constrained by high access costs.
good economic environment.
Value of Mail
Poor Good Increasing Stagnating
Economic Environment
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Forecasting of mail volumes for each scenario
Forecasting Model
A model was built to forecast 2010 total
volumes, postal product/application volumes, and sender/recipient mail flow repartitions for each scenario and each country.
The forecasts were made on the basis of
2005 volumes and assumptions inspired by the scenarios.
Example: France
Scenario #1 Scenario #2 Scenario #3 Scenario #4 Total Volumes (deduced) 59
Strategic implications of the scenarios on PB
Key Questions
to make it more valuable for mailers and/or prevent its decline?
mail growth, both addressed and unaddressed mail, and increase the mail’s ROI for mailers?
rationalization?
how can PB take advantage of the growing CPO volumes while mitigating the risk of altering PB’s relationships with PPOs?
Example of Opportunities
improve customization, make product suggestions to increase value to recipients etc.
manage campaigns, quality printing, postage for addressed mail etc.
“householding” and mail merging applications, mailing optimization tools etc.
Postal products, expand geographically, build new partnerships/business models etc.
customize payment channels for CPOs, cross-sell document management technologies, increase interest of CPOs in single mail piece etc.
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Technology Drives Customer Choice
Assisting customers in making efficient choices and providing ways to execute them effectively when various postal / carrier options are available will be critical – Easy to understand options regarding rates, delivery options, available discounts, etc. – Must address mail preparation to all postal / carrier standards – Ability to provide consolidated billing to the customer and the posts / carriers simplifies payment relationship Depending on customer’s size, decision points change – High-end customers use sophisticated IT backoffices – the premium will be on data sortation – Midrange and low-end customers use a mix of backoffice and mailroom depending on mailings
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PB role in future mail communications
MAP concept (terminal-network-access concept)
Postal Infrastructure Postal Financial Institution
Internet / Public Communication Network
Vendor Infrastructure Financial Institution
Sender Recipient
Processing Transport Delivery Submission
MAPs
Postal Network
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Technology Trends Team
Cross-functional team drawing from all areas of the company: GMSE Perry Pierce, Bob Sisson AC&T Bob Cordery, Leon Pintsov, Rick Ryan, Dennis Stemmle DMT Tony Edwards EAME Richard Collins
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L i b e r a l i z a t i
Market opportunity
Further the Mailstream vision and expand our presence – An evolution from our traditional role, not a departure:
1. Build a comprehensive portfolio of Mailstream Access Portal solutions 2. Multi-level consulting and routing services 3. Provision of postal automation, processing and information technology 4. PB Business “Club” 5. Selected PB Mail Services
Fighting disintermediation, establishing PBI as a key part of the mailstream “the gateway between the two communities /
PBI Current Key Growth Strategies
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PBI Core Business Strategies
Lines of Business still broadly operating within a very tactical framework… … Although there is a recognition for more LoB level vision and identification of broad strategic directions (on-going) Little or no real business development activity taking place within
Focus on strengthening existing portfolio, selling more and more efficiently (with various degrees of reliance on the US) and keeping our customers … but very much a solo effort! Is this operational focus a strength or a weakness? Do we really need to change this or are we identifying different needs?
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PBI Immediate Opportunities
Equipping ourselves with the right tools: Establish forum or process for LoBs to identify synergies and/or craft joint offerings – mechanisms for true one company and solutions provider behavior Develop a market research program for PBI to support both core and business development activities Design and implement a PBI wide on-going rolling strategic process Identify processes or put in place a dedicated PBI wide business development channel for all non-core business activities (incubator)
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Challenging the directions….
In the light of what you have heard today:
Hitting the right notes?…
we are about to face?
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Understanding the assumptions to qualify the direction! Assessing the risks…
To understand whether this is broadly right (or not) we must question the rationale and identify the key assumptions
Example: There are some major assumptions! We are actually saying that orchestrating a complex postal services shopping to get the right bargains holds more value than the one-stop- shop value proposition that some postal organizations are putting forward We are investing trust in the fact independence will be important to mailers We also here seem to think that we can afford not to align ourselves with any particular postal carriers Thinking hats on. Let’s understand what drives our decisions to check them! How do we mitigate the risks of being wrong?
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John Harmon, Team Leader Steve Barnes, Mail Creation Johanna Boller, Dist. Sol John Carter, DMT Tony Edwards, Group 1 Beth Ghiloni, IOP/Postal Solutions Chris Giles, GMS Mail Finishing Fabienne Luisetti, Dist. Sol Paul Johnston, DMT Peter Nicholls, Dist. Sol.
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PB Europe Business Overview
mailing products
Mail Finishing and Mail Creation revenues are 85% of total European product revenues and 90% of total European earnings Newer products have only recently been introduced (Distribution Solutions, Group 1) IOP and kiosks yet to be introduced. Difficult to clone the US business model for mailing services and the US technology platform for Group 1.
from two countries: the UK and France.
UK: 38% of revenues; 44% of profits France: 29% of revenues; 29% of profits Germany: 10% of revenues; 8% of profits ROE: 23% of revenues; 19% of profits
470,000 small to medium mailers (~35% market share) ~ 600 large mailers (market share TBD) No retail presence
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Data Integration
Segmentation – market research to help clarify
Mailing Applications – who does what, for which segment, and how?
Channel
Products and Technologies Issues and Opportunities
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Appendix 2 – Customer Needs Brainstorming Results
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Customers Needs
Measurable DM Integral solutions to support business process to achieve their goals Others Internet postage for department Mail Quality the perfect envelope Multi channel delivery for D/M messaging Opt / Permission based Convenience Better clarity of options and opportunities available to them Customer Understand delivery times & accuracy / overall / per mailing Be updated on new services / prices Increase relevance of mail piece content Improve productivity with full MIS reporting Management of information (data, price, analysis) Need to help understand how a document management strategy would address broader needs Mail stream optimiser How to validate quality of service in multi carrier down stream access market Status of mail piece Track and Trace for individual low value items Integrity of mail Managing service levels Access to discounts Proof of mail ROI How to identify total allocated cost per mail piece and select right carrier via
Mailing analysis i.e. indicates how much it costs to send an invoice Achieve lowest cost per mail piece End to end optimal costs Better ROI on D/M Monetary
Group 2 - Nijinsky Group 1 - Red Rum
Large Mailers
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Customers Needs
Shop for price & service between carriers Acquire more customers / retention Mutli-channel communication integration Respond to recipient preferences (time address) Day certain track and trace Convenience Access Maximisation of weights / formats (UK) Print multiple types of evidencing (postage permitting) Track and trace mail items of low value Cost Effective Access to D/M tools & services Solutions that create envelope and evidence Want to look like larger companies Ease of use Carrier selection based on criteria Customer 3rd party verification of service levels Ability to access carriers on regular basis (e.g Mobile phone) Managing service levels Monetary Others Data services Bureau / consultancy Quality of perfect envelope Clean an address data base (standardize, fix errors..) PB “postal access Bureau Pre-printed Postage solution for small business “PB non meter solution” Internet postage Quieter machines Data capture
Group 2 - Nijinsky Group 1 - Red Rum
SME
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Customers Needs
Simplicity of mailing Track and Trace Individual mail items of low value Managing service levels Access to discounts Cost effective access to DM tools and services Monetary Customer Internet Stamps via PC Data services bureau / consultancy Convenient evidence solution Easy to mail Want to look like large company Desktop package service Carrier selection based on criteria Group 2 - Nijinsky Group 1 - Red Rum
SOHO
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Customers Needs
Access to discounts Monetary Customer Privacy and security Desktop stamp printer Group 2 - Nijinsky Group 1 - Red Rum
Private Consumers
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Customers Needs
Collect payment for downstream access to provide access / provide MI Reduce own cost Low cost evidencing and data capture solution (GER) Reduce cost / process for undeliverable mail How to reduce rates How to profitably serve private consumer market Convenient payment solution for their SOHO customers (GER) Increase direct mail $$ for SME Monetary Better service fulfillment market (parcel) Universal access obligation Ease access to their services Increase machine readability Improve address quality Process optimization tools, (network, routes..) Reduce last mile in office processing Managing service levels Create customer loyalty Customer Others Increase share of postal spend Meters for additional products / services even non postal Seamless mail acceptance processes (physical, $$, data) Mail processing technology with open interface hardware and software (GER) Automated retail solutions Help establish strategy Data capture solutions Display my “options” first Deliverable address database
Group 2 - Nijinsky Group 1 - Red Rum
National Posts (Domestic)
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Customers Needs
Information for load leveling Managing service levels Payment & Collection Monetary Others Need Volume* Customer acquisition Upgrade in to collection and transaction (not Germany) Need equipment Expansion share / acquisition Display my “options” first Mail acceptance process Deploy retail solutions Mail preparation – present automation Group 2 - Nijinsky Group 1 - Red Rum
National Posts (Foreign Ops)
* Distinguish National v Regional
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Customers Needs
Information for load leveling Address quality Managing service levels Payment & Collection Profitability/capital (not share development at all cost) Monetary Customer Others Regional volumes Scalability of equipment / software Upgrade in to collection and transaction (not Germany) Build awareness Automated manifest submission (incl data capture) Provide leading edge solutions allowing customers access to choice
Develop acceptance procedures Create infrastructure (collect revenues for SME’s, franking, track and trace ..) Display my options first Establish credibility in eyes of mailers Compatible software solutions for mail processing Low cost sortation systems Group 2 - Nijinsky Group 1 - Red Rum
Private Posts
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Customers Needs
Improve productivity Management information Managing service levels Collect payment Monetary Sticky solutions for their customers Customer Others Integration Meet SLA’s Solutions to empower them and add value to proposition (fight off commoditization) Group 2 - Nijinsky Group 1 - Red Rum
3rd Party Mail stream Providers
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Customers Needs
Managing service levels Profitable mail for product retailers Mail stream transparency (future) Mailing information all postal mailers Data integration management solution for different carriers Group 2 - Nijinsky Group 1 - Red Rum
Other
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Appendix 3 List of 76 identified Business Opportunities
See attached Exel File