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 information of the client to whom it is addressed.
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 1
Introduction and Strategic Context 2
Workshop Participants Break-out Team Break-out Team: ‚Red Rum‘ ‚Nijinsky‘ Room: Rockafella Room: Felstead [participants in alphabetical order] [participants in alphabetical order] Group leader: Marc Morelli Group leader: Peter Ellis Claire Edwards Alain Normand Erik Maurice Annet Eeltink Jean Philippe Ducasse Denis Stemmle John Carter Gary Dawson John Harmon Ian Siveyer Matthias Ehrhard Jurgen Marr Michael Branchflower Jurgen Ringbeck (BAH – Day 2) Michael Ryba (BAH – Day 1) Laurent Deduytsche Paul Johnston Linda Nazareth Perry Pierce Malcolm Bruce Philippe Dugougeat Mark Maresch Russell Hochman Stefano Gori Sharon Emecz Tony Edwards Stuart Bonthrone (Day 2) Yves Coue (Day 2) (1) Vaslav Nijinski, Russian ballet dancer and choreographer 1890–1950 3
Europe is essential part of Pitney Bowes International’s business and future growth Pitney Bowes Sources of Revenue 2005 Non-U.S. Revenue by Region USD Million 1,375 935 381 UK U.S. 254 France 74% 26% Non U.S. 98 Germany 202 Other 110 330 1045 Total $US 5.5 billion Non-U.S. Europe Asia Pacific Canada Source: Pitney Bowes, Analyst presentations, Booz Allen Hamilton Analysis 4
The mission for the whole of ‘PB International’ is to double the business in 5 years > $2 billion ≈ 15% p.a. $1 billion 2005 2010 5
Strategic imperatives and guidelines Ambitions Investment Principles for Investment Guidelines for Investment Principles for Investment Guidelines for Growth Adjacent Market Growth Adjacent Market � Invest to be a Market Leader Revenue +15% p..a. � Invest to be a Market Leader � Invest in core products � Invest in core products in “Blue Ocean” Spaces in “Blue Ocean” Spaces � Invest in Adjacent Markets � Invest in Adjacent Markets � Invest in Improving � Invest in Improving with High Organic Growth with High Organic Growth Distribution Capabilities Distribution Capabilities � Invest in Small-to-Medium � Invest in Small-to-Medium Size Opportunities � Diversify Beyond Meter Size Opportunities � Diversify Beyond Meter Related Products Related Products � Invest in High Margin, � Invest in High Margin, Recurring Revenue Recurring Revenue � Invest in Adjacent Mailstream � Invest in Adjacent Mailstream Opportunities Opportunities Spaces 2005 Spaces 2010 � Maintain Flexibility � Maintain Flexibility Stretch Goal � Augment Existing Business � Augment Existing Business EBIT X% Y% Uncontested #1 in UK, Germany, France Source: Pitney Bowes – Presentation by Michael J. Critelli 6
This is an ambitious growth challenge in itself – but what if the base business in Europe was at threat? PB International Revenue (w/o PBMS) PB International Revenue (w/o PBMS) Scenario: „Per Strategic Plan“ Scenario: „Core Business at Threat“ 1628 1628 +15% USD Million 368 1260 p +9% a 856 G h t w o 201 r p G a G h t w o r G 150 814 370 +15.6% 814 772 97 AP & ME 300 +5% +11.1% 219 Southern -2% 266 230 185 +7.5% Northern -2% 423 375 +6.2% Western 313 -2% 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Strategic Plan Extrapolation Hypothetical Percentages = Compounded Annual Growth Rates 7
Simply put: How sustainable is the PB mailer-carrier interface position in a changing environment? Customer Future of Market Technology Competition Needs Mail Liberalization Trends Carriers Mailers Core (Postal Operators) Business Europe Existing PB Ongoing PB Strategies Solutions 8
At a closer look, the strategic landscape is somewhat more complex and will offer PB both threats and opportunities Pre-Collection Inbound Outbound Receive Collection Transport Delivery Sortation Sortation Store, Reply, etc. Creation Production Finishing, Franking, Pre-sorting, etc. Mailers “Intermediaries” Carriers (Postal Operators) Receivers National Posts Permit Mail (Initial project scope: UK, DE, FR) Bulk volume Incumbent mailers Postal Network DMT Businesses r o f n o i t t i d e n p + a m s o r C e m o “Upstream “Dowstream Metered s t w s u o Consumers Core C l SME F GMS l i access”” access”” a Mail M Business NEW National Posts National Posts National Posts Europe Operations in foreign markets SoHo SBS Operations in foreign markets Alternative Operations in foreign markets “Own Postal Delivery” Private Posts Networks Private Posts Other Private Posts Stamped Mail Consumers (multi-carrier) Key Strategic Threat Key Strategic Opportunity Key Strategic Threat Key Strategic Opportunity � Carriers seeking more control of mailer interface � Exploit new market dynamics posed by liberalization � Carriers seeking more control of mailer interface � Exploit new market dynamics posed by liberalization – Address new/emerging customer needs – Address new/emerging customer needs � PB meter dis-intermediation by mailers � PB meter dis-intermediation by mailers – Reinvent “interface position” for multi-carrier – Reinvent “interface position” for multi-carrier � Carriers moving upstream/in adjacent spaces � Carriers moving upstream/in adjacent spaces environment environment competing with PB competing with PB – Move into new spaces in/around the mailstream – Move into new spaces in/around the mailstream 9
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 “Identify and detail firm understanding of the opportunities” strategic issues” Project “Hour Glass” “Rapid market solutions “Achieve a strategy to Research, Data, Ideas, etc. for quarter 4 2006” meet needs of market place and customers” “Short term initiative “Define what PB of a core product” should be doing in 2015” Attractive Business Results of pre-workshop interviews Opportunities, Compelling Strategy 10
Project Hourglass challenge: Securing and expanding PB’s strategic position between mailers and carriers in a liberalizing market Key Strategic Questions � How to secure and expand the “strategic linking position” 1 between Mailers and Carriers (Postal Operators)? � Which parts of the mail value chain will PB have to 2 Capabilities control/take part in to do so? In what “flows” (data, payment, physical mail stream)? � How to address emerging/changing mailer needs? How to 3 PB Value address/exploit carriers needs/intentions (both national posts Technologies Propositions and new entrants)? for a � What capabilities, technologies, products/services need to be liberalizing 4 leveraged or build to do so? Postal PB Products/Services/ Market Solutions � How would possible “managed” migration paths from the 5 “classic meter” to alternative solutions have to look like? � How to capture larger share of the mailstream in addressing 6 all of the above? (e.g. permit mail, letters and parcels,…) � What other “adjacent spaces” will help secure/grow the 7 position and fill the growth targets? 11
How this workshop fits into the overall Project September May June/July Mid August April Project Week 1-2 3 7 8 to 17 18 19-23 Workshop 2 Workshop 3 Workshop 1 Information Market Post Market Strategic Preparatory Group Team Leveling and Research Research/ Planning Leaders Opportunities Testing Everybody at a minimum level of knowledge across 7 Everybody at a key areas by UK, Information on minimum level of Qualified list of Germany and France Outcomes customer response to potential strategies Clear Objectives potential opportunities Information on Team Leaders buy in Full support and and scenarios customer responses Presentation to and brief Working Initial set of agreement from and review against IMG/ELC members groups ready to start opportunities and project board Information on potential set of Agreement from Exec scenarios identified customer response to opportunities and Mgmt and Board on existing PB products scenarios for UK, strategies Refined and Germany and France prioritized set of opportunities and scenarios identified 12
Workshop Achievements and Accomplishments Workshop Objectives Understand key changes � in PB‘s strategic environment: Level set the Group i.e. key driving forces, Derive resulting evolving market a) strategic issues for PB scenarios, etc . � b) and customer needs Feeds into Develop and prioritize further i.e. key challenges and questions opportunities/ measures PB faces and hypotheses about market � to address what the consequences research could look like strategic issues and and customer needs validation i.e. not only defensive, but offensive moves 13
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