Destined to Diversify Recent research from Accenture shows diversification is at the heart of the strategy adopted by postal organisations that achieve high performance.

Destined to Diversify For the past decade, postal operators have been facing the challenges of globalisation, liberalisation and technological advancesand more recently, the worst global recession in a century. Over the past two years, postal organisations have experienced a shift in their perspective on the future. Volumes were always expected to declinebut not at the levels now being experienced. In reality, a strategy focused purely on cost reduction and efficiency improvement cannot deliver the level of change that is needed to secure a commercially viable future. Our latest report Achieving high performance in the postal industry: Accenture Research and Insights 2010 clearly demonstrates the risks around continuing to pursue a traditional strategy and the success that diversification can bring.

Postal Strategies: The Four Categories Accenture has been monitoring developments in the global postal industry for many years using our High Performance Business Methodology, evaluating the performance of postal operators from both a quantitative and qualitative perspective. This body of research allows us to monitor how the industry has changed over time and to better understand how market demands are forcing postal organisations to strive to continually improve. Perhaps this is best evidenced in the area of the postal organisations strategy. In 2006, our research showed that choice of strategy did not seem to be a major factor in determining success; having strategic clarity was sufficient. In 2009, we found that strategic choice had become more important and, indeed, four strategic categories were emerging across the

industry. In 2010, we discovered that choice of strategy was absolutely vital to success and reflected as a top priority among those postal players we identified who achieve high performance.

Figure 1 presents our four strategic categories and positions each of our surveyed organisations under the strategic category that best reflects their assessed performance. While such a snapshot at a point in time is interesting, it is the progress over time that gives us the best insight to the industry and the characteristics associated with high performance.

Global players: the geographic diversification that is being pursued by these organisations is truly global. They have identified the market segments that work best in a global sense, that is logistics and express, and invested heavily in building capabilities across the international marketplace. DPWN and TNT are the only two postal organisations that have adopted this strategy on such a global scale and the reality is that when evaluating their businesses at a corporate level, it is difficult to make a comparison with other posts. Therefore, express and logistics services players UPS and FedEx are included in our global player category for benchmarking purposes. Looking forward, it is difficult to see any other global players emerging.

Regional diversifiers: this category approaches geographic diversification on a more regional basis with

organisations extending into adjacent markets. Looking at the operators that are pursuing this strategy highlights similarities in many of their domestic markets. Most notable is the size of the domestic market which in almost all cases is relatively small. As a result, while a nationally based service-diversification strategy could offer new revenue streams these are likely to be limited. The proximity of other geographies, therefore, offers an attractive opportunity.

Service providers: these postal operators have adopted a focus that is primarily based on expanding the range of services within their domestic market. This would appear to be the most obvious choice of strategy for postal operators in large countries-in particular expanding operations where their brand is already strong and they have an existing operational platform. An additional factor may also be the lack of opportunity for geographic expansion as a significant proportion of our service providers are operating in geographies that are discrete entities.

Traditionalists: the traditionalist category has been historically the preserve of the operators that are focused on continuing to provide traditional postal services. The focus is on providing better versions of these services by integrating technology, improving flexibility and overall reducing cost. Certainly many, in fact most, of the operators offer products and services that are the same as service providers. But the financial contribution of these services is too small to affect their current financial performance.

The Path to High Performance While adoption of a specific strategy is important to achieving high performance, it is not the only factor. When we took a closer look at the postal organisations that achieve high performance, we discovered some

Figure 1: Four Strategic Categories for Achieving High Performance

Strategy

Criteria

Whos Who

Global Players

At least 25% ofrevenue outsidedomestic market in 2008.

Revenue came frommore than onecontinent or tradebloc.

Clear strategy ofinternational growth.

DPWN (Germany)FedEx, TNT (Netherlands),UPS.

Regional Diversifiers

At least 12.5% ofrevenue outsidetheir domesticmarket in 2008.

Revenue fromadjacent countrieson the samecontinent.

Dominant strategyof regional growth.

Austria Post,Itella (Finland),Le Groupe La Poste(France), Posten Norge (Norway),Posten (Sweden),Swiss Post.

Service Providers

Dominant strategyof diversificationthrough convenienceand proximity.

Service beyondmail, shipping,banking and stationery.

Innovative solutionsacross channels.

Australia Post,Correios Brasileiros(Brazil),New Zealand Post,Poste Italiane,Singapore Post,South Africa.

Traditionalists

Strategic approachprimarily focusedon improving the efficiency of mail.

National focus.

An Post (Ireland),Canada Post,Ceska Posta(Czech Republic),Correas (Spain),De Post-la Poste(Belgium),Japan Post, MagyarPosta (Hungary),Post Denmark,Royal Mail (UK),USPS.

common themes around their business approach.

Customer centricity: postal organisations that achieve high performance adopt a customer-centric approach, prioritising customer needs at every juncture of their business operations-from product development through to customer service. These operators recognize that customers have the ultimate choice and they do all they can to continue to improve their offering and maintain their customer base.

Cost focus: for postal organisations that achieve high performance, cost focus extends beyond improvement of their own operation to a fundamental consideration of their structure and the opportunity to outsource both core and non-core elements. These operators are not just looking to outsource backoffice systems-they seek to incorporate lower cost, more flexible providers into their core operations.

Digitisation: technology is seen as an opportunity not just a threat for the postal organizations achieving high performance. They are using digitisation to offer enhancements to the existing product offering, to create new products and to streamline their operational processes. Both physical and electronic environments are being embraced to help maximize their full potential.

Sustainability: the environment is a significant factor for all businesses today. Postal organisations that achieve high performance view this not as an imposition or an overhead cost but as an opportunity. They have developed products and pricing strategies that position their businesses with the impact of sustainability in mind and are using the changed practices and behaviours to drive new revenues.

The common theme running throughout our research findings is the critical importance of mindset. Postal organisations that achieve high

performance appear to have a mindset that actively seeks out potential opportunities. Whatever changes occur in their operating environment and the broad marketplace, they are willing to challenge the fundamentals of their business to grow. Accenture believes it is this proactive survival of the fittest mentality which is perhaps the greatest asset in the journey to achieving high performance.

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About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 181,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.

The Advantage of Ambition A final critical factor that arises from our analysis of postal organisations that achieve high performance is ambition. Associated with mindset, ambition is the starting point for growth and progress. Today, postal organisations are operating in very different environments with some still largely under the control of government and many needing to accommodate the needs of the private sector marketplace. This environment provides the context for each post; the balance of focus between social service provider and commercial business; between doing the same better and diversifying into new business areas. However, with the volume decline that has been experienced as a result of the global economic recession, it is clear that continuing to do the same but better is not enough.

Cost reduction alone will not ensure survivaldiversification must be a consideration in every postal organisations strategy. By recognising the importance of diversification, postal

organisations can take action and target the future aspirations for their business. By establishing positive future goals, based on a core ambition to succeed, postal organisations can generate the energy, enthusiasm and commitment that is needed to emerge from this difficult economic period with a sustainable business that sets the standard for achieving high performance.

Want to Know More? For a copy of the research findings Achieving High Performance in the Postal Industry, Accenture Research and Insights 2010 visit accenture.com/postal or contact the reports authors.

Brian Moran, managing director-postal industry, Accenture. brian.j.moran@accenture.com or Vineet Narang, program lead-postal industry, Accenture. vineet.narang@accenture.com