Digital transformation: NZ Post finds itself between a poisoned chalice and a silver lining

  • Strategy
  • November 21, 2017
  • Colleen Ryan
Digital transformation: NZ Post finds itself between a poisoned chalice and a silver lining

When was the last time you posted a letter? When was the last time you shopped online?

If your answer was more recent for the latter, that should give you some insight into why NZ Post have undergone an enterprise-wide transformation programme, rebooting their business to make it fit for the future.

Colleen Ryan talked to NZ Post's chief executive David Walsh, and group general manager, customer experience, brand and people, Jo Avenell, about change, leadership and the internet.

Transformation and cultural shifts

Although Walsh only became chief executive this year, he was previously chief financial officer, so was able to describe the whole journey starting in June 2013 with the goal of transforming one of the country’s largest employers, a State Owned Enterprise, and owner of some iconic Kiwi symbols, but one most people viewed as a business in inexorable decline.

Building a future business is the sexy end of a transformation process, but before getting to that NZ Post had to face up to the fact that a very big part of their business was indeed in a bad spot. 

Over a five-year period letters had dropped from over a billion pieces to less than half that. Few businesses can survive such an aggressively dynamic market shift - imagine losing half your sales volume over such a short period. Plus, NZ Post needed to respond to the decline in this part of its business before it could fund regeneration.

“The transformation drive was our core business, core mail, was getting decimated. And the transformation initially started from how do we ensure that we line up to that challenge of letter decline, right size of cost, operational efficiency, everything you could possibly do to get the business viable as that disruption occurred, ” says Walsh.

It was inevitable that there would be a human cost in staff reductions plus a shift in the skill base and competencies required for the future business.

Avenell was emphatic NZ Post prioritised the handling of this process and its impact on staff, with three core pillars of ensuring people understood why the business had to transform, keeping people informed and using clear and honest communication, and supporting people through the process with a programme. 

“We are committed to being very honest and upfront with our people. It is a principle we hold dear and we believed it was important that our people heard the news of change from us as management first, before seeing it in the press. People might not have liked or agreed with the decisions, but I think they by and large trusted that we were doing the right thing," says Avenell. 

The other big cultural shift that needed to be managed was to reorient the business from being operationally driven and inward looking to being a twenty-first century customer centric business.

Walsh and his team recognised that to survive and then thrive, they would not only need to find new customers, they would also have to embed a customer experience approach to what they delivered.

He says the company has always been receivers of mail and now they're having to build our capability.

"Not just at our people level but at a technology level, to win work, to win customers, so it really is a transformation around being customer-centric. That really is it.” 

The journey or the destination?

Timelines seem important at the beginning of the journey because it creates both a sense of urgency and an end point of arrival at success – if you never arrive it’s hard to feel you have succeeded. For this reason NZ Post set themselves a five-year plan and the end is near - or at least the end of 5 years is near.

However, transformation is a process and it doesn’t stop, instead the programme evolves as the business transforms.

“We probably need at some point to think about, the fact that the transformation plan ends next year, I think we need to celebrate that success in the end, but it doesn’t mean we stop adapting. Also, our people worked really hard through all of this, so there’s an element of refresh. You want them to feel like we’ve delivered something, but we might also be starting something else new,” says Walsh. 

Walsh talks about the fact that even the idea of a five year plan now feels wrong. Tethering transformation in this way doesn’t allow for the new developments outside of your control that will come along as you progress. In this regard business planning has fundamentally changed and lead teams need a more adaptive mindset.

“You used to do a business plan that said: in five years, we’re going to do that. I don’t think any business at the moment can be that certain. You can work with the trends, but if you’re planning more than probably 2 years out at the moment, you’re probably starting to lose a bit of focus on what the immediacy issues are, so there’s something in there about being able to be responsive to that disruption, and it is transformational in terms of the business has got to think differently,” says Walsh. 

I asked Walsh where he looked for inspiration. Did they look to any models of frameworks used overseas or did they consider employing consultants to do the work for them?

“It’s those things you read in the textbook that you suddenly see comes alive through practice. If you haven’t got the senior leadership team on board, if you haven’t got the board on board, if you haven’t got the real strategic clarity on where you’re going and the staff engaged, you might as well not start.”

And this has been a great strength for NZ Post’s transformation process – making sure the senior leadership team understood what the challenges were, ensuring they had the right leaders in place and then trusting themselves to effect the change.

There was enough self-awareness to recognise that people have a finite mental capacity so Walsh and Avenell accepted the process would proceed at the pace that the lead team could manage.

“It was a deliberate decision to say – and I think it was a belief – that as leaders we need to be able to lead this. We don’t want to outsource the leadership. We need to own it and lead the way, demonstrate it. From a credibility perspective, we knew what we needed to do, we needed to have the courage to do it.”

The silver lining still has to be won

Least it all seems like bad news, there was a silver lining for NZ Post in that while people weren’t posting letters any more, they are buying more and more online - and someone has to deliver all those eagerly awaited parcels.

And this is a fundamentally difference experience from a handful of letters arriving which largely comprise bills and other things you neither asked for or want. No one was ever impatient to receive their bank statement but as soon as you order something online you want it, and you want it now. So the potential for NZ Post is huge.

“You look at the data points globally and you’re seeing New Zealand at seven percent of retailers online, UK is 15 percent online. Even if that one data point is half right or half wrong, that’s growth. In China, they’re talking Alibaba doing 75 million packets a day. They expect to do 200 million within less than 5 years. So, there is reason to say there is a great opportunity for this business.”

I suggested to David that they got ‘lucky’ that at a time when their core business was declining a new opportunity opened for them. But David is quick to point out that they had to work to win this new business, it wasn’t theirs by right.

“It also means that what was a monopoly business is now also a highly competitive delivery business, so it’s not going to  fall in our laps just by being passively involved in the market, and I think that’s the biggest transformation challenge. In an environment where there are low barriers to entry, there are nimble players, they’re more technology-enabled, they don’t have a legacy of the systems and the culture that we have, and I think that’s our real challenge is how do we make “the Queen Mary to fly like a fighter pilot”?”

We had talked early in the interview about how with a five-year transformation programme the external environment would change along the way and the programme had to be adaptable and able to evolve.

A big change has been the arrival of Amazon, getting ever closer to New Zealand. This was an example of how a growing opportunity like the online delivery market was an opportunity for NZ Post but one where they would be competing with new business models and competing services. The transformation process had to not just bring NZ Post up to date but it had to constantly stay ahead of the changes that were affecting their market.

“If a new entrant comes in, like an Amazon, how are we positioned to make sure Amazon doesn’t need to set up their own competing delivery service? There is something in there about our success is both dependant on how good the market is in terms of growing, but how good are we at actually working with our customers current and future", says Walsh.

Looking forward 

Walsh and Avenell are quite rightly proud of what they achieved but also realistic about what lies ahead. They gave themselves a definite 'A for effort' so far and were very candid about the missteps and the things they might have done differently. But overall they have been stewards and leaders of a very successful transformation of a behemoth that no one with a  feint hearted would have taken on.a

The journey goes on though, and the future is not yet won. But on their record to date you’d have to bet on them getting it right.

“In terms of our preparedness for the next step, we’re not quite at a seven or eight. Because we haven’t quite landed that yet, and that’s what we’re working on now. We talked about how do you manage the decline, well, now trying to get ready for how we service the growth, and we’re still just resetting what that looks like,” says Walsh.

  • Colleen is head of strategy of TRA.

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