USPS: Innovating at a Snail’s Pace

Just about everyone has come in contact with the United States Postal Service in the past year.  And I’d bet that the interaction is largely the exact same as it was 10 years ago.  Eclipsed by the digital revolution, I consider the USPS organization to be a digital loser for the 3 reasons detailed below: it’s failure to innovate around new consumer tastes, structural inability to leverage data, and a lack of a distinctive and cohesive digital strategy.

First, digital winners either adapt or innovate around changing technologies and consumer tastes, and they do so ahead of the market.  The USPS, however, has failed to innovate as methods of communication have changed in the past 20 years. The model through which the organization creates and captures value has largely stayed the same over time:

Value creation:

  • Provides access for marketers and retailers to reach a high volume of end-consumers, as the USPS is required to serve all Americans, irrespective of geography
  • Enables marketers to focus efforts by geographic region, zip-code, etc. for location-specific offers
  • Connects individuals to one another in a way that is seen as authentic and personal (e.g., hand written letters)

Value capture:

  • Increasing prices over time drives incremental value from each piece of mail
  • As a government-empowered agency, the USPS has exclusivity over the delivery of first and third class mail in the United States

While the USPS’s value creation/capture model has remained stagnant, new players have entered the market and developed more advanced and convenient tools that are pushing out the USPS.  For instance, technologies such as Skype, Facetime, etc. have all created ways for individuals to authentically connect with one another.  A handwritten letter is a novelty of the past when new technologies like these can connect individuals face to face. Even formal wedding invitations are moving away from snail mail and into services like Paperless Post.

Secondly, the USPS is legally prevented from using much of its data to innovate.  As a government-related agency, it must protect consumer privacy and therefore is not able to share granular data with marketers/retailers to improve customer targeting.  Jim Cochrane, Chief Information Officer and Executive Vice President at the USPS says, “We know a lot about where mail goes, and where packages go, but we really can’t use that information in ways that other companies might.”  Instead, the USPS uses that data to solve, perhaps important but not so innovative, problems like optimizing driver routes.

Finally, to be a digital winner, an organization needs to have a cohesive and defensible digital strategy.  The USPS’s approach seems to closer resemble a patchwork of various “digital” ideas that fail to cohesively address the organization’s digital issue.  For example, the VP of New Products and Innovation Gary Reblin recently unveiled the Real Mail Notification (RMN) plan, in which the USPS takes a photo of every piece of mail that will be sent to ones’ home address and provides a preview each morning for what is about to arrive in the mailbox.  Reblin proclaimed that RMN is ”an idea that is going to change and revolutionize direct mail.”  I’d instead argue that RMN provides a duplicative service that lacks defensibility from retailers who could purchase large email lists and email direct offers to customers themselves.

RMN, combined with other ideas like promoting interactive features on physical mail (e.g., advanced inks, sensory papers, QR codes), don’t bring anything truly revolutionary to the table.  Instead, it feels the USPS’s efforts are simply too little too late and call for a much larger re-imagination of what mail is to the U.S. consumer.



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Student comments on USPS: Innovating at a Snail’s Pace

  1. Thanks for the article. The only innovation I’ve seen from the Post Office is in shutting down better, more efficient competitors since the 1800s!

  2. I wonder how the ideal digital transformation of such a player with these governmental restrictions would look like. In my opinion, the real digitization of such a player is primarily in the non-customer facing units, ops and IT. This is, where you can really cut down costs by moving processes from analog to digital. Getting the customer digitally involved is just the last phase.

    My personal experience with USPS. Sending letters from europe to the US. Out of 5 letters/packages, I received 2. Given that “success rate”, I wanted to track the shipment, but the European postal services cannot provide tracking after the package entered the US. It just disappears in a huge black hole… so sad!

    1. Interesting and very relatable post. I think we’ve all had a painful experience or two with the USPS at some point in our lives whether it is not receiving a piece of mail, a package arriving extremely damaged or waiting in a long line at the post office. I totally agree with SJB that instead of trying to launch “flashy” digital initiatives like the RMN they should focus on streamlining their operations and leverage the power of digital to deliver mail more efficiently and effectively. There is a lot of room for improvement in the customer experience of trying to send/receive mail that could benefit significantly from a bit of digital innovation.

  3. Great post! A rather dull company can make for an interesting subject. USPS is an excellent example of how an ownership structure, in this case a federal agency, affects a company’s performance. This opens up a broader issue of innovation, or lack thereof, at government-controlled companies. While applying private company benchmarks to evaluate USPS’ performance would not be appropriate due to serious limitations that stem from operating in a regulated industry, this should not be an excuse for underperformance.

    So is there any salvation for USPS? I believe the solution is PPP, which stands for Public Private Partnership. This term relates to the concept of cooperation between government and private entities in their work to deliver a public project or service. PPPs are typically medium to long term arrangements whereby some of the service obligations of the public sector are provided by the private sector, with clear agreement on shared objectives for delivery of public infrastructure and/ or public services. In the post office context, USPs could easily turn to Europe for successful examples. Italian and Dutch postal operators have used PPP to make their vehicle fleets more modern and flexible. Some postal operators in Europe have also established their retail post office business as separate business units with private investors. These solutions allow postal service operators to turn their fixed costs into variable costs, and become more agile. Perhaps PPPs could give USPS a shot at innovation.

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