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 / Spring 2008 / Issue 50(originally published by Booz & Company)


On Track for Growth


Lessons for a Counterpart
by William J. Holstein

Postal services have run on a track similar to that of railroads in terms of privatization and their need to compete with commercial enterprises. As postal reform looms large in both the United States and Canada, decision makers will have the opportunity to put to use many of the lessons from the railroads’ growth initiatives.

The U.S. Postal Service (USPS), a giant with US$68 billion in sales and 700,000 employees, has been engaged in a compete-and-cooperate pattern with two private-sector companies, FedEx and United Parcel Service (UPS). That has helped spur the USPS to make dramatic strides in quality and performance. FedEx and UPS have also played a key role in introducing new sorting and online tracking technologies that have spread into the postal system. In this sense, allowing a measure of competition in this formerly government-dominated sector has been fruitful for the agency.

Additionally, the USPS has bene­fited from the fact that Post­master General John E. Potter has been open to innovative ideas from outside, which is somewhat surprising considering that he started his career as a postal clerk in New York in 1978. The result of Potter’s approach has been such products and services as Click-N-Ship, automated postal centers, and prepaid Priority Mail.

But the post office is still mired in overlapping and constricting regulations. In late 2006, Potter and his allies in the corporate sector helped push through Congress a new law that put the service on firmer financial footing, preserving universal service at affordable rates, but allowing price increases tied to the rate of inflation. Potter is likely to continue to press for reforms that would allow the USPS to compete more directly with FedEx and UPS, particularly in the overnight delivery market for both letters and parcels. He says that he seeks to create a more competitive, market-facing organization. One obvious stricture that could be eased is the requirement that the USPS deliver mail to every community in the United States, no matter how remote, six days a week. Easing that to even five days a week would cut costs enormously.

The U.S. Postal Service is not the only one experiencing major changes. Some observers speculate that Canada Post will be privatized. Moya Greene, who was named president and CEO in May 2005, has experience in both the private and governmental sectors. Most significantly, she was part of the Ministry of Transportation and is credited with the privatization of Canadian National Railway. In view of the success that CN is enjoying, it would not be surprising to see Greene attempt to apply her privatization experience in her new role.

William J. Holstein ([email protected]) is a contributor to the New York Times, Barron’s, and Fortune.

Reprint No. 08107

Author Profiles:

Andrew Tipping ([email protected]) is a vice president with Booz Allen Hamilton in Chicago. He specializes in the organization and change leadership aspects of customer-focused transformation in private- and public-sector enterprises.

Justin Zubrod ([email protected]) is a vice president with Booz Allen in McLean, Va. He specializes in strategy, performance improvement, and organizational alignment for large-scale transportation and logistics enterprises.

Also contributing to this article were Timothy Murphy, a senior associate with Booz Allen in McLean; Farrukh Bezar, a former principal with Booz Allen; and Bevin Barberich, a former associate with Booz Allen.

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  1. Harry Bruce, The Pig That Flew: The Battle to Privatize Canadian National (Douglas & McIntyre, 1997): An overview of CN’s history and illustrates its progress and growth as a company.
  2. Viren Doshi, Gary Schulman, and Daniel Gabaldon, “Lights! Water! Motion!s+b, Spring 2007: Forward-looking view of expansion of transportation, energy, and water infrastructure, which are all linked together, with rail systems particularly important for travel within and between cities.
  3. Edward Landry, Andrew Tipping, and Jay Kumar, “Growth Champions,” s+b, Summer 2006: Survey data from Booz Allen Hamilton and the Association of National Advertisers identifies marketers who drive growth by leading product innovation and new business development.
  4. Geoffrey Precourt, ed., CMO Thought Leaders: The Rise of the Strategic Marketer (strategy+business Books, 2007): Insight from 15 top marketing leaders on the current and future direction of their field.
  5. National Association of Railroad Passengers (NARP) Web site: Includes a helpful overview of the U.S. Passenger Rail Investment and Improvement Act of 2007, with regular updates.
  6. For more business thought leadership, sign up for s+b’s RSS feed.
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