Before the global recession hit in 2008, my company, Pitney Bowes Inc., had already embarked on a concerted effort to evolve the business and rebalance revenues toward growth areas. Nearly a century old, with 33,000 employees and US$5.6 billion in revenues, Pitney Bowes had two different businesses. Our traditional business, serving small and medium-sized customers, was very focused on hardware — the sale, servicing, and financing of postage meters and other mail and workflow equipment. Our enterprise segment, on the other hand, was much more of a services- and software-based business model, selling to large, multinational companies. Those revenues had grown considerably over the last decade, in part through acquisition.
In May 2009, we decided to launch a thoughtful and comprehensive review of our progress. Everything was on the table: sales, general, and administrative expenses (SG&A); engineering and manufacturing; indirect and direct procurement; the size and skills of our workforce; IT, HR, and finance; and, most importantly, the overall structure of the company. We had grown up as a set of vertically integrated individual businesses managed as a loose portfolio. We needed to become a much more integrated company with an infrastructure and business model that served the distinct needs and growth potential of our two very different customer segments.
In addition, one of my personal key goals was to create a lot more variability in our cost structure, so we could migrate resources across businesses as we saw opportunities arise. Naturally, at the height of the recession, we looked for cost-saving measures that we could implement quickly and temporarily, like deferred wage increases and temporary changes to employee benefit programs. But more importantly, we also explicitly looked for the type of cost savings that were sustainable over time.
We created nearly a dozen cross-functional teams to examine every company resource and process, and a project management office to coordinate these teams. They were responsible for developing and defending the business case for their proposed actions and investments. These were then brought to senior management for review. The senior management team dedicated a half day every month to considering these action items and investments. I was part of a smaller subset of that team, called the Transformation Steering Committee, which was focused on formally approving, monitoring, and implementing the resulting projects.
To create room for the new priorities, we looked at our historical investments and either limited or eliminated many old systems and processes. We redirected that investment into the new platforms and new capabilities that we needed.
Our senior management team identified three key areas for investment. The first and most basic was infrastructure. We replaced our old Web infrastructure with a much more contemporary and flexible platform that consolidated the websites from all of our various acquisitions and enabled direct interaction with our customers. Behind the scenes, we consolidated 85 disparate data centers into six regional centers.
We called the second capability “the agile workforce”: communication tools to provide employees with the flexibility to work anywhere rather than being bound to a particular facility or office. For example, we began using voice over IP and aggressively reduced our real estate footprint.
Third, we gave more employees the ability to interact with our customers on a more holistic basis and cross-sell to them. We built an enterprise selling organization, unifying around common processes and technologies (such as using Salesforce.com as a sales automation tool).
In addition to these priorities, we launched a number of new digital products (some internally developed, others created through partnership) to drive revenue growth per customer as well as our overall customer base.
As a result of this initiative, we’ve gone to a much higher degree of global shared services. The finance and marketing groups, for example, have moved from regional to global models, leaving decision support to the individual businesses. We have a global learning and development organization focused not only on product training, but also on education about our company’s core mission — customer communications management.
Pitney Bowes has also expanded its use of outsourcing and offshoring. First, we aggregated and standardized certain high-cost and transactional work internally. Then we outsourced much of it; nearly half of our finance transactions, for example, are conducted by suppliers.
We continue to look for ways to move from fixed to variable costs on a day-to-day basis, so we won’t have to undertake another restructuring.
Our hard goal when we started this process was $150 million to $200 million in annual cost savings, net of reinvestment back in the business. We announced in our 2011 fourth quarter that we had exceeded our revised target of $300 million, one year ahead of schedule. Almost 45 percent of the savings came from non-personnel-related actions, such as better procurement, smaller facility requirements, systems automation, and similar efforts. Out of the total savings, we reinvested about $200 million back into the business.
We had plenty of challenges along the way. We had the typical organizational boundary issues that you encounter when solutions cut across traditional lines of demarcation. Often, we worked through these issues by using cross-functional teams. We are still working on the concept of continuous improvement, incorporating into our culture the requirement that everyone look at efficiency and productivity as the funding source for future investment in the business, and driving home the concept of competition for finite resources.
At the end of the day, the best parts of the Pitney Bowes culture prevailed. We have an organization of people who are very committed to the company. Once everyone accepted that we were serious about this transformation, they got on board and drove its incredible success.