International Post Corp., represents a fascinating case study of an industry sector – in this case the public post system – seeking to digitize operations in the face of fierce online competitors.
As noted in my previous blog, Tulane Professor Geoffrey Parker and I recently conducted an in-depth study for MIT’s Center for Digital Business and IPC in which we applied historical context and the concepts of platforms and two-sided networks to offer a roadmap and options that Post members could follow in their move toward digitization. This two-part article will summarize our findings and our ten recommendations. While specific to the Posts, I believe that many of the findings can be applied broadly to other industries facing similar challenges.
As background, International Post is a cooperative association of 24 member postal operators in Asia Pacific, Europe and North America.In our White Paper, A Digital Postal Platform: Definitions and a Roadmap,we state that:
“The posts have been facing declining volume of physical mail and low utilization of physical assets. Much of this is caused by users moving to digital communications for letter mail and by advertisers moving to online media such as Google AdWords, Groupon, and Facebook.
“Changing mail flows result from multiple trends: Broadcast media and mass mailings are becoming interactive and personalized. Digital bill presentment is moving online. Mobile devices enable individual tracking and broader reach regardless of location. Power is shifting from senders to receivers as information overload reduces the effectiveness of un-targeted communication and as screening technologies let recipients choose which communications they will receive when and where.”
Moreover, “New entrants and players in niche markets, like Zumbox, Volly, and Amazon’s drop-shipping, are challenging the traditional markets held by Posts. Many firms and industries – in analog photography, analog telephony, newsprint, video cassettes, DVD rental, and music discs – also have been reshaped by digital competition. Organizations in such industries have shrunk, transformed, or exited.”
With this as the backdrop, we set out to answer a series of questions: Primarily, Is there a Postal digital business model equivalent to the physical business model? If so, how would it work?
We also considered whether there are ways to compete with strong contenders such as IM, Facebook and Google, as well as other large, entrenched players. If so, how do you get all of the moving parts to work?
In the physical world, we noted: “Postal business models can be thought of as platforms -- two-sided networks that match senders and receivers. Most Posts also play both a sponsor and provider role: senders supply the content for a fee to the receivers who receive content for “free.” How can this platform and network be leveraged and enhanced to be relevant in the digital age?”
Taking the Next Steps
As part of our research, we interviewed dozens of experts at different postal services as well as their competitors to find out what applications and strategies Posts are implementing in order to enter digital markets. We learned that Posts have been trying to address the move to digital communication in several ways, most notably, by launching applications such as hybrid mail, secure digital eBox, digital identities, and other products and services, but their efforts don’t go far enough.
The outlook is promising, however, and we believe that the Posts -- with their diverse assets and competencies -- can generate revenue if they go beyond standalone products and become digital platform players.
Our ten specific recommendations include the following:
- Open platform to third parties, and aid their business models
- Enumerate functions that can serve as platform foundations, and choose features conferring control
- Redefine the Universal Service Obligation
- Use a Visa-type model for organizational structure
- Articulate the space of platform opportunities for developers and develop demonstration projects
- Use platform envelopment, seeding and partnerships to solve the chicken-and-egg launch problem
- Price to drive adoption using two-sided network strategies
- Re-examine the concept of trust in the digital space, and its differentiation from trust in the physical space
- Consider the integration of permission-based advertising to raise revenues
- Apply platform concepts retrospectively to physical assets
The white paper provides more detail on definitions, development, and implications for the ten recommendations.
In my next blog I will delve deeper into a two specific recommendations and outline our overall conclusions.
Note: The publication of the White Paper is the culmination of more than a year’s collaboration between IPC member postal operators, IPC’s market research team and MIT Sloan School of Management’s Center for Digital Business. The theme and title IPC’s 2011 Annual Conference was ‘Digital business: opportunities to create value’ at which White Paper co-author Professor Marshall Van Alstyne presented to postal CEOs the value of developing integrated platforms.