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®
Strategic Planning within the USPS
ASP Annual Conference
“Strategy is Global: Global Challenges, Global Solutions”
May 2015
Keith Ross Butler
Strategic Initiatives Program Manager
USPS Office of Strategic Planning
®
The United States Postal Service has a strong and seasoned strategic planning and
execution process, which has a long history within the organization.
This session will focus on the USPS strategic planning process, challenges facing the
organization, and trends that highlight the future of the USPS.
Participants will learn about the following:
A. Key elements of USPS strategic planning
B. Legislative mandates and long-term liabilities affecting the organization
C. Portfolio management and strategic initiatives
D. Emerging trends facing the USPS
ASP Conference – May, 2015 2
Introduction
® Mission & Vision
Mission:
The mission of the Postal Service is to provide a
reliable, efficient, trusted and affordable universal
delivery service* that connects people and helps
businesses grow.
*While not explicitly defined, the Universal Service Obligation (USO) is broadly outlined in statute to include: geographic scope, range of products, access to services and facilities, delivery frequency, affordable and uniform pricing, service quality, and mail security.
ASP Conference – May, 2015 4
Vision:
The Postal Service is dedicated to improving its
services, products and capabilities to adapt to the
changing needs of customers in the digital age.
®
Strategy is about making choices to best meet our
customer’s current and future needs…
ASP Conference – May, 2015 6
Strategic Choices
Source: Playing to Win: How Strategy Really Works, A.G. Lafley & Roger
Martin, HBR Press, 2013
®
Purpose: Operate a world-class enterprise strategy office that enables USPS leadership to
achieve business outcomes. We accomplish this by providing key insights and analysis,
coordinating the implementation of the highest priority strategic initiatives, and maintaining the
confidence of key stakeholders in postal strategies.
Chief Financial Officer Joe Corbett
Office of Strategic Planning Emil Dzuray, Director
Strategic Business Planning Office
Preston Finley, Manager
Strategic Management Office
J O Smith, Manager
Organizational Structure
Strategic Insights & Analysis Executive strategy, planning & ideation workshops
Executive Business Insights forums
Insight & analysis whitepapers
Corporate insights
management system
Strategic Portfolio Management
Support initiative teams with:
Planning and Chartering
Roadmap Development and Program Planning
Risk Assessment
DRIVE Status Reporting
Stakeholder Engagement
Corporate Strategy & Performance Reporting
Five Year Strategic
Plan Annual Report to Congress
Comprehensive Statement of Operations
Annual Performance Plan
Primary Functions and Services
14 in-house staff members comprised of Strategic Project Managers, Strategic Planning Specialists and Strategic Program Managers
Manage Enterprise Project Management Office which employs 60-100 contractors who support corporate Project Management Offices (PMOs) for strategic initiatives
Office of Strategic Planning
®
USPS Four Key Strategies (2012-15) • Strengthen our Business-to-Consumer Channel
by keeping costs low and service levels high for mail senders and
promoting high quality experiences for receivers.
• Improve our Customer’s Experience
at all touch points in ways that matter most to customers – both
senders and receivers -- and in person and online.
• Compete for the Package Business
by building a world class package platform that offers affordable,
simple, fast, visible and secure package delivery services.
• Become a Leaner, Faster, and Smarter Organization
by removing excess capacity, improving efficiencies, achieving 100%
customer, product and employee visibility, building competitive
workforce, and strengthen financial liquidity and risk management
The four focus areas align all strategic initiatives with ƒcorporate and unit performance goals (NPA), as well as staff pay for performance goals (PES).
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Focus Areas
®
Leverage market-leading
physical assets
Incorporate evolving
logistics solutions
Develop a structure that
fosters agility and
innovation
Boost the demand for mail
and packages
Expand and simplify
induction points
Integrate emerging digital,
big data, and consumer
trends to grow
Expand delivery solutions
Capitalize on the
expansion of
E-commerce and
technology
Optimize route flexibility
and productivity
First Mile Physical Network Last Mile
Leverage USPS’s brand,
trust, and reputation to
drive profit
Provide digitally-enabled
security, authentication,
tools, and insights to a
broad range of customers
Digital
Technology People
Cross-functional enablers that strengthen the Platforms
Finance Legal Communications Operations Marketing
Enterprise
Foundation
World-Class
Customer Experience Brand World-Class
Reliability and Visibility Culture of Delivery
Requirements for growth and innovation
Security Simplicity
4 Innovation Platforms Key to Future Success
Strategic Capabilities
ASP Conference – May, 2015 9
®
ASP Conference – May, 2015 11
PAEA
• In 2003, the President’s Commission on the Postal Service made
several recommendations in their published report.
• In 2006, legislation was proposed within Congress which was later
passed as the Postal Accountability and Enhancement Act (PAEA).
• This law separated USPS products into two categories:
– Market Dominant (ex: First Class Mail, Standard Mail, Periodicals)
– Market Competitive (ex: Priority Mail, Express Mail)
• The law also required the USPS to pre-fund retiree health benefits.
This prefunding required the service to pay $75Billion from 2007 to
2017.
• The financial impacts of PAEA and the 2008 economic recession
severely damaged the financial viability of the USPS and its business
model.
®
The USPS has made major strides to improve its finances. However, legislative and
regulatory action is needed to address outstanding financial difficulties.
$56.7B or
roughly 80% of
total liabilities
ASP Conference – May, 2015 12
Long-Term Liabilities
®
DRIVE Portfolio Governance Structure
SMO track/report portfolio
status/issues/portfolio risks
to ELT using
standard tool/process
ILs track/report program
status/issues/initiative
risks to SMO/ELT using
standard tool/process
Project Managers
track/report task
status/project risks using
Detailed Project
Management Plans
Standard Processes
Portfolio Management
ASP Conference – May, 2015 14
®
Report name Information reported Screenshot
• Portfolio KPI performance variance • Financial and non-financial impacts • Actuals v. plan-to-date and v. plan
• All milestones and KPIs status and target dates and performance
• Log of risks, issues, comments and corrective actions
• List of cross portfolio interdependencies
SMO produces 4 standardized reports:
Portfolio Performance Chart
Initiative Roadmaps
• Initiative milestone variance • Initiative impact variance • Initiative risk status • Initiative update status
Portfolio Summary Dashboard
Initiative & Roadmap
Performance Dashboards
• Key milestone variance • KPI status and variance • Risks status • Key issue and corrective action status • Status of interdependencies
Portfolio Reporting
ASP Conference – May, 2015 15
®
2008
economic
recession
As a result of growing challenges to its business model, the USPS faced four years
of dramatic financial decline.
Major Challenges to the USPS
Steadily
declining
mail volume
Economic
recession
Rising
labor costs
Large fixed
cost base
$64
$66
$68
$70
$72
$74
$76
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
($) Billions
*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities
**As stated in the 2010 USPS Action Plan
Fiscal Year End
Without fundamental change, cumulative
losses were projected to reach $238 billion
by the end of FY2020.**
So how did the USPS turn things around?
RHB
prefunding
mandate
USPS Financial Situation: FY2007- FY2011
Revenue Controllable Cost*
ASP Conference – May, 2015 16
The Financial Crisis
®
$64
$66
$68
$70
$72
$74
$76
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
USPS management realized that legislative reform would require time, and took
decisive action to ensure the organization’s solvency.
*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities
Key Management Decisions
Restructured
Headquarters
Prioritized
payments vs.
capital spending
Generated
revenue from
sales & Last
Mile services
Created
strategic
management
framework
Sought
legislative &
regulatory
relief
Fiscal Year End
($) Billions USPS Financial Situation: FY2007- FY2011
Revenue Controllable Cost*
ASP Conference – May, 2015 17
Emergency Initiatives
®
$64
$66
$68
$70
$72
$74
$76
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
To address shrinking volume, the USPS created efficiencies by rationalizing the
network and improving the use of data to inform management decisions.
FY2015 Q1
*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities
Key Management Decisions
Adjusted hours for
9,700+ Post Offices
via POStPlan
Renegotiated
agreements with
Unions & suppliers
Introduced
Intelligent Mail
Barcode
Consolidated 143
Mail Processing
Facilities
USPS Financial Situation: FY2012- Present ($) Billions
Fiscal Year End
Revenue Controllable Cost*
ASP Conference – May, 2015 18
Cost Reduction Initiatives
®
$64
$66
$68
$70
$72
$74
$76
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
While the USPS cut costs, management also focused on growing the package
business and engaging customers in innovative ways.
*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities
Key Management Decisions
Improved customer
interactions outside
retail locations
(e.g., online/mobile)
Enhanced Every
Door Direct Mail
(EDDM) product
Piloted
innovative
products &
services
Enhanced
product visibility
and scanning
USPS Financial Situation: FY2012- Present ($) Billions
Fiscal Year End
FY2015 Q1
Revenue Controllable Cost*
ASP Conference – May, 2015 19
Innovation Platforms
®
$64
$66
$68
$70
$72
$74
$76
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Key management decisions have stabilized the USPS and created confidence in the
organization’s future.
*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities
Key Accomplishments
Fiscal Year End
Regained
revenue growth
in FY2013
Grew package
market share
Expanded
innovative
products and
partnerships
Reduced
network and
labor costs
Returned to a
controllable
income profit
USPS Financial Situation: FY2007- Present ($) Billions
FY2015 Q1
Revenue Controllable Cost*
ASP Conference – May, 2015 20
Impact of Decisions
®
Building on these achievements, the USPS is committed to remaining the world’s
premier mail and package delivery business.
Speed the pace
of innovation Invest in the future
Engage and empower
employees
Support product
growth through
network efficiencies
USPS Future Priorities
$64
$66
$68
$70
$72
$74
$76
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
**Projected financials
FY2015 Q1
Revenue Controllable Cost*
Fiscal Year End
USPS Financial Situation & 5 Year Outlook ($) Billions
*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities
**Projections based on 2013 USPS Five Year Plan
How do we achieve financial stability?
ASP Conference – May, 2015 21
Sustainable Future
®
WE ASSESSED 23 EMERGING TRENDS IN THREE MAJOR
CATEGORIES…
…LET’S EXPLORE THEM
Emerging Trends Facing the USPS
ASP Conference – May, 2015 22
®
“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” - Wayne Gretzky
OSP endeavors to figure out where the Postal Service’s ‘puck’ will be in the future
ASP Conference – May, 2015 23
®
Social Trends
Technology Trends
Industry Trends
Social trends capture the patterns of human interaction,
movement, and preference
Technology trends include the application of scientific knowledge
and engineering in the digital age
Industry trends are new developments shaping how businesses
are organized and how transactions take place
ASP Conference – May, 2015 24
®
What strategies will position the USPS to thrive in
any Future Scenario?
Capability 1 Capability 2 Capability n
Capability 1 Capability 2 Capability n
Capability 1 Capability 2 Capability n
Capability 1 Capability 2 Capability n
Capability 1 Capability 2 Capability n
Capability 1 Capability 2 Capability n
Build out capabilities that exist in all scenarios, identify triggers for outlying
scenarios, and be nimble!
Scenario Planning
®
The United States Postal Service has created momentum for future success,
despite its financial challenges.
The Postal Service is recovering from a crisis caused by the economic recession of
2008 and the prefunding requirements in the Postal Accountability and Enhancement
Act (PAEA) of 2006.
USPS management improved the Postal Service’s finances by cutting costs and
pursuing a growth strategy for the future.
The Postal Service reported revenue growth of $800M and $1.1B controllable
income in the first quarter of FY2015.
Legislative and regulatory action is essential for the USPS to become financially
sustainable and cover its $46B in unfunded liabilities.
The United States Postal Service needs legislative and regulatory relief
to achieve long-term sustainability.
ASP Conference – May, 2015 29
Conclusion