As business leaders contend with the risks and opportunities that 4IR presents, we look back at a recent transformation of an iconic brand with more than 500 years of history - Royal Mail (now part of International Distributions Services plc).
So, what lessons can today’s leaders draw from what was considered the largest transformation programme of its kind in the UK at the time? Let’s take a look at the case study of the Royal Mail’s privatisation and transformation journey.
Royal Mail Transformation: Breaking a Cycle
In 2005, Royal Mail handled a whopping 20 billion letters, plus a handful of mainly business-to-business (B2B) parcels. It was very much a government-owned organisation, with a monopoly on the delivery of letters to UK plc and a universal service obligation to provide a ‘one price goes anywhere’ service.
It was suffering from a legacy of major under-investment, and the impact of physical and digital competition was starting to hit Royal Mail very hard.
By 2009 Royal Mail was losing around £2 million per day! To do nothing was not an option. A transformative step change was needed to break a cycle of surviving, not thriving.
Step forward to today and the impact of e-substitution and regulatory intervention is very clear to see, with letter volumes down around two-thirds since the peak of 2005 – and continuing to fall.
In contrast, the escalation of online purchasing has created an ideal opportunity for Royal Mail to bounce back from the decline of its core services and to reinvent itself in an emerging parcel delivery market, serving the B2B and business-to-consumer (B2C) markets.
A £3 Billion Transformation Programme
A key enabler to this was a £3 billion transformation programme that was launched in 2009. It touched every aspect of the organisation, impacting around 140,000 people employed by Royal Mail, its 4.5 million business customers, around 27 million addresses and an extensive supply chain.
With Royal Mail amongst a handful of organisations that can claim to serve every person in the UK, it was important that the journey of change did not hinder the level of service being offered to its many customers.
The transformation was multi-faceted, from the introduction of automation to the letter and parcel sortation processes; a streamlining of the mail processing infrastructure across the UK which resulted in a 50% reduction in the physical footprint; to the introduction of new methods for the collection and delivery of mail across more than 1,200 local depots.
Also embedded in the transformation programme was new product development to respond to the growth in online purchases; a fundamental revision to the technology backbone underpinning the operation and the customer interface; and a major cultural piece underpinned by operational excellence and a more customer-centric focus.
“Avoid initiative overload - prioritise regularly to avoid capacity constraints and resourcing challenges. Understand the change load and your organisation’s capacity to cope with it.”
Today, the now privatised Royal Mail has morphed into one of the UK’s leading parcel delivery companies, handling around 2 billion parcels per year – and growing. However, it still has the proverbial millstone of the ‘universal service obligation’ around its neck. This is the requirement to provide a ‘one price goes anywhere’ letter service six days a week – and is a regulatory standard of service to the UK’s 32 million business and social customers. It has remained unchanged for over 20 years, despite major changes to how people communicate.
With letter volumes expected to fall to around 4 billion over the next five years, the universal service is clearly loss-making and commercially unviable.
After several years of Royal Mail calling for regulatory reform, the communications industry regulator, Ofcom is studying a series of potential reforms to the postal service. This includes cutting the number of delivery days from six to five or even three, with a more expensive next-day service retained. If successful, the changes to its network and service offering will undoubtedly form the basis of the next piece of transformative change for the company.
For Royal Mail, change is very much a constant! Let’s hope the incoming CEO, Emma Gilthorpe, and the board can reflect on the lessons of the past and successfully lead Royal Mail through this next wave of transformation.
Is the Fourth Industrial Revolution Driving the Next Wave of Transformation Programmes?
A recent survey by PwC (27th UK CEO Survey) highlighted the determination of CEOs to drive transformative change in the face of persistent challenges and growth concerns.
Unsurprisingly, the Fourth Industrial Revolution (4IR), or Industry 4.0, is very much a feature of the strategies underpinning this next wave of transformation, with widespread adoption expected within the decade.
Much akin to the challenges faced by business leaders at the onset of the steam engine and the First Industrial Revolution, today’s CEOs are facing a decision on whether to lead, innovate or follow in their respective markets. Being a laggard in a world where change is now very much a constant, places their personal credibility at risk and may accelerate the decline or downfall of their organisation.
As business leaders contend with the risks and opportunities that 4IR presents, we look back at a recent transformation of an iconic brand with more than 500 years of history - Royal Mail (now part of International Distributions Services plc).
So, what lessons can today’s leaders draw from what was considered the largest transformation programme of its kind in the UK at the time?
Learning From the Past: Top Tips on Successful Transformation
So, what are the key lessons that we can glean from Royal Mail’s transformation into a parcel delivery business?
Change needs to be an organisation-wide effort, and therefore led from the very top of the organisation. The Board and the C-suite must have skin in the game! The CEO must champion the change.
Personal goals must be aligned to forge consensus, a collective understanding and a ‘line of sight’ across the organisation. The organisation needs to line up behind a common purpose.
‘Governance is your friend’ – embed a strategic programme management office (PMO) to establish meeting cadence, project management disciplines and reporting standards to oversee progress to time, cost and quality. Involve the right people and ensure effective delegation for timely decision-making. Trust the process and manage your risks before they become issues.
Carefully select your project sponsors. Ensure they have the right skills, experience, and gravitas to navigate projects through the change lifecycle. Ensure that they are ‘hands-on’ and have sufficient time to support the project teams.
"Don’t allow changes at the top table or personal egos to get in the way of corporate well-being and agile decision-making. The CEO – and the board – have key roles to play in maintaining the momentum of transformation when faced with leadership changes."
Don’t pay lip service to people engagement, particularly in a people-dominated organisation:
create the capability of leaders to ‘tell stories’ and paint a compelling vision of the future;
understand the different energies and micro-cultures across the organisation and tailor your engagement strategies accordingly – a one-size-fits-all approach very rarely works;
help your stakeholders understand the ‘why’, not just the ‘what’ and the ‘how’ of the change.
Ensure strategic alignment and investment prioritisation – with project success, benefits and value to the organisation clearly defined upfront.
Don’t allow changes at the top table or personal egos to get in the way of corporate wellbeing and agile decision-making. Again, the CEO – and the board – have key roles to play in maintaining the momentum of transformation when faced with leadership changes at the top of an organisation.
Nail your requirements and ensure effective supplier selection, contracting and management. Be very clear about what you need and why you need it. Don’t buy an Aston Martin DB5 when a Volkswagen up! would meet your requirements perfectly.
Avoid initiative overload - prioritise regularly to avoid capacity constraints and resourcing challenges. Understand the change load and your organisation’s capacity to cope with it. Remember, there is a need to maintain business as usual during the transformation, so choose your sequence of change carefully.
Ensure you have the capability to plan and design, as well as to lead the change across the organisation. The front end of the change cycle is critical to determining requirements and securing the necessary prioritisation and funding.
Have the courage to know when to stop or slow down projects that are clearly struggling. A good governance process will help with this but beware of the business leader who won’t let their pet project go.
Ultimately, don’t lose sight of your customers – most transformation programmes require you to ‘build planes in the sky’! Maintain a focus on your core offering and ensure quality and service standards are managed effectively during the transition.
While the transformation of the Royal Mail continues, these findings from an experienced Director of Transformation offer a pathway for ongoing change for success.
The Author
Ian Jones is the founder and Managing Director of Devereaux Kelly Associates – a business consultancy providing leadership development and major change support across multiple sectors. Prior to this, Ian spent a significant part of his career in the areas of strategic planning, transformational change and corporate governance. This included leading an award-winning transformation programme across Royal Mail’s UK business.
