Vol.

2 | Issue 1 | 2014

the Postal Industry

Innovation & Markets

Publi
Sectocr

l
Postaic
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Ser v

Courtesy of USPS OIG

Government as a Postal Customer and Partner:

Business Cases & Successful Engagement Strategies
Reflections on the Postal Innovation Platform (PIP) Roundtable
in Washington, D.C. on 9 April 2014

The Postal Innovation Platform (PIP) is a unique open platform and forum
that focuses on innovative postal services and studies the future of the
postal industry with a solution oriented approach. It provides a conference,
think tank and research platform that is unique in the postal world and shall
ease the implementation of new and innovative postal business solutions.

contents

Editorial

Dossier

Postal operators and governments are

traditionally very close, but due to various
reasons this traditional relationship has
been blurred in most countries over the last
one to two decades. This is not surprising
because posts have been transformed from
state entities to business entities and have
in many cases naturally evolved away
from governments. But this explains only
partly why posts and governments have
not yet seized the tremendous business
opportunities which are right in front of
them. The Postal Innovation Platform
(PIP) Roundtable on 9 April 2014 in
Washington, D.C. tried to find the key to
re-engage posts with governments and to
unlock these opportunities.
Enjoy reading our new edition of the
Postal Industry Newsletter and if you have
any feedback, ideas or input please let us
know.

3 Postal Operators and Governments: a difficult

Relationship with Tremendous Opportunities
Bernhard Bukovc

5 Posts Ambiguous Relationship with Government

Matthias Finger

6 Swiss Post and Swiss Government

Denis Morel

8 Successfully Delivering Government Services

Hans G. Landgraf and Michaela Hohlwein

10 Governments and Postal Operators: A Tale of Two

Partners
David Williams

13 Poste Italianes Experience on Partnering with

Government Institutions
Ulisse Del Callo

Bernhard Bukovc,
General Manager and Chairman of the
Postal Innovation Platform

15 Government as a Postal Customer: the Business Case

Elmar Toime

<bernhard.bukovc@epfl.ch>

the Postal Industry | Published two times a year, contains information about the postal industry. It provides original
analysis, information and opinions on current issues. The editor establishes caps, headings, sub-headings, introductory
abstract and inserts in articles. He also edits the articles. Opinions are the sole responsibility of the author(s).
Subscription | The subscription is free. Please do register at <http://mir.epfl.ch/newsletter> to be alerted upon
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discussion. The letter will be published along with the name of the author and country of residence. Send your letter
(maximum 450 words) to the editor-in-chief. Letters may be edited.
Publication director | Matthias Finger
Editor in chief | Bernhard Bukovc
Co-editor | Toni Mnnist
Founding editor | Matthias Finger
Publisher | Chair MIR, Matthias Finger, director, EPFL-CDM, Building Odyssea, Station 5, CH-1015 Lausanne,
Switzerland (phone: +41.21.693.00.02; fax: +41.21.693. 00.80)
email: <postal-innovation@epfl.ch>
Website: <http://postal-innovation.epfl.ch/>
Published in Switzerland

Dossier

Postal Operators and Governments:

a Difficult Relationship with Tremendous
Opportunities
Bernhard Bukovc*
Postal industry experts and stakeholders met in Washington, D.C. on 9 April in order to discuss the relationship between
postal operators and governments and to analyze business opportunities that this relationship could provide. The findings point into a direction that does not come up as a real surprise. But why are most postal operators and governments
still not seizing the opportunity that could be profitable for both sides?
In most countries postal operators and governments still
have close ties, although postal operators have been drifting away from governments in many countries for the last
two decades. Despite these developments the state is usually still the owner or at least holds a big share of the posts
capital. Moreover, postal operators fulfill an important role
in the states affairs and bear the so-called Universal Service
Obligation which obliges them to have a country-wide
network for the collection and distribution of mail and
other postal items in place. Therefore, after all postal operators and governments still have these strong links which
survived the corporatization of most postal operators and
even IPOs.
However, it is often a difficult and ambiguous relationship. Governments own the posts, they regulate the posts
and the postal market and often they exert their political
influence on the posts for their own needs and agendas.
Postal operators moved into defensive positions and the
relationship is as it usually is between a regulating and a
regulated entity. To reduce the relationship to this level ignores the tremendous opportunities the traditional close
ties offer.
So what are the opportunities? Posts are already delivering mail for governments and one might believe that
this kind of business runs by itself without any specific key
account management needed. This statement is of course
completely wrong because it only looks at one element of
a core postal business. Postal operators know already for a
long time that this core business is in the process of breaking away. Mail volume decline has led to 50% lower mail
volumes over the last decade in several countries. In addition, several governments follow a strong eGovernment
strategy thus replacing all paper communication by digital
means. Posts are therefore looking for other business op-

portunities, they diversify and test new business areas.

Governments on the other hand face a similar problem. Governments have to cut costs and are forced to reduce spending. This is one main reason why they move
away from letter mail towards digital communication with
citizens and businesses.
This looks like a classical lose-lose situation where neither governments nor postal operators can win. However,
this is neither a threat nor a disaster, but rather a huge
opportunity for both. What we are facing is one of the biggest challenges for postal operators and a critical situation
for governments, but this is not a moment for whining.
Instead, postal operators and governments have right in
front of their eyes business opportunities that would turn
the relationship from lose-lose to win-win. So how can this
work?
Surprisingly enough only few postal operators have so
far realized that a close cooperation with governments can
open up new revenue streams. The posts most active in this
area are either posts that are still very close to government
or that are forerunners in diversification, i.e. posts that are
actively seeking new areas of activity. In the first case, i.e.
posts that are still close to government we have the examples of USPS or Swiss Post. USPS cooperates with the
government in the passport management for many years
already where USPS has taken over from the US government part of the services, in particular being the point of
access for citizens. Swiss Post manages part of the health
administration via their digital platform and cooperates
with government in elections managing the voting by mail
processes. The advantage of posts in all three areas is that
they are a trusted intermediary and that they have built
up a competence through digitization of part of the processes and the possibility to identify the persons via their

* General Manager and Chairman of the Postal Innovation Platform, <bernhard.bukovc@epfl.ch>

the Postal Industry | Vol 2 | Issue 1 | 2014

dossier

access points. In particular these identification capabilities

and services gain importance. The example of a postal operator actively pursuing a fierce diversification strategy is
Poste Italiane. One of the first fields of cooperation between Poste Italiane and the Italian government was the
management of fines on behalf of the Ministry of Justice,
the police and other public institutions. In the meanwhile,
Poste Italiane also manages the work permits for immigrants. These services are based upon the posts capabilities of managing the processes, having a digital platform
in place that connects with all involved entities and public
institutions and providing also a payment platform. bpost,
another example, set their foot into the license plate management and, like Poste Italiane, also into processing traffic
fines for the federal police. As we can see, there are several
successful examples of cooperation between posts and governments, but thinking about the potentials these areas are
just a fraction of what is possible.
The timing for creating a strong relationship between
posts and governments is perfect. Posts have to diversify
in order to find new revenue streams replacing the declining mail volumes and governments need to reduce budget
spending and are open for new partnerships and outsourcing some of their services. Therefore, posts should not
miss this unique opportunity, develop a suitable strategy
towards their respective governments and implement the
necessary capabilities that would make them ready to partner with their government.
The participants of the Postal Innovation Platform (PIP)
Roundtable in Washington, D.C. on Government as a
Postal Customer and Partner: Business Cases & Successful
Engagement Strategies which took place on 9 April 2014,
tried to analyze this difficult relationship and find out
what the success factors for a profitable (for both sides) relationship are. In order to seize the opportunities and start
working on a profitable relationship the participants of the
roundtable identified several crucial elements and success
factors. Here are some of the findings:
1. Postal operators have to re-discover their traditional good relationship with governments and define it as
a business relationship.
2. Postal operators have to identify what the government needs and understand how government agencies
and their decision making processes work. They have to
understand the dynamics within government.
3. Postal operators have to be clear about their
unique selling propositions - their USPs - as well as their
strengths.

4. It is important to focus on the entire value chain

along the respective service or solution. This is what diversification is all about. Therefore, posts need to start
from the core activity and extend the services along the
value chain, if this is possible, either doing it themselves or
working with partners.
5. Diversification requires new knowledge and expertise. It is more or less clear that posts will not have the
competencies right away, and therefore they need to acquire them.
6. Posts will need the foundation for new services,
a digital platform that allows to connect with government
and citizens as well as businesses and to drive the processes for managing fines, health documents, voting by mail
documents, license plates, work permits, passports, identification services or any other service that occurs in the relationship between governments, citizens and businesses.
7. Beside the competencies to provide these services
postal operators will need to set up the internal structures
and organization in order to adequately approach governments. This is closely linked to above mentioned requirement that posts need to understand the governments dynamics and needs. A specific business unit within the post
could build this relationship and expand the cooperation
level.
8. However, posts will first need to show that they
are really capable of doing what is asked from them. A
stepwise approach could in the start of this business cooperation with the government allow the postal operator as
well as the government to test the service and the cooperation in general. Once the cooperation works well in one
area and both parties are satisfied it will be relatively easy
to expand into other areas.
9. Any relationship between the government and
postal operators will usually deal with sensitive information or processes, involving personal information (such
as in health care) or important documents (such as passports). Postal operators would be the trusted intermediary
and should always guarantee that the trust element is not
threatened or weakened. Therefore, posts must avoid anything that could diminish their role as a trusted intermediary and, for example, reflect thoroughly before outsourcing some of these processes to subcontractors.
10. And finally, postal operators must be innovative,
ready to diversify and adopt a strategy of actively approaching governments with ideas and proposals for cooperation,
showing a business case that will lead to the win-win situation both governments and posts are looking for.

the Postal Industry | Vol 2 | Issue 1 | 2014

Dossier
Posts Ambiguous Relationship with Government
Matthias Finger*
Government as a postal customer and partner -- this was the topic of the recent PIP round-table in Washington and
this is the topic of the present newsletter. While government has always been a customer of postal operators, being a
partner is a different matter and may well reflect wishful thinking, rather than reality.
As a matter of fact, the relationship of posts with their
respective (national) governments has always been fraught
with ambiguity and will probably continue to be so, at
least for these postal operators that are (majoritarily) stateowned. To recall, only PostNL/TNT is fully privatized
and only two other postal operators Deutsche Post /
DHL and Royal Mail are majoritarily in private hands.
For the big majority of the historical postal operators
state-ownership is and will remain a reality and so will their
ambiguous relationship with government, and politics
more generally. This ambiguity does not only stem from
state-ownership, even though ownership does not help. It
is also due to the fact that, in addition to state-ownership,
posts are regulated in many countries especially in the
member-States of the European Union by sector-specific
postal regulators, not to mention the fact that they are also
regulated by competition authorities.
Regulation emerged parallel to the liberalization of
the postal sector and the corresponding emergence of
competition, and sector-specific regulation was, at least
initially, justified on the grounds that the postal sector was
only partially liberalized and that postal operators enjoying
still some monopoly protection had to be prevented from
cross-subsidizing competitive market segments by way of
their monopolies. In addition, sector-specific regulators
were tasked with supervising the so-called Universal Service
Obligation (USO) of the historical postal operators. But
when the monopoly protection was abolished (in 2011
in most EU member-States), so should have sectorspecific regulation. But it did not and posts continue to
be regulated by specialized government bodies. This is
especially the case for their Universal Service Obligations
in matters of physical mail and parcels, which however
are rather a thing of the past given the customers shift
towards electronic communications and e-commerce.
State ownership is a historical legacy, for posts and
all other State-Owned Enterprises (SOEs). Yet in times
financial problems of governments, privatization may well
become an option so as to generate some badly needed
cash. In favor of this evolution one can mention the fact
that posts are becoming less and less relevant as public
policy instruments given that communication increasingly
becomes electronic and that parcels and express already
enjoys competition, i.e., has solid alternatives. One can
also mention the fact that posts are not related to security
of supply issues, as are electricity or air traffic control,

other typically State-owned firms. Both reasons would mean

that governments can become relaxed about posts. On the
other hand, posts are still significant national employers (still
often the biggest or second biggest employer in a country),
and postal services often remain politicized, meaning that
privatization will often be ruled out for political reasons. And,
since the financial value of posts has often already declined
because of the shift of communication to the electronic
media, governments often do not want to start a political
battle over privatization either.
This ambiguous attitude of governments, as owners, vis-vis posts is still enhanced by the existence of a sector-specific
postal regulatory body, whose power over posts is often
significant, but whose significance not. On the other hand,
posts also have an ambiguous relationship with governments,
owing to the historical legacy: becoming more autonomous
from government over time has often been achieved thanks
to significant efforts and postal operators continue to perceive
governments as intrusive and not yet as partners. It is not
uncommon that postal operators shy away from becoming
more involved with government, owing to their sometimes
negative historical experiences with government.
But, if postal operators do want to have a future as
integrated postal operators (as opposed to having a future as
privatized and totally unbundled logistics entities, financial
services providers and others more) there is, in my opinion,
no way around partnering with government. Most of the
postal operators still generate the majority of their revenues
domestically and international expansion remains, for most
of them, a subsidiary business proposition. If posts want to
grow, or simply compensate for their declining mail volumes,
they can only grow domestically, i.e., expand into adjacent
or even unchartered territory. And this, in turn, can only be
done with the active support of government, or at least with
governments tolerating such activities. Take the most recent
examples of postal diversifications, namely e-government
services (e.g. Italian Post), e-health services (e.g., Swiss Post),
social services (e.g., Belgian Post) or postal financial services
(e.g., French Post). None of these diversifications would
have been possible without active government support, i.e.,
without having government as a partner.
In conclusion, it is obvious that posts will have to work
with government if they want to grow. This also means that
post and government will have to overcome their ambiguous
relationship.

* Professor, CDM-MIR, EPFL, Switzerland, <matthias.finger@epfl.ch> .

the Postal Industry | Vol 2 | Issue 1 | 2014

Dossier
Swiss Post and Swiss Governments
Denis Morel*
Partnership with governments is very important for the future successes of Swiss Post. This article describes how Swiss
Post can work together with governments and what the challenges in these partnerships are.

Swiss governments
Switzerland is a federal state with mainly three levels of state:
Confederation, Cantons (26 cantons) and municipalities
(more than 2300). The cantons are very independent and
are responsible for many subjects, like taxes, organization
of votes and elections (also for votes at confederation level)
or health. For such subjects the Confederation defines
some frame conditions and standards, but the cantons
have fully operative responsibilities.
To address government subjects in Switzerland, an
organization has to deal not only with one department,
but instead with 26 different departments, which could
be organized differently. It means that a solution that can
work for one canton is not necessarily working for other
cantons.
Swiss Post and historical relationship with governments
In 1998, Swiss Post was established through the separation
of postal and telecom services ensuing from the dissolution
of the previous company Post Telegraph Telecom
(PTT). Since then, Swiss Post has been providing postal
services, as well as financial services and public passenger
transport. The new postal legislation transformed Swiss
Post on 26th June 2013, to a public limited company under
special law, still fully owned by the Swiss Confederation.
The parcel market was fully opened in 2004. By
2009, the letter market had been gradually opened as a
consequence of the letter monopoly having been lowered
to 100 grams in 2005, and to 50 grams four years later.
Today, Swiss Post retains a monopoly on all letters
weighing up to 50 grams. Concurrently, Swiss Post is
mandated to operate a nationwide network of postal
offices. It constitutes one the densest networks of physical
access points in Switzerland.
The historical relationship to the governments (at all
levels) is due to these two historical elements. Swiss Post
was part of the family and had thus many contacts in
the different governments, as part of it. After 1998 the
relationship to the different government bodies continued
due to the monopoly of letters and parcels. With a high
quality of its services, Swiss Post ensures a very good image
towards the governments and can thus ensure long-term
relationships.
The image of Swiss Post throughout the different
governments is the trust, the confidentiality, the reliability
and the quality of its services.The best example to illustrate
this fact is voting by mail. In Switzerland, citizens vote
at least four times a year. In order to facilitate the voting
process, and to take measures against the decreasing
participation in voting, the Swiss Parliament decided to
introduce voting by mail in 1998. Each citizen can send
his vote through Swiss Post per letter. Actually 40% of all
votes are collected and sent to the polling place by Swiss
Post. This was possible because Swiss Post has a very high
trust from the citizens and the governments, and delivers
letters with very high quality.

The relationship to the governments is in fact related

to the core business of Swiss Post and then the contacts by
the governments are mainly by the departments and offices
distributing a lot of letters and parcels (like chancellery).
Additionally in such departments, Swiss Post has contacts
first of all to logistic sections. Contacts to business people in
the governments are mostly not ensured.
Challenges for future (and innovative) services
Swiss Post wants to extend its core business with new
innovative services, particularly in the digital world. The
most prominent example is the position taken by Swiss Post
in the domain eHealth with its electronic health record.
Together with the canton of Geneva, Swiss Post
implemented an electronic health record that is compliant
with the eHealth Strategy of Switzerland. When it was
introduced in 2011, it was the first Swiss eHealth record
pilot project in Switzerland. Today, Swiss Post manages
three cantonal pilot projects. The start of the project with
the canton of Geneva was the cantons need to find a trusted
and reliable Swiss partner to implement such a platform.
Due to good contacts to the cantonal government and the
position of Swiss Post, the canton of Geneva chose it as
partner.
In such new domains, Swiss Post faces new challenges
also for services for the governments. First of all, with
these new services, Swiss Post is in competition with other
organizations, particularly the technical global players such
as IBM. Additionally one of the main competitors of Swiss
Post is Swisscom, the telecom company created in 1998
from the dissolution of the PTT. Swiss Post cannot rival such
companies on technical excellence. The advantages of Swiss
Post are based on services related to trust, reliability and
quality, as it is the case for the physical word. Additionally
hybrid services making processes worked together are assets,
which it brings with.
The second challenge is the missing of contacts and
connections to the responsible person in governments for
these new services, as explained previously. Due also to
the federalism, there is not only one section/division for a
specific topic, but the contacts have to be found in each
canton, which could be organized differently.
The last challenge is the WTO call for tenders. Since
the services provided by Swiss Post are outside the existing
monopoly, the governments cannot use them without
starting a public acquisition process. The first issue is that
Swiss Post has little experience in such processes due to
the monopoly. The second one is that the governments in
Switzerland have not enough maturity in order to acquire
services, but acquire normally IT systems. In such call for
tenders Swiss Post has less advantages. Additionally, the real
assets of Swiss Post based on trust, reliability or swissness
are not criteria in public call for tenders, since they are
mainly of discriminatory nature. The acquisition process
focuses on technical criteria, which reduces the advantages
of Swiss Post.

* Head of Products and Projects - eHealth, Swiss Post, <denis.morel@post.ch>

the Postal Industry | Vol 2 | Issue 1 | 2014

dossier

Conclusion
As shown in the article, Swiss Post has a very long
historical partnership with governments, since it was part
of the family and had a monopoly on letters and parcels.
Swiss Post can benefit of these contacts and relationships
for the future, even if they are different to the future
services. As a Swiss global player Swiss Post can also
benefit of these relationships when it comes to addressing
and understanding the differences between the various
cantons.

the Postal Industry | Vol 2 | Issue 1 | 2014

Since such partnerships are regulated under the WTO

acquisitions, Swiss Post can have fewer advantages than
other competitors, in particular for services with digital
components.
Swiss Post has to find new business areas, as it is the case
with eHealth, where the cantons would renounce WTO
acquisitions or where the unique selling propositions of
Swiss Post can be advantages to win the public call for
tenders.

Dossier

Successfully Delivering Government Services

Hans G. Landgraf* and Michaela Hohlwein**
As new trends lead to an unprecedented empowerment of consumers, citizens and employees, there are tremendous
opportunities for governments and postal operators to enter into successful partnerships. However, in order to make
this a successful and profitable relationship, posts and governments need to lay a foundation first.
We are entering a new era of unprecedented change across
several dimensions. Citizens are becoming more demanding as a greater part of the global population enters the
middle class. The worlds workforce is going through fundamental changes as well millennials now outnumber
baby boomers. At the same time, public sector and postal
organizations are dealing with an aging workforce and rising pension & healthcare costs. In addition, the worlds
growing population is increasing demand for natural resources and social services. Meanwhile, the world is more
connected than ever - more than 1 billion people are now
on social networks.
The collective result of these trends is the unprecedented empowerment of people as consumers, employees,
and citizens. These changes are revealing new areas of opportunity for governments to innovate and deliver better
outcomes by leveraging technology innovations including
cloud, mobile, big data and social to:
Deliver a hyper-personalized customer experience
Engage and empower the workforce
Plan and optimize resources in real-time in a
shared environment
The growing population will create a need for geographically distributed citizen services. In this always-on era, the
way the information is created and consumed has changed.
Government and businesses need to run in real-time to facilitate personalized engagement with citizens and customers. The most advanced postal organizations already offer
personalized services. This makes them better prepared to
leverage their knowledge and skills to help build apps for
the governments, especially as government plan to deliver
next-generation citizen experience with social and mobile.
This is particular valuable for postal organizations when
the digital world requires signatures or physical deliveries.
Postal organizations are uniquely positioned to become
the provider for distributed services to remove the burden
from governments, and at the same time, gain access to a
new segment of customers.
As citizens become even more informed and connected, nothing is more important than keeping them at the
center of everything the government does. Postal operators
have moved to a customer -centric approach and can help

to create corresponding processes for putting the citizen at

the center of services to create a hyper-personalized consumer experience.
Recruiting, retaining and engaging millennials is a
challenge, but at the same time an opportunity. A motivated and empowered workforce is the key to turning
strategy into reality. Postal operators are used to managing
large organizations from talent acquisition to employee
development and retention, with Human Capital Management Software onsite or in the cloud. While governments and businesses need to find a way to manage existing and shared resources better, postal operators have a
long history of managing resources and assets in real-time.
They can use their knowledge to support governments in
real-time management and become government resource
planning providers including Human Resource Management Services, via a shared data center.
Following is a set of recommendations to create successful cooperation and business with governments:
Choose the service according to the company strategy and the legal framework
Have skills and know-how available for the service
offered
Analyze the competitive situation thoroughly
Set up teams, processes and IT wisely
Postal operators have invested a great deal of time and
money to transform their businesses and to create strategies for the new market situation (within their legal framework). Engaged employees aligned to such strategy will
be more likely willing to create and execute the new governmental service models. Posts with a focus on logistics
can provide logistical services for the government including delivery of passports or car license plates to citizens. If
the mail carrier still reaches every doorstep, the management of digital identities for the government and private
companies can be a new business model. With that, the
brand perception and image of a post becomes even more
important. If there is a perception of inadequate quality
and poor logistics, it is better to offer services at the post
office counter, rather than have them delivered in person.
Having an increased number of customer visits to the Post
Office may increase business, e.g. via retail offerings.

* Head of Industry Business Segment - Postal Services, SAP, <hans.gerhard.landgraf@sap.com>

** Solution Manager Postal Services, SAP, <michaela.hohlwein@sap.com>

the Postal Industry | Vol 2 | Issue 1 | 2014

dossier

When dealing with governments it is important to

have employees capable of speaking their language. When
trying to co-innovate with the government, key team
members will need to be able to articulate the win/win
benefits for both the government and postal service. It is
crucial to ensure correct staffing from the various divisions that will be affected when creating and providing
new services. When in-depth IT support is required, it is
crucial that the skills and know-how already exist in the IT
and business departments. For example, when planning
to run a payroll for a government agency, the experience
with payroll for government employees should be available. Collecting and managing a high volume of small bill
payments from citizens, for example, can be offered as a
service if the post already uses software for mass billing.
In any case, a competitive market analysis is essential. The
best offerings are obviously the ones where the post is the
first and/or only provider.

the Postal Industry | Vol 2 | Issue 1 | 2014

Better citizen outcomes can be achieved when both the

postal operator and government agency co-innovate and
partner. The timing is right with the convergence of cloud,
mobile, social and big data. These innovations will help
in the transformation process and may act as a catalyst
to empower individuals as employees, customers, and as
citizens to increase their reach and relevance.
Imagine how much smarter, faster and simpler the
world can become if postal and government agencies
cooperate to give their customers a personal touch and
relevant offers at the right time, give their employees the
right tools and insights to make the right call every time
and have the right resources in the right place to quickly
adapt to market changes. For the first time, the same set of
technology innovations can be harnessed to help make everything smarter, faster and simpler, not only for organizations and agencies, but also for individuals, and therefore
help the world run better.

Dossier
Governments and Postal Operators: A Tale of Two
Partners
David Williams*
On April 9, 2014, the U.S. Postal Service Office of Inspector General (USPS OIG) and the Postal Innovation Platform
co-hosted a roundtable on Government as a Postal Customer and Partner to discuss what strategic approaches,
business models, and value propositions have either proved or have the potential to be the most successful at engaging
government as a customer and as a partner. During the half-day discussion, participants were only able to touch upon
these topics, leaving room for future research on how postal operators can build a compelling value proposition for
government. The topics listed below are some of the areas that the USPS OIG is planning to explore.
This is the best of times and the worst of times for governments. The economic downturn put nation-states under
pressure they have shrinking budgets and shrinking field
structures. Departments are being asked to deliver more
under tighter budgets, while citizen demands for information, services, digital communication, and efficiency are
on the rise.
Fortunately, there has never been a better time to do
more with less. The new digital technologies smart devices, cloud computing, and online applications offer
unprecedented ways for governments not only to innovate
but also connect their services more directly, more rapidly,
to more citizens.
Yet, despite significant progress in the digital and
customer-centric delivery of government services over the
past decade, serious barriers remain, including security
and privacy issues, ease of use, lack of cross-government
interoperability, and a digital divide millions of citizens
still do not have access to high-speed internet services or
even banking services. These barriers still prevent the efficient and modern delivery of many public services1.
Postal operators almost everywhere are uniquely positioned to help government address these shortcomings.
In the United States, for example, the Postal Service has
assets, competencies, and a nationwide reach in both the
digital and physical spheres that could help enhance and
expand government services:
A history as a highly trusted intermediary ensuring
security and privacy in communications and transactions.
A position of legal standing for important communications as well as law enforcement capabilities.

A nationwide digitally interconnected network of

more than 31,000 post offices and 230,000 letter
carriers.
An alignment with its traditional mission and role
of binding the nation together.

Many foreign posts have been successful at leveraging

these assets and competences to develop services capable
of meeting the changing needs of government. And each
of them has adopted different business models and value
propositions according to the different level of involvement of the national postal operator in the provision of
public services. In some countries, such as Brazil, South
Africa and France2, government has assigned a broader
role to the post as part of its agenda for social, digital,
and financial inclusion. In Italy, Ireland, and Australia,
government services are an established component of the
products and services portfolio. The revenues from these
services have been significant and are expected to grow.
The U.S. Postal Service generally offers fewer government
services, although its long-standing partnership with the
U.S. State Department to provide passport acceptance services has been very successful.
Despite many success stories, the historical relationship
between posts and governments is no longer as strong as it
used to be. The declining use of mail for government communication and transactions and the reduced postal presence in local communities have caused postal operators
to lose part of their relevance as supplier of essential government services. At the same time, in response to postal
liberalization, privatization and shrinking public budgets,
many postal operators have turned themselves into profitdriven commercial entities for which doing business with

USPS OIG, e-Government and the Postal Service A Conduit to Help Government Meet Citizens Needs
January 7, 2013, RARC-WP-13-003, http://www.uspsoig.gov/sites/default/files/document-library-files/2013/rarc-wp-13-003.pdf
2
The South African Post Office (SAPO) is mandated to create new street addresses (1.7 million between 2012 and 2014).The French government allocates
$ 200 million annually to help the Post modernize and maintain its extensive rural network, mainly through partnerships with municipalities and local
retailers. A similar program is in place in the UK from 2010 to 2015.
1

* Inspector General, U.S. Postal Service Office of Inspector General

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the government is often considered too complicated to

ensure an appropriate return on investment.
A group of concerned experts from various fields discussed how to address these issues and promote an effective partnership between government and postal operators
at a roundtable on Government as a Postal Customer and
Partner co-hosted by the U.S. Postal Service Office of Inspector General (USPS OIG) and the Postal Innovation
Platform in Washington, D.C. on April 9, 2014. The participants included international postal experts, academics,
consultants, and professionals from postal organizations,
government agencies, and private companies.
The roundtable focused on what strategic approaches, business models, and value propositions have either
proved or have the potential to be the most successful at
engaging government as a customer and as a partner.
During the half-day discussion, participants were only
able to touch upon these topics, leaving room for future
research on how postal operators can build a compelling
value proposition for government. The topics listed below
are some of the areas that the USPS OIG is planning to
explore.
What are the building blocks of an effective business
model that can balance the public service mission with
profitability?
The experience of international postal operators shows
that doing business with the government in a cost-effective way requires a separate set of skills in addition to
dedicated business and organizational processes. Several
participants during the workshop mentioned the need
for postal operators to have internal champions: experienced business development managers, who understand
public sector dynamics, can create innovative ways to deliver services, and who are able to foster relationships with
government entities, partners, and stakeholders. Given
their specific needs and characteristics, governmental customers could be more efficiently managed through a dedicated unit focused on business development strategies, including in particular the assessment of the viability, costs,
and benefits of new business opportunities. For example,
navigating the complexities of government needs and procedures can inadvertently generate hidden costs.
Further research in this domain could be focused on
analyzing the business models of the postal operators that
have been the most successful so far in order to identify
common success factors. In particular, the research could
look for essential building blocks of the business evaluation models that these operators use to assess the costefficiency of new business opportunities with government.
The outcome would be a set of guidelines to help postal
operators build business evaluation models that consider
the social and financial viability of their government service offerings.
Doing business with the government: What are postal
operators unique competitive advantages?
As highly trusted intermediaries, postal operators can play
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a significant role in the provision of government services

that require high standards of privacy and security, such as
identification services, voting by mail, or e-voting. Postal
operators can also rely on an unparalleled nationwide post
office and delivery network that could provide a way to
access government services in government deserts (rural
or remote areas) and for digital refugees, people without
access to or familiarity with the digital channel. By acting
as a shared service point for multiple agencies, the Postal
Service could help the government save money by reducing duplication across various agencies. And in rural areas,
local postmasters are still key members of their communities and frequently interact with municipalities.
Moreover, although many postal operators are commercially orientated, they are still government-owned. As
highlighted by participants during the forum, it may still
be easier for government to do business with them than
with private sector companies. Personal networks, common sensibilities and work cultures converge to lower
transaction costs by reducing hidden costs. As providers
of mail and parcel delivery services to governments, posts
already have a gateway into governments procurement
departments. These pre-existing business relationships can
help posts gain a deeper insight into governments issues.
Postal operators like the Italian Post or Liban Post have
leveraged their knowledge of government processes to create integrated solutions that simplify and streamline provision of many public services in a user-friendly way.
These are only some of the advantages that can position posts as preferred government service providers. Further research could help identify additional unique postal
assets that could be combined to develop a portfolio of solutions to meet governments specific operational and efficiency requirements and customers need for ease of use
and convenience. Ethnographic and behavioral research
aimed at understanding users preferences could support
the customer-centric design of these solutions.
How can postal big data help governments provide better public service?
Postal operators currently own critical datasets like the national address database, the change of address database,
the ZIP or postal code system, and large amounts of aggregated data trails left by people from their interaction
with the post (e.g., visits to post offices, number of remittances sent, parcel tracking information, etc.) In addition,
the development of sensor technologies that enable physical objects to collect and communicate via the Internet in
real time the so called Internet of Things can open up
further opportunities for posts to develop a new portfolio
of government services in collaboration with other public
and private partners.
Postal operators could leverage their extensive physical
infrastructure to collect data on behalf of both central and
local government and other public entities. For example,
sensors applied to all postal vehicles could help evaluate
road conditions and detect potholes, making it easier for
municipalities to prioritize repairs. Change-of-address in11

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formation could be used in national emergencies to locate displaced citizens. International postal big data analytics like tracking data could provide insights on gross
domestic product growth or global trade patterns. These
are only a few of the potential benefits stemming from
the synergy between government and postal data. Further
research could be conducted to explore how the new big
data analytics and sensor technologies could be used to
develop services and applications to help government better define policies and serve citizens. An important part of
this research will be the analysis of the appropriate privacy

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and transparency policies in order to address critical issues

such as the ownership of data collected as well as the conditions for collecting, sharing, and disseminating the data.
As a hub for research on innovation and the development of solutions for the postal industry, the Postal Innovation Platform can provide a great opportunity for its
partners to exchange best practices, share research findings, and undertake common research efforts to explore
themes of common interest. The USPS OIG welcomes
this opportunity.

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Dossier
Poste Italianes Experience on Partnering with
Government Institutions
Ulisse Del Callo*
When Poste Italiane started a structured partnership with Italian Government institutions to provide contact services to
Citizens, it proved that a postal operator can play a relevant role in a Nations life, going the extra step from traditional
postal delivery to becoming a business services provider through its integrated platforms and networks, central in the
Italian business landscape. Can this model be replicated by other postal operators?
Poste Italiane is currently a multi-service postal operator,
with a strong focus on financial and insurance services besides the traditional postal business. Profit-making since
2002, it is now one of the most profitable Posts in the
World, with revenues exceeding USD 36 billion, and a net
profit of USD 1,4 billion in 2013.
In a continuous transformation route started in 1998,
it has moved from being the laggard of European Posts to
being the 4th most admired delivery company in the Fortune Most Admired Companies classification in 2014,
for 3 years in a row. This has been achieved by growing its
relevance in the Italian economic landscape, by providing
its strategic capacities to the country.
Poste Italiane addresses the Government market by
providing its unique assets, reach and network capabilities in an integrated way to become the one-stop-shop for
central and local Government in the offer of complex capabilities. Technology, together with the capacity to think
out of the box and to invest in new business areas, have
been the main levers to achieve this objective.
The first experience in partnering with Government
institutions dates back to year 2000, when Poste Italiane
started analyzing its products and offerings from a customer point of view, and realized that it was providing a
number of postal and financial services to Government
agencies, which were using them within their own business processes. The primary focus was on Police Forces,
that were using Poste Italianes postal and financial services
to manage the fines cycle. All these services were provided
in a fragmented way, without any information integration or view of the entire process, and provided a poor
customer experience to the Police that had to employ its
own personnel to gather and assemble all the information.
Poste Italiane, on the other side, owned the information
that the Police needed, and was in a position to manage
it in an integrated way, offering a value added service to
the Police. The first project was then launched to manage
Police fines from end to end, by integrating all products
that were being used, from the printing and sending of a
registered mail to the payment of the fine, and insourcing all integration activities previously done by the Police.
One key element for success was the business model that

Poste Italiane implemented, which did not create additional costs for the Police, but generated revenues from
the fines administrative costs, which the Italian legislation
adds on top of the fine amount.
The Police Forces realized the potential for Poste Italiane to provide them an integrated service that would cut
down time and cost to collect fine payments, while freeing
up valuable Police resources that could be then used for
their institutional purposes.
This initiative, together with an increased proactive
commercial activity, created a momentum that allowed
Poste Italiane to be involved in a large Italian Government
initiative. The illegal aliens regularization was voted in
Parliament in July 2002, was launched in September 2002
and was closed in September 2003. More than 700,000
regularization requests were accepted nationwide at post
offices, scanned and digitized in a specialized services center set up by Poste Italiane, processed and closed by postal
employees. The initiative involved 3 Ministries and 3
Government Agencies. Poste Italiane was called to provide
the technology and physical infrastructure, the necessary
workforce, and most importantly the program management role to coordinate all Government entities involved.
The initiative required that all assets and organization of
Poste Italiane be coordinated in a joint effort with the
Government, to achieve a common goal. The visible success of this initiative positioned Poste Italiane as a strategic
asset for the Country, to which the Government could
turn when in need to achieve tasks that required technology, territorial reach and a motivated workforce behind it.
From that moment on Poste Italiane actively operates
in the Italian competitive market, to provide business services to the Government, by responding to public tenders.
Activities are typically focused on the traditional business
of moving information, money and goods, both from the
Government to Citizens and backwards. Along these lines,
and with the evolution of partnerships with the Italian
Government, Poste Italiane has developed strong document management and secure communication capabilities, which have enabled it to become the main partner for
the Statistics Agency in managing the 2011 Italian Census, and one of the key stakeholders of the Italian digital

* Head of ICT Business Development, Poste Italiane, <u.delgallo@posteitaliane.it>

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agenda. Poste Italiane has therefore positioned itself as an

effective partner to provide Government services to the
citizens.
The key elements that enabled Poste Italiane to reach
this position are the understanding of the customers intent when using Poste Italiane products, the focus on the
customers business processes, the continuous technology

14

innovation and a clear understanding on how to leverage

assets in order to provide services aligned with customers
goals.
The Poste Italiane experience is probably an interesting
case study for several Posts that are struggling to find their
place in an evolved local and global economy.

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Government as a Postal Customer: the Business

Case
Elmar Toime*
The pressures on both post office networks and governments to deliver more for less make business partnerships
between them obvious. However, success isnt guaranteed and a business case approach is needed, looking at the issue
from both sides.
Introduction
These notes concern the role of the post office network in
providing government services. Government has mail and
special delivery services as one of its main communication
channels. This is an important business for postal companies but will not be discussed here. Both the scope of mail
services and the distribution of post offices are key elements of the postal universal service requirements. However the nature of the contribution to society of these two
distinct networks is changing. And the role of the post
office network, whether a company-owned and operated
model or an agency or franchise model, to me seems to
be diverging from the activities of postal logistics services.
It is argued that post office networks, and the US Postal Service in particular, should pursue greater involvement
in providing government services. There are three themes
here. The first points out that it is not immediately obvious the post office network is suitable as a provider of government services. Then, a picture is painted of how a successful business model might look, from both the postal
and customer point of view. And, finally, a prescription is
offered for the practical steps that the Postal Service could
take to become a trusted partner for the various levels of
government in the U.S.
Can Posts provide Government services in post offices?
First of all, I support the idea of post offices providing
more government services. But its not immediately obvious that it can be either a successful business proposition
or a positive social contribution. Looking at it first from
the Posts point of view how does it fit the skills, staffing
models, technologies and floor layouts now in place? In
an efficiency driven model for post office operations, the
focus is on short cycle transactions. These are meant to
be completed at the counter quickly, keeping lines moving. Already the biggest complaint in many urban and
suburban post offices is the time it takes to be served. If we
start to introduce government services that take more time
I D services, assistance with forms, passport applications
etc. then it can disrupt the workflow engineering that
may have taken years to implement. The introduction of
a new government service may require heavy investment

in employee training, office and counter redesign, not to

mention potential adaptation of the counter IT technology. These issues mean that it is not simply a matter of replacing falling post office workloads as stamp sales reduce.
A measurable financial investment is required, and that
should surely meet some sort of business case test.
The US Postal Service has one advantage in that it
mainly operates its own employee staffed post offices.
Therefore, essentially as Federal employees, there is an
assumed higher level of trust and confidence. However,
that neednt be a barrier in offering sensitive government
services. For example, in the UK where a large number of
post offices are privately operated agencies, such government services are still available.
Occasionally the case is made that some government
services should be offered in post offices as a social service.
That is all very well, but it costs money to do so. That
shouldnt be financed by a cross-subsidy from postage
which adds to the lack of transparency in product costing.
Finally it is worth making the point that there are many
levels of government federal, state, county, city and in
principle post offices could serve all.

What would a successful business model look like?

The answer is in the question. Providing more government services in post offices should not be an emotional
issue. It should be about the business case. It is a specific
public policy position that post office numbers should be
maintained, even in the face of difficult commercial realities, such as the postal operator losing money on its operations. That is a reasonable public policy and it is one
found in nearly all countries. The question that has to be
faced is who pays? And that gets us back to business
cases, from two points of view, that of the Postal Service
and that of the government customer.
From the postal point of view what is the impact on
existing activities? What is the level of investment required and what is the business potential? Investment in
IT, in employee training, in new workflows, and in post
office layout will be needed. Will the services be provided
in all offices or in a subset? What are the likely costs in

* Director of E Toime Consulting Ltd and Chairman of Postea Group, <etoime@binternet.com>

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terms of time to process each transaction at the counter?

Are these costs going to be based on marginal or average
costs? Will these services only be required for a few years
or is there potential for growth?
And from the government customer point of view,
whats the business case? Is it a new mandated activity
for which the government has no existing resources? Is it
the transfer of work from other agencies to the post office?
If so, whats the cost of transferring in terms of impact
on people currently providing the service? How does the
postal cost structure compare with other options? Understanding the customer business case is also an essential ingredient if the postal company wants to make a real pitch
for new work.
There is a wonderful postal example where all these
factors seem to come together, where everybody wins.
In Italy the government asked Poste Italiane to assist in
the management of immigrant work permits. This is a
complex multi-department process requiring significant
resources. The postal company, with its strong IT infrastructure, was able to devise and suggest new workflows,
developing systems to interact with the various government agencies involved. Life was made easier for both
government and the people trying to get their work visas.
The important and vital outcome was that a government
problem was converted into a business opportunity for the
postal company, who could then hope to attract a new set
of customers to its other products and services.
Looking around the world, the easiest cases are where
either there is a very strong central government, where departments are tightly knit, or paradoxically, where central
government is very weak and therefore needs a national
partner presence. In the first case, persuading central government brings everyone into line. In the second case, the
government needs help.
Unfortunately, most countries fall in between. Government departments are independent, protective of their
own empires and reluctant to share or devolve. Political
approval of an idea does not translate into departmental
action. To my mind, the most powerful answer then is the
solidity of the business case.

Practical steps for the Postal Service

To develop and new line of business requires focus and
dedicated resource. The post office network should be
structured as a Strategic Business Unit. This has to be
separate from delivery logistics. The post office acts as an
agent, and is paid as an agent, for logistics related activity selling stamps, accepting parcels, and so on. This
has been taken to an extreme in the UK where Post Office
Limited is now a government-owned company independent of Royal Mail, the postal mail company.
Within this SBU there should be a business develop-

16

ment unit looking solely at the question of government

services. What existing government services are in place?
What services could be provided at State and local level? How can existing services inform ideas for new ones?
What would be the characteristics of the ideal government
service, in terms of transaction time, training, technology?
What are the barriers to going down this track of finding new services? Are there competitive issues that would
attract a negative lobby? Internally, how would management lines of control work, could technology be adapted
easily and what would be employee attitudes? All the
practical issues might as well be confronted at the beginning. This is not the time for idealism.
One hard piece of work would be to sketch out the
business case once the best opportunities are qualified.
Appoint a public sector champion because someone has
to start lobbying government departments, sounding out
the political, practical, and economic barriers. Where are
pain points for government today and how could the Post
help? Perhaps it is possible to make an investment ahead
of a contract. For example, if retail counter systems need
to change and if new identification technology is important, then perhaps those investments could be made ahead
of an actual contract. That is riskier, but it is being proactive. It isnt about competing with digital solutions as the
government tries to do more and more online. It is to
complement those activities.

Conclusion
The development and enhancement of government services provided from post offices is not a new concept in the
postal world. It had its origins in the very foundation of
the network and continues in many forms. The need for
identification services is growing as a direct consequence
of the digital age. The need to search for and win government services is a business story, not one for idealism and
emotion. Yes, maintaining a post office network is a core
public policy for most governments. But it has to be paid
for, from taxes, from customers, or from cross-subsidies.
Lets at least be clear about want we want to achieve and
then give the Postal Service a mandate.
Biographical notes
Elmar Toime was chief executive of New Zealand Post and
Executive Deputy Chairman of Royal Mail. Now living
in London, he has a life-time achievement award for leadership in the postal industry. He is founding chairman of
the Postea Group Inc. and is a member of the Deutsche
Post DHL supervisory board. He advises and comments
on postal and logistics matters.

the Postal Industry | Vol 2 | Issue 1 | 2014