(bright music)
-: Welcome, Marc. It is great to see you
and I'm looking forward to our conversation.
-: I am too, Rich, this is tremendously exciting for me.
-: It's a remarkable journey you've been on,
and I've heard you talk about it, but I think it might be
great just to start how you would describe
what was the business you inherited versus
what have you tried to make it over this timeframe?
-: It's a great story and it's instructive,
and I think it's an important story
as you contemplate transformations.
Historically, in 2012,
85% to 90%
of our profit was
a derivative of posts.
-: Right. -: Around-
-: Postal meters? -: Postal meters.
We had an outsourced mail-room business.
We had a production mail business, which we manufactured
or co-manufactured sorters and inserters.
But if you tried to explain the company economically,
you clearly would have zeroed in on the posts.
If you asked me that question today,
what I would say very succinctly is
Pitney Bowes provides digital,
physical, and financial offerings and capabilities
to facilitate the sending of parcels and mail.
And that is important in retrospect,
because I've read a lot about
BCG's work on transformations,
and I think it's terrific.
Getting too far away from your core is
one of the traps of transformations.
Because, if you aspire
to be something that you don't have the capabilities to do,
the probabilities of success, which were already pretty slim
for successful transformations, become even slimmer.
-: A lot of what I understand you had to do early on was
figure out, after a lot of M&A activity
and other things- -: Right.
-: What businesses you really wanted to keep and not.
-: The way I looked at the portfolio was
what are the markets we can win in?
What are the markets that can fund our transformation?
And if they didn't answer
those two questions in a positive manner,
then they were businesses that were right for divestiture.
-: So you narrowed it down, and then you had to figure out
what you were going to do to win in
the medium and longer term.
-: It was probably foreseeable that shipping was the place
that we were going to be able to have
the highest probability for success,
because it was the most akin to our core.
I mean, so if you think about postal ingestion
with a letter versus postal ingestion with a parcel,
it's different.
But, there's a lot of core capabilities there,
not the least of which is your relationship with posts
that you can leverage off of.
One of the challenges of transformations is, oftentimes,
companies will run out of time or run out of money
before they get to the next step. Or run out of patience
from the stakeholders before they get there.
So if I would've had a more cold-blooded view
at the outset of, really
where we had the capabilities to be successful,
I think we would have been able to move faster.
-: So a part of a transformation journey is figuring out
how do you think you're going to win in the midterm,
how do you focus in on that part of the portfolio,
but also the strategy to make that part
of the portfolio successful. But then also,
how do you fund the journey? -: Right.
-: How do you make it productive?
How did you think about that part of the transformation?
-: I looked at the balance sheet,
and I think there was lots of different opportunities
to optimize the balance sheet.
So we ended up taking $500 million of expense out.
We took inventory from $250 million to $50 million.
The businesses we pruned, we sold at good times,
and we were able to sell them in a way that provided cash
to do what we needed to do.
So fast-forward from 2012,
where we probably had $100 million of shipping revenue.
Today, we've got $1.7 billion.
-: Wow.
And how has digital and analytics and the next generation
of technology featured in that journey?
-: Such an interesting question.
So there's a lot of talk in the industry and in your circles
and my circles about digital transformation.
And I think, in some ways, Pitney Bowes is the case study
for digital transformation.
So I'll give you a perfect example.
So our mail meter business,
which we invented in the industry 101 years ago,
it was, in 2012,
a single-application analog device-
monolithic, proprietary. In 2017, we re-platformed
the mail application
on an Android operating system
off of a multi-application device
that was open,
that other developers could develop applications for,
and we could put shipping applications on.
-: So you made it a platform business,
as opposed to a proprietary business.
-: We went from analog to digital.
-: And when you look at the growth vectors ahead,
how much do you see new technology featuring
into the vectors that will be most important?
-: When I started with Pitney Bowes in 2012,
hard to be precise, but probably 3%
or 4% of our revenue was from new products.
We were spending a good amount of money,
but we weren't getting anything for it.
Last year, probably 40%+ of our revenue came
from products that would have been introduced
in the last couple of years,
and it tells you the import of innovation.
-: How did you think
about how you guided your teams internally?
How did you think about using-
-: Right. -: External partners?
How did you just think about that process?
-: So one of the aspects,
and I think, perhaps, the most important aspect
of transformation, is culture.
Innovation wasn't a pillar of the culture
that was immediately obvious to me because, coming in,
you couldn't see a lot of new revenue from new products.
In some ways, the company was trapped in the 20th century.
But as you looked more deeply,
it truly was an innovative company,
and there was lots of good examples of it.
So we assembled 150 leaders,
and they weren't necessarily the highest-ranking people
in the business, but they were people
that we thought could affect the culture
in a positive way going forward.
And they were held accountable for it.
They were rotated in and out of that team
based on their success. And as you look back
over the last eight years, I would say the success
of that team was one of the really important factors.
So we had been very purposeful
about using these 150 leaders to affect culture,
and it became
very clear within the fabric of our business
that this was something that was critically important.
-: One of the more recent changes that you've made was
the change to the presort business,
which gets things ready for the postal service.
Can you talk about how you thought about that
and how digital tools factored in?
-: Presort I set
with someone outside of the core of transformation,
because it was such a successful business.
That being said, there hadn't been the innovation
in the business that it needed,
and you could begin to see the margins deteriorate.
So your team helped us with pricing,
beginning to harvest the data that we had,
and allowed us to be more surgical
about how we think about price,
and it allowed us to innovate, in terms of our routing.
That allowed our trucks to be more efficient.
So it's a great example of innovation
from a process perspective. And that's so important
because, when you talk about innovation,
people tend to think, "Well, that's somebody else's job,"
"That's the development guy's job,"
or "That's the new product guy's job."
But everyone has an opportunity to innovate,
if you think about it broadly enough.
-: Well, it's a great story.
Thank you for joining and congratulations. And hopefully,
and I'm optimistic you've set the foundation
for many good years ahead-
-: We're not there yet,
but we're on our way.
-: Right, thanks. -: Thank you, Richard,
and thank you to your team for helping out.
It's been an important part of the story.
-: It's been a privilege.