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