Monthly Archives: March 2012

Postal Reform Now…Will Congress Act to Save or Kill USPS?

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Is the Postal Service going downhill??

“Industries Fear the Ripple Effects of Proposed Postal Service Cuts” – Was the title of the article in by Ron Nixon in the New York Times yesterday.  It is a good statement of some of the key issues that are being taken up starting this week in Washington.  All sides are lined up to help shape the final outcome.  Today ,CCN Money  has picked up the story as well.  It seems that all eyes are on Congress as they take up the issue of “postal reform.”  All this while all the ears are on the Supreme Court as they take up the issue of ‘Obamacare.’  We certainly do live in interesting times.  As the pace of change and disruption our world picks up we must expect many more battles in the future to go along with these two. 

Congress has begun work on their vision for Postal Reform, if reform is what they really have in mind.  All of the various constituencies are lined up on both sides of the issue.  Some want more, and others want the USPS to do less.  On the plus side are the wine and beer lobbies that want to be able to use the USPS to ship their products, something the USPS is prohibited from doing by law.  On the negative side the insurance and banking industries are lined up to ensure that the USPS not move into their fields, as some in Congress has suggested they do to create more revenues.

Like the newspaper business which is also undergoing its own transformation, the USPS is a huge enterprise that employees nearly 600,000.  Beyond that the entire direct marketing field, including mailing companies, printers and direct marketers employees over 10 times that amount.  This is a big deal, and we need to get it right.  As was noted in the article the field supports over $1 trillion in annual economic activity.  It helped to put both of my sons through college, so it is still dear to me.

Nearly every business relies on the post office to deliver packages, advertise services and send out bills. This postal supply chain supports millions of American jobs in fields as diverse as banking, agriculture, media and manufacturing.  This is an urgent issue since the USPS is losing nearly $36 million a day.  As volumes of mail have decreased with former users now going to digital methods of delivery.  Even the USPS has said that it does not expect to get those missing volumes back in the future.

The USPS is also saddled with a Congressional mandate to pre-fund future retirements, the only government agency to have to do so, to the tune of $5.5 billion.  Relief from this mandate would cut the shortfall in half.  A sign that this is a big deal is the nearly $300 million spent over the last three year by those lobbying on all sides of this issue – both the USPS employee unions and industries who work in the direct marketing field.

Postmaster General Patrick Donahoe has proposed closing half of the post offices, approximately 3700 and shutting half of the mail processing centers, 250 there.  Both changes, along with stopping Saturday delivery, would also help to bring down the shortfall.  In a world that has gotten to email and instant messaging for time vital business and personal communications, there would seem to be some wiggle room for printed mail – derisively called ‘snail mail.’  A big question is how fast do we need to be, especially if we want to price reduction, or at least fewer price increases.  And yes, the USPS is also asking for a 50 cent first class stamp.

Postmaster General Donahoe said in prepared testimony.  “If Postal Service were a private company, we would be engaged in Chapter 11 bankruptcy proceedings.”  The Senate is beginning the process now, and the House will begin deliberations, probably next month.  A key deadline for consideration is May 15, when a moratorium on closing postal facilities will expire.

Currently under consideration is a bill that passed a Senate committee in November that would tap the overpayment of the future retirement benefits, currently at $10.9 billion to pay down postal service debt (to the U.S. Treasury) and use up to $2 billion for incentives to get a number of long term employees to retire.  The USPS has also planned to open its own health care for employees in hopes of cutting their costs, but there is pretty widespread opposition to that from Congress and the employees.

The USPS is a legacy system with a long history.  Like so many of our other ‘legacy’ systems, including newspapers, they are in deep trouble with the change in the economy in our broadening digital age.  Change is great for some, though it sucks for others.  I live in both worlds, and yes, I still want things the way they used to be.  The question is how much am I willing to pay to have that.  We make those choices each day, and we are making those choices now regarding our postal system.

In the face of the current situation I have to applaud Postmaster General Donahoe and his staff, though that is a strange position for me.  I prospered under the USPS, and endured a lot of petty regulations as well.  They clearly understand where they are today, where the world is going, and have surfaced a plan that will help them to move forward under their current legal and financial burdens.  Congress has the keys to open doors for them to endure and preserve the current levels of service many still desire.  They also have the keys to the vault and say no more.  I compliment the PG for a real and thoughtful plan, and I hope our elected officials will make the right choices.  In the face of the coming elections later this year – this should prove to be good theater, and maybe even good politics.

Gary Pruitt and the Future of Newspapers and Journalism

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Gary Pruitt, new head of Associated PressIt was announced yesterday that Gary Pruitt will be leaving the leadership of McClatchy, the 3rd largest newspaper chain in the U.S.  Gary, just 54, was the leader of the charge of newspaper conglomeration in the early part of the 21st century.  Timing is everything, and Gary’s was not good on that call.  Now it seems that he will be making a better call by becoming the chief executive of The Associated Press.  This is a plum job in journalism and Gary has made his way to the top of the pile of what is now print journalism.

I’d like to give Gary a new nickname – Prescient Pruitt, for knowing when it is time to leave.  The definition of the word  prescience [ˈprɛsɪəns] n – knowledge of events before they take place; foreknowledge [from Latin praescīre to foreknow, from prae before + scīre to know].  I think that says it all in the face of the current state of the newspaper business in 2012.

Not to say that Gary can take all the blame, there is enough of that to go around for all who failed to see the train coming down the track, but he was the big gun with the big check book who bought everything in sight, just before the bottom fell out.  With so many papers have been sold for high multiples, the debt they took on has helped to sink nearly all of them.  This in the face of a natural decline of the media in the face of the digital onslaught they were about to face.

I wish Gary well in his new role, I had a number of professional dealings with McClatchy when they were my client in the 90’s, and they were a class act.  From everything I have heard of Gary, he is as well.  Now he will have to help journalism from this new position at A.P. providing content (not news) that will flow through the presses and the digital screens of readers to keep real journalism alive.

There is much more to say about the state of newspapers and marketing – once they were a singular entity, but now more loosely linked – and where the state of media is going.  Newspaper revenues have declined to 1984 levels in 2012 – I know Gary did not see that coming – and digital revenues are screaming upward.  Can newspapers maintain their position of strength?

A similar issue faces the U.S. Postal Service – after great periods of growth for decades their volumes have declined, and they face major cutbacks and reorganization to remain viable and cost effective for mailers and mail recipients.  Both media are linked together in their future.  What do they need to do to survive, and the bigger question is – can they survive.  More TK!

A Death by Inches for Newspapers

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Sometimes you see a chart that stops you dead in your tracks.  I saw one today in The Atlantic that graphically displayed growing and shrinking industries.  My sons both inhabit the top-growing field of the Internet…and I, still have my past linked to the bottom industry – Newspapers.  Ouch!

This is a great chart because it shows growth and size of the industry losses or gains in terms lost at a single glance.  I hope we can see more of these from the suppliers – LinkedIn Analytics.

As I deal with clients and prospects this will be part of my kit bag to help explain key opportunities, and the pockets of pain at the same time.  This is why the recession has been both so deep, and so persistent.  As employment shifts from the old sources to the high growth areas it is easy to see that needed skill sets must be transformed or much of the pain for those who have lost jobs will find it to be permanent.

A Last Chance for Yahoo?

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Change comes again to Yahoo along with staff cuts

It’s hard to think that having come so far in just such a short period of time that Yahoo is in so much danger.  Major cuts are being aimed their large products organization, as well as other arenas in which the company has lagged.  Like many in similar situations they are also cutting: Public relations and marketing, research, marginal businesses and their weaker regional efforts.

Yahoo struggling for some time just hired PayPal President Scott Thompson as its new CEO. Scott was most recently in charge of the large eBay online payments unit.

He starts next week, but big changes are coming fast.  Staff conference have already begun and an all-hands meeting on Yahoo’s main Silicon Valley campus is scheduled ASAP.

Thompson also hired Boston Consulting Group to help focus the company on “growth” initiatives and to find the best path for Yahoo going forward.

Scott appears to be looking for areas to quickly jumpstart Yahoo after a failed turnaround over the last round of turnaround leadership.  Cuts are likely, but the focus will also be looking for new areas to move into.  That what consultants can do for you, find the costs, and find the new directions.  Let’s hope that BCG has a great compass to find that new direction.

Adding to Scott’s woes is the news that Prabhakar Raghavan,the head of its labs unit will be departing for Google.  His research at Yahoo focused on search technologies, with particular interests in text, web mining, and algorithm design.

Sources said was spurred by the likelihood of major job cuts in his research unit.

Staff cuts will happen, and they could be significant.  Staff at Yahoo have been through this before, or their predecessors have, but the effect is still chilling, and these could be larger than ever before.  With 14,000 employees and a large contingent of software contractors not in that count, the ‘dead pool’ is significant, but costs must be slashed if Yahoo is to survive.

In a conference call to analysis Scott said “Our leadership is engaged in a process that will generate significant strategic change at Yahoo, but final decisions have not yet been made at this point. Beyond that, we will not comment.”

In other words, get ready for some big shoes to start dropping and very soon.

Whether we are talking about the USPS, newspapers or older digital media like Yahoo, the future will go the quick and nimble, and the adaptable.  There is no longer any ‘legacy’ left in media…’what have you done for me lately’ is now all that matters.

The Pony Express Collides with 21st Century

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Postmaster General Patrick DonahoeTomorrow, Patrick R. Donahoe, USPS Postmaster General will be addressing a gathering of key postal businesses from throughout Southern California at a Postal Customer Council event at Knott’s Beery Farm Resort Hotel.   The location is fitting since Knott’s was built on framing images of life in the old west, stagecoaches and railroads – just like our vision of our Postal Service.  I think that is a key to our discussion about how to handle the transformation of the USPS in the 21st century. The USPS like newspapers, printers and mailers are in the midst of a major reshaping as increasing numbers of businesses and all people are moving to digital forms of communications.  The world will never be the same as it was when I started my career selling for Xerox in the 70’s.

Facing great change and pressure the USPS has done a good job in creating plans to bring the service in line with the needs of the 21st century, and stagecoaches are not in the mix. The Postal Service drafted its business plan with analysis from Boston Consulting Group and Accenture.  Based on my reading of the plan, they have gotten good advice, though it has not been well received in Congress, though nothing really is anymore…but that is another problem that modernization needs to impact.

In the last quarter of 2011 the USPS lost $3.3 billion.  The forecast for a full year-end is a $14.1 billion loss for the year ending Sept. 30.  The losses will continue, and continue to grow if nothing is done

First-class stamped mail has declined more than 50% in the past 10 years, from 52 billion deliveries in 2002 to 26 billion in 2011. According to an email from USPS representative Sue Brennan, the drop in mail has resulted in significant excess capacity.

Among the recommendations from the USPS, and their consultants in the new plan to cut losses are:

Rate increases – The U.S. Postal Service wants Congress to help it raise the price of a first-class stamp to 50 cents, an 11 percent increase, as part of its strategy to avoid annual losses as high as $18.2 billion by 2015.  The fact still remains for the USPS is that we are the least expensive postal service in the world- we could even say that we are under priced for the service that we deliver. A price increase would seem to be in line all things considered, including real value.

Staff and facilities reductions – Closure of a number of local post offices and half of the larger mail processing centers would save significant dollars, and would also reduce staff by over 35,000.  This would be a tough call in the middle of a financial downturn, and a national election.  Nine states will see eight or more processing facilities closed.  Almost half of the 223 plants scheduled to be shuttered are located in nine states, including mine.  For the most part, these states, which include California, New York and Texas, have the largest populations in the country.

Curtail Saturday delivery – The Postal Service says it would save $2.7 billion annually by cutting mail delivery to five days a week.  Those of us in urban areas are likely to see this as positive, but rural areas have tended to see this a problem.

Manage Their Own Health Care Benefits – The USPS states that they could save $7.1 billion a year by managing their own health-care benefits.  This, along with not prefunding pension benefits, would be significant, but are a large political football for both sides. The USPSwould have lost only $200 million if not for payments it had to make toward the $5.5 billion it is required by law to set aside for future retiree health benefits annually, something no other government agency needs to do.

Our transistion to a post industrial society is hell for those who still provide the bulk of our labor.  The USPS has dramatically changed over the last couple of decades and automation has made it a model for most of the world, but not even that is not enough well production volumes decrease.  Savings from automation aren’t there any more, and now we have to remove some chairs from the table.  Like newspapers, the transition is painful, but it is still inevitable.  The USPS plan is a good business plan, and Congress should adopt it for the most part.

I wish I could hear the Postmaster General tomorrow.  Unfortunately, I have a previous engagement with a client dealing with digital marketing issues and their competition.  Doesn’t it just figure – new media trumping old media once again.  I hope the USPS gets their way in the end.  The plan is real and reflects the medicine we all need to take now.  In an election year this will drag out and become another political football.  Shame on us for allowing that to happen.

Pinterest – Social Media for ‘Unsocial People’

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Pinterest - Our Fastest Growing New Social MediaI’m a consultant helping businesses adopt digital technologies for their businesses.  My client base is heavily made up of senior executives, most who have little personal experience in social media. To say that they have little personal use for it would be an understatement.  I understand, these are my people after all, but my other people -my family is heavily invested in social media, but personally and professionally.  They have helped me to see the ‘light.’

I am on Facebook since 2008.  I joined so I could understand the dynamics of the FB since I was recommending it to my clients as something they should be using in their integrated marketing mix.  I might as well have been asking my clients, senior executives like myself, to strip naked and walk through the streets.  Their kids might do it, but they certainly weren’t going to.

“Social Media for the Unsocial Person” – what a great tagline for understanding the intersection of senior execs and introverts – older ‘quiet’ people – ‘my people.’  I fashed one recent morning with that thought in my head and wrote it down.  I thought that like myself, many don’t understand how they can use and have fun with social media.  Not wanting to express themselves in words, or divulge ‘secrets’ about themselves, there was something that could work – and in fact was working for me.

Over the last several weeks I have discovered Pinterest.  Like many of my ‘discoveries’ it came from my personal idea factory and digital brain trust – my family.  I don’t know who was first to invite me to Pinterest, my eldest son or my wife.  Both are huge on the net, and both have great writing and visual skill sets.  I love visual things, and color.  I dress with lots of color.  Thank God, my wife checks me each day before I leave or I would have been arrested by the fashion police for some infraction of good taste.

What I did find is that I liked what I saw and I immediately got into looking at all of the visuals, first in the men’s clothing category.  I started ‘repining’ and liking things…wow this is easy.  Then I started finding that others commented on my ‘pins’ and ‘likes’…maybe I do have an eye for these things.

As a male, I feel a little funny about being excited about something that has been heavily adopted by women.  About 82% of active users are female, but then women make up a majority of all social networking sites and spend 30% more time on sites than men according to Nielson.  So why does it excite me – again I am a visual learner.  I listen to audio books for pleasure, but always fiction, and mysteries and action are a majority of that.  I have an extensive business library, but few business audio books – they just don’t sink in for me.  This has been critical for my understanding of ‘me’ – give me images or go home.

Since Pinterest skews so heavily to a female audience as of now, what about a more manly version.  There is a new sites that offers men their own versions – I’m waiting for the scratch and sniff version myself.  These new sites is Manteresting and Gentlemint. Designed by men – we can now look at tool chests and bacon cheeseburgers among other interesting choices.  I’m full right now, and one big tool chest is enough for me, so I don’t think I’ll be jumping on this macho bandwagon soon.  This could be a real hard sell for men, so I think I’ll lurk for awhile and stick with Pinterest for now.

When you take a look at the female demographics – which are similar to other social media you might be scarred until you understand that women account for 85% of all consumer purchases – that includes everything from healthcare to autos.  Wow, a nice tight audience for your goods and services, and it is proving successful for a number of businesses who have jumped in.  Visuals sell products – my 30 years in the advertising field has been well spent – I finally learned something, and it has be reinforced.

What does all this mean – visuals excite, and visuals sell.  It’s a great new niche for many businesses to help them in their marketing efforts.  For those of us who really want to be ‘social’ it is painless and no need to bare our souls to others.  Like something, pin it, and it to your boards and others can share.  A great way to spend a few hours luring over goodies you would like to have, used to enjoy or didn’t know existed.

Pinterest is a great way for everyone, including those of us on the male side of the spectrum, to become ‘social’, now it’s time to check my Facebook page, though don’t expect any status updates – those I mainly keep to myself.  Introversion runs deep and ‘quiet’, but I enjoy seeing and hearing of my friends exploits – check out my ‘pins’ and you’ll understand me better – that’s all you get from me. Social media for unsocial people – that certainly describes me,  and my relationship to Pinterest.  Check it out, especially all you shy people.