earth class mail - send the right message

8/15/2019 Earth Class Mail - Send the Right Message

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NOTE: THIS IS A PRE-RELEASE DRAFT FOR LIMITED DISTRIBUTION TOATTENDEES OF THE 2007 NATIONAL POSTAL FORUM ONLY. FINALRELEASE OF THIS PUBLICATION IS SCHEDULED FOR APRIL 16, 2007.

Earth Class Mail has been researched and written by a team of

executives, advisors and board members of Document Command, Inc., thecreators of the worlds first online post office, Remote Control Mail

(www.remotecontrolmail.com). The intended audience includes not just the

operators of the worlds posts, but also the politicians, analysts, financiers,automation vendors, and major enterprise customers who all have a stake in,

or at least a view of, the postal industry and its future course amidstsweeping changes.

The authors backgrounds are described in the Introduction whichfollows but there were many more contributors to this seminal roadmap

document which describes how posts can transform themselves into healthy,robustly growing enterprises ready to take on the 21st century. Their

backgrounds include current or past affiliations with postal industry giantssuch as Pitney Bowes and Siemens; Wall Street firms like Bear Stearns and

Merrill Lynch; communications utility giants like Sprint/Nextel and Verizon;

logistics giants like Amazon.com and Southern Pacific Railroad; technologyleaders like Wang, Microsoft, Apple, Tektronix and Intel; as well as

professors at UC Berkeley, George Washington University, University ofWashington and UCLA; and executives of United States Postal Service and

other world-renown postal operators.

Earth Class Mail is a living document constantly being expandedand revised. To make sure you always have the latest and greatest version

of the publication, please visit our website at www.earthclassmail.com torequest a free subscription to future editions.


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TABLE OF CONTENTS

Introduction.....................................................................................................................5By Ron Wiener

The Trillion Dollar Postal Industry:Poised for Growth or Doomed to Extinction?............................................................11By Dr. Ken Lynn

Will Postal Mail Eventually Be Delivered on the Internet?......................................23By Cameron Powell

Remote Control Mail: The First True Execution of Online Postal Mail.................35

By Cameron Powell

Untarget Marketing: The First Dramatic Inflection Point in Direct MailMarketing Since the 70s..............................................................................................43By Natalee Roan

The Next Generation of Postal Automation: MegaSorters.......................................53By Michael Miles

The Case for Liberalizing the USPS and Taking it Public .......................................65By Chris Kwak

Blueprint for a 21st Century Post Office: Combining MegaSorters with RemoteControl Mail ..................................................................................................................89By Ron Wiener


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IntroductionBy Ron Wiener

The ubiquitous postal industry, with its 5.5 million employees and mission critical role inthe economies of some 200 nations, has long been taken for granted. And why shouldnt it be?

After all, in most countries it is the largest employer, with the widest footprint of buildings,transportation fleets, and labor union influence. A country could not function efficiently withoutits letter post (businesses could not send bills, customers could not pay them, vote-by-mail ballotscould not be collected, governments would have difficulty collecting taxes, etc.) and so citizensand businesses therefore assume that the powers-that-be will make sure that their post will alwaysbe around to serve them. Most never give it a second thought.

But those of us in the postal industry know the future is not nearly so certain, at least notfor every country. We are alert to rapidly changing dynamics such as the cannibalization oftransactional and advertising mail by the Internet that impact revenue. We are also cognizant ofthe ever-rising costs of labor and pension obligations, and that even the very latest in automationequipment may not provide sufficient improvement in productivity to guarantee the economicsurvival of any post office for very long at least not without a lot of changes and the politicalwill to effect those changes.

Postal patrons individuals and enterprises are also rapidly changing their behavior.On one end of the socio-economic spectrum, citizens of affluent countries spend more timetraveling and less time at home or in the office. On the other end in developing nations thereare still billions not served directly by a postal carrier, and who do not have an Internetconnection. Ironically, many are far more likely to see the Internet reach their village before thepostal carrier.

This white paper paints a vision of the future in which posts not only survive, but onceagain become thriving, growing organizations at the center of the communications world. As asegment of global communications, mail has continued to drop from a once-dominant position tomake up less than 15% of all communications (including cell phone calls, faxes, email, etc.) andeven that figure is declining due to the rapid proliferation of mobile and high-bandwidth digitalinfrastructure. In this white paper we describe a vision for how posts can catapult forward andtightly integrate to the Internet infrastructure. Yes, to make them relevant, and central, tocommunications in the Internet Age. This means more than just ordering postage or looking up apostal code online. It means actually receiving your mail through the Internet. On the back end,it means harnessing the power of the Internet to drastically reduce the cost and improve theefficiency of mail delivery.

While the vision we paint is exciting, we stress that it is more than a discussion ofconcepts and ideas. Too many speeches at postal conferences have ended with the refrain,technology will bring the solution to our current problems without any further elaboration.Any vision that has a meaningful chance of succeeding must be able to be put into practice. And

thats the good news. This white paper addresses not only the social, political, and technologicalbackdrop for this discussion, it describes at a high level (well avoid too much engineering-speak)how this vision can be implemented, incrementally, by any postal operator, starting today.

In certain countries, like Brazil, cell phones have reached large swaths of the populationbefore the investment in copper wire land lines to serve them could have ever been warranted.We believe the Internet-enabled posts of the future will experience a similar scenario. That is, theInternet will reach distant villages and deliver postal mail to remote patrons long before postalcarrier routes would have to reach them.


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What is behind the name Earth Class Mail?

Earth Class Mail is the next step in the evolution of an industry that hasnt seen muchfundamental change since Benjamin Franklin invented the early-American postal service 225years ago. It is Earth Class because it is global, able to deliver mail to addressees no matterwhere in the world they are, electronically. And as youll see, it is Earth Class in its

conservation of the environment.

Posts are typically at or near the top of the list of targets to reduce environmental impactsin most countries. Indeed, in the United States, the Postal Service is the third-largest consumer ofenergy among government agencies, behind only the Department of Defense (DOD) andDepartment of Energy (DOE). Posts require more electrified and heated buildings, fuel moreairplanes and trucks, and constitute the largest slice of paper consumption in their nations andhence they represent one of the biggest opportunities for radical reduction in the use of non-renewable resources and greenhouse gas emissions. As the largest or one of the largestemployers in a country, the impact of posts employees driving to work each day is also in theextreme category, emphasizing again the importance of worker productivity to the environment,not just to the price of postage.

An inflection point in postal service development was the idea that the sender pay the fullpostage, rather than the recipient. In the past, the challenges of delivering a letter across thecountryside or across the world was sufficient to require a financial incentive for the deliveryagent to complete the trip; it was thus necessary to have the recipient pay some or all of thepostage to ensure (as best as possible) full delivery. Eventually Posts became so structured andreliable that senders could agree to pay the full fare, and eventually businesses began to see theopportunity in expanding and servicing their customer bases reliably and cost-effectively by usingthe Post and the pre-paid postage stamp.

Today, disruptive technologies now have a different answer to this seemingly long-settledquestion of who pays for postage? With millions of consumers and businesses willingly payingfor the convenience of faster and more mobile communications cell phones, email and instant-messaging we already have evidence that many will pay to receive some or all of their postalmail in electronic form. Electronic postal mail is more convenient when youre on the road, andeasier and less costly to handle than paper. It is also environmentally more sensible, and in anage when cradle to cradle is the new mantra of physical goods designers (e.g. computers andfurniture are being designed to be nearly 100% recyclable so we dont overflow our landfills withtoxic trash), consumers are willing to pay more for something kinder to the earth for futuregenerations, and they demand their providers do more to reduce their environmental impact.Posts are no exception.

Any avid reader ofFast Company magazine will notice that each issue these days is jam-packed with stories of innovative companies disrupting old-line industries with new, greentechnology solutions. Its happening in every sector, from plastics to construction. It is ironic,though, that one of the largest environmentally-impacting sectors of the economy the Postal

Service rarely if ever gets any coverage in this publication. Yet the alternative messagingindustries whether email-based, search engine-based, or one of the other Internet-enabledplatforms get round-the-clock coverage.

The postal operators seem to be caught in a dilemma. Promoting the environment is agood thing, but if it means promoting less paper usage and results in less physical delivery, it isperceived to be bad for the post office (bad for revenue, employment, and profitability). A fewenlightened posts have already mentally shifted to the new paradigms (e.g. Canada Posts ePostservice), but even these examples have so far only marginally reduced the environmental impact


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of paper mail. These services may be new for the posts introducing them, but they are typicallyonly mimicking innovations already proven in private industry. Theyre not radical enough, andthey dont leverage enough of the posts intrinsic competitive advantages.

We only need to look at the telco industry to see what happens when establishedinfrastructure players allow newcomers bearing alternative technologies (here, cell phones) to

steal billions of dollars of economic value while the establishment slumbers. Most postaloperators are sitting in a similar hot-seat whether they have fully realized it or not and this isreflected most palpably in the very low market capitalization multiples the stock markets haveassigned to the publicly-traded posts.

Clearly, there is a coming freight train carrying dramatic changes in customer behavior,technology, and political climate. The posts of the world each have to make decisions as towhether they wish to continue to stand in front of this freight train come what may or take theenlightened view, get on top of the freight train, and help drive the train to a more sustainablemodel, a model more sustainable ecologically and economically: thats what Earth Class Mail isabout. This white paper outlines one vision for how posts can send the right message andaccomplish the twin goals of economic and ecologic sustainability at the same time, ensuring thecontinuance of the most reliable and secure form of messaging known, and making it even more

reliable, more secure, and more cost-effective than ever before.

About the structure of this white paper

This document was authored by several people, each bringing a unique perspective to theissues above. What brings them together is an association with a single company, Seattle,Washington-based Document Command, Inc. As the company has moved from concept tolaunch of its popular Remote Control Mail service (www.remotecontrolmail.com), it hasestablished hard evidence of market demand and the user behaviors that occur when postal mailrecipients are given a mouse to manage their incoming mail. The results are very exciting andprovide sufficient evidence of viability to certain posts, equipment vendors, major enterprises andindustry associations to lead to the development of a platform that could even be implemented ata national level by Universal Service Providers (USPs) and other postal operators. Thisdocument details that vision and the practical steps for posts and related parties.


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A little about the authors and their chapters.

en Lynn, PhD, was the son of two United States Post Office employees. Mailwas in his blood, so to speak, from a young age. Over a distinguished 25-year

career with the USPS Ken rose to the rank of Assistant Postmaster General ofLogistics, responsible for the operations of the worlds largest postal service and

some 800,000 employees, a quarter million vehicles, and half of the worlds mailvolume to move. He is one of the few in these ranks to have earned a PhD, and inmany other ways was always an overachiever. In his chapter entitled TheTrillion Dollar Postal Industry: Poised for Growth or Doomed to Extinction?, Ken shares hisexperience as a young buck coming into USPS management with new ideas, and why the half-life of a new idea in a large, staid organization with a vested interest in its own inertia can be nomore than a few minutes or hours before someone points out that such change is unlikely tooccur.

Ken brings us some information from the Universal Postal Union (UPU) and publicmarket sources about how other posts around the world have successfully made the transitionfrom government agency to privatized corporation, leading in many cases to exceptional

productivity enhancements, diversification of revenue streams well beyond what was thoughtachievable in their monopoly days, and even reduced postage costs and improved deliverytimes for postal patrons. As a professor at six colleges, Dr. Lynn has a knack for getting themessage across, and his message to posts is a clear one: Youd better look at change as a goodthing to be driven by your very own organization not a bad thing to bar at the gates or youwill eventually be disintermediated by overwhelming market forces.

ameron Powell, asa business entrepreneurand lawyer, has for many yearsworked at the intersection of business, law, and public policy. He has deep

experience in issues of intellectual property, monopoly, and best business practices, aswell as in putting businesses online. Powell a Harvard Law School Graduate,former adjunct professor and US Department of Justice trial lawyer before he becamea business development executive in the Internet sector dives to the very roots of ourattachment to physical paper, and then explores why we nevertheless seem to wantalmost every form of communication to go digital.

In a provocative and insightful chapter, he addresses the fundamental question, WillPostal Mail Eventually Be Delivered on the Internet? Cameron discusses surveys of consumerbehavior relating to mail before drawing more well-founded conclusions from statistics of theiractual observable behaviors, taken from Remote Control Mail users. Camerons first chapteralso has a significant section devoted to the environmental impact of the printed mail matter, thepostal organization that delivers it, and the corporate organization that intakes it. In his secondchapter, Remote Control Mail: The First True Execution of Online Postal Mail, he brieflysummarizes the workings of the service at the heart of this book.

atalee Roan was the youngest faculty member in the University of California,Berkeleys Industrial Psychology department where she designed and taught

university classes in statistics, business management, leadership, and organizationdesign. In her later life in the private sector, Natalee gained the distinction of havingjoined, at the pre-revenue startup stage, not just one, but three major wireless carrierswhich have become household names: Sprint and Nextel (now merged), and GTEWireless (now Verizon). Sprint reached annual operating revenues of over $8 billion

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in just 4 years, where Natalees responsibilities included the creation and execution of marketing,sales and distribution programs and training eventually to support 35,000 sales reps at 13,000points of distribution in consumer and business to business markets.

In her previous marketing roles, Natalee of course used direct mail promotions, but alsoevery other available media, to create such meteoric growth in these legendary companies

customer bases. In her section on Untarget Marketing: The First Dramatic Inflection Point inDirect Mail Marketing since the 70s, Natalee explores two revolutionary concepts in directresponse marketing. First, by delivering postal advertising through an online service like RemoteControl Mail, extensive information can be gathered about what recipients dontwant to receive,and smart marketers will begin to use this to boost their response rates by suppressing specificnames and general demographic segments that are patently not interested in their offers so thatmarketing dollars can be focused on prospects who might be. Second, that marketers will soon beable to deliver their direct response materials, in rich-content digital format, directly to onlinemailboxes, where they will a) be invited by the recipient, b) not be illegal like email advertising,and c) be able to compress weeks-long sales cycles into moments-long, by drawing prospectsfrom initial interest to placing orders in a matter of mouse clicks.

ichael D. Miles, P.E. has spent the past 29 years as a mechanical engineerworking on everything from aerospace brakes to oscilloscopes, but most

relevant to this discussion he designed mail sorters for postal automation giantSiemens. Big ones that were pushing the envelope on throughput, so to speak,hundreds of feet long and with hundreds of mail container bins. As the ChiefTechnology Officer at Document Command, Mike got to design mail sorterswith millions of mail containers in a single machine a building-sized machine breaking the mold of prior thinking that tomorrows faster, cheaper mail sorterhad to fit in the same general footprint as yesteryears. By departing from the classical approachto postal sortation mechanization Mike was able to invent all-new, patent-pending designs thatreduced labor costs by some 70%... a true breakthrough in a field which endeavors to make onlysingle digit enhancements in productivity year-to-year.

Miles MegaSorter design indeed represents a quantum leap over the first-generationmail sorter technology which has been around since the 60s. Instead of pinch bands andhorizontal conveyor belts that can bubble sort mail at speeds that max out at 40,000 per hour,youll read about how the MegaSorter can sort multiple mailstreams letters, flats, priority mail,express mail and small parcels all at once. And sort it all in just 90 minutes, regardless ofwhether it is handling 200,000 pieces or 20 million pieces at a time. For postal operators, theMegaSorter not only saves billions in labor and BTUs, but allows their customers to enjoyRemote Control Mail features from the entry point of the postal stream rather than from the exitpoint, creating vast new revenue opportunities while saving vast numbers of labor hours andenergy resources.

hris Kwak went straight to Wall Street after graduating from Harvard, topractice the craft of covering publicly held enterprise-software companies as

an equity research analyst. Like Dr. Lynn, by a relatively young age Chris rosethrough the ranks to become a senior analyst covering companies such asMicrosoft, Oracle, and Salesforce.com, and industries ranging from software,security, IT services, Internet, and video games having worked for prominentinvestment firms such as Deutsche Bank, Credit Suisse First Boston, BearStearns, Viking Global Investors and Susquehanna International Group.

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The world of Wall Street is much more brutal and swift in dispensing justice to badcorporate decision makers than youre going to find in the government sector. Stock price is onehighly visible way with which investors (and the analysts who cover the stocks) vote with theirwallets as to whether they believe an enterprise is on the right track for the future or not.Government-owned posts lack this feedback mechanism and so we already see a rapidlywidening gap between the fiscal track records of government-owned versus shareholder-owned

postal operators. Chris takes a look at the world of posts, now an amalgam of unshackledliberalized private or public corporations and government agencies and hybrids all along thespectrum and creates an analysis for the reader of why and how the USPS must go public byearly in the next decade in order to survive the oncoming tsunami of radical change in technologyand consumer behavior. It is a fascinating read from a Darwinian point of view, and any postaloperator is sure to glean valuable insights from it.

on Wiener is the founder and CEO of Document Command. If BenjaminFranklin was the father of the modern Post Office, Ron was the unwitting

father of the Online Post Office, known as Remote Control Mail. (Though heclaims there is no connection, his oldest son happens to be named Benjamin.)

As a serial entrepreneur he ran companies with major catalog and directmarketing divisions, large-scaling Internet IT infrastructures, software andhardware engineering teams, and complex manufacturing operations. For Ron,this business was at the confluence of his core competencies and favoriteindustries.

The idea for Remote Control Mail came to Ron first when he counted up the hours of hisweek that he spent driving to PO boxes and private mail box retail outlets, homes and offices, justto pick up his mail and see if there was anything important. He soon realized what a significantpercentage of his time was being wasted chasing after this last form of communications thatwasnt hanging off his belt or sitting on his desk as a digital medium. Ron realized that the lastanalog tether that kept him from being truly mobile as he flew his Beechcraft Bonanza fromplace to place, was his postal mail. Everything else was portable: email, voicemail and efax wereall instantly accessible wherever he landed, but as someone who needed to check his postal maildaily for legal documents, checks, RFPs and other time-critical items, he felt tethered to multiplemailboxes, forever enslaved to driving a globe-warming circuit between them. The very notiondefied his sensibilities as a pilot and a technologist there had to be a solution!

Remote Control Mail was hatched in Rons Venture Mechanics business incubator inPortland, Oregon, where a small engineering team spent the first year working out a means offinding a veritable needle in a haystack i.e. locating a single letter in what might be a pile of 5million letters so that if he were to go online from Geneva and see that hed received animportant letter from his accountant, hed be able to read it, as a PDF file, within 5 minutes.Rather than laugh off the idea as implausible, future CTO Mike Miles scrapped four inferiormaterial handling automation schemes before finally settling on what is today known as the

MegaSorter a mail sorter with millions, instead of hundreds, of pockets. The rest, as they say,is history, and today Remote Control Mail has untethered postal recipients from their mailboxesin over 80 countries, and is being actively evaluated by several national posts as a platform forserving every citizen, and every business in their country, their postal mail online.

For editorial inquiries or speaking engagements please contact Melissa Milburn, VP ofCorporate Communications, [email protected], 206-972-9096 cell.

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The Trillion Dollar Postal Industry:

Poised for Growth or Doomed to Extinction?

By Dr. Ken Lynn


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A Little History

As I looked around the room, I was struck by the raw authority represented by themembers of the interview team. It was April of 1975, and I was being interviewed for the topexecutive distribution position in the United States Postal Service. As a postal clerk, carrier,supervisor, and postal inspector during the previous eight years, I had seen their pictures in

various magazines and publications of the Postal Service and had periodically read instructionsand material they had sent to the field. But today I was actually in the same room with them andwas about to be asked questions that I was afraid I could not answer.

I recognized E.V. Pete Dorsey, the Senior Assistant Postmaster General for Operations.I would later be struck by Petes humor, mentoring ability, and political skills, but today I wasonly aware of his position and the authority he held. Sitting next to him, was James V. P.Conway, Chief Postal Inspector of the Postal Service. Jim was an outstanding speaker and had avery long history at the Postal Service. Next to Jim, sat Peter Del Grosso, Director of the PostalServices Operating Policies Office, someone that held a considerable amount of authority andpolitical power in the organization. Pete was a behind-the-scenes guy; I would learn thatnothing got done in the organization without his approval. There were a number of others at the

table but those were the ones I recognized.I remember how nervous I was, and while Pete Dorsey had counseled me to pretend like

youre down at the local tavern having a couple of drinks with friends, it didnt help much.There were a couple of simple questions that anyone who had been in the service for 8 yearsshould have been able to answer. And I did. Then came the toughest question of the day. It camelike a hardball from Mr. Dorsey (who had been the president of a professional A-league baseballleague). He asked, What makes you think that you can do a better job than any of us around thistable have done in increasing the productivity of the postal service?

I certainly wasnt very confident about my answer, but I spoke the first thing that came tomy mind. It seems to me that you guys have gotten all the productivity gains you can get fromthe distribution cases that Mr. Franklin made when he was Postmaster General. Looking back atmy answer, it now seems like something they might have considered smart-mouthed. But backthen, it was a fairly accurate assessment of the Postal Service: they had created the besttraditional postal service in the world in spite of limited technology, a great deal of governmentregulation, and their own strategic inhibition, which I discuss further below.

One of the members of the interview team, Ed Brower, had been the Assistant PostmasterGeneral for Bulk Mail Centers. He was still smarting from having built 21 bulk mail centers thathad been planned when the Postal Service had over 1.5 billion parcels, but which were completedwhen the volume had dropped to only 300 million. As the bulk mail centers were being built,UPS was intervening in the USPS rate process to make sure we fully attributed costs to parcelposts. The result was that our prices had to go up, and as they did, UPS undercut them. It wasonly downhill from there because UPS understood their core competency as well as our rate-setting process. Distribution centers were simply not going to work for the Postal Service. But

there was another reason they wouldnt work: Distribution centers presumed that the exclusivelyphysical delivery of mail, at very high costs to the USPS, would last forever.

In this chapter, I discuss the strategic inhibition that has prevented the Postal Servicefrom adopting the technologies and market-based strategies that may hold the key to survival. Ibriefly profile some of the many successful private-sector executives who came into the PostalService as Postmasters General only to stop short of transforming the Postal Service andultimately left after having merely maintained the organizations traditional trajectory. I detail theliberalizing forces pushing the postal market domestically and internationally. I describe some of


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the challenges facing the Postal Service and their need to address competitive forces. I concludeby highlighting Remote Control Mail and its transformative potential to redefine the mission ofthe Postal Service.

What is Strategic Inhibition?

Through the years, those of us inside the Postal Service were always caught in theargument as to whether we were a communications or a physical distribution business. Havingmore or less settled on the fact that the USPS was a physical distribution business, most of thestrategic thinking in the Postal Service was geared almost exclusively toward mechanizing andautomating all of the physical distribution processes. We paid less attention to adopting emergingtechnologies and market-based processes to generate revenue and increase market share.

I believe the commitment to the landmark Postal Reorganization Act of 1970 theprotection of the postal monopoly and the fear of losing it not only created an organization thatwas completely risk-averse, but one that severely hampered postal management from pursuingemerging technologies. We were always reminded that it was not in our best interest to attemptto create new products that would infuriate the business world and invite a review of the postal

monopoly. Rather than look creatively at mail as communications or documents, we looked at itfar more narrowly as a commodity to be delivered through a physical distribution process.

This strategic inhibition would preclude the postal service from participating in importantportions of the communications market: telephone, fax, email, and emerging technologies. Ascommunications shifted from analog to digital, new products and services started to supplantphysical mail. As can be seen with hindsight, the Postal Services failure to adopt newtechnologies has had significant repercussions.

Strategic Inhibition and The Exclusively Physical Distribution Strategy

Most of the companies that contracted with the postal service to create the path to the

physical distribution future fell into the traditional and risk-averse camps. If 240 distributionpockets were good on a multi-position letter sorter, 1,000 pockets were better. For either thePostal Service Research and Development Group or the Postal Services favorite contractors, sizewas simply no object. A flat sorting machine that took up an acre and couldnt fit into mostpostal distribution centers and a 10,000-pocket letter distribution machine were but twomisguided efforts to mechanize and automate the manual physical distribution processes.

The Postal Service suffered from what Ive called strategic inhibition, an inability toabandon the orthodoxy in favor of embracing new technologies with market-based best practices.One continually discussed strategy for changing the strategic direction of the Postal Service wasto bring an outsider into the position of Postmaster General. Surely someone from the privatesector would make the USPS look more like the private sector, right? This idea proved socompelling that the USPS would embrace it over and over again after the reorganization of 1970.But none of the short-timer outsiders brought into the Postal Service had the strategic vision ormuscle to transform the organization. Therefore, none of them moved the Postal Service one inchaway from a purely physical distribution model.

Elmer Klassen, formerly president of American Can Corporation, was PostmasterGeneral from 1971 to 1973. Klassen oversaw the seminal, if incomplete, postal reorganization.Of all Postmasters General, Klassen came the closest to redirecting the vision of the PostalService if for no reason other than the Postal Reorganization Act of 1970 was passed during histenure. But after Klassen, no one wanted to go near the subject of postal reorganization for fear


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of risking the postal monopoly. Benjamin Bailar, Klassens successor, had been a financialanalyst and vice-president of American Can. While he certainly tried to bring improvements tothe organization, he did very little to shift the Postal Services direction.

In 1986, many people hoped that bringing the former CEO from American Airlines,Albert Casey, into the Postal Service was a move in that the right direction. But, alas, Casey

brought credentials from the logistics world, and not from the communications or technologyworlds. In the end, his seven-month tenure was not enough time to make strategic changes to theinstitution.

Al focused on having a reorganization completed within four months without the benefitof a strategic reorientation. Despite his technological innovations at American Airlines, he didnteven develop ends statements that conveyed to the Postal Service what his final vision wouldlook like. Rather, he focused on what had been successful for him in the airline industry leanorganizations and the Postal Service proceeded to reorganize around the same strategicprinciple of physical distribution. Meet the new boss, same as the old boss. The Who had told usthat a few years earlier.

Preston Tisch, by all measures a successful businessman as Chairman of LowesCoporation and owner of the New York Giants, was Postmaster General for two years. Prestonwas another victim of the narrow strategic vision that found solace in hiding behind themonopoly. He made no changes in strategic direction or made any attempt to bring in newtechnologies that could have connected the Postal Service.

The fourth Postmaster General in four years, Anthony Frank had been Chairman andCEO of First Nationwide Bank, a Ford Motor Co. subsidiary that was the second-largestconsumer banking operation in America. Frank stated his focus as productivity, wage rates, andrevenues . . . and seeking to make more changes in the next five years than weve made in the last200. Unfortunately he only stayed four years and most of the changes were tactical and notstrategic. Next came Marvin Runyon, who had retired as a Ford Motor executive and previouslyserved as CEO and President of Nissan USA, as well as Chairman of the Tennessee ValleyAuthority. He was Postmaster General for 6 years, during which time he made no discernible

changes to the Postal Services strategic direction. He too failed to anticipate non-physicaldistribution strategies.

We Know Whats Good For You

The ideal end-state envisioned by all of these postal managers evidently revolved aroundthe creation of a system that would automate mail preparation and mail distribution in ahomogeneous delivery order sequence of flats and letters that could be provided to the carrier.This was a dream based on the strategic design of the postal service being purely and always aphysical distribution system run by an organization that knew what was best for its customers.This planned-economy omniscience was not isolated to the Postal Service. An ad from the BellSystem placed in a 1948 National Geographic Magazine captured it well: We are in the uniqueposition of knowing what is best for our customers.

The Postal Service did share that opinion. As just one example, I was a consultant forMasterCard International in 1994, when non-carrier employees in the Postal Service wereremoving credit cards from mass mailings intended for customers at residential addresses. Theannualized losses to MasterCard were in the range of $800 million. To combat this misuse of themail, MasterCard developed a solution that was both truly novel and a win-win, a combinationthat may have held the seeds of the solutions demise.


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MasterCard proposed using their own secure carriers to deliver the cards to theirdestination delivery branch. MasterCard was willing to pay the full postal rate, deliver the cardsto the actual destination delivery unit themselves, and receive a signature from the delivery unitmanager at the destination post office. It was an ingenious solution, securely delivering the cardsto the destination post office, because most of the stolen cards were being taken by postalemployees at transshipment points within the Postal Service, large offices, airport postal units,

and other places where entire trays of cards could be re-addressed to fencing centers around theworld.

When we met with Postal Officials in Washington, they were unmoved. They would notallow MasterCard to use another carrier to deliver the cards to the destination postal unit. Theywere not happy about interfacing with another carrier and there were no rules that they felt wouldallow them to provide this serviceeven though they were going to receive the full, rated postagefrom a company that was one of their largest customers. In fact, they suggested that the cardscould be sent individually registered to the billion customers worldwide that were sent the cards,at many times the cost of having the customers make a phone call to validate the cards and morethan 40 times the present postage.

Any manager that has ever been successful in a business based on market factors would

instantly recognize the issues at play in the MasterCard case. However, the environment isquickly changing. The Postal Service can no longer afford to tell its largest customers No!without explanation or even logic of any kind.

We Know You Want It in Physical Form

All of the Postal Services strategies were based on the assumption that physical mailcommunication was and always would be in the best interests of the consumer. While the PostalService envisioned some loss of volume to other technologies, it nevertheless assumed aconsiderable combination of business and personal mail would continue to feed its requirementfor volume. It is unclear if the organization ever considered a migration of bulk business mailand standard mail to other technologies, and/or their elimination simply because such mailconsumed significant natural resources and had an enormous negative impact on the environment.

As Cameron Powell points out in Will Postal Mail Eventually Give Way to theInternet?, the Postal Services customers are asking for something entirely different from whatthe Postal Service is giving them. As the Bell System and others have found, this tension hashistorically been resolved by the disintermediating forces of deregulation or highly disruptivetechnologies. This is another way of saying that if the Postal Service doesnt answer marketdemand, the market may provide its own answer, one in which the Postal Services role will be ashadow of what it has been.

The Postal Services physical distribution strategy has meant that mail was one type ofcommunication and one type of document in the business stream. We gave very littleconsideration to the life cycle of that mail document once it entered a business and the realrevenue opportunities presented to us in document management.

In the 40 years since the Postal Service began to mechanize and then automate themailstream, it has demonstrated a strong commitment to both service and cost control. Itssuccessful movement of mail to higher automated productivity rates is very significant, especiallywhen one considers the flexibility that Americans have to mail cards and letters of almost anysize. The service levels of the Postal Service for first class mail have remained at world-class,and when one compares the universal service provided to its customers with the rest of the world,the USPS is recognized as the class of the postal world.


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But change is afoot around the world. Posts are no longer traditional posts. Andchanging a large organization requires a grand strategic vision suitable to the task. The PostalService has not to date demonstrated an understanding of the sheer scale of the vision required.When we were told that we had a short time to complete the reorganization, I can remembersharing with Mr. Casey that I believed he did not understand how large the organization was andwhat a difficult task it would be to do the job. He simply said, Size doesnt matter. You simply

must divide by more zeros. I believe it does matter. The USPS is a behemoth and exertstremendous impact on the economy and the environment. It is like an aircraft carrier, and youhave to start steering it way ahead of the desired turn.

Is Competition Healthy?

How open was the Postal Service to competition? I remember being with PostmasterGeneral Ben Bailar after hed watched one of the first Federal Express ads on national television.The ad showed a person waiting in line at a post office with the clock nearing 5:00. The ad wasplaying on a widespread public perception about postal customer service, so the window curtainwas pulled down at 5:00 in the face of the waiting customer. The story line then exhorted the

now famous, When it absolutely, positively, has to be there overnight. While the ad was verywell done, the Postmaster General was quite angry. Fred Smith has obviously not seen this, hesaid, saying less about Fred Smith than about his innermost feelings about the sanctity of thePostal Service and the evils of competition.

He reached over and called Fred Smiths personal line. I didnt hear Freds side of theconversation, but it became clear to me that Fred had seen the ad and thought the perceptionscontained therein were right on target. Fred Smith was a recognized risk taker his trip to LasVegas where he bet the half of his Federal Express payroll he did have in the bank in order to winthe other half became the stuff of legend and his perception of his competitor as slow,cumbersome, and out of tune with the customer fueled his market-based strategy to provide betterservice to his customers. He listened to the customer telling him it did matter how longsomething took to get delivered, heard theyd pay more for service and took away the lions

share of the overnight service market.Meanwhile, still in our own world at USPS, we continued to decide on behalf of the

regulators what information the regulators needed in order to regulate us. And so of course wetended to generate precisely that data that supported our position in the rate cases. I wassometimes in the thick of it. As a rate case witness in 77-1, I built a hypothetical postal servicemodel to develop the service-related costs that were attributable to each class of mail and thentried to use postal data systems to support my position. Unfortunately, this data was a product ofsystems that were designed to support the strategic initiatives of postal management notnecessarily to generate strategic modeling for best practice and technology innovations.

Former Postal Rate Commission Chairman Clyde S. DuPont expressed his frustrationwith the difficulty the Commission was having getting particular types of data: Although our

discovery powers are generally sufficient to permit us to test and clarify evidence presented in ourproceedings, the service has treated the actual collection of data as its exclusive domain. Itreserves the design of its statistical systems and the data to be released as a matter of unilateraldiscretion. Thus the commission and the parties to our proceedings have been tied to the data thePostal Service is willing and able to make available.

In the final analysis, Federal Express, United Parcel Service, and all of the other majorpostal competitors did drive significant changes in the manner in which the Postal Servicemanaged itself. If FedEx could get it there the next day, then we began to believe we could too.


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But we wouldnt have believed we could do it if we hadnt seen it happen, just as RogerBannisters shattering of the four-minute mile barrier led dozens of runners to break it in just thenext few years. This is what competition does best. UPS also affected us strongly. While UPSgrew bigger and bigger and we began to talk about them having service problems like we did, thebottom line was that most postal managers recognized that UPS was providing better service thanwe were and it served as a motivation for us to do a better job. In other words, competition did

make us better, in spite of our denials that competition had any role in what we were doing.

Competition was not viewed very positively in the Postal Service for a lot of reasons, notto mention that we didnt want any competition in the First Class letter stream, and that hidingbehind the monopoly was a convenient way to leave the subject alone. We always argued that themonopoly was necessary to fulfill our mission and to provide an economically sound postalsystem that could afford to deliver letters between any two points in the countryno matter howremote. Unfortunately for us and the consumer, our head-in-the-sand strategy also inhibited thePostal Service from seeking out innovation, moving into new and profitable markets, andplanning for the substitution of other technologies for physical mail.

Changing Markets & Competition: The High Price of Ignoring Reality

Nobel Prize winning economist Milton Friedman once said there is no way to justify ourpresent public monopoly of the post office. It may be argued that the carrying of mail is atechnical monopoly and that a government monopoly is the least of evils. Along these lines, onecould perhaps justify a government post office, but not the present law, which makes it illegal foranybody else to carry the mail. If the delivery of mail is a technical monopoly, no one else willbe able to succeed in competition with the government. If it is not, there is no reason why thegovernment should be engaged in it. The only way to find out is to leave other people free toenter.

In its Postal Market 2004Review and Outlook, the UPU points out that in allregions of the world, competition from non-public postal operators is a reality. According to our

survey of postal regulators, only 6% of public operators do not yet face competition from otherpostal operators.

While the USPS is still flexing its monopoly powers, other postal administrations havegiven them up and are becoming trend setters for liberalization. Liberalization is the internationalname for market based postal models. Germanys postal service is now listed on the stockexchange, as is the Dutch Post, which has been liberalized since 1989. The Japanese Post isexpected to be completely privatized in 2007. New Zealand and Sweden have had privatizedposts for years. Great Britain is continuing to refine its liberalization of its post. China is listingits Parcel Service Company for public investment.

Some former leaders of the USPS realize that the time to move out strategically hascome. William J. Henderson (former Postmaster General) in his article, End of the Route: I Ran

the Postal Service; It Should be Privatized, suggested that, employees now realize that theUSPS is threatened by technological change, and therefore maybe less resistant to change.

Rick Geddes book, Saving the Mail, presents a compelling elaboration of Friedmansargument against the postal monopoly: Many of the old arguments were never truly valid, asliberalizations around the world and economic research has shown, and some of them have beensuperceded by technology. In his later chapter, Wall Street analyst Chris Kwak takes up the sameargument and adds real urgency and some intriguing twists.


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USPS: Will It Be Challenges or Opportunities?

The USPS stands at an historic intersection. Geddes believes that the postal service hasachieved a number of the goals of postal reorganization, including, but not limited to,improvements in productivity, elimination of direct subsidies, diminishment of directcongressional control, and mail users paying more of the costs. On the negative side, the Postal

Service has not protected the taxpayers initial equity, maintained wages comparable to privateindustry, nor eliminated political influence over the service. In his (2003) summation, Geddesstates, Further reform of the U.S. Postal Service is timely. The Postal Service is losingsubstantial amounts of money, while rates are rising rapidly.

The nature of any reform, how quickly they take place, and the strategic modeling thataccompanies them will be the challenge that identifies whether or not there is a window ofopportunity currently available to the U.S. Postal Service. Geddes says that once those criticalinstitutional reforms are in place, the Postal Rate Commission can gradually reduce the scope ofthe Postal Services monopoly by contracting the size of the reserved area. The contractionwould allow competition to be introduced steadily but slowly and thus build confidence in themarkets ability to provide delivery of letter mail.

While I can appreciate Geddes cautious optimism, I can also appreciate that the world ischanging quickly enough that time is not favoring the USPS. In fact, if the substitution of emailfor physical mail continues at the estimated rates, and the USPS fails to reinvent itself to takeadvantage of those technologies, its challenges will continue to be challenges rather thanopportunities. And if the USPS does not fully grasp the demands of mail recipients to receive, inelectronic form, even mail that began as paper (of which more is discussed in the section entitledWill Postal Mail Eventually Give Way to the Internet?), it will only fall farther behind.

Some Countries Already Playing Leapfrog

It is always interesting, if not critically important, to take a look outside the United States

and see what other countries posts are doing in response to changing dynamics. For example, weincreasingly see some of the trendsetting posts using vertical and horizontal integration strategiesto allow them to own and manage the external physical distribution services as well as to connectto electronic document management systems within organizations. Without strategic inhibition,they are creating a supplier network that manages all of the communications needs of customers.These strategies require the posts to add to their offerings traditionally mail-aligned services, suchas mail pre-sorting and international 3rd-party logistics management, plus non-traditional servicessuch as document scanning, storing and destruction services, remittance processing, and printmanagement. Some of these foreign posts are eyeing a market in the United States where theUSPS has done little to shape the future by developing strategic initiatives that blend technologywith their traditional physical distribution product.

Around the world we also see examples of posts that are struggling to keep up with new

economic growth. Some countries in the Arab World, for example, do not have mail delivery tohouseholds and businesses. Their citizens are required to travel to their local post office to pickup their mail (by contrast 15% of American households use a PO Box). Saudi Post and Microsoftrecently announced an undertaking in which Microsoft will build the new web presence for SaudiPost, and one of the features they are considering is an email notification service to let citizensknow when mail has arrived for them, so they can know that its time to come down and pick uptheir mail.


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Vietnam is another example of a country among several in Asia with a rapidlygrowing economy and a post office that is struggling to keep up its investment in automation inorder to meet the demand. As new businesses launch and existing businesses grow, mail volumenaturally increases. Countries like Vietnam are faced with two options. They can invest in thesame generation of technology that the industrialized countries have been using for the past fourdecades. Or, they can make the leap to a more scalable and cost effective next-generation

infrastructure, such as Michael Miles describes in his chapter on MegaSorters, and enjoysubstantially better worker productivity much sooner than the industrialized countries could getthere. They can do this because they have the opportunity to take a fresh mindset to theirautomation needs. Historically, once a post picks its automation platform, it tends to stick with itbecause it has gained institutional comfort with the operation and maintenance of that equipment,not to mention long-term contracts and relationships with suppliers.

In general, smaller countries and those in northern latitudes are the most attuned toautomation advantages, and, given that they do not enjoy the scale economics of a La Poste or aDeutsche Post, they are always seeking to make every possible improvement to their productivity.Yet they must remain competitive in a much more open market. Northern countries like Swedenand Estonia have the additional concern that sending out their carriers in the middle of brutalwinter snow and ice storms is a lot more costly (and riskier to employees) than during thesummer months, and so anything that can be shifted to an electronic delivery would be a blessing.Even something as simple as having a convenient electronic means of letting the carrier knowthat a family is on vacation and therefore their house can be skipped over would incrementallyreduce their costs of operations. These countries have been more aggressive in adoptingelectronic services than countries to their south where the weather is less to prone to tax theirproductivity figures.

Why Should We Pay Attention to Postal Transformation?

The transformations that are taking place in the world of posts will set the stage for themodels that will replace simple physical distribution of the mail with new technologies. The

connectivity of traditional mail to document management and enterprise content managementtechnologies will drive significant markets in the future world of posts. Those organizations thathave taken advantage of market opportunities will be far more likely to succeed in a competitiveworld than those that have maintained traditional government regulation and safety.

It is of critical importance to the remaining non-liberalized posts like the USPS toreinvent themselves now, while they can still leverage their national trust brand to extend theirofferings into the enterprise and into the homes of their customer base through the power of theInternet. Failure to do so will most certainly result in loss of monopoly, loss of market share, andloss of opportunity to take advantage of the changes in business processes as well as changes inthe communications markets. In the following chapters my co-authors will further address theneed for, and inevitability of, such a reinvention.


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Appendix A - Supplemental Facts about Postal Organizations

For those readers not intimately familiar with the posts of the world, weve included here someinteresting facts and figures:

The U.S. Postal Service In Perspective

In 2005, the USPS had operating revenues of $69 billion dollars, assets of $25 billiondollars, and 803,000 employees or 1 in every 188 people employed in the United States works forthe USPS. The Postal Service processed mail weighing 12.9 million tons or 15% of the paperproduced in the United States in 2004.

Each day the USPS delivers over 680 million pieces of mail.to 143 million addresses.It delivers more than twice as much mail as it did two decades ago with the same number ofemployees. To put that number in international perspective, the Universal Postal Union reportsthat 1.2 billion pieces of mail are delivered world wide each day putting the USPS at over 50% ofthat volume.

The USPS is the third-largest employer in the United States (after the United StatesDepartment of Defense and Wal-Mart) and operates the largest civilian fleet in the world, with anestimated 214,000 vehicles. In an interview on NPR, a USPS official stated that for every pennyincrease in the national average price of gasoline, the USPS spends an extra $8,000,000 a year tofuel their fleet. This implies that the fleet requires some 800,000,000 gallons of fuel per year, andan estimated fuel budget of $2 billion dollars.

Some International Perspective From the Universal Postal Union

Amongst the industrialized countries, the United States of America has the highest levelof domestic letter-post traffic in the world, with 199 billion items a year. Meanwhile, Japangenerates some 25 billion items, while Germany and Great Britain generate about 21 billion items

each.Amongst the developing countries, the Peoples Republic of China generates the most

letter-post items, more than 23 billion, followed by Brazil with 8.6 billion and India with 7.3billion.

The UPU classifies industrial countries as, Australia, Austria, Belgium, Canada,Denmark, Finland, France, Germany, Great Britain, Greece, Iceland, Ireland, Israel, Italy, Japan,Liechtenstein, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Portugal, San Marino,Spain, Sweden, Switzerland, Vatican, and the USA.

Other size statistics from the UPU: Postal services employ close to 5.5 million people,making the Post one of the largest employers in the world. The industrialized countries employalmost half of all postal employees. The United States of America, with 803,000 employees, and

China with 688,000, have the largest numbers of postal employees in the world. More than665,000 permanent post offices world-wide make the Post one of the most extensive networks onthe planet. Globally, India has the largest number of permanent offices (155,516).

It is clear that the posts are generally one of the largest employers in the country wherethey exist. Internationally they employ almost 6 million people and have a clearly vested interestin the reduction in first class letter volumes and the rise of other communication technologies.How they see themselves individually, and as a group, separates the trend setters from the trendfollowers.


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Appendix B - Selected References

UPU The worldwide postal network in figures

UPU Postal Market 2004Review and Outlook

UPU Postal Market in the Age of Globalization 2002

UPU Strategy ConferenceDubai 2006

USPS USPS Annual Report 2005

USPS USPS Strategic Transformation Plan

Earth Trends (http://earthtrends.wri.or/?Years=2004)

IDS Postal Wire Newsletter, Whats the latest on other Foreign Postals, 2003.

The Global Fight on Postal Markets, Postal Sector Meeting on Multinationals, May 2001.

Tappi (http://www.livingtreepaper.com/about_faq.html)

Cohen, Ferguson, Waller, and Xenakis, Universal Service Without a Monopoly?, Office of Rates, Analysisand Planning, U.S. Postal Rate Commission, November 1999.

Cohen, Robinson, Heehy, Waller and Xenakis, Postal Regulation and Worksharing in the U.S., December2004.

Cohen, Jonsson, Robinson, Selander, Waller and Xenakis, The Impact of Competitive Entry into theSwedish Postal Market.

Rick Geddes. Opportunities for Anticompetitive Behavior in Postal Services, American Enterprise InstituteAEI Online (http://aie.org) (2003)

Rick Geddes. Saving the Mail How to Solve the Problems of the U.S. Postal Service. 2003.

Milton and Rose D. Friedman. Capitalism and Freedom, University of Chicago Press, 1982, P. 29.

Robert Cohen, Matthew Robinson, John Walker & Spyros Xenakis, The Cost of Universal Service in theU.S. and its impact on Competition, 2002. Published in the Proceedings of Wissenschaftliches Institut furKommunikationsdienste GmbH (WIK).

William J. Henderson, End of the Route: I Ran the Postal Service; It Should be Privatized, WashingtonPost.


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Will Postal Mail Eventually Be Delivered onthe Internet?

By Cameron Powell


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Our ancestors loved their papyrus. It felt good and was the only medium aside from stone which was too heavy to carry in which words could be preserved. Papyrus scrolls, and theinformation on them, werent as portable or searchable as what followed them, and disasterrecovery was unheard of. Papyrus scrolls were eventually bound into portable books, and theChinese invention of paper in 105 C.E. transformed the transmission and storage of information.The invention of the book with its bindings in which multiple scrolls could be embedded, and

the resulting tome carried around and, later, by the Chinese, of paper, was a twin revolution ofconvenience and storability, and so papyrus preceded the platypus into unplanned obsolescence.But the book, like the mail itself, invented by the Persians in around 500 B.C.E., is rooted entirelyin the technology of paper, which was invented in 105 C.E.

The Technology of Paper

A distaste for paper and its costs to businesses, the environment, and productivity hasdeveloped in recent decades, and much of those costs are now preventable by advances intechnology.

The future of most mail, in fact, is digital, and delivered on the Internet. Is this another

way of harping on the familiar refrain that email will replace letter mail? Not at all. To be clear,this majority of mail will still begin as paper and be mailed. But its delivery to Internet-enabledresidences and enterprises will be digital, so mail reception and processing will be more likeemail and voice mail. Electronically delivered postal mail is not, like email, a substitute for mail;it is a partial substitute for currently labor-intensive and costly mail delivery. By reducing thecost of receiving paper mail, and eliminating associated downstream costs of handling paper,mail-related companies can actually make substitution by email or fax less attractive.

The Universal Postal Union (UPU) has already affirmed that [t]he postal industry andmarket are about to change decisively and more rapidly than ever before. Global forces are atwork: globalization, liberalization, deregulation, competition and technology; and they arebringing dramatic changes to the way we work, learn, communicate and live.1 These forces, theUPU warns, are unstoppable. This chapter is primarily concerned with elaborating on one of

these forces, technology, which will change the paper-based-mail business in ways the UPU hasnot discussed publicly.

In this chapter, I present arguments for and against receiving paper mail. I examine thetrue and avoidably high costs of handling physical mail: direct, lost-productivity, andenvironmental. I then discuss the benefits of converting paper mail to digital form as early inpapers life cycle as possible: in the mailroom upon delivery. In the next chapter, I then detailthe workings of the first system applicable to all mail, Remote Control Mail online postalmail.

Well Have a Paperless Society When We Have Paperless Toilets

So said the emcee who introduced Document Command at a recent venture capitalconference, and he was right; predictions of a paperless society have not come true. Theres alot to love about paper, and thats true even of those of us who work on reducing the costs ofpaper. As I write this in a coffee shop where a high-tech friend sits across the table from me, Iam left cold by his Sony Reader. I have no interest in storing several hundred books on anelectronic device, even if I can take a single item, the Reader, on a trip, rather than the four books

1 Universal Postal Union, The Post Emerging Issues and Trends, 2002, p. 5.


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and three magazines I might otherwise take with me. Electronic media has no historical oremotional resonance for me. It does not remind me of happy days reading as a young boy, or ofdays I soaked up the sun with a book at an outdoor caf. These memories are deeply engraved,and closely associated with books made ofpaper.

The national posts, mailers, direct mail marketers, printers, and paper manufacturers

(whom well collectively refer to as the Mail Partisans) will patiently explain to you that peoplelike me just like the feel of paper and dont like sitting in front of a computer 16 hours a day.Small children, the elderly, and the poor currently deal better with paper. Although people claimnot to like what Mail Partisans call unsolicited mail, peoples responses to it are profitable forthe mailers.

Pitney Bowes recent study, Mail Preference Study Shows Consumers Clearly PreferMail, reported the findings of a consumer survey commissioned from InternationalCommunications Research (ICR): even in today's electronic world, the majority of consumers(66%) prefer regular mail for documents, letters and messages, up from 62% in 2001. Regularmail, Pitney Bowes, said, continues to be the essential tool in communicating with the consumer.It is universal, convenient, descriptive and perceived as secured, as well as more persuasivethan email. Pitney Bowes also reported that consumers overwhelmingly claimed they would

rather receive new product and service offerings via regular mail vs. e-mail, whether or not theyhave done business with the company sending.2 Consumers are also more likely to discardunopened e-mail (three out of four) than unopened regular mail.

More statistics support the Mail Partisans side of the argument: According to theUSPS Household Diary 2005, mail volume is growing at 3% per year. First Class mail hasdeclined by 20% since 1998, but annual volume goes up by several billion pieces of advertisingmail. per year. The growth in mail volume consistently outpaces population growth and the rateof household formation: there are 145 million delivery points, and 1.8 million new deliverypoints are added each year.

The USPS Household Diary 2005 says 96% of all mail is generated by businesses, 80%of which is received at home, and 4% is generated by households. Mail has become by, of, and

for the corporation; it just so happens that much of that mail is mailed by that corporation toindividuals. Here is our first hint of what may be delicately called the lack of alignment of theinterests of the corporate mailers and the residential mail recipients.

The Case against Paper Mail

In March 2000, the Postmaster General and CEO of the USPS was moved to proclaim aNew Golden Age of Mail and to report that he had delivered on his promise to keep the mailrelevant.3 Only a few months later, he reported the sobering trends that First Class mail wasnot growing at historical rates, that consolidation of multiple mail pieces into one envelope wasbecoming common, and that electronic banking and payments were growing.4 His dual anddueling opinions well represent the ambivalence and uncertainty our society is feeling aboutpaper-based mail.

2 Perhaps a subtle and artfully diplomatic reference meaning whether solicited or not.3 The Post Office, Annual Report, 1999-2000, HMSO London, Chairmans Review.

4 William J. Henderson, USPS Faces Sobering Trends, statement to the Fall 2000 National Postal Forum,at Anaheim, CA, reported in dmnews.com, Sept. 12, 2000.


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The first counter-argument to the Mail Partisans concerns unsolicited mail known ashard spam and junk mail. Ill then discuss the costs of delivering other unwanted mail (notnecessarily unsolicited, but not wanted at the time of receipt) and even wanted mail, particularlyin the enterprise context.

The High Costs of Hard Spam: Unsolicited Mail and the Waning Mail Moment

Studies show that the so-called Mail Moment, the degree of delight that a mail recipientexperiences upon reaching into her mailbox, has been declining for decades and is at an all-timelow. For more households every year, mailboxes are devoid of personal First Class mail andstuffed with bills and unwelcome Standard Mail. How can this be consistent with the MailPartisans data?

Pitney Bowes consumer survey, like studies of the Mail Moment, all suffer from thesame defect: they ask consumers for their opinions and self-reports about their mail behavior,which are far less accurate and reliable than actual observations oftheir behavior. Indeed, whenwe observe actual behavior, the statistics are less comforting: consumers simply do not respondto over 99% of all prospecting advertising mail. (The tracking capability of the Internet permits

us to discover what people do with their mail if that mail is received online, and users can beasked questions about why they are shredding or recycling pieces unopened. See Natalee Roanschapter in this book). Response rates to direct mail prospecting campaigns have sunk well below1%. In some studies, response rates to email spam were actually higher.

The environmental costs of unsolicited mail are higher than spams, and disposal coststime and money. The cost of dealing with unsolicited mail is arguably far higher than the cost ofdealing with unsolicited email.

While estimates of the cost of email to corporations vary widely, Nucleus Researchreported in June 2004 that electronic spam, at that time,5 cost companies $1934 per employee peryear. The true number is (or was, in the study) probably lower,6 but if it were even $50,companies would still have reason to expend significant time and money to block it. Suchestimates are useful, but, once again, observable behavior is the best index of the pain of spam.The market itself is perhaps a more accurate index of the costs borne by companies: spam isconsidered such a nuisance that the desire for its prevention spawned a $5 billion dollar industry.

In 2002, spam accounted for about 10% of email traffic; a year later, 60%. It was bannedin 2003, and many consumers sensibly ask why spam has been banned while direct mail remainslegal. Rick Geddes might answer them as follows: mail, unlike email, has benefitted from amore powerful and deeply entrenched political lobby. Losers include the privacy lobby, whichhas lost out year after year to the Mail Partisans argument: Because printed mailers represent asignificant cost to senders as opposed to emails that represent no cost economics assure thatmarketers dont overly communicate to disinterested targets, and therefore we do not need tolegislate.

5 Spam had doubled in the two years between the June 2004 study and study only two years earlier, and the amount ofspam has only continued to increase since 2004.

6 Nucleus claimed the figure was conservative because it did not include the dollar expense of IT personnel,software, CPU hardware, and bandwidth hogged by spam. However, the study also estimated that each of the 29spam emails per day (in 2003) took away an unexplained 30 seconds of employee productivity. This number is perhapssupportable if it is attempting to take into account the fully-burdened costs of all employee time devoted to email, fromIT SWAT teams to administrative assistants.


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Pitney Bowes, in the Mail Preference Study, points out that [c]onsumers are becomingmore and more inundated by unsolicited new product announcements, sales pitches and productofferings through multiple channels, including e-mail, mail, and telemarketing. (Emphasesadded). But in one of those channels, telemarketing, there is an easy and effective way to opt out the Do Not Call Registry. And email appeals to consumers have become highly regulated. TheDMAs opt-out, by contrast, is largely unknown, unwieldy, and ineffective.7

This is notan argument that direct mail become outlawed or even regulated. It is simplyto say that the industry cannot afford to ignore the fact that for the man on the street, direct mailoccupies an unenviable position.

Direct mail is not faring as well as weve been led to believe. Let us not confuse a lackof political will on the part of Congress with the sentiments of the recipients of direct mail. Themarket, reflecting consumer demand and new technology, can do what political will cannot, asdiscussed further in Natalee Roans section on the revolutionary new concept of UntargetMarketing.

Indeed, in our research at Remote Control Mail, we have found no more emotionallycharged issue among recipients of mail, nothing that has a greater hold on their imaginations andpassions, than the question of how to forever stop the delivery of mail they dont want. As onecustomer put it, No one calls spam Standard Email. Its just junk. We hear stories ofStandard Mail recipients who have stuffed mail and worse into bulging reply-paid envelopes andsent it all back to the unfortunate direct mailer. Postal carriers have lost their jobs because theydefied company rules and heeded patrons demands not to deliver unsolicited advertising mail tothem.

These people are angry. They are real believers. So far, they have lacked onlytechnology to effect their will. That technology is now here. Once paper mail is digitized fordelivery, and the sender read by optical character recognition, an automatic rule or the pointingand clicking of a recipient are all it takes to place the recipient on a suppression file. In TheNext Inflection Point in Direct Marketing, Natalee Roan will explain how direct mailers canactually use technology and the express preferences of recipients to mail more profitably and

effectively, with less dissatisfaction from recipients. But next, some of the hard costs of receivingmail in paper form.

Paper Costs a Lot to Move, and up to93% of Mail is Not Wanted as Paper

A great deal of mail is not unsolicited, but it is unwanted. Think of the email you get:how many subscriptions do you have to emails that you guiltily delete as soon as they arrive?Mail has similar tendencies. We wanted it once, but we dont want it right now. For example, wemay like getting our favorite rock-climbing catalogs, but in Seattle we dont climb much inJanuary. Similarly, we like buying gifts for our wives and girlfriends from Victorias Secret, butwe just want the catalogs to arrive before their birthdays or our anniversaries, and not once aweek.

7 Aside from costing $5, the DMA opt-out lasts for five years and follows only the address submitted (if you move, youstart over). And worst of all, it presents a false choice, given the capabilities of technology, of receiving all direct mailor none, with nothing in between. Because most consumers do want some direct mail, all or nothing is noimprovement on all, and thats no choice at all.


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Unwanted mail is thus a larger category that includes unsolicited mail. Some mail maybe wanted but not inphysical form. We might call the entire category Physically Unwanted Mail.How much of all mail is physically unwanted, and any delivery of it wasted? Below are thechoices made by our customers8 when presented with mere images of the outside of their mail:

If you allow users choice, they will prevent you from delivering, and facilitate theecologically responsible recycling of, a whopping 52% of their mail without even opening it.Theyll ask that:

52% of mail be immediately recycled or shredded unopened. 44% be scanned. 4% be delivered in physical form.

Of the 44% of mail pieces whose contents are scanned, there is still a physical piece todeal with. Heres what users start doing:

8 A quick note about the customer base reflected in this graph: these users span 80 countries, but all have a mailreception address in the United States. Users range from residential households and major corporations to militarypersonnel, expatriates and foreign-based businesses, and baby boomer lifestyle consumers who live in an RV full timeor have multiple homes. To be sure, these are segments that for the most part are highly targeted by direct mailers they are well educated, travel frequently, earn high incomes, and have a lot of disposable income. Since most of theseusers have only signed up for service in recent months (Remote Control Mail was launched only in the summer of2006) many of them have not given mailers the opportunity to catch up with their new address. Most of the mailreceived at their RCM accounts arrived with a yellow USPS forwarding sticker, or came from a sender theyvecontacted directly to inform of their new mailing address.


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In other words, only 7% of all pieces are ever delivered in physical form, while 93% ofall mail pieces are merely shredded, recycled, or scanned 93% are unwanted in paper form atall. With those figures in mind, lets look at what most organizations spend unnecessarily today.

Delivering mail physically is expensive. According to two studies, one by IDC and oneby the accounting firm Coopers & Lybrand, the cost of delivering an envelope to an enterprise is

between $.35 and $1.00. But if 85% of all mail delivered to named employees is not wanted inphysical form, you need only multiply the number of pieces of mail that your named employeesreceive by 85% and then again by a conservative $.50 to get a sense of the daily waste incurredby your company in delivery alone of employee mail thats unwanted in paper form.

Enterprises also receive process mail e.g. invoices, contracts, and checks which canbe handled the same way every time. We call this Automatic Rules Mail. TheAssociation forInformation and Image Management (AIIM) never tires of reminding people how expensive paperis. For example, the lifecycle cost of pushing paper is over $20per document(something thatwas once a piece of mail). Coopers & Lybrand estimated this cost at $50 per document withpaper filing efforts costing $20, looking for lost paper documents costing $120, and reproducinglost paper documents costing $220.

We can identify the following hard costs of mail, some applicable to personal mail butmost incurred by any organization that receives mail:

Taking delivery Housing all organization-based recipients at their own permanent desks with filing

cabinets including housing recipients who could be fully virtual if only they had a wayof timely and reliably receiving their mail

Hand-sorting mail to the mail stop (or, in certain cases, machine sorting using costlyequipment)

Carting mail around an office Loading mail into trucks or vans Truck mail across a corporate campus Paying fees under a private express statute for crossing a public street while trucking mail

across a corporate campus Hand-casing paper mail at mail stop Filing opened mail away Locating again, or losing and trying to locate (AIIM claims that employees spend 6% of

their time searching for lost paper documents) paper documents that were once mail Retrieving paper documents Copying paper documents Faxing paper documents Opening the mail for someone who is traveling and reading by phone, copying, or faxing

the contents elsewhere Sharing the mails contents with others (by courier, fax, copy, scanning and emailing,

etc.) Storing with filing systems or at expensive off-site archives Paying to haul away as trash (including by households) Destroying mail Transporting mail between almost every step


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Paper Mail: Often Costly, Inconvenient, and a Dampener on Productivity

Less quantifiable, but no less real, are the lost-productivityand opportunity costs exactedfrom an organization when only two of the three major communications media can be checkedand managed either automatically or remotely anywhere, anytime.

From delivery to destruction, paper mail unnecessarily touches many non-mailroomemployees: receptionists, administrative assistants, secretaries, paralegals, janitors, colleagues.The complexity of the waste is illustrated in the following example.

Lets say a legal executive, Evelyn La Post, attends a week-long international postalconvention. While walking the floor of the exhibits and in the hallways between seminars withtitles like The Future of Mail, she is able to stay current with two of the three major streams ofcommunications in business today: she can receive phone calls, voice mails, and text messageson her cell phone, and she can receive email and efaxes by computer or phone. The result? Shecan also answer andreturn phone calls and emails, and business continues to get done.

Lost Opportunities, Lower Recipient Productivity

But anything sent and delivered via paper-based mail is consigned to one of two lessdesirable fates. The first fate is that the messages in the mail are not acted upon at all, and not forat leasta week, because the pile of mail at the office will not be diminished immediately upon herreturn, but rather will take several days or more. In a 48-week working year, then, profitability,growth, and productivity via mail matters are all slowed by over 2% for each week out of theoffice, and countless opportunities and good will are lost as the request for RFP is missed, thephone call from a potential client or customer seeking information is belatedly responded to, andso on. Nucleus Researchs estimate that email spam costs a 3.1% drop in employee productivityis a useful comparable.

Lower Productivity for Other Employees

The other possible fate of the mail that arrives only physically, at the office, is that themessages in them are conveyed to the executive in a manner little improved from that employedby Ben Franklins secretary during his tenure as Ambassador to France. First, several employeessort, cart, and hand-case the mail. Then a well-paid executive assistant with a burdened cost ofbetween $100 and $200 an hour attempts to ascertain for himself which mail is important toEvelyn and which is not, then opens and reads the mail. He then calls Evelyn to leave messagesor has conversations in which he conveys to Evelyn the contents of the mail and receives anydecisions of what to do with it next. Perhaps he then takes the time to deliver it to yet anotheremployee, and so on.

For the rest of their lives, each of the pieces of mail that Evelyn did not order to bethrown away will be moved around, lost, searched for, copied, trucked away, stored, retrieved,stored again, and finally destroyed, all at far higher cost again, $20-50 per document than ifthe pieces of mail had been scanned immediately upon arrival.

It is therefore decidedly not free to receive mail in paper form; it costs, in fact, far moreto receive and later process mail than to send it. Yet most organizations do not track the highcosts of handling incoming paper mail in the same way they set budgets for outgoing mail. Thatmeans most organizations have very little idea what they are spending, and as any businessprocess expert can tell you, if you cant track it, you cant improve it.


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The Environmental Case against Delivery of Mail in Paper Form

The environmental costs of paper mail delivery have become increasingly difficult, andpolitically risky, to dismiss out of hand. A company whose business model consists entirely of aresponse to the demand to stop unsolicited mail begins with the trees:

Unbelievably, we chop down 100,000,000 trees and waste 28 billion gallons of waterevery year producing this stuff. Most of this goes straight to the trash or recycling bin.

Each year, America9 alone dumps into landfills 22 billion pounds of mail. Of the 212billion pieces of mail sent each year, only 16% are recycled, meaning 168 billion pieces becomewaste, filling up and leaching into landfills. (Six billion of those pieces were delivered toaddresses that were no longer valid, and returned to sender.) Of all the materials we recycle inAmerica, the paper of which mail is composed is the least recovered. Paper as a whole isrecycled at a rate of over 50% in most municipalities.

With 10 million cases of identity theft a year, plus new rules from the governmentdemanding all sorts of things be shredded after use, shredding has become an enormous industry

in America, with annual expenditures of $6 billion and growing fast. And yet when weinformally poll office workers, we dont find any who know that shredding paper also destroys itsability to be recycled into new office paper. In fact, most people dont even know that the fiber inpaper that isnt shredded can only be remade into new paper 3 or 4 times before the fibers breakdown too much.

That means that each year, Americans finance the felling of enough trees to make another168 billion pieces of mail that will never be recycled, and billions more that may be recycled intosomething less than new printing paper or office paper. For every ton of paper we do not recycle,we increase the air pollution produced by new paper production by 74%, and water pollution by35%. We also put more toxic ink, formaldehyde and other chemicals in landfills. For every tonof paper we do not recycle, we lose 204 trees and consume 8,190 gallons of oil.

The cost of mail, in trees, oil and gas, landfills, and carbon emissions is becoming amatter of increasing urgency. Just as recycling saves oil, fewer last-mile and last-cubicledeliveries mean lower fuel usage and reduced carbon emissions that contribute to climatechange.

Like the political will that preceded the U.S.s seminal environmental statutes of the early1970s, interest in the environment is once again back on the radar. Corporations, universities,and government agencies at all levels are introducing a dizzying array of serious green initiatives.One of the Universal Postal Unions five prime objectives is environmental sustainability, and ina recent report the UPU noted some leading industry efforts in that direction:

The postal sector ma

earth class mail - send the right message

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