The Digital Transformation of Pitney Bowes

There are many cautionary tales of disruption Kodak and Blockbuster that don’t have particularly happy endings. Company A ignores changing markets, company B swoops in and snatches all their customers, Company A fades into obscurity. But we don’t hear stories about the disrupted becoming the disruptor all too often. Pitney Bowes is one of those rare enterprise companies that saw change coming head-on in their lane and changed direction in time before being upended by it.

Digital transformation is a phrase that is frequently bandied about, but it is serious business that turned the 96-year-old company formerly known for leasing postage meters to an eCommerce powerhouse.

After almost a century of continual success, Pitney Bowes needed to rethink its business strategy to stay ahead of a rapidly evolving marketplace. With disruptive technologies looming, Pitney Bowes looked to reinvent its business to take advantage of the market opportunity in the $40 billion physical and digital commerce category.

Pitney Bowes introduced Commerce Cloud and created a digital business that helps them unlock the vast potential of their digital identify, locate, communicate, ship, and pay capabilities. It represents a huge shift and strategic milestone in the company’s evolution. Aria is proud to help power this digital transformation as Commerce Cloud’s key billing and monetization component. “With Aria, we are able to quickly respond to our customers’ needs in terms of product and service offerings at a speed that was once unthinkable with traditional technology,” said Joseph Schmitt, Vice President and Chief Information Officer of Pitney Bowes.

Pitney Bowes recently spoke with Insigniam Quarterly about its digital transformation and the continued challenges of an analog company going digital.

From Insigniam Quarterly:

Pitney Bowes could have easily been wiped out by the digital revolution. But when Marc Lautenbach was brought on board as president and CEO, he made a commitment to accelerate the transformation of the multibillion-dollar organization into what is now billed as a “global technology company.” It is the stuff of leadership legend, and yet Mr. Lautenbach says the true test of his—and any executive’s—big decision comes in the follow-through.

“Many large organizations tend to employ the same strategies when they pursue change or have change thrust on them by market forces,” he says. “Success is not so much a question of decisions on strategic choice as it is a question of your capability and fortitude to stay on the new course you’ve chosen.”

The transformation process can be challenging, however, with revenues falling in four of the last five years. Even as net income spiked from $143 million in 2013 to $408 million in 2015, revenues fell from $3.9 billion to $3.6 billion during the same period.

Many executives might start doubting their decisions. But Mr. Lautenbach remains steadfast in his mission to make Pitney Bowes a major player in e-commerce.

“We have continually decided to choose the alternative that creates the most long-term value, even if it creates short-term disruptions,” he says. “And in today’s world of the equity markets, that’s something that’s challenging. I think most companies bow to that pressure, and that’s why most companies don’t end up transforming themselves. They make decisions thinking something is the right long-term bet and then, when things start going the wrong way, they don’t have the fortitude to stick with it.”

New Directions

Transformation does not always require wholesale reinvention. As he looked to make Pitney Bowes a relevant digital player, Mr. Lautenbach aimed to build on its core strengths and identity, redefining it for a new context.

The process began by examining the company’s true north—the vision, values and services that define the organization and make it tick. The decisions Mr. Lautenbach made from then on built upon that foundation.

“As you’re thinking about transforming a company, or at least as I thought about transforming Pitney Bowes, you try to realize those cores, those gems that you have that you can pivot off of to create that next chapter,” he told Fortune. “We have been and continue to be a mail company, but there’s other germs of that business that we can begin to create our new future.”

Under Mr. Lautenbach, for example, Pitney Bowes added an entirely new but related business unit focused on digital tools and services, including mobile apps, that now delivers more than $1 billion of annual e-commerce business. Online marketplace eBay, for one, uses Pitney Bowes software to automatically determine where any given package can be shipped internationally and how much the duty on that item will cost. Another piece of Pitney Bowes software pinpoints the locations of 1.2 billion users of social media for the likes of Twitter, Zillow and other social platforms.

“To a degree, decision-making and strategies are the easiest part of the process. How you communicate the decisions, how you manage the change, how you drive those decisions, is the difficult part.”

Tell a Good Story

Mr. Lautenbach’s decisions for both revamping the legacy business and building up new business have been met with trepidation by some in the organization who could not see past the upheaval these developments caused. And that ties back to his point about executive decision-making: Making the right call is just the start. Executives must follow through to overcome any opposition and make the new future seem like the only one.

“To a degree, decision-making and strategies are the easiest part of the process,” he says. “How you communicate the decisions, how you manage the change, how you drive those decisions, is the difficult part.”

Mr. Lautenbach says his secret to success is storytelling. “We remind people over and over again why we’ve made this decision and why we are making these changes, because they will forget and will just focus on the disruption,” he says.

At the executive level, these conversations are a regularly occurring part of the process. Every 90 days, Mr. Lautenbach meets with his executive team to share what has happened during that period and make a plan for what the next 90 days should look like. At first, he says, attendees tempered their comments. Eventually, however, after Mr. Lautenbach showed that these meetings were a safe space to share the good and the bad, the team started opening up. And not just to him. “All of a sudden, they’re telling the stories to one another,” he says.

Mr. Lautenbach, however, is not naive enough to believe that storytelling will bring everyone on board in every instance. “You also have to resign yourself that not everyone is going to buy into the changes that you are making,” he says.

But in the face of that sharp disagreement, it is still possible to garner respect by showing a decision was not impulsive, but rather the result of real thought.

“Even if you think you’re making the right decision, putting down on a piece of paper all the alternatives at a very simple level, with the pros and cons, is a healthy thing to do to make sure you don’t overlook a particular option,” he says.

That kind of process helps executives communicate the rationale behind their decisions, Mr. Lautenbach says. The reply from employees may be, “Wow, that makes sense.” Or it may be, “No, you missed an alternative or you didn’t judge the pros and cons correctly.” Either way, talking people through a sound explanation helps builds trust and buy-in.

“That’s a problem with people who are instinctive about making decisions,” Mr. Lautenbach says. “It’s hard for them to get people to follow because they can’t really explain how they arrived at their decisions. If you can be structured in how you make decisions and transparent about why you made the decision you did, that allows people to follow the logic.”

Read the full story at Insigniam Quarterly