Deutsche Post CEO Frank Appel presents Strategy 201503/11/2009, 11:30 AM CET
- New name Deutsche Post DHL underscores two-pillar strategy based on mail and logistics
- MAIL division to focus on quality and new products in electronic communications
- DHL to strengthen cross-divisional collaboration
- Mid-term growth of 1-2 percentage points above market for all business units targeted
- Leadership culture underpinned by new incentive system
Bonn: Frank Appel, Chief Executive Officer of Deutsche Post World Net, today unveiled his Strategy 2015 aimed at making the company fit for the future. The new Deutsche Post DHL will rest on two pillars: an integrated international logistics company focusing on quality and customer service and a strong mail business with a clear commitment to the universal service obligation in Germany – complemented by new value-added electronic services. The new name represents clear structures, increased cooperation and mobility within the Group and integrated solutions for customers.
“We have to improve if we want to maintain long-term relationships with our employees, customers and shareholders. And we can improve tremendously if we systematically address our weaknesses,” Frank Appel said in describing his vision for the Group. “Our goal is to remain ‘Die Post für Deutschland’ as well as ‘The logistics company for the world.’” Following the aggressive expansion phase of the recent years, the new focus will help unlock the company’s potential to increase organic growth, Appel said. “We do not have to reinvent the Group. We just have to make more out of what we have – in the interest of our own business and our responsibility for the world in which we, the world’s leading logistics service provider, operate.“
In essence, the new Group strategy provides for a two-tier structure with MAIL and DHL as well as tighter links between the three DHL divisions, the latter being facilitated by the creation of an additional overarching executive committee. Other steps will be the simplification of planning processes, an even more intense focus on the shifting needs of customers and the reinforcement of Frank Appel’s open leadership culture through a new incentive system that stresses performance and respectful interaction among employees.
Strategy 2015 is aimed at defending the Group’s strong position in the German mail market and raising profitability at DHL. In the mid term, all Corporate Divisions should generate annual organic growth of 1-2 percentage points above the market average. In addition, all divisions should rank in the top quarter of their peer groups regarding profitability, cash conversion and return on capital. In light of the current economic crisis, the Group in the short term aims to maintain a solid cash position and reduce costs further. A key component of this effort will be the IndEx program announced in November as one of the elements of the Roadmap to Value capital markets program. IndEx is aimed at generating savings of at least 1 billion euros in non-operating costs by the end of 2010. Reaching the financial targets of Strategy 2015 will contribute to a satisfactory shareholder return in the mid term.
The new Group strategy is the result of a detailed analysis of its shortcomings and potential. This analysis, to which all corporate divisions contributed in recent months, determined that the steps taken by the First Choice and Roadmap to Value initiatives are indeed having an impact, but that they do not go far enough. In particular, the individual business units should work more closely together. The DHL divisions could markedly increase revenue by responding to customer requests in a concerted effort. In MAIL, significant growth potential was identified in dialog marketing, electronic communication and parcel.
The following is a detailed overview of the measures and programs of Strategy 2015:
- The collaboration between the DHL divisions will be accelerated by a Executive Committee DHL whose function will be to facilitate cooperation among the three DHL divisions GLOBAL FORWARDING / FREIGHT, EXPRESS and SUPPLY CHAIN in the interest of the customer.
- In a step to improve customer orientation, specific target sectors such as life sciences, technology or automotive will be promoted under a dedicated sector management.
- The driver of innovative logistics solutions will be a new organizational unit called “DHL Solutions & Innovation.” In this central function – extending across DHL – all previous innovation activities will be bundled in order to offer customer-specific solutions with the help of new technologies. This central function will report directly to the CEO.
MAIL – Deutsche Post
To recalibrate the business in response to decreasing volume and increasing digitalization, the MAIL division will refocus its core business while retaining the high quality level enjoyed by German customers. In the process, the company will primarily concentrate on the integration of physical and digital solutions in dialog marketing. It will also introduce an online letter to provide secure electronic communications as well as integrated sender and recipient services at Parcel Germany. To meet these objectives, the MAIL division plans to step up investments in coming years and may also consider partnerships. The ultimate goal is to strengthen the company’s unique position as an integrated service provider for secure and reliable communications.
A new guiding principle based on the idea of “Respect and Results” is designed to markedly increase the level of employee involvement and commitment. Openness and responsibility are central to this end. To promote communication among the Group’s divisions, future executives will need cross-divisional experience. A new incentive system is designed to underscore performance differences and reward extraordinary contributions.
Results planning and review
The dialog between the Group’s headquarters and the business units will be simplified and more focused. The finance and strategy areas will work more closely together to help the Corporate Board set group wide targets that will be broken down to the individual units. The financial planning process will be streamlined in terms of time, and the results will be reviewed more systematically.
Strategic programs and initiatives
Current strategic initiatives will fit seamlessly into the Group’s new direction. This applies in particular to First Choice, the successful program to increase customer loyalty that was introduced in 2007. The capital markets program Roadmap to Value aimed at generating cash and increasing profitability will also be vigorously pursued further. In the area of corporate social responsibility, the Group will concentrate on the climate protection program GoGreen, DHL’s Disaster Response Teams as well as education and training programs such as Teach First.
Frank Appel concluded:
“Strategy 2015 is the right tool to get the engines of this company burning and tap the potential that is locked inside. At the end of the day, it’s about connecting our businesses in such a way that we simplify the lives of our customers.”