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The Innovator's Dilemma: Q&A with John Schloff of Pitney Bowes

By October 27, 2008Article

When confronted by transformative disruptive technology such as Cloud, how can senior business and IT executives identify opportunities to leverage technology to create new business value? As part of Saugatuck Technology’s ongoing “Executive Insights” research program, we recently talked with John Schloff, VP Global Strategy at Pitney Bowes about how an industry leader such as Pitney Bowes embraces disruptive technology to create, innovate, and extend a major business brand in the Cloud.
As Schloff explains, this has included evolving some of its current offerings, as well as creating new Cloud-native solutions that exploit its inherent value capabilities. In particular, Schloff highlights some of the planning and key decision making around the launch of, a new digital mail communications platform that it is launching that empowers consumers to receive, view, organize, and manage bills, statements, direct marketing, catalogs, coupons and other content.
More importantly, this interview provides a window into the transformative impact that the Cloud is having on all traditional business brands, not only in helping them lower costs and for internal process improvement, but also as an important platform that is helping them create competitive advantage and drive new revenue streams. readers should be aware that this OpEd piece is an edited-down version of a much longer two-part interview that was published through Saugatuck’s “Cloud Leadership Strategies” research service on April 29, 2011. For readers interested in gaining access to the full interview, details are provided at the end of this article.
Bill McNee: John, I am so glad we could connect today to have you give us an update on what you have been up to vis-à-vis the Cloud and the launch of Volly. It is probably a good idea to give our readers some context to our business relationship, as Saugatuck has been working with Pitney Bowes (PB) across several dimensions over the past few years. This includes working with the Business Insight (PBBI) division as it began its ISV to SaaS transition, as well as working with the office of the CIO as it concerns providing some decision support around some shorter- and longer-term Cloud business solution investments.
But the work that brought us together was of a different nature – and focuses on some very strategic business issues and directions that you are helping to shape. As I recall, the specific consulting engagement we did for you related to helping PB conceptualize then test some new product concepts around Cloud-enabled document management business services for small businesses.
John Schloff: Yes, hearing this reminds me about when we first started working together – probably two years ago. At the time, in my strategy role, my colleagues and I were seeing that we needed to accelerate our path towards digital communications as a complement to physical communications.
As you know, essentially what Pitney Bowes does across our various businesses is help our customers communicate with their customers. Traditionally we did that with a meter machine that is a critical tool to move physical communications. This is a very profitable business, but as communications continue to shift, we recognized a while ago that we had to invest more aggressively to help our customers talk to their customers through digital channels as well.
Pitney Bowes actually has been doing this for a number of years. We have been working in the field of customer communications management, which is really about understanding all aspects of creating and delivering information to your customers. These include sourcing, tuning and refining data, pouring that data into a use engines (perhaps a document composition tool), managing the output from these engines in terms of formats and flows, and actually producing physical or digital communications from these processes. There are also critical aspects of customer and marketing analytics and reporting.
Bill McNee: How has your product strategy and go-to-market thinking evolved more recently?
John Schloff: A couple years ago we heard about this thing called the Cloud, and we thought that we better figure out, and begin to migrate, some of these “use cases” around our products today to take advantage of this new technology. From the strategy perspective, we thought about how to provide service to our customers in a different way, using a Cloud platform instead of a dedicated machine. We incubated some [solutions]. Several made it and some were cut.
For example, our latest postage meter is in fact a Cloud device. It is a piece of hardware that you run envelopes through in an automated fashion that lays down postage, but it is all connected to the Cloud. All of the software that pushes down to the machine now comes down through the Cloud along with different applications. When we want to load a new application to the machine, it comes down through the Cloud. When rates get updated, that all gets pushed down from the Cloud to thousands of customer sites globally. There have been huge gains for us in taking what used to be a connected product (but not connected in this fashion), and now connecting it up into the Cloud.
Bill McNee: I understand you are working a fully digital means of what you are referring to as Customer Communications Management called Volly. Tell us about it.
John Schloff: With Volly, we looked at mail from a totally digital perspective. What would that mean? What would it offer? What could we give the consumer? What would it mean to the mailer?
We’ve been working on Volly for about 18 months. Here is the easiest way to think about Volly. Take your business hat off, and put on your consumer hat. It is tomorrow morning, and you are walking down the end of the driveway – and think through that experience. The first thing to think about is the mailbox itself. It is really a secure consolidator of information; you open that mailbox and what is in there? Typically there are bills, statements, coupons, catalogs, and promotional mail. There’s a whole bunch of information – and interestingly enough – the mailbox is generally very secure.
So we began to think about whether we could replicate the role that the mailbox plays in a totally digital environment. What if we could create a secure consolidator of information that is totally digital?
Another conceptual step we focused on was the role mail plays in a consumer’s life. We did a lot of consumer research on this, and found a number of different roles. Mail reminds us to pay bills and keeps us organized. Mail also helps us be consumers. It helps us learn about new products and services, often provides us discounts on those goods and services, and then helps us shop for them. What we intended Volly to do was to replicate all those different roles.
But there is another dimension that we had to consider, and that is the mailers. Mailers have two big challenges: managing costs, and maintaining the relationships they already have with consumers. Balancing those twin pressures is really hard for mailers. There are things they can do to push their costs down, but those steps can harm customer relationships. So as you think about where business opportunities often pop, it is at the convergence of different dynamics in a marketplace. And this is where Volly comes in.
Bill McNee: Great explanation. You’re providing a secure [digital mailbox] environment, but how are you going to gate it so that it still maintains some level of public access?
John Schloff: We did a lot of research on this. We had people come in with stacks of mail, and we queried them about their process at home. It is amazing the different processes that exist around . . . mail workflow.
We then showed them the concept of a single consolidated view into all of their bills and statements, all with a single sign-on. And we then asked them how that would contrast with their current bill and statement receipt, manage and pay process.
We found some stark contrasts. Today, most people receive and pay bills through an array of sources and practices, many requiring them to go to different web sites. There is real frustration with having to remember where they have to go, for what bills, which username they have on a particular site, which password, etc. So a major play here is the consolidation. For consumers, simplicity equals real value.
Bill McNee: Would there be a place for some sort of predictive radar for consumers?
John Schloff: Yes, consumers were introduced to a concept by which they could customize reminders for different bills. Perhaps they want an alert that their mortgage is due in three days – maybe delivered on their mobile phone. Or, they might want that notification through Facebook. We received very positive feedback on this concept.
Then we shared another concept that we’re working on
. . . where consumers control what promotional mail they receive. Imagine you could raise your hand and say, “You know what? I want promotional mail from this category or this brand, and I want coupons from these organizations.” What if all of that came in and was organized intuitively for you, and what if we could use the same alert platform to remind you before a coupon expires? The feedback surprised us; it was even greater than the interest in the bill, statement and payment platform for some segments.
We also asked how they would feel if we could bring those services together under a single user experience and also give them the ability to tag, store and retrieve mail pieces the way they want, and to also be able to upload critical household documents, such as wills, insurance policies. What would that be like? Well, we received off-the-charts positive feedback.
Originally, we were going to roll this out in phases, starting with the bill, statement and payment platform, then follow with the shopping and coupon platform, and then we were going to follow with the household management tools. However, the feedback from the consumers was so strong on the whole integrated concept that we changed our positioning and roadmap so that we are going to deliver the breadth of this as a single lifestyle offering.
So that is what Volly turned out to be, and that is what we [announced in January 2011 and] are launching [in the Fall of 2011].
Bill McNee: What’s your biggest business challenge as you launch Volly?
John Schloff: The biggest business challenge we have is getting density in the mailbox, and this is why we have initially focused on the mailers. By “density,” I mean getting a large percent of mail pieces in the Volly platform. Density is what will determine success in this market. It is what brings real value to the consumer.
I think the user interface will be number two. We will always be testing and refining to ensure an optimal experience for our consumers. Third will be to find the right balance between breadth and depth of solutions offered. Depth of value will be important to both consumer adoption and consumer retention. It is one thing to deliver coupons. But why not go further and create an intuitive personalized way to organize them? Why not remind consumers before coupons expire? Let’s step out a little further and imagine how coupons can be linked to shopping patterns or tied to location-specific elements.
Blll McNee: John, what would be some of the lessons learned as you have journeyed through the process of concept testing, building the offering, and now getting ready to go to market?
John Schloff: In a new white space offering like this, there is so much you don’t know. You have to keep your ears to the ground, and you have to be very agile in responding to what you hear. The old way of doing product development has been very structured and routine and isn’t going to work [in the Cloud].
[Further,] the whole concept of agility that is required to get new businesses up can be dealt with so much easier in the Cloud, both in terms of the underlying technology and product development. It is way easier to bootstrap a new offering by leveraging the inherent pay as you go pricing characteristic of the Cloud.
Key Takeaways
As Clayton Christensen made famous in “The Innovator’s Dilemma,” once-leading brands in every industry have fallen down from their high perches due to disruptive innovations. Simpler, more accessible products and services, often with lower margins, are usually responsible. Here are some key best practices and lessons learned at Pitney Bowes as John Schloff and others have encountered the reality of the Cloud:

  • [Understand] the nature of the disruptive technology and how to rethink the current business value proposition in the terms the new technology dictates. With the shift to e-mail and now the Cloud, Pitney was faced with what Schloff termed “embracing non-physical means of communication.”
  • [Understand] how to extend and preserve value from the traditional value proposition. Schloff and associates recognized that moving the postage meter, Pitney Bowes’ cash cow, to the Cloud was the first step, re-conceiving the postage meter as a Cloud device [connected to the Cloud for rates, new software and for capturing usage data].
  • Redefine the core business proposition in terms that are native to the technology itself. Here Pitney Bowes reconceived their value in Cloud terms by introducing Volly as a specialized mail service – a consolidator of digital information that is both secure and private.
  • Understand the value proposition clearly from the user’s point of view, in order to hone its design and implementation to ensure the value provided will be appreciated. At Pitney Bowes this was accomplished through observing and listening to both the potential consumer and to the mailer and by using focus groups as an extended surrogate for the consumer.William S. McNee is Founder and CEO of Saugatuck Technology. Mike West is a Vice President and Distinguished Analyst with Saugatuck.Saugatuck Technology’s Executive Insights on the Cloud research program provides first-hand accounts of how senior Business and IT executives have realized value from the Cloud. It is part of a newly launched subscription research and advisory service from Saugatuck called Cloud Leadership Strategies.
    To access the full transcript and insights associated with this in-depth interview, including the full list of key takeaways and lessons learned, go to:

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