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Strategic Business Case 2017-2022

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Strategic Business Case 2017-2022 GD 2018/0087 ISLE OF MAN ISLE OF MAN 1ST £1.00 THORNTON AND BREGAZZI 2018 THORNTON AND BREGAZZI 2018 ISLE OF MAN ROW THORNTON AND BREGAZZI 2018 Strategic Business Case 2017-2022 REF-V5 - TO BE SUBMITTED WITH TYNWALD PAPER DEC 18 Who we are Our Mission: “To provide value added postal, distribution and digital services for our customers and make a positive contribution to the Manx economy.” Our Vision: “Working together to protect the core business, growing profitably and diversifying selectively to the benefit of the Manx economy.” Our Values: • Put our customers first, treating them with respect • Build on our trusted status • Conduct our business with integrity • Protect our customers’ information • Take responsibility for our actions • Treat each other with fairness and respect • Drive innovation and creativity • Succeed together Key Stakeholders: STAKEHOLDER OUR COMMITMENT Our Employees Our people are our most valuable asset and are crucial to the effective delivery of our services Our Customers Our trusted services link people and business worldwide allowing customers to take advantage of our range of physical and digital services that support resident and business service needs Government We provide letters and small package delivery services under the universal service obligation. We complement this with commercial services that traditionally have ensured we remain a self-funding Statutory Board Private Sector We partner with the private sector, delivering services to customers in a commercially viable way Strategic We work with strategic partners (key suppliers, other small postal authorities etc) leveraging Partnerships knowledge, experience and skills to innovate and protect the quality of our service, competing on a fair basis Unions We work with the trade unions, maintain and build collaborative relationships with them to ensure their members’ views are represented Post Offices Sustain viable community services in the areas of the retail network and universal services obligation in a customer focussed, efficient manner iompost.com 2 Our strategies and key objectives: Strategy 1 Work together Objectives; • To develop a modern, engaged and flexible workforce, attracting, developing and rewarding talent • Continue to build and maintain strong stakeholder relationships • Live our values, promoting innovation and a commercial approach Strategy 2 Defend the core business Objectives; • Sustained viable community services in the areas of the retail network and universal services obligation • Use technology, data and new ways of working to improve service, working conditions and service affordability • Continue to be customer value focused, secure and compliant Strategy 3 Diversify selectively and grow profitably, to return the business to a sustainable profit, supporting the local economy and reinvesting into the business Objectives; • Understand customer and market needs and priorities • Develop current and new profitable products and services • Develop digital solutions and services to protect and grow our customer base Programme for Government Theme and policy statements alignment to which our strategy responds: Theme Policy statement Responsible • Demonstrate sustainable public finances with clear recognition of financial targets that Island support Government priorities • Make access to our services more focussed around the needs of our customers • Continue to transform Government Services through the use of digital technology • Deliver against our commitment to reduce carbon emissions Enterprise and • Create an environment that allows businesses to thrive and flourish Opportunity • Maintain our reputation at the forefront of innovation and emerging technologies and Island respond quickly to new business models Inclusive and • We will work together with local authorities and other partners to deliver the right Caring Island services in the right place at the right time, making sure national priorities are funded accordingly iompost.com 3 Contents Strategic Business Case 2017-2022 1. Executive Summary 5 7. Integrated Mailing Solutions 2. Overview 6 7.1 Overview 20 7.2 Dimensions 20 3. Current Structure 6 7.3 Reasons for change 20 4. Corporate Division 7.4 Work together 21 4.1 Overview 7 7.5 Defend the core business 21 4.2 Dimensions 7 7.6 Diversify selectively and grow 21 4.3 Reasons for change 7 profitably 4.4 Working together 8 8. Stamps & Coins 4.5 Defend the core business 9 8.1 Overview 22 4.6 Diversify selectively and grow 9 8.2 Dimensions 22 profitably 8.3 Reasons for change 22 5. Mails Division 8.4 Work together 23 5.1 Overview 10 8.5 Defend the core business 23 5.2 Dimensions 10 8.6 Diversify selectively and grow 23 5.3 Reasons for change 10 profitably 5.4 Work together 13 5.5 Defend the core business 14 Diversify selectively and grow 5.6 15 profitably 6. Retail Division 6.1 Overview 16 6.2 Dimensions 16 6.3 Reasons for change 16 6.4 Work together 18 6.5 Defend the core business 18 6.6 Diversify selectively and grow 19 profitably iompost.com 4 1. Executive Summary This strategy is required to sustain the business in the The postal industry is long term as a modern, self-funding Post Office fit for the future and minimise the risk for a subsidy from rapidly changing - the Government. If delivered, this strategy sees the business’s finances digital era is the game turnaround from a loss to a small profit over the five year period, retaining our position as a net contributor changer in the services to the public purse. It has been developed in line with our mission, vision and business objectives we provide. and contributes to a number of key themes for the ‘Programme for Government’ and ‘SAVE’ initiatives. Our universal service obligations of letter mail and retail Corporatisation of the Post Office has been debated network service transactions continue to decline as since 2003 and the Board believe a change in the business and retail communications and transactions business’s corporate status is needed to future-proof move online. the business in the long term. However, the Board feel the debate should be postponed for the foreseeable There is an increasing risk that Royal Mail, our main future in order to allow the business to focus on trading partner for mail to and from the Island, will look delivering its strategy. to change the pricing structure of our commercial agreement and seek to renegotiate the fees we Key strategies include: receive for non-universal service obligation (first or second class) mail as they seek to address profitability • A review of the Post Office Network to ensure it challenges. This would have a significant financial impact provides a viable and affordable service in the future on our income and a reduction in up to a third of our against the backdrop of falling transactions mail volumes. Negotiations are ongoing. (average -7% per annum) The current financial year 2017/18 has seen a • Review and modernise collection and delivery material drop in commercial revenues as the large local service operations to optimise resources using corporates, mainly banks and insurance companies, technology and modern working practices have reduced in number on the Island. Those remaining seek to reduce costs by moving work off-Island to • Introducing a pricing strategy for letter mail to larger print houses. This revenue is no longer sufficient protect the first class service to ensure the overall profitability of the business without material change. • Review our 6-day letter delivery service in line with reducing customer demand (average -7% Further diversification into new products and services, per annum) but maintain a 6-day delivery service for as approved by Tynwald in 2006, has not developed parcels and other time sensitive items with sufficient pace to replace the overall decline. With further one-off costs in respect of pension • Increase contracted parcel last mile deliveries contributions and building revaluations compounding the sales decline, IOM Post Office anticipates making a • UK sales presence to increase our off-Island net loss in 2017/18. customer base and UK partnerships This year the new Board and Executive Team have • Increase the pace of introduction of our new reviewed the business’s strategy and have agreed services. E.g. MiCard, (Hybrid) Smart Delivery, strategic changes to more accurately respond to our scanning, more/new direct mail customers current challenges. • A review of terms and conditions, employment practices and job evaluation • Changes to our pension scheme to ensure it is affordable and sustainable for the future iompost.com 5 2. Overview Isle of Man Post Office (IOMPO) is a self-funding The commercial services IOMPO offers today compete Statutory Board of Tynwald providing public postal fairly with the commercial sector and are not cross services. At the turn of the century, mail volumes subsidised. This includes the delivery of parcels - a started to decline as individuals and businesses started competitive, price sensitive market and therefore the to take advantage of new quicker and cheaper digital increase in online shopping has only been a small communications available to them. benefit to IOMPO, with income not replacing declining letter mail revenue in the way that many may presume. Mail volumes have halved in the last 10 years. At its peak mail volumes were declining by 10% per annum Like other postal operators in public or former public (currently 7%). IOMPO recognised the challenges facing ownership, we have high fixed costs and less flexible the postal industry and commenced offering a franking operating models than our competitors. Our services, service (post marking of envelopes) to the high number the prices and the Government levy have only been of banks on the Island, this was the embryonic stage of sustainable in recent years due to the profits from the mailing division it has today. our commercial services, primarily large corporate commercial print and postage contracts. In 2006 Tynwald also recognised these challenges and approved IOMPO to “pursue the diversification and IOMPO has needed to find £1m of new income every development of new commercial opportunities in order year just to stand still.
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