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Signature Redacted Signature of Author: MIT Sloan School of Management May 8, 2015 Signature Redacted Certified By: Ezra W Evaluate Innovative Strategies Leveraging Existing USPS Capabilities and Resources to Advance as a Vital 21st Century Service Organization By Isaac Sebastian Cronkhite Bachelor of Science in Industrial and Systems Engineering Virginia Polytechnic Institute and State University, Blacksburg, Va 2002 SUBMITTED TO THE MIT SLOAN SCHOOL OF MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION ARaI(WV AT THE MASSACHUSETTq INSTIT[JTE OF rECHNOLOLGY MASSACHUSETTS INSTITUTE OF TECHNOLOGY JUNE 2015 JUN 2 4 2015 @ 2015 Isaac Sebastian Cronkhite. All Rights Reserved. LIBRARIES The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. Signature redacted Signature of Author: MIT Sloan School of Management May 8, 2015 Signature redacted Certified By: Ezra W. Zuckerman Sivan Alvin J. Siteman (1948) Professor of Technological Innovation, Entrepreneurship, and Strategic Management Thesis Supervisor Signature redacted Accepted By: / /' Stephen Sacca Sloan School of Management Director, MIT Sloan Fellows Program in Innovation and Global Leadership Evaluate Innovative Strategies Leveraging Existing USPS Capabilities and Resources to Advance as a Vital 21' Century Service Organization By Isaac Sebastian Cronkhite Submitted to the MIT Sloan School of Management on May 8, 2015 in partial fulfillment of the requirements for the degree of Master of Business Administration ABSTRACT For centuries, the United States Postal Service (USPS) has fulfilled its mission to bind the nation together by providing universal delivery service. The Second Machine Age has ushered in a new digital economy, which is transforming the way the world communicates and conducts business. Consequently, USPS faces unprecedented challenges, including nearly a decade of declining mail volume and inflexible business conditions that make it difficult to sufficiently react. The Postal Service must continue to transform and adapt to advance as a vital service organization. To fully understand the capability to adapt, this thesis will explore the long Postal Service history of embracing innovative technologies and organizational transformations to meet the changing needs of the American public. The Postal Service has been exploring innovative strategies to continue to adapt to a rapidly changing digital economy. For a new strategy to be successful it must align with the firm's industry positioning, competitive resources, organizational capabilities and existing business conditions. This thesis will analyze the USPS positioning within the two Industries that it currently operates, and examine existing Postal Service resources, positioning and capabilities to identify competitive advantages that can be leveraged to implement innovative competitive initiatives. This thesis will develop an understanding of its organizational capabilities and evaluate existing business conditions that impact the ability to implement new strategies. This thesis will then evaluate potential strategies based on their ability to leverage these competitive advantages, align with organizational capabilities, and navigate current business conditions. Finally, strategic frameworks will be applied to evaluate and prioritize strategies based on their industry attractiveness, viability and competitive sustainability. Ultimately the goal is to provide strategic recommendations to leverage organizational capabilities and resources and help the Postal Service advance as a vital 2 1st century service organization and meet the changing needs of the American public. Thesis Supervisor: Ezra W. Zuckerman Sivan Title: Alvin J. Siteman (1948) Professor of Technological Innovation, Entrepreneurship, and Strategic Management Page 1 2 Acknowledgements First and foremost, I would like to thank the United States Postal Service for continuing to believe and invest in my capabilities to lead change in such a distinguished organization. Specifically, I would like to thank Megan Brennan for providing me with this incredible and humbling opportunity, Jeff Williamson for believing in me and inspiring me on this fantastic journey, Susan McKeen for her years of encouragement and support, Kristin Seaver for her mentorship and example on how motivated Industrial Engineers can make a difference, and finally all of the countless dedicated Postal Service employees who have helped me advance in my career. I would also like to thank the Sloan Fellows Class of 2015 and the MIT Sloan Fellows Program Office for making this year at MIT so rewarding. To my thesis advisor Ezra Zuckerman, who helped me discover my passion for competitive strategy and helped guide me through this thesis process. To my parents, Russell and Marina Cronkhite, who have taught me the value of hard work and conviction, inspired me to pursue my dreams, and provided me with invaluable guidance always at the right time. To my children: Zachary for the person you are becoming, Calder for always cheering me up, and Emerson for your welcomed addition to our family. To my incredible wife, Joanna, who has inspired me to become the man I am today, encouraged me through life's challenges, and filled in my capability gaps. Thank you for your incredible patience, love and support. Thank you for joining me this year, and being my wonderful companion through life. Page 1 3 Disclaimer The views expressed in this thesis are those of the author and do not reflect the official views, policies or positions of the United States Postal Service. No official United States Postal Service approval is expressed or implied. Page 1 4 Table of Contents Chapter 1: Introduction .......................................................................................................................... 9 History of USPS Transformation and Innovation.............................................................................. 13 Chapter 2: Industry Analysis of M ail and Package Delivery Business................................................ 23 USPS M arket Dominant and Competitive Product Lines ................................................................ 23 Analysis of M ail Industry.................................................................................................................... 24 Industry Lifecycle...........................................................................................................................24 Industry Attractiveness (Porter Five Forces)................................................................................ 27 Emerging Industry Trends..............................................................................................................36 Industry Summary ......................................................................................................................... 37 Analysis of Package Delivery Industry ............................................................................................ 37 Industry Lifecycle...........................................................................................................................37 Industry Attractiveness (Porter Five Forces)................................................................................ 41 Emerging Industry Trends..............................................................................................................51 Industry Sum mary ......................................................................................................................... 53 Chapter 3: USPS Com petitive Advantage........................................................................................... 54 USPS Competitive Advantage............................................................................................................. 54 Resource Advantage......................................................................................................................54 Positional Advantage ..................................................................................................................... 56 Capability Based Advantage...........................................................................................................58 Chapter 4: Analysis of USPS Organizational Structure and Design .................................................... 61 Organizational Structure .................................................................................................................... 61 Oversight and Regulation............................................................................................................... 62 Human Resources..........................................................................................................................71 Organizational Design........................................................................................................................79 Lean Hierarchical Control...............................................................................................................79 Initiative vs. Coordination .............................................................................................................. 82 Chapter 5: Evaluation of Potential USPS Strategies ......................................................................... 88 Introduction to Potential Strategies ............................................................................................... 88 Same-Day
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