Australia Post, Telstra and the ‘dying business’ dilemma

Who would run a former government-owned monopoly these days?

In the last week, Australia Post’s Ahmed Fahour announced 900 administration jobs were to go from its Melbourne operations, while last week Telstra’s David Thodey recounted discussions from his recent trip to the US, where he was told his “business model is dead”.

Both organisations, ironically once part of the same Commonwealth Postmaster General’s department, face massive disruptive change from new technologies. How they manage these changes will have consequences far beyond their corporate results, with important consequences for the nation.

The Good Old Days …

Once, for Telstra and AusPost, the future was certain. Growth in the core telecommunications and mail businesses was seen as a function of general economic growth. The demand for these essential services, it was expected, was assured.

The internet, in different ways, put paid to those certainties. For AusPost, the most significant change was the collapse of the traditional letter delivery business. Once a monopolistic license to print money, the era of the internet has seen the demand for its core letter delivery services collapse by 30% over the last five years. This has seen this segment of the business become a significant drain on the organisation’s performance – letter delivery lost A$122 million in 2011, A$187 million in 2012 and A$218 million in 2013.

Future Ready or Future Shock?

In 2010, AusPost announced its “Future Ready” strategy, seeking to identify future market segments where its performance could be developed and improved. This strategy revolves around developing three areas, namely communications (digital and physical), the provision of a physical portal to access government, business and financial services and finally as a deliverer of parcels.

Of the three business segments identified in Future Ready, one is promising (parcels), one is questionable (the services portal business) and one is abominable (letters) – hence the recent manoeuvres to clarify and separate the business into its core elements, most probably with a view to the future privatisation of that part of AusPost that makes profits – parcels.

AusPost is seeking to innovate – thus far with limited success. For example, in 2012 it launched MyPost Digital Mailbox, seeking to offer customers a secure way to pay bills (sound familiar, BPay?). Recent reports suggest it has met with limited success.

The Digital Mailbox illustrates two key problems for AusPost as it attempts to transform itself into a digital transaction hub. First, it pursues such initiatives as a late mover, confronting established incumbents with deep pockets and an installed base. Second, any such intiatives are subject to eventual competition from the likes of PayPal, and indeed the Australian banks, whose global reach and e-commerce capabilities should frighten AusPost.

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