History of Transformation

UPS has been in the package delivery business for 95 years, providing services to businesses
and consumers worldwide in more than 200 countries. In 1994, UPS began to investigate the
potential of e-commerce and started an internal group focused on enabling e-commerce. UPS
redefined its core business and found ways to change its structure and processes, forming
new businesses to take advantage of new opportunities.

Products and Services

UPS is in the transportation industry. They move goods, information, and funds between
individuals and companies. Their operations provide delivery by land and by air, and they
offer services at customer shipping centers, as well as online through UPS.com. They operate
in more than 200 countries worldwide, do business in 15 different languages and dialects, and
deliver an average of 13.2 million packages per day.

Catalyst for Change

UPS was interested in finding ways to leverage their extensive infrastructure and expertise in
basic transportation of goods, services, and information. They wanted to enter new markets
and continue to grow. They also wanted to undergo a more fundamental change—to
transform their company into an enabler of global commerce.

Vision and Strategy

In 1991, the company's vision was to be "the leading package delivery company." They were
able to grow significantly toward that goal, but they weren't satisfied with just that. They
wanted a larger challenge for the company. In 1999, they changed their vision statement to
"the enablers of global e-commerce." It was at this time that their company purpose (vision),
mission, and strategies were redefined as follows:

 Purpose (why they are in business): To enable global commerce.

 Mission (what they seek to achieve): Fulfill their promise to constituents by:
o Serving their evolving needs
o Sustaining a strong and employee-owned company
o Continuing to be a responsible employer
o Acting as a caring corporate citizen
 Strategy (their plan of action): Sustain the core and create their future by:
o Investing in the core business of worldwide distribution and logistics
o Building competencies in the integration of goods, funds, and information
o Using technology to create new services
o Attracting talented people
o Studying customer behavior and anticipating their needs
o Practicing innovation that leads to growth
o Developing an environment that enables them to treat each customer as if he
or she were the only one
Changes Made/Evolutionary Process
When UPS began the process of transformation, they started at the basic level—taking a hard
look at their core competencies and expertise. They also examined the assets in their
multifaceted infrastructure, from data communications, to their fleets of trucks and aircraft, to
their call centres. They did this analysis and examination with the idea of finding ways to
leverage the growing technology and connectivity of the Internet in order to build entirely
new subsidiaries of UPS. In the process, they found several gold mines. With additional
investment in information technology (at the rate of more than $1 billion USD per year), they
were able to transform a very sizable company in record time.

Once they had identified opportunities within their own company and finished their internal
analysis, they re-examined the external world to learn more about e-commerce, markets, and
their customers. After taking a look at what people were doing with e-commerce in the
external business world, UPS decided that their own definition of e-commerce was not about
technology, but was about the integration of "bits and bytes with bricks and mortar." They
noticed that customers were changing, and the power dynamic was shifting from the sellers
(companies) to the buyers (customers). UPS wanted to find ways to provide more access
points to that new breed of customer.

UPS also claims that luck and timing helped a great deal. With the surge in e-tailing as well
as B2B e-commerce, UPS was in a unique position to meet the increased demand. They were
the bridge between the physical and electronic world, with a well-tested and highly reliable
infrastructure to serve both of those worlds. UPS was able to foresee the importance of
electronic information to the transportation industry. As early as 1985, they began improving
their data networking applications to enhance communications with their customers and
increase efficiency. For instance, they built up their IT network and database in order to
collect and track over 200 data elements for every single package that they ship. With over 13
million packages being shipped every day, that's a lot of data! However, their system
continues to handle that level of information exchange. Consequently, they were well poised
to help the multitude of new B2C online companies who came to rely on UPS for shipping.
UPS was able to offer these new companies tracking services as well. It was as easy as setting
up a link to the UPS Web site. UPS also offers a set of transportation APIs called the UPS
OnLine Tools that allow businesses to integrate tracking, rating, address validation, and a
number of other valuable functions into their Web site. Now, through their eLogistics service,
small B2C companies (as well as large companies) can have their own virtual logistics
department hosted at UPS.

When UPS redefined its core business, the description included the transportation of goods,
but also funds. They wanted a way to leverage their expertise and infrastructure to transfer
funds among entities. UPS has always dealt with COD payments, credit risk assessment,
billing systems, and cash flow. With the advent of electronic signatures, it's easier to move
such services online, and provide that as another service to their B2B customers. UPS has
even started UPS Capital, which provides working capital to small businesses. UPS Capital
has also applied the Internet to its business, developing online COD receivables-management
products and cutting customers' COD receivables wait from two weeks to two days.

Business communication services became another new UPS offering. UPS has significant call
centre expertise and infrastructure to handle the call volume generated by more than 13
million package deliveries daily. Now that more of their tracking requests come in through
their Web site rather than by phone (about 2.5 million requests per day), they have excess call
centre capacity. They are now offering call centre services to their customers, and integrating
the call centre services with their customers' business infrastructure.

Several of the new and existing UPS services can now be combined. With the new
subsidiaries, UPS now has the potential to lease call centre capacity to a customer, handle the
logistics and related information exchange for all transactions, and then provide fulfilment
and shipping to the customer's customers. UPS is already doing this, and an example of one
of their customers is Nike.com. All of Nike.com's back-end systems are provided and
managed by UPS, along with order handling at a UPS worldwide logistics centre, and then on
to UPS fulfilment, and some of the shipping as well (depending on the destination). Through
creative deployment of its core competencies, UPS has taken on greater pieces of the value
web in B2B e-commerce.

UPS has been able to make tremendous strides because of their open and consensus-based
company culture. The company is still 99% employee-owned. Executives are willing to listen
to ideas from any employee. There are informal and formal ways to bring ideas forward, and
employees are encouraged to do this. UPS also seeks good ideas from their customers and
partners. It's all about being willing to listen to an idea, regardless of the source, and then
having the business savvy and commitment to implement the best ideas. When the e-
commerce team started inside the company in 1996, team members from different functional
areas were able to get the resources they needed to move forward because the highest levels
of management were committed to the cause. There is also a more formalized process for
employees to bring forward ideas. Teams such as the e-commerce team, for example, are
made up of people from different functional organizations such as IT, sales, marketing, and
finance. Once an idea is ready to go forward, the team members begin the process of
identifying the stakeholders affected by the new idea and work to get their buy-in first. The
idea makes its way onto the agenda of a marketing or management committee, most often
made up of these stakeholders. When the committee evaluates an idea and makes its decision
to move forward, there is a much greater likelihood that the idea will be approved. This
scenario truly represents a self-empowered entity. People tend to support what they helped to
create, and every employee is really a stakeholder (and in the case of UPS, they are
shareholders as well). This open consensus-based process helps UPS make significant
changes in a very short period of time.

In their transformation, UPS also restructured their organization from a functional-based

structure to one that is centered on process. They now have organizations that focus on the
customer information-management process, the product management process, the customer
relationship-management process, the business information and analysis process, and the
package management process. These changes did not happen overnight, because the
organization was very large. However, the reorganization is already starting to pay off.
Development time for new projects has decreased significantly. The focus on process seems
to help, at least so far.
Main Lessons
UPS has done a remarkable job of leveraging their core competencies for the new world of e-
commerce. They have figured out how to deliver their core business services in new ways,
while leveraging their tremendous infrastructure assets.

They haven't forgotten where they came from. In that they have managed to preserve their
company culture. It has served them very well in promoting the creative thought necessary to
come up with new ways to do business and grow the company.

They were brave enough to change the vision, starting at the top, and committing themselves
to it from the top all the way down through every employee of the company. They managed
to do it quickly by making changes in their processes and organizational structure.

UPS has been aggressive in finding new revenue streams with existing and new customers.
They understand not only their customers and related needs, but have also figured out ways to
deliver more value. They have expanded the roles they can play in the overall value web by
leveraging their infrastructure and expertise.