Speakers series with Australia Post
Organisations are transforming, evolving and redefining their strategies to adapt to new trends and market demands that are being driven by customers. Putting customers at the forefront of everything we do remains critical to the way we do business, not just in the private sector but also in government.
In this Speakers series session, Michael Oates from Australia Post, General Manager of Portfolio Strategy and Innovation spoke about how Australia Post has remained relevant and found their place as an innovator in the digital economy. Michael also shared the customer centric approach his teams are taking to protect jobs in a highly competitive market, as well as current projects the organisation is working on to drive innovation now and into the future.
If you missed the event, you can watch the video presentation.
Good morning ladies and gentlemen and welcome to this next instalment in the speaker series hosted by the Department of the Premier and Cabinet. For those who don’t know me I’m Tony Keyes, the Queensland Parliamentary counsel and it’s my pleasure to be your MC today. I’d like to start by acknowledging the Aboriginal peoples and Torres Strait Islander peoples as the traditional custodians and owners of the land and particularly the land on which we meet today. We recognise their connection to land, sea and community and we pay our respects to them, their cultures and their elders past, present and emerging. I also welcome of course our guest speaker today, Michael Oates, the general manager of portfolio strategy and innovation at Australia Post and all staff invited across Queensland Government thank you for joining us. These speaker series events are designed to provide you with an opportunity to hear from Australia’s business, philanthropic, sporting and cultural and creative leaders to learn from their stories and experiences and to be inspired by them in our roles as public servants. We’ve come together today to talk about the importance of customer service and how Australia Post in particular is embracing disruption to drive innovation now and into the future.
On the 3rd of March 2015 the Australian Government announced reforms to help Australia Post remain viable and continue to deliver a quality and sustainable mail service for all Australian’s. As Australia post manages the ongoing disruption of their traditional services, their ability to innovate and offer new services that meet the changing expectations of their customers is critical. Being customer centric is a key priority as we will hear for Australia Post. Innovation at Australia Post is about connecting with customers, communities, businesses and people to solve their problems and make life and work easier. A customer centric approach is not just about putting customers first but making exceptional customer service a priority. As public servants, we need to think about how we put our customers first through Government services both internal and external. In preparing for today it struck me that Australia Post probably has more to teach us as public servants than might first meet the eye.
I was saying to Michael earlier that as an everyday customer of Australia Post you can get used to the idea that it’s just a corporate citizen out there doing its business in the way that another corporate citizen does like its fully commercial competitors and in fact I had to resort to google to establish whether in fact Australia Post had been fully corporatized. Those who are old enough might remember that the former post master general’s department was disamalgamated in 1975 into the telecommunications commission now known as Telstra and to the Australian postal commission. The Australian Postal commission of course is now Australia Post it converted to the Australian Postal corporation in 1989 under an act of the Commonwealth Parliament and remains as that to this day. So it is a much more public sector organisation than you might think. Like a lot of us, it has to think in two directions, one is its public sector accountabilities and its quasi private sector-oriented ideas about customer service so we will have a lot to learn about what Michael has to say. The other thing I discovered from google which again I should’ve known off the top of my head is that regardless of whether its government or private or something in between, Australia Post has an incredibly long history which dates back to 1809 when the first postmaster of the colony of New South Wales was appointed. Coming back to the modern day here at DPC we have a strategic workforce plan that details actions that we’ll take to drive innovation and effectiveness. Those actions will also ensure we deliver exceptional customer service to internal and external customers which is critical to the way we do business.
Before I formally welcome Michael to the podium I will just tell you a little more about him. Michael is a senior strategy executive with more than 20 years of commercial success across Ocean Air and South East Asia in express freight and logistics, international mail, business process outsourcing and professional sources and that experience spans across both public and private sectors. As I said earlier, Michael is currently the general manager of portfolio strategy and innovation at Australia Post he always positions the customer as central to every role and is driven to identify ways to achieve organisational objectives. Not only is Michael a transformational leader and mentor but he has a strong track record in building high performing teams and creating a supportive environment for team members to excel and these things sound very familiar to us in this sector. He is an effective decision maker and experienced negotiator who focuses on building long term multi-level customer-oriented relationship. Please join me in welcoming Michael Oates.
Thank you for that very kind introduction and thank you for inviting me here today. It's certainly a great privilege to be here and present to you and tell you a little more about Australia post and what we're getting up to. So I have been at Australia Post since 2016, so only 3 1/2 years and for someone at Australia Post that is not a long time because we do have people that have been there for a long time. But I came into Australia Post to head up the sales function and I did that for 2 years and now I have moved into a more recent role heading up portfolio strategy and innovation. Prior to that was with EY or instant young and Bosh and DHL and also had my own start up business that I've created back in 2003, so it's the first online career company here in Australia.
So at the time I was working with DHL and I went to the board of DHL and said, I think the markets changing, I think we I think there's real opportunity to go to B to C as opposed to concentrating on B to B and they said no no we're sticking with B to B that's where it's at. So anyway, I was able to start this little business and built it up to a point where I actually had a retail presence at Brisbane International Airport for a little while as well. So I had a university business catering to university students, had a business catering to just the general market, the airport and a little business in the UK. So essentially got to a point where QANTAS came in and said, what is this guy doing and disrupted me completely in a very short period of time and that was the end of that. But it was a great ride whilst it lasted, then I went back to work for man, so here I am now.
I guess I over my career I’ve become really passionate about customer centricity and particularly looking for new ways to solve customer issues as new technologies become available in the world around us continues to change. In Australia Post, we're trying to keep up with these changes in continuing to develop customer solutions that have not only solved many customer issues but have led us to becoming an innovative and customer driven business.
So today I thought we'd cover a few things. So firstly, I'll take you briefly through what it means for us to be innovative and customer centric and why it's important. I know with yourselves that through your innovation strategy you’re committed to tackling challenges that you're facing today and tomorrow, to propel the state forward. Not unusual for us either, because we are facing some significant challenges which we’ll go through. I'll go into Australia Post history and as Tony mentioned before we know 210 years is how old we are. We are Australia’s oldest continuously running organisation so there’s no other entity that's been going for that period of time. I'll take you through our innovation strategy at a high level and dig into a few of our key programs that have helped us to drive an innovative and customer centric culture. Then circle, back to Australia Posts original purpose and how that's been affected by the digital economy and Ecommerce in particular, and finally I’ll finish off with some tips or learnings as a result of innovation journey that we've been on.
But firstly, when you think of Australia Post, you might think it's all about licking stamps, posting envelopes and sorting parcels, but I can tell you there are times where we have to actually put out body on the line. So this is an example of that.
This was taken about 12 months ago as a result of the posties around the country as there was real spike in dog attacks. Every day we have a postie who is attacked by a dog and gets medical attention, and every week we have someone in hospital with serious injuries. So they actually bought the exec team in and said right we want to show you how to handle dogs when you're under attack from a dog. And they said we need a volunteer, so the whole team stepped back, they obviously staged the whole thing and I ended up putting on this bloody jacket and getting mauled by this dog. So, it wasn't a pleasant experience, but I do have a newfound respect for posties and what they have to put up with every day.
So what exactly is innovation and what is customer centricity? I believe innovation can't exist without customer centricity, so I'll be speaking about them both as if there is if they’re dependent upon one another. So, when I think of customer centricity, I think of essentially like a mind map and I have the customer in the middle and then everything else happens off that. That's sort of my guiding principle if you like, that true north in terms of any work or project that I'm involved in, I always make sure that the customer is in the centre. And we find that Australia post are the worst that when down in head his office, when we work on any project, any initiative we're developing stuff because we think it's what the customer needs, and that's the wrong way to go about it.
So when I was at EY and we would be working on pictures for new business and the partners were presenting back to me on the pitch and they’d be talking about their features and benefits, and I’d say well so what? So what does that actually mean to the customer? Is it unique? Is it differentiating, is it compelling? And they’d say well, we believe it is or we think it is, or we think that's what the customer needs. You've got to constantly challenge yourself to say, well is it actually what the customer wants and what the customer actually needs? And have you engaged the customer and validated that that is true? So that’s really important and you've got to be solving, in terms of innovation, you’ve got to be solving real problems, so understanding what the customer problems are in solving them.
And last year I was fortunate enough to go meet with Swiss post and they have a drone program that's underway at the moment. What they did is they essentially, and this is essentially the counsel they gave me, you need to solve the problem, find the problem and solve the problem. They did that over there in Swiss some between. So there there's 2 hospitals and they've got labs in each hospital and they needed to get blood and tissue samples from hospital A to hospital B. The existing process was via road and it was taking between 20 to 25 minutes so the Swiss post got involved and they worked with the equivalent of CASA over there and came up with a solution where they had point to point drones. So they're able to load up the drone at hospital A with the blood or tissue samples and fly them to hospital B, where they would have patients on the table. They were able to reduce the time from getting from hospital A to B from 20 to 25 minutes, down to 3 to 4 minutes through using drones and they're doing up to 10 flights a day now. And their Civil Aviation Authority equivalent over there is saying come on Swiss post we want more of these around the country because this is really cool, it's working and it's solving community problems.
So, I know with your own strategy you've got solving big challenges as one of your five pillars so clearly you get it and that's what it's all about solving big problems. So why is it so important, in terms of customer centricity and innovation? Firstly, it's good for business, so obviously it's important to generate revenue so you can continue to operate, but more importantly, it’ll provide you with the means to reinvest and continue to grow. It challenges the status quo, so what I love about doing this stuff down at post is that we never hear that’s because that's the way we've always done it, we are now constantly challenging, why are we doing it this way? Because we're not unique in that you guys are probably similar, there are processes that we have in place with why the hell are we doing it this way? So we're trying to create a culture just constantly challenges the way we do things and make it safe for everyone speak up and put their hand up and say well, there's a better way to do it, why don't we try this? So that's what we're doing.
It gives you the freedom to create. So what you begin with could be completely different to where you end up, because you're thinking freely and your focus is on the best outcome for customers in the community. You'd be amazed how often this happens, you know where we will start out thinking that we're working on and solving one particular solution and we've got in our mind what we think it could look like and by the time we get to the end of that journey, it is completely different. But that's again when you're engaging with your customer all the way along, you know that it's OK for it to be different at the end, because that's what the customer wants. It grows and strengthens teams.
So people feel empowered when the challenge to break the mould and do something different and an empowered team is an engaged team, so you get a better output. It changes the landscape. You could be one big idea away from completely flipping the world you know on its head. You only need to look at Facebook and what a difference it has made right across the world. You know it's funny, the major post offices talk about Facebook and they say that should've been us. Post offices are the most connected then they had been forever to the community, they've got the access to the most data, but they missed the opportunity. It's interesting when you meet with a different post office and they will say well, what if it had been us so, we've got to create the environment where it's safe for our people to actually come up with these ideas. It’s better for your customers. This is probably the most important thing of all, so nothing else is possible, really without the trust and support of your customers and your community. So, trust builds, advocacy and loyalty and we know how important this is especially in the world of social media today when one bad experience can reach hundreds and even thousands immediately.
But fundamentally, if you're trying to innovate without the customer at the centre of your approach, you are doomed to fail. We've got litany so many examples at post of different products and solutions that we've spent some serious money on, that we didn't in the early days do enough testing out in the market on, does the customer in the market really want this? One only as recently is sort of 18 months ago, a product called Shipster that we thought would work really well with customers. And we did a lot of dough on that and but what we have done as a result of that, as we've actually invested in getting all the learnings and documenting and putting that in it's part of our innovation process, so that when we get to incubation, and I'll take you through shortly, but that we make sure that we learn from those past mistakes. And that we don't continually burn money because we are a government owned entity, and the money we spend is taxpayers money and we don't make a lot of money, so we have to make sure that we spend it responsibly.
So what does this all mean for Australia post? Some of you may know the work we're doing in innovation, particularly building customer solutions, but I guess again you're probably thinking 210 years old you’ve been here, what can an old post office tell us about innovation? I think that's fair enough, but the fact is, we have been around for 210 years, we are one of the few global post offices or few post offices around the world that are still making a profit. There are a lot of post offices that aren’t, and I'll talk about that.
But I thought it's probably worth going through a few facts and statistics to give you a brief overview of the size and scale of Australia Post so you can appreciate just how big an enterprise it is. So, Australia Post is Australia’s largest employer with more than 78,000 employees, community postal agents, licensees and contractors right across Australia speaking 65 languages and 143 nationalities. We have approximately 4356 retail post offices and each and every day we have over 90,000 people walking into those post offices, so that's about 230 million people a year. We have over 500 facilities which includes large sheds, sorting facilities and offices and we have approximately 2600 trucks on 6500 vans and that's Australia Post. The red trucks and the Blue Star Track trucks, which is a wholly owned subsidiary of Australia post where all the parcels come through.
We have more than 15,000 street post boxes. All of those street post boxes have to be cleared at 6:00 PM every night around the country and that's not Saturday night but Monday to Friday and Sunday evening as well. I guess if you think about, when was the last time you actually bought a stamp, put it in an envelope and went down and put it in a post box? I'd say a lot of you would probably struggle to think about when that was and so what we're having is having these post boxes cleared every night at 6:00 PM and there's nothing in them, but it's a community service obligation, it's legislated that we have to do that. So that just another cost, cost that's a fixed cost that we have to deal with and manage.
We have got 1.76 million post office boxes, 30,000 parcel lockers, we have approximately 7 and a half thousand posties going up and down your street every day and again we have a 98.5% success rate in terms of delivery and that's an SLA with the government. Last year the Australia post group, including Star Track, delivered more than 3.3 billion items to more than 12,000,000 addresses across the country. And our biggest day in terms of volume, was on Monday the 17th of December, the week before the full week before Christmas where we delivered just over 3 million items on the one day. So, it's pretty big numbers when you start going through and trying to give you that perspective.
So we are a 7 billion dollar enterprise and in FY19, our letters business fell almost 9% to 2.22 billion, draining 192 million dollars from the letter side of our business. So our overall profits fell 70% in just 12 months, there's not many businesses can sustain that sort of loss. So the profits fell to 40.6 million, so when you think about 7 billion dollar enterprise are only making 40 million dollars, it's not a lot, not a lot of money. And this year we budgeted to make 15, so it's getting closer and closer to the line. So Australia Post like many other major Postal organisations around the world are facing disruption like never before. As I mentioned, we have fewer people sending letters, that’s in decline. But you know if we look at what's happening with some of the other global post offices are going to put into some perspective for you.
So US post office that costs the US government 7 billion dollars a year to run, so they're losing 7 billion dollars a year so that’s how much it's costing them. With Canada post in FY17 they made a profit of 150 million and FY18 lost 850 million. And in the UK with Royal Mail they're looking at laying off up to 22,000 workers. So we are Australia post at a real inflection point, at a point where we don't get this stuff right then we're going to cost the Australian Tax payer, costing all of us a lot of money to run, so we need to get it right. That's essentially where I guess my role in innovation and my team come in, in terms of trying to find out where are these future revenues going to come from and how we're going to make sure we mitigate the risk around the 15 million dollar profit number and make sure that we continue to pay a dividend to our boss, to the shareholder, to the government that we have done every year.
So we reporting to the Minister of Finance and Minister of communications. So when you think of bureaucracies and trying to get stuff done, It's pretty hard because you know we've got yes, the letters business, we have got that on our own we don't have any competitors there, but we've got the parcels business that we are competing with the likes of Toll, TNT, FedEx and DHL. So we need to be agile and move fast and react and do all the things that you would in an open market yet we are a government owned entity and we've still got all that associated bureaucracy that comes with that.
So I thought I’d take you through the innovation strategy at a higher level. One of the biggest challenge changes we made out of the last couple years is we've merged our product with innovation. So that we can focus on developing, testing and validating new ideas for products and services while looking at our current portfolio and making sure what we offer is commercially viable and in line with what our customers want and what they're actually willing to pay for. There is no use developing stuff if they're actually not willing to pay for it. And stuff that's going to help them with their everyday lives. So we do this over a phased approach, so ideate, so we're creating, exploring, and learning about new product portfolios for business in a customer centric way. And I'll go into that in a moment. Then accelerate, so fast tracking the de-risking of the investment in a new product, service and business idea before it goes out to market. Then incubate, so creating an incubating new future business opportunities. So there's three sort of distinct stages that we go through. And the state that I will focus more on today is around the accelerate pillar, because this is where we do a lot of innovation at post and we have 2 key programs under this pillar being hack days and the accelerator program.
So this is the latest poster that's on every floor around head office down in Melbourne on hack days. Hack days at Australia Post is all about bringing together people from across the business in a fast paced and challenging 36 hour period, where they create solutions to real world problems through what we call the hack. So the last day we did, we had 28 different teams from right across post. We also invited some universities to participate, so we went out to some of the universities, and we said, look, here are some of the problems that we're facing, if you've got teams of people from different areas of the university, they want to participate in this, they can come in and potentially win some prizes, but you know, we want to learn from others outside of Australia Post too.
So that particular day was amazing to see energy and some of the ideas that came through. So this next hack days in 2 weeks and basically we have said to the teams, you can come in with whatever idea that you like and normally we have given them some guardrails to work within, but we've said if we really want to be innovative, take the shackles off and just have some open thinking and let's see where you go with it. So that's what we're doing and we'll see what we get. So as it says here, boldly go where no hacker has gone before, so I don't know where it's going to go but we will see. But it's a great starting point to see how we might start to solve some of the big and small business and customer needs so i've got a little video so we'll just take a look at that.
I think hack day is a bit of an institution at Aus post that everyone gets really excited, there's a real buzz and atmosphere about it and it's really great to see the people out here on level 10 come to the showcase and really get to see what their colleagues have done the past 2 days.
So this year we chose a choose your own adventure theme, which is sort of a non-theme really. So in previous years there had been themes which were kind of guiding people as to what kind of hacks were looking for and what kind of ideas, so this time we really left it open so choose your own adventure is exactly that.
I really like it, I mean compared to previous hack days, you know we had a very specific topic to work on whereas now we can just work on anything we want. You know we have more options and flexibility to choose what we want to do so, I think it's really good.
There’s a significant variety, there's some really impressive ideas out there and in my role from leading innovation, it's around you know what can we identify that we can execute and get in market to make a difference quickly. And there's at least half a dozen out there that I can see that we could monetise pretty quickly.
This year we changed the judging format, which is really quite exciting, we had a mini Shark Tank where we had a panel of 5 judges and about 20 teams pitch to those judges for 3 minutes and to get their ideas across and really make sure that they had that opportunity to know that the judges have heard their ideas and give that idea opportunity to move forward in the business.
I thought was a great opportunity actually we had a couple of technical hurdles getting the presentation up and running, but we got good engagement from the judges, everyone seemed to be really keen in our idea is a great opportunity just to get some more pitching experience.
My first hack day has been brilliant, I've had the opportunity to work with some of the best minds in Australia Post, so it's a very interesting hack day for me. I enjoy hack days because I get to express my ideas and get to work on something that's not work related, you know if you do something at work every day you want to do something different and it's a perfect way to do something different and something fun.
I really like the opportunity to get together with different team members of different disciplines and just really quickly move an idea forward, an idea that you might not normally have the time or resources to work on. So yeah can come up with some great ideas for the business and I really just get them out there and get them into a demonstratable format.
So this year we have got several different categories of awards. We wanted to make sure that we could recognise hacks that are done in different ways. We've also got hacks where we look at the new kids on the block and who's coming with the freshest idea. A lot of feedback from previous hack days is that everyone loved getting involved for the 2 days, but the ideas just didn't have enough weight behind them to keep moving forward. I think hack day is now moved under innovation and it's really exciting to see that myself and Vicki can take those ideas onboard and provide feedback and if possible to move them into the business, we know the different pathways to push them along, which is exciting to know that these ideas are going to go somewhere at Australia post.
Yeah, so it's a great way to capture some really cool ideas, but I guess what do you do with the shortlist of ideas and where do they go to from there? So the ones that are successful, we move into our accelerator program and essentially that is where we will really validate or invalidate some key assumptions around those ideas, those opportunities. We will give them a specific budget will allocate a team to it and then also allocate an innovations coach to it as well. So the is coach in place to make sure that they're following the methodology in approach all the way through is really important too. But not all ideas are put through the accelerated program come from the hack days they come from any area of the business. But they must meet a certain criteria ideally, including being strategically aligned, they focus on customer problems and therefore customer facing, they have a high degree of uncertainty, they leverage current assets wherever possible, have had some pre work done already and their suitable for incubation. So once they go through the accelerate program, if we have validated the key assumptions and they are proven to be true, then we move it through to the next stage, which is the incubation stage and that's where we want to build a business cas, we will throw some more investment at it, put a fixed team on it and then we'll try and build it up to a point where it then gets moved into BAU. So, there's the whole process that goes with that.
The key challenge we have with the accelerator program though, whilst in terms of innovation the ideate, accelerate and incubate, works really well and it's really cool when you're running a business and you've got to get people to come out of the existing day-to-day business and work in these teams, that's really hard to try and get that continuity and have people stay in their teams the whole time until they've finished through the accelerator program. So we've actually had to innovate our self, in terms of the actual accelerator program.
So what we used to do on the left hand side we used to have a 12 week accelerator program. Now if we had 3 or 4 teams working on a program for 12 weeks, that was a lot of investment to pull them out of an existing team and have that existing team try and get on and deliver what they need to deliver that year. So we were getting a lot of people who are getting pulled back halfway through and it just was really impacting on the success so difficult to resource, and the results weren't coming through fast enough. So we stopped it and so we've got to do this differently. It's going to be a better way to do this. If we're going to make it work, so we've shorten the program down. At 6 weeks full time, there's 2 weeks planning at the start. It's a lot easier to resource, so it's a lot easier to get to a GM across the business to say so we need to get so many resources from your particular area. There is a faster turn around of insights and we're actually getting more cycles of accelerators through the years. So because we got so many product groups working at a pretty fast pace, they're coming up with specific ideas that they want to put through the accelerator, so now that we have redesigned it we’re able to put more through and then hopefully get more going through the incubation phase as well. So it's working quite well.
One of the examples are great examples that's come out of accelerate program is solution called for Fulfilio, and Fulfilio is actually in market now. It's almost like Amazon Prime and it's what Amazon have done in the US, they've gone out right across the US and made sure they’ve got warehouses that are really close to their end market and made sure they’ve got the right stock in there that they know that that particular customer at that postcode wants. So there's a lot of these predictive analytics user and a lot of other data that we would use to understand what we need to put in a specific location. We've also got with our declining in letters, so we got a massive fixed cost letters network all these facilities around the country that are half empty, because we don't have the volume going through at the moment. So because they're half empty, we are thinking how can we leverage our existing assets and get a better return from that? And this is where Fulfilio comes in because we're all around the country, we've got the biggest footprint, bigger than anyone but if we can leverage Fulfulio and act like an Amazon Prime if you live here in the Australian market, then we are serving at the Australian customer. We're also helping Australian businesses and we're also trying out the long-term sustainability of Australia Post as well.
This particular business Fulfilio, was launched in 2017 is now a leader in fulfillment, partnering with brands such as Carlton United Breweries, Deliveroo, Frank Body and many more. Fulfilios now known for their service recently being announced E based fulfillment partner as well as one of the Top 10 E Commerce service providers in 2019 by a CIO outlook magazine. So this is not by mistake or they are successful because you know by differentially investing in customer research up front which we did and we did a lot of it, we got so much more understanding of whether there's a need and how far that need really goes.
Our hack days and accelerator programs are focused on bringing new ideas and testing and validating them with customers, but at the heart, they are about coming up with new ways to connect people to the things that they want and actually need. So that's what's important. The other, I guess approach we use in my team is human centred design thinking. Many of you are probably familiar with this, but the people first approach considering the needs and desires of customers and employees, it combines the human centred consideration of desirability. So what are people want, need or desire and that’s the important thing, it's not what we think they want, need or desire its what they want need or desire together with the business oriented considerations of feasibility. So what is technically feasible? What can we actually do and viability, what is financially viable?
Even when we look at drones, we are doing work with drones at the moment in terms of proof of concept stuff, it's really tricky one, everyone loves drones and I love a good drone story but it’s really hard to make money out of it because you just can’t because it's difficult to scale. So we're working with a pathology lab in Melbourne at the moment where we're looking to move to similar to what Swiss post have done and getting the learning taking the learnings from them, but we're looking to move blood samples from Warrnambool out on southern part of the state, via drone up to Clayton on the other side of the bay, Port Phillip Bay. So that will mean that we've got these drones and I should’ve put the video on, I'm sorry I didn't put it on this presentation I thought it would go too long, but this really cool drone from that, so we did some testing at a facility a few weeks back, it’s an enormous drone, but it carries about 10 kilos, can fly at about one 100km per hour. We would be looking to take urgent blood or tissue samples from Warrnambool up to get tested in Clayton.
But the only way we can make money out of it as if the pathology industry actually creates a new product where people are willing to pay for it. So we're pretty confident that we can make it work and we can potentially solve a problem if you like, but are we going to make any money? So that's the problem. But we could potentially get learnings out of that we could apply to regional Australia, rural Australia in terms of how we deliver our parcels because if we've got a lot of places who have routes that are about 600 kilometers long that they do 3 times a week. They could potentially have a parcel, attach it to the drone, fly it up to the actual house on the station and then fly back. So there are other applications we could use, but as far as drones go we're not looking at that as our next big revenue stream winner that's for sure.
So some of the areas that we are using human centred design thinking is in solution sprints. So Christine Holgate, who was our CEO, became frustrated pretty quickly with some of the problems that we are facing within Australia Post. She wasn't seeing it as being sold so she said Michael, we need to create a wall room, get it set up, get a team of people in and solve these issues. So, we've got some people who are trained in human centered design thinking terms of the approaches of methodologies, and we've put three sprints through already and the benefits that we have identified are significant terms of cost out of our business and improving the process and improving the actual end result for customers.
So that's working really well and digital service design, so we're overhauling our mail redirection service, so I don't know if anyone's moved in the last 5 years or so, but when you had to use the Australia Post mail redirection service, I'll be the first to say it's pretty average and it doesn't work very well. So through the human centered design thinking approach we have now modified the actual forms for mail redirection service as well as their web point of sale material as well, completely reengineering that piece to try and drive a better outcome. Because that's one of the, apart from when we get all of the inbound calls to Australia post apart from where's my package, it's to do with the mail redirection services. People getting pretty frustrated with that so we were trying to nail that one pretty quickly. Sorry it's a terrible slide for an audience, so I shouldn't put in there but just to give you an idea of the sort of the outcome in terms of the approach that we've taken as it relates to human centred design thinking approach.
Okay, so this final slide on the innovation, on our approach to innovation, I thought I’d put in because it just sort of puts in perspective what's happening. So, I’ll just move over here, but you've got our core business here in the corner being mail and parcels right, that's where we get all about revenue from. When we look at the role of innovation, so we're trying to look for ways to slow the decline in mail. We know it's inevitable and it's going to continue to fall, but if we can just slow it by 1%, that is a significant sum of money that we can save the enterprise. And for parcels we’re looking again to defend and remain ahead of the market, so we have about 80% of the market in terms of parcels, which is really lucky, fortunate to have that, but we're doing everything we can to make sure we're protecting and defending that. Because we've got everyone eating around the edges trying to take a slice of that because it its growing, online retail industry is growing at 20% year on year, so we've seen you know what's happening in the US and the UK, we know it's only going to get bigger and so we're investing really heavily in the infrastructure, you probably haven’t seen it yet but the Redbank facility that we're about to open up here in Brisbane is a massive investment for us and we have got robotics through there, but so it really cool and what they've done there is pretty significant.
Then we move out towards the edge of the core here, we've got that payments and financial services piece and the identity. So they’re two other product areas that we put in our core, but we have small market share at the moment we're investing heavily now. So in 3 to 5 years we have a dominant position in those markets. Then when you move out into the adjacent areas, we've got health and aging and data. The reason I have selected both of those for the innovation function to work on is that health and aging, I mean, you look at the aging population, you look at Australia Post as the most trusted brand in the country, we’ve got the biggest footprint and we are at the centre of every community, that if we can't find and nail something in health and aging as an adjacent solution, then I'll give up the game. So there's got to be something there and we're working.
I've created what we call GP, a Global Postal Innovation Community where we are now connecting with other Postal organisations around the world with the innovation teams to work on this together, and solve these issues together, because by us being successful here in Australia it’s not going to affect US Post or Netherlands post or Royal Mail, but by us working together, we are all basically pooling the innovation teams and their experience and intel to try and come up and solve some of these issues because we're all in structural decline so we're just trying to be smarter with work with what we have. Data, so Australia Post has access to so much data, more so than virtually anyone in the country other than probably some other potential government organisations, but we don't do anything with it. So we could commercialise it in so many ways and for good not for evil, but it is a real opportunity for us but we've got a board that is just so risk averse and they just do not want to touch it, but it is a huge opportunity for us.
Another opportunity, I went to a licensing show in the US last year, I met with the licensing heads of all the different movie studios and I said look I’m from Australia Post, we've got this many trucks we’re the most trusted brand and I said we have got all these street post boxes, I basically said we have got all this empty real estate all over the country that we could potentially advertise the latest movies coming through and have that cycling through pretty quickly, would you be interested? Every one of them said are you kidding? Like where do we sign we would love to have some of that, but you know I came back to present to the board and the board said you kidding? No way. The brand is just so important to us and it's so important to every Australian, that they just said you cannot mess with the brand. So yes, we could make some money out of it, but there's some things that are off limits and as I discovered that was one of them.
Then you've got your transformation area out on the edges and we've got a team of people working on future portfolios and they are looking at and going into other markets looking at what the latest trends are, what are the latest threats, what do we need to do to again be agile and moving and pivot to make sure we're staying ahead of it as it relates to our core business? They're coming up with some pretty stuff and bringing back some pretty cool stuff and again I’m trying to empower the team as well to get involved in going to these conferences that are relevant to Australia Post and get a speaking engagement, get up there and tell them what we're doing and start networking and building the network and get ideas coming back in. We were looking to spend some money on a consultants report to get this stuff for us and why would we spend over $100,000 on a consultants report, when our own people could go over there for 1/5 of that and actually get our own network, get their own learnings and bring them back to the team and try and grow from there. So and again, it's about engaging your team, empowering your team and making sure and backing them to bring some of these ideas back in Australia. That's that particular slide.
Alright, so in terms of connecting to our actual purpose so I’ve taken you through innovation strategy and this is being brought to life, but as I said earlier, we are a community organisation, so our customers are at the centre of everything we do, and our purpose is to connect people and it always has been in the 210 years that we've been in existence. I'll share with you some of the changes that we've made to our traditional business that you may be more familiar with. So in the days of the PMG that we mentioned earlier, we connected people through telegraph's and letters, but as new technology is being developed those methods have changed. Technology in the digital economy is completely disrupted traditional ways of working and communication, as you all know. We all have smartphones, many of us, if not all of us are on some form of social media, information is at our fingertips every minute of every day and we all need to say is, ‘Hey Google’ and I hear it every morning with my 13 year old son as he lies in bed and yells out, ‘Hey Google’, what's the weather today and always laugh in the kitchen 'cause I think we're in Melbourne mate it’s going to be cold, raining and drizzly, so I don't know why you worry about asking Google. But a perfect example in a rise of ecommerce.
Would there be anyone in here that hasn't actually shopped online? Nope so, we're all doing it right and thank God you are because it's keeping me in a job. Thank you. But this has been a great opportunity for Australia post to grow our parcels business, but it's also helped us to look at the traditional letters business and create efficiencies in the network while at the same time look at technology and how we might provide more digital solutions that our customers want and expect. We're combining our networks now, so we used to have two networks, letters network, parcels network, we are not calling it one network, and we're combining them where we can to get greater efficiencies so.
So what do our customers want and who are they? Well first we have the end consumer who wants faster delivery and choice in how and when their parcels are delivered. I know I want choice in terms of the way I want it delivered so their expectations are to have control over, the experience and that goes for the community in general. Looking at our delivery business so our mail centres were once our major facility and letters outweighed parcels, so again, we've connected all of that. Around the same time online shopping started to take off, we've always delivered parcels. And we're now increasing all the opportunities surrounding parcels, so we're investing in our business to just make sure that we have the largest infrastructure. We got everything we need to ensure we protect our 80% market share.
So some of the things we've done, is we acquired star track in 2012 and that was a masterstroke of the previous CEO for who secured that particular deal, it was originally 50 50 with Qantas and then we bought them out. We brought together the parcel and letters network, we're investing 900 million over 3 years to give us greater capacity to handle the continued growth in parcels, so that's a significant volume that we’re backing that horse because we know in other markets that's where the growth is. We've installed parcel lockers at over 350 locations and posties are now delivering 40% of our parcels. So we modified the postie bikes so I'm not sure whether any of you seen the three-wheeler postie bikes, they’re now carrying up to 80 kgs in parcels. One thing Christine Holgate is really passionate about is making sure that, wherever possible, that not one postie will lose their job. So she wants to make sure that we're retraining them and modifying the way they work to ensure that the posties are protected have a role in the community. We offer, text your choice to customers to let us know or let them know if they'll be home when we deliver or if there's a more convenient location for us to redirect the parcel to. We also offer on demand so that's a 3 hour delivery, it could be between 6:00 and 9:00 PM of an evening or Saturday from 1:00 to 6:00, so we're trying to provide as much choice as possible again to reamin competitive because we're competing with everyone else out there in the parcels market, and they're doing whatever they can to differentiate themselves from Australia post, and we're trying to peddle as fast as we can as big and bureaucratic as we are, to try and stay ahead of the game.
We've expanded our footprint up into Asia, UK and the US to help Australian businesses grow and be successful overseas. So we are doing quite a lot to remain competitive right. So if we talk about, I guess we are in a unique position to actually service the growing digital economy. While providing physical capabilities that purely digital players can’t offer, we can leverage our network and build on what we already have, particularly our 4500 post offices. I think the next biggest retailer in Australia beyond Australia Post has about 1200 retail outlets, we have 4500. So again, it's a competitive advantage, we’ve just got to
try to leverage that better than what we currently are. You may have noticed something different, your local post office is actually changing now we've got a new head of consumer and community, Nicolle Sheffield in Melbourne. She is completely overhauling the post offices because within our post office network, we have 3500 licenses. So that's 3500 mums and dads who actually own the business and need to make a profit. So and up to now, there's a lot of them that gave been struggling.
So we're completely overhauling the merchandising strategy and we'll see over the next few months, you'll see quite a lot on TV around the new merchandise that will be in Australia Posts so there will be men’s merchandise, women's merchandise, children's merchandise and homewares. They'll be a great Aussie coin hunt that you will be sick of hearing soon when we launch that in November. But there will be the A to Z of one-dollar coins and it's all do with Australian icons or slang, or you know like U is for ute, T is for thong, HSV Hills hoist. Just crazy stuff that people love collecting stuff as we've seen with the Coles and Woolworths miniatures, but we know that by having these great Aussie coin hunt it will drive foot traffic into the post offices, they will buy more stuff and our licensees will make more money. We're trying to make sure it’s relevant to everyone. So we're going to start selling Samsung and Apple products and that's again big shift from what you've typically seen. But you know, historically we've sold blow up beds and eskys, last year we sold 5000 blow up beds across the retail network and 14500 eskys now I don't know anyone that would go to Australia post to buy an esky, but 14500 people did. So there you go so. We're also, our licensees are being upskilled to handle financial transactions like pay bills and everyday banking through bank at post. We are trusted organisation not simply because we've been around for a long time, but our customers in communities and you, are at the center of everything we do and we have to continually change because you do.
When we talk about trust, it is important and we are an incredibly trusted brand as I've mentioned a few times, but everyone loves simplicity and they want to access products and services as efficiently as possible and that shouldn't come as a surprise. But we've also seen that trust is becoming increasingly important in the digital economy, and particularly when it comes to things like identity services. So this is a space where Australia posts are really getting in and owning space and as I mentioned before, we are heavily investing in it to make sure we have a commanding position in there. So if we look at some of these areas so digital ID, is an easy and secure online identity verification service. It's the back bone of a few of our digital identity products, so from digital employee and student cards, to being a repository for identity verification like police checks, this solution could change the way we hold our information and how we interact with our connected organisations.
In the middle there, workforce verification we recently launched, which is a B to B solution for employment screening including Visa and police checks. This product is another that came through our accelerator program and is now being developed in our real-life solution for what can be a pretty manual and time-consuming tasks. Not to mention the burden of handling sensitive data. All that is taken care of with our online application process that can be bolstered by our retail footprint. Our solution allows you to have your identity verified instore and we will securely store that data for up to 10 years. So any further police checks you need to undertake will be as simple as resubmitting your stored data. If that organisations using Australia Post just don't break the law in between and get a record. So no need to search for your birth certificate or passport, this is an Australian first for police screening and one we're pretty proud of, and we're also continuing to grow our partners and find other businesses that value a customer approach to new services like we do. So TrustCheck is one that's currently in the incubation down in Melbourne which is a great example, so we partnered with in NAB to allow businesses transacting online to identify fraudulent transactions through the trust check approach and in the analysis of the data, we can give them far greater certainty than they have currently got that the person they're transacting with these actually that person and is real.
What can you do? So this is just about near the end and then we can have some questions. So in terms of some of the learning, I guess putting yourself in your customers shoes. Think about what they want, what will make their lives easier, how will the decisions you make impact them and do the customer exploration upfront and do it really well and you can't ever do enough of it from my experience. Invest now for the long term, so and not just in technology but invest in the right people, with the right skills and the right attitude. You want to work with people who are customer focused and have an entrepreneurial mindset. I've actually got my innovation teams, the average age is probably about 25, I think if I wasn’t there the average would be about 22, I drag the average up a bit, but we've got quite a lot of young people out of Uni who are in there and just coming with a different way of thinking. There’s still 30, 40 and 50 year olds but it's just really interesting just seeing what's coming through from the younger generation.
Don't be afraid to try something new, but have a plan. I know you've got your strategy in place in your pillars, but have that plan and follow the plan. Because you know we've seen throughout the example of Shipster there, we didn't follow the plan and we did a lot of dough. So we want to make sure that we're not going to make that mistake again. Follow the bread crumbs, go where the research takes you. It might not be where you thought it would take you and it's really interesting, as I said before, you can start off thinking it's going to take you down one particular road, but you get off another road.
Test with your customers and community, test and test again and make sure your idea is validated. So I can't say that enough that just how important it is to just connect with and really understanding who your customer is, and connecting with them and understanding what they want. Learn and iterate from the mistakes of the past. As I said, our CEO is really open, Christine Holgate saying it’s okay to fail. And she means it because she was part of Shipster as well when she said she wanted to put whack of money behind it and really push it and she did, and it didn't work so we failed. But we've come back from that and we’ve said here are the learnings out of this and we will not do that again and will make sure that we follow the process give you teams in space to focus, spin their wheels, make some mistakes, but innovation is not a straight line. You go all over the place and that's what I find really cool about it, it's not coming into work and expect exactly where you’re going to go that day, it could go anywhere.
Change the way you make decisions wherever possible from decision by bureaucracy, to decision by experiment. So you know, just try things and let the research or the fact base do the talking. Embrace disruption, we are getting disrupted more than anyone at the moment and it's probably seems crazy that we would embrace it, but we do. We know that within at the moment everyone is looking, you hear of like Toll in our space 7/11 having Toll, you can go and pick your parcels up from Toll, sendler doing things with DHL, so people are becoming more and more time poor and they're looking for convenience in terms of picking up their parcels, they don’t all want to go to a post office because the post office closes at 5:00 o'clock. So what we've done is we're actually going beyond our network and we're extending, and we're launching this in a couple of weeks, so it’s still not public, so chatter mouse rules. But we are extending our network well beyond the post office so that you can pick up your parcels from up to 2500 other locations around the country, and many of those 24 hours a day. So again, we're trying to stay focused on what you want and how your lives are changing so that we remain relevant and it's up to us to change the post office itself to stay relevant.
So I guess finally in closing, before we go to questions, I thought let's just share this photo with you. That's just one of the one of the teams that are working on the hack days and the accelerators. So just to show that they do have a lot of fun and it's great in terms of the engagement that builds amongst teams. But I will say sustain innovation comes from developing a collective sense of purpose, from unleashing the creativity of people throughout your departments and from teaching them how to recognise unconventional opportunities. It starts from the top. Leaders create the psychological environment that fosters sustained innovation at all levels. So Christine Holgate has her personal email address on their website. I think she's crazy, but she does and she gets smashed with emails every day, but she responds to every one of them. She's one of these leaders I think literally sleeps about 3 or 4 hours a day and just keeps working so she's quite unique in that sense. But you know the emails come in, she filters them down and we respond to them. Our SCIO Bob Black has an email address called ideas to Bob. So anywhere across the network, if anyone's got an idea, they can send it through to ideas to Bob and he will bat it down to someone within his team or who he thinks can manage it. But the critical thing is here is the feedback loop, you have to get back to them within 48 hours with some sort form of response. Because if you don't get back to these people, the ideas stop flowing and they don't come in. The best ideas will come from within your own team and that's what we're trying to create. So they drive it from the top to create and support an innovative culture. And as I say to my team every day, don't stop trying things, you might make some mistakes along the way, but you have to keep testing and trying new ideas and new approaches because we all have the opportunity to shape what a better tomorrow could be. So thank you.
Thanks Michael. That was really action packed and I'm sure all of our minds are spinning with all the ideas in lines of inquiry coming out of that. We are up against the clock. That's fine. It was all terrifically valuable. If you do need to disappear, that's fine but we will make time for a few questions from the floor if anyone has questions for Michael.
[Person in the audience asks a question]
Michael you said B to B and B to C, what does that mean?
I'm sorry. So business to business. So where you are transacting from one business to another business, as opposed to business to the end customer. Yeah, so that’s what I was talking about. So I was the business transacting with the end customer at the end out in the market.
[Second person in the audience asks a question]
Michael so you were talking about your financial services and payments, what is Australia Posts view on the move to some companies who are merging their payment of bills at a post office are charging an extra $2.50 to pay the bill at the post office. This effects a lot of elderly people, I know my mum it’s a concern, so is this an issue that has come up at the moment?
I’ll be honest, it’s not an issue I’m aware of, not saying that it is not an issue. I’d be happy to try and get a specific answer from the lady who heads up the financial services area because Christine again is very sensitive to issues for the more vulnerable people in the community in terms of their ability to pay. We have an obligation to provide a service to everyone that is affordable. So no I’m not aware of that one but I am happy to take it on board so send me an email if you like and I’m happy to follow that up for you.
[Third person asks a question]
I recently, in the last few days I got a personal text from DHL and two from Australia post which I thought was a scam because the URL said, ‘po.st’, Australia post brand is not generally known for innovating generally across Australia. So moving to these text service solutions are you going to be using like your retail outlets because you've got so many of them as communication channels to educate us to say hey, it’s okay it’s not a scam?
It's a good question. We have so many scams because we're just such a soft target. So every day we put it in the paper saying don't respond to this or don't respond to that. It's really hard to keep up with the number of scams coming through, so even have the retail outlets to train at the end customer. Look they’re having conversations everyday with customers around this because we do get asked about particular scams, but because they’re changing so much, it's hard to have a constant narrative on that. So we are just going to try and stay vigilant. Our own people internally fall for phishing scams with emails because we are internally getting hit with it. But yeah, so it's just a constant battle for us.
[Fourth person asks a question]
So I am just curious about the hack days that you run, how do you make that inclusive for staff across the country?
So that’s a great question, the most recent one in Melbourne we had some people from Sydney come down, but what we're doing 'cause I said the same thing, we need to start moving this around to other states because it's not cost effective to be flying people in from everywhere. So we are going to start moving it around and have it like a traveling circus if you like to make sure we get in the ideas from Perth and the ideas from Adelaide and up here.
[Fourth person asks another question]
And when you say that is it just head office or are you getting ideas from the postie?
So we do get them from everywhere, it's some of the best ideas are coming from people who are just processing parcels in a facility, because they're doing it might have that same job for 5 or 10 years and because they're just so close to it. They're the ones who see and understand well if I was actually able to change this process just a little bit, it's going to make my job easy, but then if we multiply that by 1000 around the country with saving millions of dollars through the year. And that's how we're trying to capture those ideas, because the best ideas are coming from our own people.
[Fifth person asks a question]
I just wanted to ask about the customer service that you were talking about earlier, and just how manage that consistent and quality experience with customers with your franchisees?
Yep so we work really really closely with the licensees, so we have a whole team of people that are constantly engaged with the licensee network and a lot of that funnels back through Applex so the Australia Post Licensee Advisory Council and their spokespeople for them. So one of the sentiment will come up to them and come back into the business, but we're also out in the business regularly. And I know with my local post around the corner in Melbourne and quite often, when I am there will go in and talk to him and just so you know what's happening, what's going on? And I look at his merchandise and I'll see that it’s discounted 50% and I say, what are you doing with all these rubbish in here? So does it actually sell? And he says no it doesn't sell that’s why I have to discount it. He said I need someone to help me with my merchandising so we make sure that we're getting people into actually go in and actually help them because again it's their livelihood. They’re so busy behind the counter trying to process the parcels and pay the bills, but they’ve got all these real estate in the front that they could make money if they have the right merchandise and so we're really trying to help them, but they were trying to make sure that the voice of the retailers is heard and we help them because they're just so important to us.
[Sixth person asks a question]
Yes Michael, when it comes to innovation, you often hear that you should fail often and fail early, in terms of government money have you got any ideas for our department in terms of that concept?
It's a good question. I mean think you've got a process that you that you do follow. And engage externals, who are pretty qualified and experienced in this space so that it's a calculated risk. Not every idea back is going to be successful, but one thing I did with the accelerator program and took over this role is there were 6 accelerator programs each program had a $50,000 budget to take the opportunity through and so first of all I cut the budget. I said you don't need $50,000 to prove whether this is going to work or not so dropped down to $20,000, and I said you don't need to run for 12 weeks to determine is this a winner or not and I said you can get to week 3 and you can shoot it, so shoot it, like let's not just waste money because we say it's going to go for 12 weeks. So if we validated enough to show that it's not going to work then get it out and let's focus on the stuff that is. But yeah I would go external where you can as well just get, this is why we get the external coaches to come in and we use them as well, so we don’t just do it all in house.
[Seventh person asks a question]
Yes so two things the first ones a bit rhetorical, why don't post offices sell greeting cards? It really annoys me. I go to send a card to my Mum for a birthday and there isn’t any there so then I have to go somewhere else to buy the cards and then post it. So that's just a brain dump. What's your take on 3D printers? I reckon a few years ago they would've been seen as a massive disruptor and now it just seems to sort of embrace in 3D prints in origin.
So it look we are certainly not in our function. It's not something that slide before I put up in terms of the cornea Jason in the transformation is not something in the way focusing on or looking at too closely, but you have to your 1st question, I mean we have so there's a lot of Australia post that are a part of news agencies, so there's greeting cards right there.
[Eighth person asks a question]
Yes, Michael. My name is Ben. I'm from PMO within one of the department's here, so I'm asking for my project perspective, how do you mitigate resistance to change? So you got great innovations, they come from your team of really motivated happy people, then it gets thrown over to the business where you got people that have been there a long time, alot of resistance to change, maybe some of the franchise owners don't trust in the solution. How do you mitigate that?
That's a really good question. So first of all it helps a lot when you've got leaders that believe in change and see what's coming at us and they know they have to be agile and adaptive and so forth. So that's really important and there was another point that just flew out of my head. And I'll just lost it. Sorry. Sorry I've got it will see it was to do with the Australia post licensee Advisory Council. So there they are, so their livelihood is a post office, right? And then they've got their representing all of the roots of the licensees. So I went to present them on the new program that we’re extending and telling them that we are extending beyond the post office. So we're going to have retailers out there, could be hardware stores, could be supermarkets, could be service stations that will collect and accept returns of Australia post items. So you can imagine the response I got because there was a direct threat to their livelihood so they didn't want change and I just said to them look we need to stay relevant to the customer, to the end customer. So it's up to us to make sure that, we will try to help you as much as we can, but we can either stand here, do nothing and watch it be done to us with the rest of the market coming in and solving that need, filling that gap or we can get on the front foot and we can own this space and protect our 80% market share and it will be 80% of a bigger market share because what we do is make it easier for people to shop online. Because when you get easy returns you'll buy more because it's easy to return back, but there's no real great returns solution. Our returns solution that we bring is paperless. So you walk into a service station for example with the book that you bought off Amazon and you'll say is my QR code on the phone. I don't want this book it’s the wrong one and will just scan it, put it in a satchel and take it and that's it done and as soon as Amazon gets it you get your money credited back too, so it's a really cool solution that we're about to launch. So there are plenty of people in post that don't want to change, you just gotta try and apply some logic and say how you'd rather be part of this change, then sit back and watch the rest of the market go.
Folks, we might have to draw stumps there, we've gone a little overtime, but Michael obviously is being very generous with his time, including taking those questions. He's actually agreed to stay behind and talk to people one on one if you have any further question. Please join me in expressing our appreciation.
Stay tuned for our next Speakers series event.