Published: Oct 10, 2007 in Knowledge@Emory
UPS is supposed to be celebrating 100 years of success. Instead, the company is doing what it is famous for: reexamining its past and contemplating its future to see what can be fixed.
“That’s typical for UPS, because for that company it is about the journey not the destination. It is a company built on a culture of dissatisfaction,” says Sundar Bharadwaj, a professor of marketing at Emory University’s Goizueta Business School. “UPS keeps innovating for consistent long-term performance.”
While UPS maintains its focus to keep competitors at bay, others are taking notice of the company’s hard work. Mike Brewster and Frederick Dalzell have written a book, Driving Change: The UPS Approach to Business (Hyperion, 2007), detailing the company’s past growth and future outlook.
The book relates different stages and phases, and lessons learned by UPS management. “The story is the growth of a small local delivery service into a regional influence, then into national and international carrier. It tells how a company has built its associations and relationships to help business implement their strategy by creating their transportation infrastructure,” notes Benn Konsynski, a chaired professor of decision and information analysis at Goizueta.
While many other companies indulge in “competitive paranoia,” Bharadwaj says, UPS doesn’t mention rivals; it just keeps striving to solve its problems. “UPS has always focused on its own processes and has constantly worked to improve those processes. And it seems to be working,” adds Bharadwaj, co-director of the Emory Marketing Institute.
According to Goizueta Marketing Professor Jagdish Sheth, companies that do well financially and command a premium price in the stock market are those that are able to win the hearts and minds of five different stakeholders: employees, customers, suppliers, community, and investors. “UPS seems to do very well with all of them and I believe this is so because for many years the company was privately owned and has only gone public in the last 10 years,” explains Sheth, a well-known business strategist and the founder of the Center for Relationship Marketing (CRM) at Emory University.
Customers reap the benefits of a company that has not come out of major innovation, but has changed and upgraded its processes, notes Bharadwaj. The company’s strength lies in its ability to compete for each customer. “UPS works at generating something each customer needs and their solution fits each customer uniquely. That may be the engine of growth for them in the long run.”
Currently, the company is doing quite well by bundling products. This allows UPS to prosper despite a lack of population growth.
“There is very little population growth, so companies have to figure out how to get more revenue from the same customer. UPS and others do this by selling more than one service to each customer,” explains Sheth.
For example, many transportation companies are bundling logistic solutions and financial solutions, Bharadwaj says. But for customers, it’s about more than just combining two components—it is an answer to a problem, he emphasizes. And that is what makes UPS a standout.
“For customers, it’s not just having a bunch of things; they want the bundled components to work together and also work with what they already have so they don’t have to change their systems,” notes Bharadwaj. “Companies need to understand how a customer’s business works and come up with solutions. But they can’t offer a solution just because they sold it to another customer in the same industry. They have to really cater to that specific customer, and UPS is great at that. UPS understands that.”
Also, UPS garners widespread accolades for its customer satisfaction. That is key for any company’s future, adds Sheth. “UPS is very much civically engaged and encourages employees to get involved in community events,” he says. “UPS customers are by and large very happy. It’s not a flashy company, but they give people value for their money.”
Konsynski believes UPS stands out in the business sector because of its strong values and commitment to its employees. “It is unique because the company sustained a pattern of growth by utilizing college age, part-time employees who grew into lifelong careers. There is a strong culture of nurturing managers from within,” he explains.
Despite its standing as a global company and unionization, employee loyalty is high, adds Sheth. That’s because UPS understands that growing managers from within only makes the company stronger. “Outsiders make two mistakes: They believe it is their job to teach current employees something new and they never bother to learn how good the internal culture is,” says Sheth. “But UPS has had very strong community relationship and employee loyalty. That hasn’t happened by accident.”
So, while others may see UPS as just a shipping company, investors, suppliers, customers and employees see it as a large value-added services company, says Sheth. For example, UPS is an enormous buyer of trucks, which they co-design with suppliers. “They have a very strong supplier relationship,” Sheth adds. And when UPS bought retail stores, they also started selling packaging and document services. “UPS goes beyond shipping and transport,” he says.
Like any company striving for organic growth, change is not always smooth. For example, going public has caused some growing pains for UPS. When the company was privately owned, it didn’t have to perform quarter by quarter, explains Sheth. “The company built long-term value because employees owned UPS,” he says. Every manager, especially senior executives, was given stock options.
“Most managers bought the shares and kept them since there was no outside stock market,” adds Sheth. “But once the company went public to raise more capital for global expansion, they had two kinds of investors: employees with a long-term view and outside investors—mutual funds, hedge funds, brokerages—who buy and sell daily,” he says.
This means UPS “is driven by a short-term stock market perspective, which is in conflict with its long-term goals,” notes Sheth.
Nevertheless, UPS continues to dominate the national and international transportation market, observes Konsynski. “They have maintained a high-performance operating network that has scaled to over 15 million parcels a day. The increased customer visibility and relationship building is part of its success,” he says. “The culture is a very important part of who they are and what they offer. It is the most remarkable company I’ve worked with in 35 years of consulting and academia.”
What’s ahead for UPS? Authors Brewster and Dalzell contend that to move a company forward, “the future vision must be communicated to employees: One or two meetings introducing a new product or line of business won’t do the trick. A sustained, coordinated series of messages and events must provide evidence that this vision is the key to a company’s health—and to employees’ self-interest.”
