Technology-Driven Strategy: The La Poste Case

European Straits #27

Dear all,

My past week was dominated by several meetings with the Groupe La Poste, the state-owned corporation that operates the French postal service (among many other activities). I have been involved with La Poste for three years now, mostly as a member of the strategic committee that oversees their digital business unit. This week, I thought I’d share a few ideas inspired by my experiences there.

First, technology has finally become a strategic challenge for La Poste. Many organizations have long expressed an interest in technology, but it has usually been confined to the margins of the corporate world. For business executives, technology was all about creating a web site for their company, advertising their brand on the Internet, and nonchalantly operating digital businesses on the side. Today, technology has become more about strategic positioning. And large corporations such as La Poste now use technology as a lever to upgrade their core assets, redefine their value proposal, and redesign their entire value chain. This is a major leap forward, with far-reaching implications.

Second, with more technology, La Poste is in the race to become a leader in proximity services. I call every business that involves a direct and sensitive interaction between an employee and a customer a proximity service. This “industry” includes a wide range of activities, among them food, hospitality, education, healthcare, security, personal care, maintenance, last-mile logistics.

Proximity services matter because it’s where most of the jobs will be located tomorrow, as human interaction, unlike routine tasks, tends to resist both automation and offshoring. Yet today it’s still an unattractive job market for onshore workers: badly paid jobs, barely rewarded by society, with scarce social benefits, and particularly harsh working conditions. Only when the government takes charge, like in education and healthcare, are those workers blessed with a certain level of security.

This could all change with technology, which contributes productivity gains in proximity services and the possibility of improving quality and paying workers more. Indeed if La Poste succeeds in its new strategy, the postman of the future will morph into a plurality of proximity workers augmented by technology, providing a large range of day-to-day services to a multitude of customers either in urban areas or in the countryside (where La Poste ensures an enduring support for remote communities).

Finally, being a state-owned company is far from being a liability. Indeed I’ve discovered along the way that the largest players in the private sector don’t perform any better when it comes to becoming a tech company. State-owned companies may be crippled by waste, capital scarcity, and red tape. But we all know that large private-sector businesses have their own problems: short-termism, capital rationing...and red tape as well! Moreover, there are certain values in the public sector, such as universal service and care for the public, that better prepare employees to embrace the new corporate culture in the age of ubiquitous computing and networks.

It’s too early to tell if La Poste will emerge as a leader on the fast-growing and job-rich proximity service market. But at the very least harnessing the power of technology gives it a real shot at trying—and will provide many lessons for us to learn from. Indeed we at The Family invest a lot on working with legacy organizations, including my own time working with La Poste, for at least three reasons: first, working with incumbents is inescapable in Europe, where venture capital is not strong enough to provide entrepreneurs with the luxury of disregarding them; second, there’s a lot to be learned about the digital transition by embracing the point of view of incumbents; third, business strategy is a discipline that is useful for our portfolio startups as they themselves turn into large companies.

By the way, don’t miss my latest Scaling Strategy note: From Startup to Tech Company.

Warm regards,

Nicolas

(I’ll be on the road for at least the next two weeks, so there may be randomness in sending this newsletter. I wish you all happy summer holidays!)