Not Postal Reform, But Paradigm Shift!

The publishing and graphic arts industries are under assault on many fronts: from new technologies, from changing and uncertain advertising strategies, from constraints on readers' time, from a confused economic picture and, frankly, from our own mismanagement. When Quebecor World, one of the world's largest printers, filed for bankruptcy protection in January, that was certainly an ominous sign for the printing industry.

The paper industry too is in trouble. And current solutions are questionable. Does anyone believe that the private equity ownership of the paper industry will result in a more successful, stable industry in the long-term? Certainly equity firms are masters at financial engineering, but that's not going to result in an industry that serves us better, or that succeeds in attracting new talent, or that can help the paper business reform and prosper in the future as it needs to.

Most concerning is the print distribution channel. Last year saw the passage of postal reform. A key tenet of that reform was rate protection. Going forward, increases are to be limited to annual consumer price index levels or below.

But what no one wanted to acknowledge at that time was that First Class revenue had already started to decline. And that decline will only accelerate as electronic delivery of bills and payments becomes more widely accepted. How can a $75 billion dollar entity accept inflationary increases in the face of declining revenues without changing its mission?

While the printing and mailing industries congratulated themselves on passing postal reform, and Maine Senator Susan Collins was heralded as our champion for saving the legislation at the 11th hour, the reform effort overlooked a vital concern: a discussion on what sort of Postal Service we need in the 21st century. Does the government still need to play a role, when the overwhelming majority of mail is business mail—either bills, or sales offers telling us why we need one more credit card?

When Benjamin Franklin founded the Postal Service, dissemination of information through a reliable and affordable postal system was an underlying tenet of democracy. That certainly is no longer the case. As the European Union moves to postal privatization by 2010, we're still thinking like we're in the 19th century. Postal reform should have addressed what the mission and objective of the USPS is for the next 20 years—and promulgated a plan based on that assessment. Postal rate caps won't work as First Class volumes decline 5%, and that is inevitable.

Recognizing and adapting to change is imperative in our business. Hoping that conditions won't change isn't a strategy. And maybe the toughest part of all is that when we've identified a paradigm shift, that we need to make some difficult decisions.

If we don't, then our fate may be similar to that of the Swiss watch industry, which held 80% of the market in the late 1970s when it invented the digital watch. Concluding no one would buy a watch that couldn't be wound, they didn't patent it, displayed it at trade shows, and within a decade lost 70% of the market to digital watches from Japan and the U.S.