Incremental and Disruptive Innovation

The mailing and shipping industry has been built around decades of manageable incremental innovation. The result is an ecosystem and postal operating system that is far better than it was just a few years ago. This model now faces disruptive innovation in the marketplace (alternatives to mail) and in core operating processes (new ways of doing things). Firms in the industry must adapt or they will be left behind.

The Buzz About Drones in the Delivery Process is Just One Example of Disruption

One popular example of the potential disruptive innovation is the use of drones for delivery. They have been all over the news recently. Jeff Bezos’ piece on CBS’s 60 Minutes was what helped bring the innovation to the public eye, but the technology had been growing long before Amazon announced their plans. More examples of test applications are emerging with increasing frequency. Most recently in Russia a pizza company claimed that it was using drones to deliver and did so faster and cheaper than traditional delivery.

Disruption is Inevitable

Skeptics have severe criticisms of delivery drones and they should. Drones have a number of hurdles to overcome before they become viable. On regulatory grounds alone, drone delivery is likely to gain hold first outside of the United States. That being said, skeptics should not underestimate the power of the American (or really any) consumer. If an alternative exists where they receive a product faster, cheaper with the added benefit of reduced impact on the environment, then you can bet that consumers will push for this alternative. While drones may not deliver on these qualifications yet, they are rapidly approaching a world where this is reality. If this kind of change is happening, then companies in the ecosystem can either scoff at innovation and fall to the wayside like BlockBuster or Kodak, or champion it and emulate Apple or Amazon.

The “Amazone” Revolution

Amazon has literally reinvented the concept of e-commerce and has pushed the evolution of parcel delivery and logistics to its absolute edge every year. Drones are only part of this effort. This disruption will continue as others respond to the changes and come up with variations or entirely new approaches. The shopping experience has evolved from one where you go to a store and hope they have what you like, to a digital experience where you can order specific items to match your needs and get it delivered fast with potential savings. In a way Amazon is finding a way to outperform Walmart when it comes to logistics.

Megacities and Rural Delivery

If you look at Russian pizza example you see that both consumers and producers were clamoring for either the savings or the novelty of drone delivery. Andreas Raptopoulos of Matternet pointed out at PostalVision 2020/4.0 that as humans continue to move into cities and megacities and create massive amounts of congestion innovators will find new ways to provide services. We see it in the “sharing” society (Uber disrupting taxi service, for example). It may come in the shape of networks of automated parcel lockers. Pneumatic tubes may be reintroduced.

In rural areas, a delivery service could take to the air to allow for a whole new network of transportation. With supersmart mobile devices, always on tracking software, delivery need not be tied to a single physical address.

The Growing Power of Consumers

Who will respond? There are some in the mailing and shipping industry that believe that they (mail service providers) are the customers and will determine the shape and pace of change. Some still think that consumers will continue to be passive actors in this play. Wrong. Consumers are emerging as the stars of the show. Dynamic routing, speed, low cost, multiple delivery locations, security, and convenience will increasingly be determined by consumers. If current providers can’t meet these demands, someone else will.

Who is investing in the digital front end of mail or in creating value through relevant analysis of the flood of data being created by new tracking capabilities? Why hasn’t hybrid mail evolved to bypass transportation and processing to be entered into the delivery system as close as possible to the point of final delivery? Who is prepared for 3D printing? Who is ready for the impact of the “Internet of Things”, where almost every physical item in the value chain process is talking to every other thing along the way?

While drones may ultimately play a bit part (or may be a supporting actor), the combination of changes will lead to rapid and disruptive changes that cannot be easily predicted. Those who are invested in the ecosystem would be smart to be in front of innovation rather than deny its existence.

Bryan Klepacki

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