With the report to transform Posta Kenya already out, new CEO rolls up his sleeves as he prepares for the audacious task
By George Gichuki
Often, when they enter the market, no one seems to notice them. They appear insignificant and totally out of tune with the customers’ needs. Most of their features look alien and conspicuously different from those of other products in the market performing related functions. But like a hurricane, they blow away giant products and organizations which have dominated the market for countless years. In the process, they create new industries which totally wipe out the existing ones. They rake in billions in profits because of their agility and subtle way of facilitating business. These are disruptive innovations and examples include: the personal computer which phased out the typewriter, M-Pesa which introduced a totally new experience of sending and receiving money eclipsing telegraphic money orders as well as postal orders and the electronic mail (email) which replaced centuries old letter writing, disrupting the postal and greeting card industries in the process. It is perhaps the latter innovation (email) that took away the sail from a giant vessel – the Postal Corporation of Kenya (otherwise known as Posta Kenya).
Nevertheless, disruption of the traditional post office business that has been occasioned by technological innovations is a global phenomenon. It is not unique to Posta Kenya. In particular, the mail business has shrunk considerably throughout the world. Faced with that monumental challenge, Posta Kenya has been forced to embrace technology in its product and service offering. “Shrinking revenue from the mail business has brought about cash flow challenges in our organization,” says Mr. Dan Kagwe, the Postmaster General. “Consequently, we have developed innovative ways of overcoming that hurdle and we are relentlessly pursuing opportunities in e-commerce,” he adds.
Mr. Kagwe was confirmed as the Postmaster General and chief executive officer of Posta Kenya six months ago. He served in that position in an acting capacity for nine months. He joined Posta Kenya five years ago as the head of department in charge of strategy and business development. One of his monumental tasks – as he has outlined in Posta Kenya’s 2016-2019 strategic plan is growing the organization’s revenue against a backdrop of ruthless disruptions. “We are committed to growing our revenues to over Kshs. 17 billion in three years as follows: 2016/2017 (Kshs. 3.8 billion), 2017/2018(Kshs. 5.1 billion) and 2018/2019 (Kshs.8.3 billion),” he states in the plan. “In order to achieve our set targets, we require a paradigm shift in the way we do business so as to move to the next level,” he adds. Indeed, his effort is bearing fruits going by a recent review of the three year strategic plan. “ One of the key things that we noted during the review is that we are on our way to doubling our revenue from Kshs. 3 billion in 2016/2017 to about Kshs.5.2 billion by the end of 2017/2018,” he avers.
Posta Kenya undertakes its business under the Postal Corporation of Kenya Act, 1998. Its operations commenced on first of July, 1999, with the dissolution of the Kenya Posts and Telecommunications Corporation (KPTC). It operates as a commercial public enterprise and its mandate includes provision of accessible, affordable and reliable postal services to all parts of Kenya under the Universal Service Obligation (USO). This obligation is spelt out in the United Nation’s Charter of 1948. Posta Kenya’s vision is to be the leading global provider of innovative postal and related services, while its mission is to provide innovative communication, distribution and financial solutions to its customers and to create value to its stakeholders.
For many years (especially when it was under KPTC), Posta Kenya was a monopoly. Given its legal status at that time, it offered its products and services exclusively in the market. The flip side of that business model is that it made the giant organization complacent and a bit slow in the uptake of technology. That is an oversight that Mr. Kagwe appreciates. “By monopolizing the postal services, we failed in picking some cutting edge innovations – like mobile money transfer – when they started being launched in the market,” he points out. “Nevertheless, we have learnt from that experience and today, our business is being driven by technology backed products and services,” he adds.
One of these products is M-Post (Mobile Post Office), which has enabled a customer’s mobile phone number to automatically become his or her post office number. Through M-Post, customers can track their mails using their mobile phones and get notified once the same is received. There is an option of the mail being delivered to the customer’s preferred location either through Posta Dispatch or Express Mail Service (EMS). Significantly, the product links the customer’s physical box to his or her virtual address.
The revolutionary product was recently recognized at the Africa Public Service Day celebrations in Kigali, Rwanda. It emerged the best innovation in the Youth Empowerment Programme category.
The quest for Posta Kenya to embrace technology is well captured in its current strategic plan which has taken cognizance of the fact that new technologies and practices are continuously being developed in order to improve the communication sector in the country. As guided by this plan, Posta Kenya has undertaken to take up innovations that not only improves the delivery of its products and services, but also supports the government’s agenda of growing a cashless economy and connecting banking and mobile telephony service providers among other business partners through integration, in order to effectively serve members of the public wherever they are.
Against that background, Posta Kenya is leveraging on its vast network of about six hundred and thirty branches to tap business from commercial banks among other service providers. Currently, it has partnered with leading commercial banks in the country including: KCB, NBK, Co-operative Bank, Barclays and DTB. “Today, commercial banks are reaching most of their customers using technology (branchless banking model) as opposed to brick and mortar and to that end, we are integrating our system with their point of sale ( PoS) systems, hence enabling them to cut their costs drastically,” observes Mr. Kagwe. This has become a key revenue stream for Posta Kenya.
Every year, the organization is expected to pay dividends to its only shareholder – the Government of Kenya. Nevertheless, since its establishment, it only managed to do so in 2014 when it issued the National Treasury a cheque of Kshs. 17.3 million as dividends. It is for that reason that Posta Kenya is keen on doing more business with the government as it strives to grow its revenue. Some of these services include clearing and forwarding and courier. “We have formally written a letter to our parent ministry – information, communications and technology – expressing our wish to lender these services to the government,” observes Mr. Kagwe.
In 2016, the cabinet secretary for the said ministry appointed a taskforce to review Posta Kenya’s business model and align it with the current technology and market trends. Some of the challenges that the organization has been facing include: cutthroat competition from private sector players, disruption of its business model which has mainly been occasioned by technological advancements, high cost of doing business, aging workforce, meeting the universal service obligation and maintenance of its vast networks. The taskforce handed over its report to the ministry in June, this year. Before it is implemented, the ministry will review the report, offer the necessary guidance and consult further on the way forward together with other relevant government organs.
This will form the foundation of turning around the strategic commercial public enterprise in order to make it more profitable and responsive to various challenges emerging daily in its line of business. Offering leadership towards the attainment of that audacious plan is Mr. Kagwe. Clearly then, his in tray must be full but he is betting on embracing technology in his bid to transform the giant organization.