“Every business needs to continue to transform itself and move into new markets,” says Marc Lautenbach, the first outside chief executive in Pitney’s 93-year history as the leading U.S. maker of postage meters is struggling to adapt its 20th century brand for the 21st century

June 25, 2013, 6:33 p.m. ET

Pitney Bowes Readies 21st Century Message



Pitney Bowes Inc. CEO Marc B. Lautenbach on leadership lessons gleaned over time and preventing burnout.

Pitney Bowes Inc., PBI +3.30% the leading U.S. maker of postage meters, is struggling to adapt its 20th century brand for the 21st century.

Amid weaker demand for mail—revenue for the mail and document-services company dropped 4.4% during the first quarter following a 4.3% decline for all of 2012—Pitney is consolidating its core business to reduce costs while expanding its digital-commerce operation. Those digital initiatives include a service that enables eBayEBAY +1.59% to calculate the cost of shipping packages overseas, location check-in software for Facebook FB +1.30% users and a credentials-verification service.“Every business needs to continue to transform itself and move into new markets,” says Marc B. Lautenbach, the first outside chief executive in Pitney’s 93-year history.

Yet Mr. Lautenbach remains upbeat about the mailing business. “Mail will be a very relevant portion of the commerce framework for the foreseeable future,” predicts the 52-year-old CEO, hired in December from International Business Machines Corp. Direct marketing, for instance, “is still more effective with mail,” and its volume is growing, he adds.

In an interview with The Wall Street Journal at Pitney’s headquarters in Stamford, Conn., Mr. Lautenbach also described the dividend outlook, future takeovers and his management shake-up. Edited excerpts:

WSJ: You recently said your brand must move into this century. What did you mean?


Mr. Lautenbach: Our brand is an artifact of the 20th century. It has a lot of great associations with integrity, reliability and the mail. The brand does not have the association I would like it to have with digital businesses. The brand needs to catch up with our capabilities. Digital businesses are an artifact of the 21st century.

WSJ: What were your biggest challenges when you took command?

Mr. Lautenbach: We had to stabilize the mail business, an important provider of economic value for decades. Another challenge was how do you make these largely software assets acquired over the last decade more valuable? The third was improving the company’s capacity to transform its business model and culture.

WSJ: When might Pitney stop making postage meters and become a pure digital player?

Mr. Lautenbach: Not in my lifetime. As you look at our five-year strategic plan, mail continues to be pretty important.

WSJ: About 14% of your annual revenue now comes from digital-commerce services. How much higher will that be in five years?

Mr. Lautenbach: If these businesses grow about 10% a year world-wide, it will be a roughly $1 billion operation in five years—compared with around $675 million last year. Digital-commerce operations have the opportunity to provide substantial growth opportunity [and] even higher profit margins because we have leading-edge capabilities. We want to be leaders in the markets we are trying to serve—which are primarily e-commerce, location mapping and document encryption.

WSJ: This spring, Pitney halved its quarterly dividend. Shares that day plummeted 15.6%. Will you soon restore your lowered dividend?

Mr. Lautenbach: I don’t think that is in the cards. Even at today’s rate, it is competitive. Putting money into those digital-commerce businesses provides a better return for our shareholders than other uses.

WSJ: Why has it been difficult to integrate the more than 80 acquisitions that Pitney completed in the past decade?

Mr. Lautenbach: We have not leveraged the technology that we acquired across our entire company. Companies are driving to become globally integrated enterprises. Put all the stuff in the back office together, and you can drive incredible efficiencies. Among other things, we must no longer have 37 different systems for taking orders and producing bills for customers. It will take several months to work down to hopefully one system.

WSJ: What kind of takeover will Pitney do next?

Mr. Lautenbach: I don’t feel the need to do a transformational type of acquisition. We are not going to buy another maker of postage meters. We are going to be very disciplined and do acquisitions that build on our software-services capabilities.

WSJ: How can you transform the culture of a company with an iconic brand?

Mr. Lautenbach: I initially decided to use the client as an anchor for our transformation. To become more client-centered, I sent the top 120 executives to make three client calls apiece by the end of the first quarter. They asked mostly current clients how we can improve.

WSJ: You’ve already replaced a third of your corporate officers. Three of those six new hires are IBM alums. How will that hasten Pitney’s transformation?

Mr. Lautenbach: I created a leadership team with specific experience integrating and scaling digital businesses and building global brands.

WSJ: Will you make more management changes?

Mr. Lautenbach: Leadership always continues to evolve. [But] we have made most of the senior-level changes that needed to get made.

WSJ: To increase accountability, you recently aligned almost all executive pay with your financial results—up from about 70% before. How did your fellow executives react?

Mr. Lautenbach: No resistance. It became very clear what they were going to get paid for. Being customer focused and financial results are sides of the same coin. If you treat customers poorly, you get bad results.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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