The purpose of this course is to help individuals and organizations survive when confronted with disruptive technologies that threaten their current way of life. We will look at a general model of survival and use it to analyze companies and industries that have failed or are close to failing. Examples of companies that have not survived include Kodak, a firm over 100 years old, Blockbuster and Borders. It is likely that each of us has done business with all of these firms, and today Kodak and Blockbuster are in bankruptcy and Borders has been liquidated. Disruptions are impacting industries like education; Coursera and others offering these massive open online courses are a challenge for Universities. In addition to firms that have failed, we will look at some that have survived and are doing well. What are their strategies for survival? By highlighting the reasons for the decline of firms and industries, participants can begin to understand how to keep the same thing from happening to them. Through the study of successful organizations, we will try to tease out approaches to disruptions that actually work. Our ultimate objective is to develop a strategy for survival in a world confronting one disruptive technology after another.
7.1 UPS
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From the course by University of Maryland, College Park
Surviving Disruptive Technologies (On Demand)
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From the lesson
4.1
Two companies in this module are private and are very successful; a quasi-public agency has a hard time competing with them and their technology
Meet the Instructors
Hank C. LucasRobert H. Smith Professor of Information Systems
School of Business
Frankie, this week we get to look at two successful companies, and compare them
with an organization that is very old, has a long history, but is having trouble
competing in today's environment for a variety of reasons.
Our first example is United Parcel Service, UPS.
And I know you must like UPS, because whenever the UPS man comes, you run to
the front door and bark at him to welcome him.
So let's take a look at this company and how successful it has been.
The familiar brown UPS truck, we see them everyplace.
A little history of the company. It was founded in 1919 in Seattle, so
it's not quite 100 years old. It went public in 1999 and that was the
largest IPO at the time. It began as a bicycle delivery business
which is, pretty interesting if you can think of where they are now.
They probably didn't jump over, mountains like this, but, that was the best bicycle
video I could find. [COUGH] And moved their headquarters to
Oakland and they bought a common carrier so they could offer daily pickups and
CODs, collect on delivery. things like delivery and collecting money
and so on are regulated. So the The industry does have to, to meet
some government regulations. In the 1930s, the east cost department
stores started to us UPS as opposed to the United Postal Service.
So this is the first place where the United States Postal Service begain to
run into problems from UPS. UPS became the first company to deliver
to every address int he United States. Of course the USPS does that and has for
a while. It began overnight service in 1985 which
I would guess was probably in response to the success of FedEx.
And it's been operating its own airline since 1988.
Some interesting statistics: Largest package delivery company on revenue and
volume. Delivers for one point eight million
customers in two hundred countries and territories.
It delivered over four billion packages and documents in 2011 and delivers about
sixteen million items a day and of course that really goes up during the holiday
season every address in North America and Eupore.
Thirty-two million daily tracking requests.
A tracking request happens when you go to their webpage and over in corner, it says
track a package and you put in the number, you've been given and it will
tell you, it will list all those places that the package has been and where it is
currently. 95,000 vehicles, 230 jets, and a major
use of Information Technology for operational purposes and for customer
service. It's interesting because, when Federal
Express started a package tracking service on its computer system, so you
could go to FedEx and see where your package was.
UPS had not done very much with technology, aside from very routine
transactions processing application. And the predominant spirit in the company
was, why would anybody want to track a UPS package?
Because, once we pick it up you know we're going to deliver.
We, we don't make mistakes, we don't lose packages, it will be there.
So why do you need to track it? But it turns out that people did like to
track their packages. So UPS developed a package tracking
application of its own. The good news about this is, it is
confidence enhancing for a carrier like UPS.
Because it fits in with their existing business.
It's just an additional customer service that they provide.
Prior to this time there'd been an under-investment in IT at UPS its
estimated that they spent about a billion dollars to catch up with Fedex and now
the two have roughly comparable IT budgets each year.
Here is some data on their performance. you can see that their sales are doing
very well. Except, in here, you can tell that they
are sensitive to general economic conditions.
When the economy, declines. people ship fewer packages.
People are buying few things. By the way, one of the the, events.
1 of the technology disruptions that has really benefited UPS.
What do you think that would be? Okay.
It is E-Commerce because all of the things that you order over the internet
of the US, a substantial number of them, UPS deleivers.
FEDEX delievers a lot too and the USPS, the United States Postal Service is in
last place. So why is UPS so successful?
One is a relentless drive for efficiency. They adopted technology when it was
disruptive, they use management science to tell them how to load the trucks Okay?
So, if you follow a UPS truck their routes are layed out so that they try to
minimize left turns because that takes longer and uses more fuel.
So that's what I mean when I say they're pretty successful in terms of looking for
efficiencies in their operation. They have really high levels of customer
service. reasonably attractive salaries, the
salaries are, are very good for their drivers, who, are generally, blue-collar
workers. UPS is unionized, they've had some
strikes. They stop where there is business, they
don't have to go someplace where nobody is asking to have a package picked up or
delivered. So, in summary, UPS competes with FedEx
and the United States Postal Service. It's a highly successful firm in a
business subject to variable operating costs, like fuel.
High capital costs in the form of trucks and planes.
Processing facilities where the packages come and then are distributed to be
delivered across the country. And information technology.
And as we mentioned, they've used information technology positively.
And they have avoided, major disruptions from it.
Or if you viewed FedEx's IT applications as disruptive then, then UPS has morphed
it's business model to encompass them, to include them, and to make them competence
enhancing. They're also subject to the strength of
the economy. So it is I think a very well managed
company. And we'll stop for a quiz for you to say
why you think the company is so successful
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