September 28, 2012 at 4:01 pm | Blog
On September 28th, The Wall Street Journal announced that the U.S. Postal Service (USPS) will again default on its obligation to fund future retirees’ health care costs. The $5.6 billion default marks the second failed payment to the U.S. Treasury in two months.
The USPS May be on the Verge of Losing its Competitive Advantage
While there’s no doubt the USPS must overhaul its business model if it wants to stay in the game, closing offices and eliminating Saturday delivery only undermines its competitive advantage– further exacerbating its financial woes. Virginia Congressman Gerry Connolly said it best, “Giving up six day mail service, closing rural post offices, and ending next day mail service will forfeit USPS’ competitive advantage, and would accelerate the decline of the Postal Service.”
Just like thousands of companies, large and small, the USPS is responding to financial trouble with a laser-like focus on cost-cutting; believing that cutting costs (read: eliminating services) will help pull it out of the red. The trouble is this: the cost cutting measures the USPS proposes represent valuable customer services. Cutting these services results in an inconvenience to its customers, and jeopardizes its competitive advantage.
What other company delivers first class mail to your door six days a week and offers a brick-and-mortar shop in every small town across America? What other company offers affordable Saturday parcel delivery? This is what makes the UPSP unique. Par down on post office facilities and strip Saturday delivery – you’ve effectively wiped out the agency’s only differentiators. Disgruntled customers will look elsewhere.
Moreover, your friendly postal worker acts as a company ambassador; an extended competitive advantage of sorts. Customers often develop a genuine relationship with their mail carrier who strengthens their confidence in, and emotional attachment to, the USPS. Take away that friendly ‘Saturday hello,’ and the convenience of Saturday mail delivery that comes along with it, and you’ve told your customer that their needs don’t matter. You’ve distanced the customer yet again and practically begged them to look for an alternative. These are distinct competitive advantages that the USPS should maximize and exploit, not eliminate.
In 1985, Michael E. Porter wrote a ground breaking textbook, Competitive Advantage: Creating and Sustaining Superior Performance. Porter stated that a competitive advantage can come about in two ways—cost advantage and differentiation advantage. The USPS should be capitalizing on both.
- Where have you cut expenses at the cost of undermining your competitive advantages?
- Where might you actually invest more to shore up your differentiators?
Make a list of both and see what makes sense for your growth.
Interested in learning more about the positive impact of a well defined competitive advantage? I suggest you read Creating Competitive Advantage, by Jaynie L. Smith. This powerful guide ranks in the top 1% of books on Amazon.com and BarnesandNoble.com, and will help you begin to learn and understand the power of identifying and communicating your Competitive Advantages in order to stay ahead of the competition.