“Leadership starts with a vision,” according to Myron Gray, president of U.S. Operations. “But the route to realizing that vision is never perfect and almost never direct. It’s filled with crossroads and multiple options.”
For someone who has been involved in the U.S. transportation business his entire career, it's great to be in a state that calls itself the “crossroads of America.” As you just heard, I've been with UPS for more than 30 years. Throughout that time, we have constantly looked for new ways to make our operations more efficient. One of the most important of those changes offers, I believe, a lesson in the subject I want to talk about today, leadership.
Here's the takeaway: The kind of leadership that creates real change is built on a precise combination of vision and action. I'll explain: A little more than 10 years ago, we told our drivers – no left turns. But long before there was an official policy, we knew what anybody who sits in rush hour traffic knows: left turns mean your cross traffic, which takes time, and risks collisions. But we wanted to confirm what we already knew in our gut. We measure everything at UPS, and there's nothing more important to measure than efficiency. So we put our IT resources on the job.
The result was an advanced technology platform called ORION, which gives our drivers a system to map out the best routes. ORION is a 1,000-page heuristic algorithm. It's what's called a practical methodology. That means it's good enough for the immediate situation, even though it's not perfect. ORION doesn't necessarily map the perfect route for our drivers, who make an average of 120 stops each day. Instead it chooses from millions of trillions of potential routes – to give our drivers a very efficient route. Yes, millions of trillions, based on that algorithm and our experience over time.
And you know what ORION and its massively complex algorithm told us? That's right. “No left turns.” Since 2004, turning right, plus other efficiency-optimizing efforts, has saved about 10 million gallons of gas and reduced emissions equal to taking more than 5,000 cars off the road for a year. The leadership lesson here is that everything starts with a vision. But the route to realizing that vision, for any of us personally and for our organizations, is never perfect, and almost never direct. It's filled with crossroads and multiple options.
Most people and companies aren't even aware they're at a crossroads until they choose one direction over the other. But leaders must always assume they're where multiple decisions and options intersect. Because, as leaders, we face many more crossroads than straight stretches of road. Sometimes, you'll have to go left. Sometimes you'll have to take the long way around. What's important is that leaders know where they're going and keep moving to get there.
It's kind of like basketball: The teams that will make it here to the Final Four in a couple of weeks, they all move forward, but not necessarily in a straight line. But they always know exactly where they are on the court. And they always know exactly where the goal is. Business is a lot like that. You reach your goals by moving ahead, while always knowing where you are. How do you do that?
Vision makes that possible. Because leadership is not only about what's next. It's also about what's now as well as what was, and finding the right balance among all three. We recently had a guest at UPS, Vijay Govindarajan, a professor at Dartmouth. He gave us a great perspective on those three states of business. If you know Vijay's work, you know he puts things in boxes.
Box 1 is “Manage the Present.” That's where you put the things you're doing right now to improve performance.
Box 2 is “Selectively Forget the Past.” That's where you file all the underperforming, obsolete and outdated stuff, products, services, policies and assumptions.
Box 3 is “Create the Future.” That's the box for initiatives that position you for the long-term.
Or looking at it another way, all organizations divide their time between three actions: preservation, destruction and creation.
According to Vijay, most organizations spend most of their time focused on the present – which he says is a short-sighted perspective. Not focusing on “next” because you're mired down in “now” can mean going nowhere. Let me tell you a story that illustrates that. It was 1998 and I was district manager in our Rocky Mountain district.
This was a 25-year-old district that wasn't very profitable. I knew we needed to grow sales, and I thought we needed some new blood in our organization to help us do that. So I asked my boss to send me some candidates for the job who were highly experienced in sales. But my boss says he wants to send me a guy who had very little sales experience. He said, “Just talk to the guy. See what you think.” So the guy flies out and I meet him at the gate. This was back when you could do that.
He shakes my hand and says, “Where's baggage claim?” I said, “Don't worry about your bags.” I'm thinking to myself that he's going to get right back on a plane and go home. So we sit down in the gate area, and I start telling him all the problems we had and how tough this job was going to be.
Finally, he looked at me and said:
“I know what you're doing. You're painting the worst picture you can paint because you don't think I'm the right guy for this job and you want someone else. But I'm not getting on that plane. This is my job. I want to help you do what you want to do, and I'm not getting on that plane.”
So I said, “OK, let's get your bag.”
This guy was still wet behind the ears, but he had a lot of ideas. He helped us change our thinking, from focusing so much on the 10 things we needed to do today, to the 10 new customers we needed to find tomorrow. So we started looking for prospects in businesses and industries beyond the ones we traditionally served. And we started going to see prospects and learning about their business. It may not sound like it, but that was a pretty radical approach back in those days for our company. Within a year we reached profitability and growth of 7 percent.
If I had focused only on the present, I would have insisted on a sales guy who would have probably come in and tried to turn the business around in three months. Probably using traditional sales tools and methods. But that would have left us stuck in the present. We all have to focus on the present. That's how the work gets done. But we can also use now to anticipate next so we can do something about it. In other words, committing to the future before it happens.
Once you see it that way, the present takes on a whole new significance. It's about vantage point, your vantage point, which, as a leader, is a unique one. I've learned this through experience, a lot of years, in a lot of different positions throughout our company. I started as a package handler. Today, I manage 320,000 people across the U.S. I'm older, smarter and my perspective is a lot different than it was when I was sorting packages.
For a time, as the Americas Region Manager, I also had responsibility for 57 countries. I'm glad I started where I did, and I'm glad I had that international experience. All those stops, starts and crossroads have given me a unique way of seeing things. You see, very few people see the "organization" from my perspective. But here's the thing: Everyone in our U.S. operation needs me to see the organization from theirs.
I've held practically every job that I'm now responsible for overseeing. So I understand the day-to-day, on-the-job challenges. It's now my job to help anticipate and solve those same problems. Having managed from coast to coast, I know that what matters most in Oakland, for example, may not be all that important in Dallas or here in Indianapolis.
Laws and regulations are different and they create different dynamics for leaders. Having been at UPS for all these years, I know where we are and how we got here. That's valuable information for figuring out how we get to where we want to be next. As a leader, I also have to be a visionary with my head on swivel. That's especially true at a company like UPS, because we move products and goods for just about every industry you can think of.
From retail, healthcare and high-tech to automotive, government and aerospace. Small, independent businesses to the largest global enterprises. All that diversity gives us a finger on the pulse of domestic and global economies. With approximately 2 percent of global GDP moving through our network, and 6 percent in the U.S., we've become something of an economic bellwether. That's why you'll see our CEO and CFO on CNBC and quoted regularly in the Wall Street Journal.
In fact, as I speak to you today, nearly 100,000 UPS package cars and nearly 500 UPS owned- and-operated aircraft are in various stages of delivering nearly 18 million packages customers will entrust with us today. At the same time, we're gathering a lot of data and developing a lot of insights. We're getting constant readings on what's happening now and that feed into our vision of what might happen next. The people most interested in our insights? Our customers. More and more, customers in the wide range of industries we serve are looking to us to do more than move their goods.
To many, data has become as important as their packages. As logistics become a competitive difference, they're looking for us to help solve their problems. You may have noticed that our new tag line is: United Problem Solvers. We still “love logistics”, the tag line of the last few years, but customers want our insights as well as our help beyond logistics. They want to know what's over the next hill and what's round the next corner and how it will impact their business. Not just trends but disruptions. The kind of disruptions that can test assumptions and question strategies and alter plans.
When we look at now, around the world, we're starting to get a good sense of how now will create next. As leaders, like a driver armed with ORION, we're starting to get a much better sense of the possibilities as we plan our routes to the future. One thing we know, we'll be dealing with three global game-changers.
One is shifting demographics.
Two is empowered consumers.
Three is emerging markets.
When we look at demographic shifts, we see two powerful forces. Much of the planet is growing older. And much of it is growing younger. There were 606 million people aged 60 or older in 2000. By 2050, there will be close to 2 billion. Such numbers pose a host of threats and opportunities for many industries. But nowhere is this more true than healthcare. New regulations. Growth in large-molecule, temperature-sensitive products. Gaps in the worldwide healthcare system that the Ebola crisis made all too clear.
As the population grows, so will the potential for more and more severe disruptions. But we're not only getting older. We're also living differently, with expectations unlike those of previous generations. At the other end of the demographic spectrum, many of the developing economies in the world are seeing a surge in young people. Again, there are a host of issues. The World Bank estimates that youth between 15 and 29 make up 44 percent of the world's 7.2 million people.
This so-called “youth bulge” is happening in the places least prepared to give them jobs. In Africa, for example, an amazing 40 percent of the population is under the age of 15 and 70 percent is under age 30. As this tide of young people collides with economies that have difficulty providing them with jobs, there are fears that the global disruptions we're witnessing will only worsen. The answer, the only answer, is jobs.
Turning to consumers. For the first time in history, technology gives consumers control of the research, shopping and buying process. That's why some people call them the “new consumers.” Actually, they're not new at all. Just empowered. Empowered consumers come to the marketplace armed with a set of non-negotiable expectations: convenience, order, authenticity, control. For the first time in commercial history, the power has moved from the center to the edge. Success for any business means connecting with consumers in their place, in their time, on their terms.
That shift started, of course, in developed economies, where consumers were first to get their hands on the digital controls of the relationship. One of the real world-changing events of our time is that consumer empowerment, and the escalation of expectations it drives, is rapidly spreading through the developing world. A billion people joined the ranks of the middle class in the last decade. And a billion more are on the way in this one. They are part of a shift in humanity that is remaking the planet. Each day the world gives birth to another 200,000 people. By 2050, our children will share this planet with 9 billion people, mostly in urban areas.
That means every week for the next 30 years, the world will be adding one million people, the equivalent of a city the size of Brussels, Belgium or Dublin, Ireland. According to McKinsey, in the next 10 years, 136 new cities will replace older ones in the world's top 600 cities and all of them in the developing world and 100 of them in China. The majority of these new citizens will come from emerging markets and developing economies.
According to Michael Spence, Nobel Prize–winning economist and senior fellow at Stanford University's Hoover Institution, “The rise of emerging economies is upending global trade flows and altering the notion of value.” xOver the coming decade, emerging economies will represent nearly 75 percent of GDP growth. The total GDP of those economies will nearly triple in that same period. Take a country like Indonesia, for example. Maybe you don't think too much about Indonesia. But you will because it's going to be a top ten economy before too long.
It has the youngest population of any country on the planet. They are technologically savvy. All of that points to increased spending and increased innovation. According to The Economist magazine, the top 5 GDP growth countries are Papua New Guinea, Macau, Congo, Turkmenistan and Eritrea. You'll notice that there are no BRIC's in the top 5; BRIC's don't even crack the top 10. So, I think it's fair to say that there were few times, if any, in the history of business where change has come faster and from more directions than today.
No wonder we need to have our heads on a swivel. As leaders, our vision must incorporate events and issues that are completely new to us. Our actions against what we see will demand a precise combination of skills. Some leaders inspire change. Some leaders manage it. The best, a rare breed, indeed do both. Many a leader with a great vision has failed at managing change effectively and productively. What's left is the reality they envisioned. But maybe not the reality they got.
If you have a vision for future change, you must make it actionable in the present. How? Remember that unique perspective I talked about? Now, todayis when you use it. You can do it by influencing stakeholders and marshaling support from the top down. All the while keeping projects and people moving forward from the bottom up. Let's go back to those three disruptions for just a moment. Each provides an opportunity for enlightened leadership.
Right now, our aging population and the growing youth population are creating a risk-inherent environment. Let's look first at the aging side. We see a tremendous opportunity for companies to deliver new medicines, services, products and devices that support affordable, innovative and efficient healthcare, especially in developing countries. That includes healthcare companies, of course, but also all of the many other companies that support healthcare and life sciences.
To do that, they'll need efficient and reliable supply chains. Outdated procedures, reliance on paperwork, and the absence of standardized practices impede efficient and reliable supply chains in many places. As an advocate for international trade, UPS encourages removing barriers that impede the movement of not only life-saving products, but all goods, across borders.
That would help our business, of course, but it would help our customers even more. According to the Small Business Administration, companies participating in international trade are 20 percent more productive and have 20 percent better job growth than those that don't.
Leadership in the second disruption, empowered consumers, is unfolding at hyper-speed and touching every part of economies. From our position on the front lines of commerce, we see that brand loyalty is yesterday's news. The prize today, is brand advocacy. It's not enough for people to love your product. You need them to inspire others to love it, too. Consumers come to the marketplace armed with a set of non-negotiable expectations. You've got to meet them wherever they find convenient. And that's a lot more than halfway.
For our company, the shift centers on a critical fact, getting products from supplier to consumer is no longer simply a transportation issue. Increasingly, it's part of how consumers view the core value of a company's brand. We're no longer just delivering a customer's product. For many of our supply chain and logistics customers, we're now part of the infrastructure that builds and defends their brands. For retailers and manufacturers, especially those in emerging markets, transportation is also a competitive difference. It's one more way they're trying to address the needs of the online shopper.
But delivery is only a competitive advantage if companies like mine can give more control to consumers in the last mile of a brand's journey. We're doing that with innovative services and systems like UPS My Choice and the UPS Access Point Network. UPS My Choice gives consumers online visibility and mobile access to see their UPS deliveries so they can choose to reroute shipments and adjust delivery dates and locations as their needs dictate. It's a convenient way for busy consumers to manage their package deliveries to fit their schedules and lifestyles.
Another way UPS has made e-commerce more convenient for consumers is through the UPS Access Point network. At a local retail establishment, consumers can pick up their in-bound packages and drop off returns. It's all a reaction to empowered consumers. We're putting control in their hands. In closing, we all must commit now to make sure our customers and consumers have what they need for what's next.
Like the ORION driver figuring out the fastest and most efficient way to get from point A to point B, it takes looking ahead, analyzing and deciding where the organization is going, while understanding at all times where it is. Janus, the ancient Roman god of beginnings, transitions and endings, had a distinct advantage. He had two faces, one gazing forward, into the future. The other, looking back, at the past. And while Janus might be an allegorical character, Janus-like vision is a categorical imperative for today's leaders. That's because vision is about seeing not in one direction, but all of them.
So, when it comes to leadership today, turning right isn't always right. Seeing forward and back isn't seeing far enough. Sometimes, left is right. And don't forget about sideways and up and down. One thing's for sure: If Janus were real and reining today, especially if he were running a business like yours or mine, two faces would hardly be enough.
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