Herna Verhagen & Jennifer Crites on what’s driving the success of digital transformation at PostNL

Video transcript:

Alexandra Jankovich: We are here today with the CEO and the CIO of PostNL, the postal and logistics service provider based in the Netherlands. It’s for the first time in this series that I’m interviewing two leaders of a company, Herna Verhagen, one of the few female CEOs on the Dutch Stock exchange, and Jennifer Crites, the first female CIO on the stock exchange. Herna has been with the company for 30 years, of which 11 years as CEO, and Jennifer joined the company seven months ago. Welcome, Herna and Jennifer, so great that you took the time to do this interview.

Herna Verhagen: Thank you.

Jennifer Crites: Very nice to be here.

Alexandra Jankovich: Jennifer, you joined the company seven months ago, and your background is in consumer goods, in food and in fashion. So what are your first impressions at PostNL?

Jennifer Crites: Yeah, I have to say it’s been an extremely exciting seven months so far. I entered the company and, of course, I had all this the normal onboarding, excitement of meeting new people, finding out the new strategy. And we almost immediately went into a new company strategy to shift the company more towards an ecommerce operating model. So that brought already some additional change and excitement within the first couple of weeks of my joining. And on top of that, we also, just like every other company, started really feeling the pressures of all the macroeconomic challenges that we’re facing. So it’s definitely been an exciting seven months.

Alexandra Jankovich: I think PostNL has already gone through a lot of changes. I think Herna during your time as a CEO, there was a major transformation from being mainly a mail delivery service provider to being much more focused on parcels. You’ve also already told us Jennifer, about a new ecommerce strategy. So I would love to talk about this transformation, but to start with the very important basics, the customers. Herna, who are your customers and how did their demand changed in the last  years?

Herna Verhagen: I think PostNL, of course, has… not only a function in mail and parcels, but it also has societal functions. So the true answer to your question is… it’s  million Dutch people and it’s million Belgian people.

Because in the end, every consumer is our customer. Also, every business customer is our customer. They come into our retail stores, they have contracts with us. So if you truly talk about the amount of customers, it’s a big amount, a huge amount. So, it’s crucially important indeed to find out exactly what you’re asking. What is the question of all of those customers? What are the denominators and of course, where do we see equal desires and where do we see different desires? And I think that has changed over the last years partly because we transformed from a mail company into much more of an ecommerce logistics company, partly also because of the way we act, behave, what we expect, has also been changed by the use of our mobile phones, by the apps we use, by the convenience we have on the Internet.

So there are many ways in which desires have been changed over the last few years. The only way to maintain that very important position is that you’re constantly trying to stay ahead of those developments. That’s the reason why we say the change to ecommerce is crucial, but also the change to being much more digital is crucial. And underneath that is a huge IT transformation.

Alexandra Jankovich: But if you start with the customer, as you say, you want to be ahead of the developments. And we always say, digital is not for digital sake, it is to serve the customer better. And can you give examples of how you serve the customer better now with digital?

Herna Verhagen: To give you an example. I think that when we launched the PostNL app, which by now has almost  million unique consumers in it, it was special to have an app. Today it’s normal. For example, five years ago, when we started in the app, that you could follow your parcel, it was special. Nowadays it’s normal. But nowadays you would expect that you can exactly decide yourself how you want to receive your parcel.

So there are many changes. If you think about what people are expecting, there are many, many changes. And I think one of the most unexpected changes is that… we also give consumers the opportunity to see which letters fall into their mailboxes within  hours. That is one of the most used parts of the app.

Alexandra Jankovich: Yeah, it’s true. Because I, as a customer, I just want predictability. If I ordered a birthday present for my child, I want it to be on time, delivered in the way that I want it. I want to be able to track it, and I’m probably not the only one. So customer demands are constantly rising, but then of course, also the complexity is rising. And on the other hand, and that’s also where Jennifer comes in, you need to keep the costs under control. So complexity goes up, but the costs actually need to be lowered, I guess. So how do you use technology to make that happen?

Jennifer Crites:  We’ve had to really turn our IT strategy for “digital first” in mind. So a lot of selection of technologies and platforms that are really built for an agile way of working, or what we would call a shallow kind of development. So sometimes we even take development out of the hands of our IT professionals and allow the business customers or partners to make the kinds of changes that they need to make in order to be able to keep up the speed and actually to keep it relatively simple. So indeed, that complexity can become a huge barrier. So we’ve really changed our strategy to make sure that we are investing in technologies and platforms that allows us to keep it as simple as possible.

Herna Verhagen:  And to give you an example. Because of the changes made in IT, we made it possible for every roll container, we have in the organization and in roll containers, you collect parcels, you collect mail, there is a beacon placed on it. And that means that we can follow the roll container or roll cage through the company, but also with our customers when it’s on its way from a customer to us. Having all that data of those more than 300 000, roll cages means that by now we are able to, for example, create efficiencies.

We have even a better understanding of the volumes coming to our organization, a better understanding where our roll cage is standing without any volume in it. We have a better understanding of how many trucks we have to send to customers to pick up the roll cages, because we do know upfront how many are already there to collect. So the fact that we have much better IT standards and also platforms for the different functions we have in the organization, that enables the operation, in this case, for example, that enables the operation to work more efficiently… and to be better prepared for the volumes coming to our sorting and delivery centre.

Alexandra Jankovich:  I was also wondering, how do you use the data to constantly improve the customer propositions?

Jennifer Crites: So, we’ve been investing in our data platform and our data quality for a number of years now with the intention to offer more value based services through data to the customers. So different types of reporting, some kinds of forecasting, modelling for them as well, based on the history of their data.

We also have some algorithms to try to help our customers for also gaining efficiencies. For example, how can they select the right packaging material, how can they minimize the amount of airspace that’s in their packages based on algorithms we have provided to them and what we know about their product selection. So we have quite a number of ways to make value out of the data that we’ve been collecting over the years and to give it back to the customers for increased value propositions for them.

Herna Verhagen: One of the examples, and that’s also based on the data and the fact that artificial intelligence is used… to build a model, is that when parcel deliverer comes to your door, you’re not at home. He normally brings the parcel, of course, to one of the retail stores. In the past he brought it to the retail store he thought of which was nearest, but some of our retail stores are much busier than others. So sometimes there was not enough floor space for those parcels. And then when you came to the retail store, it was difficult to find the parcel or you had to wait too long. That’s what we’ve changed.

Alexandra Jankovich: And I think you have the digital next strategy that is essential here.

Herna Verhagen: It’s an essential strategy. It’s also part of the overall strategy of PostNL. In every part of PostNL it is crucial to further digitize, to make more use of the data, to collect the data, to make sure that the underlying IT systems are as standard as possible, but still able, of course, to do what we need to do. So it makes it very explicit how important digital is for our organization. And what we did do, we did spend more money in foundational IT. We did spend more money in the delivery capacity of IT and spend more money in the design capacity of the organization of specific digital subjects.

Herna Verhagen: We also always say that a digital transformation is 80% people and 20% tech. Do you recognize that?

Jennifer Crites: 100% yes. Absolutely. It needs to be in the mindset of every employee, also that we need to think digital first, and to also embrace the ways of working that allow us to become much more agile, which helps us to become more digital for our stakeholders.

Alexandra Jankovich: Absolutely. And what change did you make in the organization to do that?

Herna Verhagen: We do have a CIO. We do have a chief digital officer in the executive committee. That’s an organizational change we’ve made. We added money to invest in the IT domain of Jen to truly change the organization and the IT organization to be ready to expand the amount of digital in our organization of Digital Next, also meant lots of changes in the IT domain, and you can tell something around it, but that has been crucial, and that’s in people and, of course, also in money to invest it’s always both.

Jennifer Crites: So we’ve made a lot of changes in the way we’re working with our platforms and our systems. So we’re going as cloud based as possible, which allows us to be a bit more flexible and agile. But we’ve also made a big change in the recent years to actually insource our development. So we’re fostering an engineering community within the IT department at PostNL.

Actually, it’s the first time in I think… I’m probably going to date myself here,  but in about 20 years… that I’ve worked in an IT organization that has insourced its software development. So I think it’s a signal of a very progressive move from PostNL to do something…

Alexandra Jankovich: Absolutely.

Jennifer Crites: Really something special, but also a signal about  how seriously the digital transformation is here, and putting in the right investment in to make it a success.

Alexandra Jankovich: That’s great. We really also always believe that insourcing is crucial because it’s your critical competence for the future.

Jennifer Crites: Exactly. Absolutely. And I think also you find when you’re working in an insourced model, that actually your employees are also more creative and more innovative in terms of how they come up with the solutions that are ultimately… what’s driving the success of the digital transformation. So, indeed a very crucial foundational element to make this work.

Alexandra Jankovich: And how do the people in the IT department work together with the business people?

Jennifer Crites: We’re working in an agile way, specifically with the safe methodology of agile, which is a scaled agile framework. And that means that we have what’s called design teams in the businesses, and they are the ones who are helping with the requirements on the functionality, what’s needed. And we also have on the IT side delivery teams, and they’re very much lined up and dedicated to each other so we have a streamlined way of getting requirements in, but also delivering against those requirements.

Herna Verhagen: What also helps, and that’s the reason why I find it crucial, that the CIO is also part

of the top executive team. When you have business discussions, especially in a much more digitized world, IT, or if you put the domain a little bit broader, is always an important input factor in our success. Bringing that to the same table and having those discussions from the different angles, directions, and views, in my view, is crucial when it comes to making the right decisions and choosing in the end the right strategies.

Alexandra Jankovich: Absolutely. And I think Herna, you already have a long history of doing that, of having the CIO as part of the board. And now it’s interesting because you have a CIO and a CDO on the board. How does that work?

Jennifer Crites: For me, it’s a very logical set up, to be honest. A company that’s making a choice to go digital and to drive a digital strategy should have a very concentrated business unit dedicated to the digital way of working. So the digital business unit is very much looking at how we transform the company into a digital company. And the IT organization is working hip to hip with the digital team to understand what the tools and the platforms are that we can put in place to really enable the rest of the organization to make it work.

Herna Verhagen: The reason, I think, why you can do it next to each other in one management team is that at least our unit digital is more focused on, for example, how we digitize part of our sales channels or how I can optimize in choosing which sales channel I use to make it more convenient for consumers. I think the outcome is almost always an IT question which needs to be picked up in the agile teams. But thinking about your sales channel strategies, thinking about the digitization of your sales and marketing, et cetera, is a specific competency.

Alexandra Jankovich: I’m very happy to hear that it works so well. Talking about competencies, Herna, you probably had to bring up the level of competencies in this area in PostNL. I talked to Nancy McKinstry, who led an year digital transformation at Wolters Kluwer, and she described how part of her organization could join this new way of working and how part of the organization she could train, and that part of the organization couldn’t really come along. If you think about the start of your transformation until now, what would be the percentages of the organization that you could take along in various ways?

Herna Verhagen: In PostNL you see two big changes. You see, first of all, the change from a mail company to an ecommerce logistics company. It means that 10 years ago around 90% of the revenue of PostNL was mail related. Today it’s 70% ecommerce logistics related, which is a totally different world. And also that in itself asks for different competencies. And above that, or on top of that, we said we want to digitize, and we think the digitalization of all we do is crucial in our future success. So you can understand that in the end, and I’m not sure what exact percentages of people who did not come along and people who were able to pick up, but quite some people have changed over the last  years. First of all, because of the change to ecommerce and secondly, because of the on top change of the digitization of all we do.

Alexandra Jankovich: Herna, you’re describing the fundamental changes that PostNL went through from a focus as a company and then the digitization on top of it are combined. How do you keep the organization engaged during the transformation?

Herna Verhagen: I think important in that is constantly explain what your strategy is. So, keep doing that and why that is your strategy. To try to keep people, try to make people understand why changes are important and what it will bring us. I think that’s one, that’s the storytelling and that remains important. Although you think maybe that your strategy is 100% clear, the storytelling remains to be important. I think secondly, by also following via engagement surveys, it is very clear in which areas do we see improved engagement and where do we see engagement lacking. And then trying to understand why and solve the “why”. That’s an important element in that as well.

And I do think that with the change of the organization we brought in lots of new competencies, different backgrounds, different ages that also helps because there are many people in the organization who love the fact that it’s much more diverse than it was before in many ways. That also helps. So it creates a different atmosphere and in that sense I would say it helps motivation.

Alexandra Jankovich: Of course there are other organizations and leaders who are earlier on in this journey. Are there any lessons learned that you can share? We always see that it’s very easy to talk about the online first companies, about the pure players, but I think companies who have a legacy of a different business, but I think companies who have a legacy of a different business, of different IT systems of different people and then to go through it. So any lessons learned for others?

Herna Verhagen: My first lesson would always be “be clear and honest.” So when changes are necessary, explain a clear “why”, but do not hesitate to change. So I think that sounds simple. It probably is simple, but that’s the basis under every change in the organization.

Second, you’re as strong as the team you have around you. So as a CEO you can give direction, but you can never change the organization. It takes many more people and the team around you, in this case, the executive committee, is crucial in that as well. So having a group of people together who believe that that strategy is the right strategy for the organization and understand how to translate that into action in my view is important. And I think clear goal setting, but that’s for me personally. I have a clear goal in mind and I never lose sight of that goal. And of course, you go a little bit to the left, a little bit to the right. But in the end, I try to keep track of where we need to go.

Alexandra Jankovich: Because of course, you are listed on the stock exchange. Also, talking about external stakeholders in a process like this. How does that play a role or any lessons learned there?

Herna Verhagen: They play a very important role because in the end they finance the organization. What I always say is if you truly want to change, you have to make sure that your stakeholders are aligned.

Jennifer Crites: I think companies that really want to make this a success, we’ve talked a lot about what the investment was in the IT foundation to get it to a point where we could also help enable the transformation. And I think a lot of companies hope that they can become digital, but not really have to spend the money to do so. So I think also a success criteria is to be willing to put some investment in to make the change happen. And of course, how much you can put in determines how fast you can move. But I certainly think it’s something that I’ve certainly seen in my past, where a lot of companies want to do it, but simply are not in a position to be able to invest and make it go fast enough. Yeah, I think that’s very right what you both are saying.

Alexandra Jankovich: It’s also a lot about leadership. Because you cannot predict everything. So it needs a vision, it needs clear goals, it needs the investments before all the benefits are clear. But it should be clear that this is the future. This is the only way and you have to constantly engage all the stakeholders around you to constantly explain, as you say also, Herna, it is necessary. We have to do the investments. This is the path we’re taking and we’re going to continue. That’s what I hear you both saying.

Jennifer Crites: Right. The repetition and persistence is also necessary.

Alexandra Jankovich: Yes, very crucial. And if we look at the future, do you think that customer demands are going to change further the coming years? And how can technology help? Of course, there’s a lot out there in terms of technology that can help to make that happen, to fulfil those needs.

Herna Verhagen: I do think that customer demands keep changing partly because the digital world changes and the abilities you have in the digital world are growing. So in that sense that’s also, I think, clear guidance for us as a company because that’s what you can do in one of the games. In the end, you translate to companies you work with as well. For our business customers, I think putting you as a consumer more and more where and how do you want to receive your parcel is an important trend as well. So, yes, I do think that we’re not yet, or maybe not at all at the end of what we can expect from the digital change, but also, what is expected.

Jennifer Crites: And from an IT perspective, it’s probably one of our top three challenges that we always identify, the pace of change and demands that are expected from a technology perspective to be able to keep up with the changing and aggressively increasing pace of change from the consumers and the customers. So I think from our perspective, we stay on our strategy to continue to modernize our foundation because we think that the more modern technologies allow us to remain flexible and scalable and to act with speed. And on top of that, also continue to invest in the data foundation. With the data and the creativity of our people around what to do with the data, the possibilities are really just limited by the imagination in terms of what we’re able to achieve for our customers and consumers.

Alexandra Jankovich: I think that part of the customer demands will also be, or are already, around sustainability, and I know it’s also a fundamental part of your strategy, so maybe you can also tell something about your goals in that area and also, again the role of technology to play in there.

Herna Verhagen: I think when it comes to ESG, ESG is a crucial element and has always been, but I think at this moment, it does much more at the forefront, and in the past is a crucial element in that strategy of the E, the S, and the G. It’s a licensed operator. And in that sense, there have been lots of changes over the past few years, but also lots of changes I have spent going forward when it comes to the S… So the sustainability. So when it comes to the E, environment, it’s much around that we want our last mile to be fully emission free by 2030, and by 2050 we want to have the whole organization CO² emission free. What I do hope is that of course technology will help us to do that much faster than we currently can think of. But the important steps we’re taking, for example, at this moment in time, I think we’re by far the cleanest per parcel and is, for example, the introduction of our light electronic vehicles in the city centres. Much smaller vehicles which are driven via electricity which helps us reduce carbon emissions in the city centres, fewer traffic jams in the city centres and in that sense, much more convenient. So we’re taking lots of steps.

If we build a new sorting centre, that sorting centre is totally BREEAM proof, which means that we do everything to be as sustainable as possible, which includes lots of solar cells on the rooftops, and in most of the sorting centres we are running, today already around % of the energy is created fully emission free. So there are lots of steps already taken and will be taken in the next coming years. But in my view more is necessary also by industry development, in getting trucks emission free, in getting planes emission free. Because also those elements are an important part of our delivery chain.

On the S it’s much more also what you probably did read in the media. We’re much more putting on the forefront that we want to have more people employed by PostNL on an undefined labour contract… an indefinite labour contract. We find it important to get the balance better than it is today. To give you an idea, if you take the total amount of employees within PostNL, around 85% to 90% is already employed by us. But we want to increase that amount because we do think that going forward, ecommerce will keep growing but the underlying growth is still there. And that means that you need to create sustainable networks, not only sustainable in the sense of CO² emission, but also sustainable in the sense of labour. And that’s what Jen already said. If you want to put effort into it, it means people and money.

Alexandra Jankovich: It’s the material, it’s the cars but I think you also have ebikes and everything and it’s the people, the social side to take good care of them. And I think that I, as a customer, I notice then, what do I notice? For example, someone who delivers it comes on an electric… vehicle. Or I notice because sometimes I also think I get too many boxes. The boxes that are too big for a small parcel. What do I notice as a customer of all these things?

Herna Verhagen: I think what we want to do is not yet ready. But what we want to do is to present what the CO² emissions per parcel is. So if you truly want to know what the CO² emission is, then in the near future we want to make that explicit per parcel so you truly can compare who’s the greenest in the market. That’s one. But to be the greenest, you need to do lots of the investments.

The light vehicles in the ebikes, in electronic scooters and electronic vans. And we’re now already replaced most of our trucks onto biodiesel trucks and biodiesel as % less of CO² emissions than normal diesel. So that’s all necessary. So we make it more specific and make it more, I would say, visible for the consumer what it truly means to have a CO² neutral parcel, which parcels are more CO² neutral than others. When it comes to sizes, and that’s what you already said, we can help customers with because we do have lots of data. So we do know big boxes, small boxes, two big boxes, etc. And what I said in the past, we distribute 40% air.

If you can reduce that, that has an enormous impact on the amount of vans for example, you use to distribute parcels. And what we do is with all the data we have, we help our business customers, for example, to understand “how can I make parcels less air-consuming”.

Alexandra Jankovich: I think that’s great. That’s the real progress that’s needed, and it’s possible now, as you also say, Jennifer, with the data, so let’s do it. And I think it’s great that you’re on it, and that you put the people and the investment in it to do it.

And now, diversity and inclusion. Herna, you are still the only female CEO on the Amsterdam Midcap Index. I think there are 25 companies in there. I think on the whole stock exchange, there’s one and a half more, I think female CEOs, you’ve got Nancy and Geraldine, but you’re on the Amsterdam Midcap, you’re still the only one. Now, when can we welcome more women?

Herna Verhagen: I think it’s coming. I’m very much in favour of the quotas we have in the Netherlands, and also making those quotas applicable to boards of management. But on the other hand, what I also do see, is that when you want to have more female CEOs, you need to have a pipeline with more qualified women and lots of companies have built those pipelines. So when I look into the board of management level minus one, I see much more very successful women than I did see five to ten years ago. So in that sense, I’m quite hopeful that there is lots of potential available. But to give you an exact date, I don’t know. But although I also understand the scepticism, I think that progress has been made in enabling. I think your pipeline and having all those senior managers is crucial in the end to get them on a CEO function.

And then last but not least, of course, you need the supervisory board who then take the opportunity to select a woman like we did with Jen, which is also the first female CIO of a stock listed company, which is great.

Alexandra Jankovich: I think that is great, seriously.

Jennifer Crites: It’s an honour.

Alexandra Jankovich: With your diverse background, do you have any advice for other women and men out there?

Jennifer Crites: I think the advice I would give is probably don’t stop going for what you want. And only you own your career. No one else is going to own it for you. So if there is an ambition to get to that level, you need to make sure that you’re owning the steps to get there and not wait for someone else around you to necessarily help you. Of course you want to build your networks and you want to find your sponsors and that’s very critical, but that’s still an action that belongs with you. So you need to really take your career by the horns and decide for yourself that you want to go for it and not wait for others around you to help you necessarily initiate steps. You need to initiate those steps yourselves. So I would definitely give that advice. It’s advice that I find myself giving often.

Yeah. So I think also the networking is absolutely critical. So take the opportunity to get out there and meet with people. Through industry events or external groups that you can become part of. They’re more critical than you’ll ever think. I think I heard a stat the other day that we’re PostNL, the talent that we’re able to bring in, and actually get into the company, I think is about 60% to 65% through networks of our current employees. So it’s actually quite a strong number, which also shows the effectiveness of the networking. So it’s definitely an element that everybody should be building throughout their career when their ambitions are as high to get up to a CEO or a CIO level.

Alexandra Jankovich: I think that’s great advice and it worked for you as the first female CIO, so that’s a great example as well. And Herna, do you have any other advice? Next to this advice.

Herna Verhagen: Absolutely, yes. I do think diversity and two females here, you automatically think about gender diversity. But diversity and inclusion is broader than only gender. What is, in my view, crucial that it is chefsache. So you need to take it as your responsibility as a CEO. That’s one. There it starts. You cannot make it an HR priority. Of course they can enable lots of what you want to do, but it needs to be your responsibility. I think that’s for me, crucial, if you want to make it, if you truly want to make it happen.

And the second one is you have to spend attention on it. I would say daily, but very often it doesn’t come automatically. So set clear targets, bring it up in the discussions with your senior management, make appointments which are visible for the others, and do that once over once, year over year. That is, in my view, what in the end creates more diversity and which enables you to appoint senior women on positions.

But it’s relatively easy stuff. Just make it your own priority and pay attention on it. That’s it.

Alexandra Jankovich: I think it’s completely easy. I mean, anyone can do it, you could almost argue.

Herna Verhagen: That’s correct. Anyone can do it. It’s much more are you truly willing to make a change.

Alexandra Jankovich: And I think it’s great what you’re saying. That the pipelines, because I agree with you, of course, it’s about attention and focus and spending time on the whole topic. And it’s so great that that already resulted apparently in very good pipelines and very good women performing everywhere in the minus one board level. So they’re just going to come up. I mean, there’s no other option.

Herna Verhagen: So yeah, that’s what I think.

Alexandra Jankovich: That’s great.

Herna Verhagen: Well, it was nice.

Alexandra Jankovich: It was really nice. Actually, I’d love to go on for another couple of hours. Because I think that both of you in the different fields have already gone through a lot of change, but I think you are completely ready for all the change to come. So thank you so much for sharing your experiences in this field. Because I really see that other people again can get inspired who are in different part of this journey. It’s great about sharing everyone’s experience because, well, that helps all of us. So thank you so much for taking the time to do so.

Herna Verhagen: Thank you.

Jennifer Crites: Thank you very much.