DHL

From Startup to Global Upstart

Po Chung, Roger Bowie

• Publisher: De Gruyter
• Year: 2017
• Print ISBN: 9781501515927
• eBook ISBN: 9781501507441
• Edition: 1
• Topic: Business
• Subtopic: Business History
• Index: Business

DHL: From Startup to Global Upstart is the story of a startup that became the first worldwide logistics service organization, fighting regulation, trade restrictions, customs, and many other technical issues to develop processes that have stood the test of time to become the accepted norm in delivery throughout the world. It is a story of using "soft powers, " persuasion, and ingenuity, working with, and around, emerging technologies to eliminate barriers to success. This book provides an extraordinary look into how a little startup with grit and perseverance succeeded in the face of overwhelming odds and revolutionized many of what are now accepted transportation and supply chain practices.

Po Chung, DHL International co-founder, and Roger Bowie, former DHL Worldwide Services Director, discuss how DHL paved the way for one day international package delivery and how they have maintained their global leadership position against powerful American titans.

Chapter 1
Born Global

This is a book which tells a story: the story about the little company that could; the little company that thought that doing business globally could be enabled by faster connectivity, in a physical, pre-internet world. The little company that pioneered global express delivery services and overcame regulatory barriers which governed postal, customs and logistics activities.

The little company which recognized the time sensitivity of commercial correspondence between and within companies doing business internationally. The little company which built a global network predicated on speed, reliability, security for the physical movement of those intrinsically valuable business assets.

The Little Company Which was Seen as Illegal in Every Country

In 1969, Larry Hillblom and two older colleagues, Adrian Dalsey and Robert Lynn, formed DHL (using their surname initials), a courier service providing door to door delivery of time-sensitive documents between San Francisco and Honolulu. It was a time of intense change and opportunity. It was a few short months after Neil Armstrong stepped on the moon, with immeasurable social impact and a challenge to the world to acknowledge and embrace the mind-boggling technology involved. On the other side of the spectrum, however, the prospect of technological change had come just far enough to inspire this unfunded start-up, far more quietly, to change the world and the way it does business.

Dalsey, Hillblom and Lynn (D, H, and L). 25th Anniversary party, 1994

The initial capital invested was a few thousand dollars. The rest was put on credit cards. It was too much for Robert, and he left, leaving behind the “L.” Adrian Dalsey, the “D,” supported early international expansion before falling out with Larry over the prospect of an early sale of the business. Larry, the “H,” effectively steered the fledgling business through its entrepreneurial phase to challenge the status quo of international shipping, to become a global upstart. He then withdrew to pursue other activities, while maintaining a close watch and influence from a distance. Thus, began the business career of the man who, according to a recent biographer,4 “made globalization possible.”

This book is not about Larry, or the other founders, but the brief quote above is an entirely appropriate starting point for our discussion. Indeed this book is about the hundreds if not thousands of people who, together, created the extraordinary culture of DHL, and who collaborated to achieve Larry Hillblom’s legacy, to effectively change the world of business. We will not specifically name those people, but we will reference Larry and other founders such as Dave Allen, Bill Robinson and Po Chung, not only as key influencers of the DHL philosophy and culture, but also as evidence that DHL was never an American company, but was instead a nascent global from birth. We will also profile the key leaders, Bill Walden in the 80s, followed by Pat Lupo in the late 80s and 90s, as well as the key legal counsel who collectively over the years saved DHL from premature extinction.

Fundamentally, this book is not about individuals: it is more about the ideas, the philosophies, the culture and the context of the times which underpinned a period of relentless innovation that established a new way of doing business that has evolved a bit, but survives today. It is more about the drive, the heroics, and the happy accidents which supported a great idea and turned an entrepreneurial effort into a crusade from which emerged one of the earliest truly global companies of the modern era. And it is about the barriers which were ultimately overcome as change, and fear of change, combined with regulation and history to protect the status quo. From start-up, to upstart, to the most international company in the world.

In this context, we leave the people’s stories, of which there are thousands, (and which deserve dedicated if not autobiographical publication) to other efforts. Instead we concentrate on their collective activities and achievements in building a global business which paved the way for the globalization phenomenon which characterized the last two decades of the 20th century.

Any story of this nature inevitably relies on a chronology, and we can segment DHL’s chronology broadly into decades. The 70s comprised the start-up, entrepreneurial phase, with an almost single-minded focus on building up the global network as DHL’s major asset.

The 80s was a decade of continued growth, but also maturity, as systems and processes were broadened and institutionalized under a more classic corporate structure. But investment in consolidation necessarily had to sit alongside continued rapid growth, which created the classic phase two (in start-up terms) pressures of capital and cash flow. In this decade, brand emerged as a significant intangible asset, and early management philosophies were polished into an emerging corporate culture. Diversification was also a hallmark of this decade, as customers increasingly asked for an extension of the core service into parcels of all sizes and content. Moving from a single homogenous product line, carrying documents of no commercial value, to offering a small parcel express service for dutiable items was not as simple as it reads. There was considerable variability in approaches to levying customs duties on items with an extrinsic commercial value. Further, concern about the impact of technology and emerging electronic data transmission as a substitute for physical document carriage also drove investments into new technologies designed to keep DHL ahead of the game. Increased competition and huge market growth also forced the rapid accumulation of physical assets, hence the pressure on cash. Few companies survive this critical phase of development.

The 90s saw a transformation of a relatively simple, courier service product suite into the complexity of a nascent integrator; the move to offer the same express solution for dutiable goods as well as documents. This was the time that the term logistics entered the DHL lexicon, and the fact that DHL actually achieved this is nothing short of astounding. External investors certainly helped, but ultimately the completion of DHL’s journey from courier to a full-service delivery provider did not occur until the new millennium, when Deutsche Post paid the ultimate compliment to the founders’ vision by acquiring DHL outright.

Our story will not go that far; instead we will concentrate on the first two decades, following (but not slavishly), the chronology, preferring instead to examine four themes which emerge from a retrospective look at a business in its journey from start-up to upstart. Along the way, we will examine the factors that enabled this “company that could” to endure. And, at the end, we will see how a company closing in on fifty years has been able to maintain the same basic values and work ethic that made it survive in those difficult start-up years.

What are those themes?

The road DHL has taken throughout its history has been dictated to a large extent by these four themes:

The business environment: What was it like in those times? How was business done? How did people think when they built a business? What were the challenges and how did DHL overcome them?

The market: How did DHL’s services change the market? What drove customers to demand DHL services? How did customers and competitors help shape market growth and DHL’s response? How did a brand emerge?

The regulatory environment: Why was it like it was? How did DHL approach seemingly-interminable barriers to make it possible to continue to do business, for itself and for its emulators?

Philosophy and culture: Finally, but not least, what thoughts, ideas, backgrounds and experience coalesced into a functioning system for going global and building a sustainable leadership cadre and culture?

This is the story of DHL as a disruptive, innovative force, perhaps unlike any other force until the internet of things allowed the Amazons, the Googles, the Facebooks and arguably the Ubers and Airbnbs to once again challenge the existing views of building and operating a global enterprise.

Chapter 2
The 70s

DHL was incorporated as the 60s came to an end, a decade which saw the postwar baby boomers challenge, if not cast off, the straightjacket cultures which characterized their parents’ life views as they recovered from the trauma of World War II.

The 70s, however, was a vastly different decade, one which challenged the hedonism and optimism of the 60s in more ways than one.

In the USA, the country was at war with itself as it faced a dubious outcome in Vietnam, and as conservative middle America reacted against the hippie culture to elect and re-elect Richard Nixon, whose dark moods mirrored the uncertainty of the times.

In Europe, economic turmoil lead to an expansion of the European Union from six to nine countries, a move that was both a political and economic turning inward. The United Kingdom, in particular, experienced a decade of relative decline, both in terms of global influence as well as a stagnant economy beset by industrial unrest. The Soviet Union was becoming more recalcitrant in the face of US political turmoil, and China reached out, tentatively, but prematurely, as the Cultural Revolution lingered on under the Gang of Four.

In 1972, Palestinian terrorists struck at the Munich Olympics, and England and Ireland saw an increasingly active Irish Republican Army (IRA). Global insecurity was further impacted by perhaps the defining event of the 70s, the oil embargo of 1973, which created economic turmoil in the developed world. The impact of a huge surge in the price of oil meant stagflation, high unemployment as well as inflation, effectively ending the postwar, Bretton Woods era of fixed exchange rates and capital controls.

As the decade progressed, America was consumed by the Watergate affair, proof that politics are often dirty, opportunistic, and that the highly moral and idealistic posturing of political leaders jostling for the nation’s highest offices are sometimes just masks in a dirty game of charade. “The president is a crook,” heard not for the first time, and certainly not the last, took on a devastating new meaning when actual evidence about Richard Nixon emerged. The president resigned rather than be impeached. America arguably lost both confidence and innocence during this time, recovering momentarily in the world view with the success with the Camp David Accords between Israel and Egypt, before being challenged again by the Iranian Revolution. The hostage crisis, which lasted over a year and humiliated Carter, resulted in another Cold War warrior president to emerge in the form of Ronald Reagan. Meanwhile, the Russian bear continued to growl, as détente, which had progressed in the early 70s, fizzled, and the Cold War, once again, intensified.

Socially, the younger generation moved from extroversion to introspection, as music trends showed with the rise of progressive rock, a misnomer in the context of the prevailing mood shifting from optimism to angst, often aided by mindaltering chemicals. Then it was back to extroversion in the face of disillusionment with the political system.

In short, this was not an environment conducive to globalization!

On the contrary, the prevailing regulatory frameworks which existed throughout the western world were protectionist in nature.

Postal laws which entrenched monopolistic rights to national postal systems had their origins in the Middle Ages, when insecure monarchs created a framework for monitoring communications between citizens and across borders.

Postwar insecurities and prevailing mind sets of “never again” produced customs and trade frameworks designed to promote and then protect local industry from international competition. Customs processes were consequently deeply bureaucratic, also in line with governments’ self-appointed role to be job creators, as importing and clearing goods became an Orwellian nightmare game of “pass the parcel.”

However, global trade was still a significant component of the world economy, no matter how constrained by regulation, driven by technology and in no small way a consequence of the emergence of the oil cartel. Planes became bigger, with room for more passengers and more freight. Ships became faster, and containerization revolutionized port handling processes and reduced transit times between ports, which meant that supporting processes such as sending shipping manifests also needed to speed up. Telecommunications improved such that regular long-distance phone calls became both possible and within economic reason. The telex machine turned the telegram into an everyday office tool. Oil exploration boomed, as the search for more and cheaper fuel drove oil companies to more obscure parts of the globe. Banking grew as a consequence of increased inter-country and intercontinental financial transactions, and important deregulation started in the USA, affecting air transport and opening up protected skies to more open competition.

And so, in certain quarters, this time of economic and political upheaval, concurrent creativity and freedom of expression also generated or produced entrepreneurial individuals whose minds turned to commerce, with or without the support of mind-changing drugs, and whose frames of reference went beyond conventional borders.

The obvious examples are the two Steves, Wozniak and Jobs, who founded Apple, Bill Gates and Microsoft, Richard Branson and Virgin. Here were determined individuals of contrasting styles and personalities, be it shy or swashbuckling, but involved in high profile technological and travel sectors which were “sexy” if not in name, then in public perception.

Transportation of goods, was, in contrast, decidedly unsexy and under the radar. Logistics (which as a commercial term did not actually emerge until the 80s) focused on getting finished goods distributed to end customers. There was no thought at this time of integrating the sourcing of raw materials with production and distribution as we will see in the 80s and 90s.5 Logistics in this sense was still very much a military maneuver. In transportation, there were a number of entrepreneurs, including John Emery of Emery Airfreight (to become Emery Worldwide), Sir Peter Abeles of TNT and Gordon Barton of IPEC, but the two standouts were Larry Hillblom (and colleagues) and Fred Smith (Federal Express). They were two very different characters who focused on the small items which the freight forwarders found uneconomic, and built large networks which relied on economies of scale to generate margin. In short, Larry and DHL chose the international market as a playing field; Fred chose to concentrate on the USA (still, after twenty years, a larger market in terms of volume). Fred was an Air Force guy, who brought the discipline and structure of military logistics to package delivery. Larry in comparison was a free spirit, who spoke the (at the time) heresy that governments should be promoting not restricting/controlling commercial activity. Both DHL and Federal Express were, in effect, born in the 70s, and have become global colossuses, along with UPS, a much older company, built essentially on industrial engineering principles.

Engineering, military logistics and imagination fueled the new thinking about courier or express services which emerged from the dark early years of the 70s to support and indeed promote international trade and the emergence ...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Chapter 1: Born Global
• Chapter 2: The 70s
• Chapter 3: The Start-up Years
• Chapter 4: The Start-up Years: Business Innovation
• Chapter 5: Innovation and Its Broader Impact on Business Dynamics
• Chapter 6: Cultural Dynamics: What was Going on Here?
• Chapter 7: Barely Legal—Early Regulatory Battles
• Chapter 8: 1970s Vignettes and Bloopers
• Chapter 9: Transition
• Chapter 10: The 80s
• Chapter 11: The Walden Years—Structure and process
• Chapter 12: Business Innovation
• Chapter 13: Business Context—What Was Going on Here?
• Chapter 14: Business Context—Competition Explodes
• Chapter 15: Regulatory Battles
• Chapter 16: Cultural Dynamics
• Chapter 17: Anecdotes, Accidents, and Altruism
• Chapter 18: Adolescence to Adulthood
• Chapter 19: Powers
• Chapter 20: From Start-up to Upstart to the Most International Company in the World
• Chapter 21: Epilogue: The 2008–16 Reincarnation
• Index