System dynamics approach for digital transformation and complex policy design for the postal sector in Southern Africa

Abstract

The key motivation of the study was to explore and enlarge understanding of the factors that inhibit and drive the performance of the postal sector in a dynamic setting in the context of Southern Africa. This study was prompted by the unsatisfactory performance of the postal sector in Southern Africa as measured by the Integrated Index on Postal Development (2IPD) an index used by the Universal Postal Union to measure the performance of Posts across the globe on dimensions of reliability, resilience, reach, and relevance. Postal operators across the world are faced with inescapable business model disruptions steered by the digital era, and Southern Africa is not an exception. The dawn of the digital age presents both prospects and threats to business models of the industrial age as digitalisation has resulted in a sustained decline of mail volumes as the core business of the postal service for the past 100 years. The substitution of traditional physical mail with electronic alternatives has been a threat that has unsettled the postal service for over two decades. However, the arrival of the digital age has quickened the decline of mail volumes at an unprecedented speed as the digital age diffuses to almost all sectors of society and the digital economy becomes the preferred platform for conducting business. A constructivist philosophical worldview, an inductive research approach, a Grounded Theory research strategy, and a qualitative methodological choice were adopted for the first phase of the research which was to identify the inhibitors and drivers that are prevalent in the postal sector. System dynamics was adopted as a modelling and simulation approach for the second phase of the research and aimed to conceptualise the interaction of the variables extracted from the insights gained from literature through a Grounded Theory research strategy. The ten dimensions that arose from the exploratory study were digital culture, adoption, customer insights, digital investments, digital ecosystem, operational efficiency/excellence, shared vision, digital capabilities, digital competitiveness, and diverging interests. These dimensions were further synthesized during the development of the system dynamics model, four key stocks emerged that are prevalent in managing digital transformation in the postal sector. The four key stocks (variables) that emerged were adoption, digital culture, operations capability maturity, and financial performance. The system dynamics approach revealed that the postal sector can be described as a complex phenomenon due to intricate interdependent variables that interact in a dynamic setting. The complex nature of the postal sector is further amplified by multiple feedback systems of non-linear relations. The results of the study point to the complex interaction of these variables that inhibit and drive the digital transformation and competitiveness of the postal sector. It is by grasping these complexities that decision-makers and policymakers could pull the levers revealed by this research to direct the postal sector toward a sustainable future. The system dynamic model (stocks and flows) was developed and validated with postal industry experts, and the verification and validation processes confirmed that the model outcomes are reliable and reflect the reality of the dynamics prevalent in the sector. The results indicate that the factors that inhibit postal development and sustainability of the sector include poor digital culture, poor adoption of the Universal Postal Union digital ecosystem, and underperforming operations capability and this leads to poor financial performance and unsustainability of the sector in Southern Africa and many developing countries globally. Different policy design and analysis scenarios were evaluated, and the outcomes of the policy design and analysis revealed that there are vital levers that administrators and policymakers could pull to improve the financial performance and overall competitiveness of the postal sector. The levers include but are not limited to factors such as digital financial payment services offered, support services offered, ePost and eGov services offered, e-commerce services offered, change of Chief Executive Officers in 10 years, unavailability of Enterprise Architecture blueprint, number of staff who attended Train-post courses, Information and Communication Technologies (ICT) index, e-Government index, marketing effectiveness, adoption fraction, contact rate, drop out of adopters rate, non-compliance to electronic advance data, compliance to quality of service, operational expenses, rural population, universal service obligation paid, universal service obligation shortfall and other factors. The study presents a scientific and systemic approach to improve operations capability maturity as measured through the Integrated Index on Postal Development (2IPD) and the financial performance of the postal sector in Southern Africa. The novelty of the new body of knowledge lies in the mathematical equations developed and their application through simulation and scenario analysis to develop a robust solution to improve the business model of the postal sector in Southern Africa through the adoption of a digital transformation agenda and complex policy design. It is noteworthy to point out that the study confirmed the systems thinking principle that “the whole is greater than the sum of the parts”. This was evident in the results when the stocks were improved as stand-alone compared to when the improved stand-alone stocks interacted with each other in a dynamic setting. All stocks exhibited solid improvements when stand-alone scenarios were allowed to interact with each other in a dynamic setting.