“Radical Simplicity” by Ken Allen, CEO, DHL

Focus like a laser . . . .

DHL, the courier company was founded in 1969. Before it, nothing like it existed. The three co-founders — Adiran Dalsey, Larry Hillbloom and Robert Lynn ( DHL) — had decided on a whim to create a system by which the paperwork required for international shipments could reach the destination before the cargo arrived. Thereby helping the smooth passage of shipments via customs. It was a simple idea that was executed brilliantly for many years. Between 1989 and 1999, the company grew by more than 1500 per cent, doubling its customer base to more than half a million — and was operating in 227 countries. In 2002, DHL was taken over by Deutsche Post. At that point it was losing €150 million a year, “having never learned how to effectively manag the financial complexity of a global network and operate as a harmonious whole rather than an affiliation of regions”. But by 2007 the company that had a presence in approximately 220 countries was posting gargantuan losses. By 2008, with the global financial crisis on the horizon, DHL Express made a record loss of € 2.2 billion. In the US it was losing over €100 million every single month. In 2009, DHL was 40 years old but was not as yet consistently posting profits. Ken Allen, a long term DHL employee who had quite literally risen from the ranks, was appointed global CEO. The new CEO put in place such a strict turnaround plan to the extent he was not averse to trimming the fat in the company as long as it was better in the long run. For instance, he removed all together the US domestic operations thereby making more than 12,000 employees redundant. Yet, by redoing strategies and thinking out of the box, especially by being sensitive and understanding to cultural differences and insisting service to the loyal customer is paramount as that was the only sure driver of a Profitable Network, Ken Allen managed to make a remarkable turnaround for the company. It meant that by 2011 the company was producing good results and made €1 billion in earnings before interest and tax (EBIT). In 2017, DHL generated €1.62 billion EBIT, a billion of cash flow as well as investing €1 billion in capex ( capital expenditure). In 2018, the business performed even better, delivering a record EBIT margin of 12 per cent and €1.95 billion EBIT.

Radical Simplicity is about this remarkable change in DHL wrought by the clever steering by Ken Allen. It is a book written in first person that allows for the enthusiasm and excitement of the author be palpable to the reader. More importantly it rises above a classic self-help book that has the tenor of a motivational speaker but plucks general examples from here and there. Radical Simplicity is about actual work done and how it transformed the fortunes of DHL. How did innovation and quick thinking to the new economic circumstances of a global economy impact and help the company. The company had its origins in being a disruptor of the postal service but once it grew, it seemed to lose its way and seemed to have forgotten to innovate. Ken Allen documents brilliantly in this book how he had to learn to manage the company but at the same time ensure that every single employee, especially those at the frontline, knew what the company meant and what it stood for. His clarity of thought is evident in the way the chapters are structured and he recaps his basic advice. He constantly reiterates that tough decisions need to be taken but it can only happen if you know the business through and through. It involves a severe amount of cost cutting and constantly being aware of the input costs. Cost will always be “your enemy” but it has to be factored in. This requires the senior management to more than know, be familiar with, the tasks of those reporting to them. Also to be very simple and direct in your approach of dealing with employees and customers. Be frank. Be transparent. And constantly motivate those around you by role modelling. It is not an easy task since it requires focus, determination and grit to remain on track. It can impact relationships and those that remain are really only a handful. While it is critical to be aware of the employees and look after the well being of the firm, it is equally important that everyone looks after themselves especially their health. Be extremely focused. Set goals. Figure out strategies. And you will achieve success. Today DHL employs more than 100,000 people and is posting profits year on year. After reading this remarkable book, I spotted this magnificent Facebook post where noted Australian author, Susanne Gervay mentioned that she used DHL to take a shipment of books to Rwanda and that DHL very kindly reduced their costs considerably. It made it an affordable cost for the NGO facilitating this shipment. The customer truly matters!

Read the book. It does not matter if you are an entrepreneur or not. It is an excellent book for understanding businesses and managing your goals.

Update: This blog was corrected as Jane Chung rightly pointed out on Ken Allen’s LinkedIn post that “Great review for a great book. BUT, I would like to correct what is probably a typo that has DHL only operating in 142 countries by the end of 1999. According to company records and submissions to regulatory authorities, DHL was operating in some 227 countries by the end of 1999 – 197 of these were in place by the end of 1990. A massive achievement by DHL’s early pioneers!”

13 February 2020

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