Strategic Planning at United Parcel Service

Strategic Planning at United Parcel Service
We fully recognize that it is not possible to develop a true strategic plan more than a few years out and that
business plans should have an even shorter horizon. But we are convinced that it is possible and wise, indeed
necessary, to develop a set of very long-range scenarios that can form the foundation for our future strategic
plans.
— Michael (Mike) J. Eskew, Chairman and
Chief Executive Officer, United Parcel Service (UPS)
As Mike Eskew walked through the long, open atrium of UPS’s corporate headquarters late in
March 2005, he thought about his upcoming lunch meeting with Vice President of Corporate Strategy
Vern Higberg. Higberg was preparing a presentation for the senior management strategy committee,
the Strategy Advisory Group, on improvements to the strategic-planning process. While the company
had made major progress in planning for the future over the past 10 years, Eskew had charged
Higberg and his colleagues with developing recommendations for moving forward, citing one of his
predecessors, who had said, “The future of our company will be no better or worse than the quality
of planning we do to prepare for it.”
Company Background
History
In 1907, 19-year-old Jim Casey borrowed $100 from friends to start the small company that
eventually became UPS. From its humble origins delivering messages for the city of Seattle,
Washington, UPS had grown into a $37 billion corporation (see Exhibit 1 for financial performance).
Over the 98 years since its founding, it had transformed itself several times, first into a package-
delivery company, then into an international air transportation company, and finally, in the late
1990s, into a logistics company. In November 1999, after 92 years as a private company, UPS went
public in the largest corporate initial public offering (IPO) to date.
By 2005, UPS was the world’s largest package-delivery company, as well as a leading global
provider of specialized transportation and logistics services. It served more than 200 countries and
territories worldwide. UPS Airlines, as of 2005, was one of the 10 largest airlines in the United States.

The acquisition of Mail Boxes Etc.® had provided the company with over 3,500 retail locations in the
United States. With a workforce of 384,000, only Wal-Mart and McDonald’s had more employees.
Organization
In 2002, when Mike Eskew, an industrial engineer and 30-year veteran at UPS, became the
company’s ninth CEO, he found a highly centralized, hierarchical organization with a traditional
structure at the top. A Management Committee met weekly, with a full-day meeting once a month, to
provide the day-to-day management of the company. Various other committees and staff groups
assisted the CEO and Management Committee, including a Strategy Advisory Group—a subgroup of
the Management Committee—that met monthly to address more strategic issues (see Exhibit 2 for an
organization chart).
Within this structure, the responsibilities of corporate staff and field operations in the regions
were clearly delineated. Senior management and staff, working in a collegial, consensus-building
culture at corporate headquarters, set direction, determined priorities and budgets, and defined
initiatives and rollout plans. The more hierarchically run field was responsible for execution and
meeting revenue and cost goals. The Corporate Strategy Group’s (CSG’s) strategic-planning manager,
Ed Rogers, explained: “All strategic decisions are made by the corporate office. UPS does tactical,
rather than strategic, planning at the regional level. There is a clear line between strategy and
execution, since the regions focus on delivering on the next quarter’s business. They also have rollout
responsibility.” Said one observer, “One side of me says it would be nice to have more autonomy in
the regions, but we’re in a network business, and what’s best for one region could easily foul things
up for other regions or the overall network.”
Culture
Over the years, the company had acquired a reputation for being relentlessly focused on efficiency
and execution. Founder Casey instilled a desire to run the company “like a military operation,
ordering recruits to be polite at all times and to place speed above all other virtues.”۱ Carefully
researched work methods, developed by industrial engineers and rooted in time and motion studies,
coupled with time-tested policies and procedures, led to UPS’s reputation for low-cost and highly
predictable customer service. UPS reportedly tracked its drivers so closely that it even knew how
many times they shifted gears in the course of a day.2
Along with efficiency and discipline, Casey had left a legacy of continuous improvement, which
he called “constructive dissatisfaction,” and a set of strong values that included service excellence,
employee ownership, and a commitment to stability for the company’s employees, shareholders, and
customers. The result was a loyal workforce, with extremely low turnover. It was not uncommon for
employees to spend their entire working career at UPS. Internal promotion was standard practice. All
of the company’s CEOs were long-term employees who had risen through the ranks along with their
peers. Most senior managers had business or engineering degrees yet had started their careers at UPS
as part-time package-handling employees or package-delivery drivers.

Evolution of Strategic Planning at UPS
Early Years
Through its growth years from 1907 to 1997, UPS had shifted from message delivery to package
delivery as opportunities arose (see Exhibit 3 for a timeline of key dates). Until the early 1990s, there
was no formal strategic-planning process. Instead, strategy was the responsibility of a small group of
senior managers and involved little more than a series of discrete, ad hoc projects. In the mid-1970s,
one task force had recommended that UPS expand globally; its members had then been charged with
opening up Canada and Germany. Roughly 10 years later, a second task force, soon named the
Strategic Technology Group, was formed to identify major gaps in technology. It then became
responsible for overseeing an $11 billion investment in technology and was later reintegrated into the
technology and engineering groups. In 1991, then CEO Oz Nelson and his senior managers
introduced a corporate mission and strategy statement that codified the values of the founder and
refocused the company on the four constituencies it intended to serve: customers, UPS people,
shareowners, and communities.
The Decade of the 1990s
In the early 1990s, competition from both private companies (e.g., Federal Express) and large
government-supported agencies (e.g., Deutsche Post) started to threaten UPS’s position. Senior
leaders became concerned that the company’s execution mentality was hindering management’s
ability to see significant changes in the environment.
In 1996, Jim Kelly, the soon-to-be CEO, began to address these challenges. He set up the Strategy
Advisory Group, a small subset of his direct reports, to meet monthly for half a day to consider and
debate strategic issues. Kelly also established the CSG, a staff organization of 20 people, most of them
tenured UPS managers with significant line and staff experience. He expected the CSG to develop the
strategic processes for planning for the future, to research and frame key strategic issues, and to assist
the Management Committee and the Strategy Advisory Group in strategy development.
After surveying consultant offerings, the CSG decided to design its own strategic process. The
process that ensued was actually a series of discrete activities, some linked more closely than others,
involving a relatively small group of managers at headquarters. Activities included scenario
planning, strategic planning, and support for strategic decision making and strategy implementation.
Higberg described the process as “not the most nimble, since it uses multiple tools and
methodologies. But so long as we have the backing at the top, we can use any approach it takes to
make it work.” The CEO played a central role. In fact, Higberg observed, “At UPS, strategy is owned
by our chairman. We exist to support him and work at his direction. He is our chief strategist.”
The implementation of the new strategic process involved several steps that unfolded over a
period of years. An important first step was a scenario-planning session held in 1997. Two years later,
in 1999, senior management completed a crucial second step when they drafted the UPS Charter,
redefining UPS’s mission and purpose and providing a detailed statement of the company’s values
and strategies. The new mission and purpose moved UPS from “leadership in package distribution”
to “enabler of global commerce” (see Exhibit 4 for the UPS Charter)
Into the New Century
In January 2002, shortly after Eskew became CEO, he convened a Management Committee
executive retreat whose purpose was “to focus the group on the kind of company we were going to
be in 2007—on our 100 th
anniversary.” The outcomes from that meeting formed the “Centennial
Plan,” the third step in the strategic process. As UPS’s version of a five-year strategic plan, the
Centennial Plan was designed to guide the company to its centennial anniversary by providing
themes and broad, overarching direction. Shortly thereafter, the fourth step in the strategic process, a
“Strategy Road Map,” was developed to take the Centennial Plan to an executable level of detail.
Since the Centennial Plan was segmented by years, an annual plan could be separated out and
translated into regional business plans that were handed down to the regions to execute.
With these steps completed, Eskew, in early 2004, decided that it was time for another scenario-
planning session. He was concerned that UPS was getting closer to 2007—the end of the first
scenario-planning session horizon—and believed that management needed to be thinking further
out. As he put it, “I felt comfortable that we understood the strategy and had initiatives to carry us
through the next five years, but I didn’t know what came after that.” Shortly after the scenario-
planning exercise was completed, the Management Committee met in early 2005 to revisit and
update the Strategy Road Map.
1997 Scenario Planning3
To address the distinctive UPS challenge, described by one manager as “less a struggle with
execution and getting things done than with coming up with creative ideas about what to do,” senior
management in 1997 reviewed alternative long-range planning approaches. They ultimately chose to
bring in consultants from Global Business Network to facilitate a set of scenario-planning workshops.
These workshops were preceded by a series of interviews inside and outside UPS that led to the
definition of the key focal issue facing UPS: “The future of UPS’s global business in an ever-changing
competitive environment.” Working through the various stages of the process, the participants
created four different scenarios that could impact UPS’s future.
Axes of uncertainty Participants, primarily UPS managers representing different functions
and generally reporting to a Management Committee member, went through several hours of
discussion over driving forces and critical uncertainties. They eventually defined two axes of
uncertainty. The horizontal axis was the “Market Environment,” or the flow of goods and funds
across borders, a continuum that ranged from regional and national markets with trade barriers to a
more global market with a free flow of goods. The vertical axis was “Demand Characteristics,” or the
nature of consumers and the type of goods and delivery mechanisms they required. This continuum
went from traditional consumers, requesting more traditional goods and services, to proactive,
sophisticated consumers (which UPS called “prosumers”), demanding high value-added services and
active engagement in supply-chain activities.
Scenarios In combination, these two axes produced four scenarios (see Exhibit 5 for 1997
scenarios). The first scenario, “Tangled Paths,” depicted a future with a highly competitive business
marketplace, constrained by strong regional and nationalistic government regulations, where
consumers desired more variation in products. The second scenario, representing the “Regressive
World,” described a future similarly constrained by regional and nationalistic government

regulations but with a more traditional supply chain, competitive landscape, and set of consumers.
The third scenario, “Global Scale Prevails,” portrayed a global marketplace with slower adoption of
new technology because of stable demand, more traditional consumers, and industry consolidation.
Finally, the last scenario, named “Brave New World,” described a future with a deregulated,
globalized marketplace, providing mass customization of goods and services to proactive consumers
and populated with new forms of competition and virtual organizations, such as alliances and
business webs.
The teams went on to outline specific characteristics of each of the scenarios, to position UPS and
its competitors within the scenarios, and to identify implications and possible strategies for the
company’s logistics business, technology and government affairs efforts, brand, workforce, and
culture (see Exhibit 6 for 1997 scenario implications and strategies). No early warning signals were
defined in 1997. Instead of creating narratives to describe the scenarios, the teams decided to use an
outside media company to prepare dramatic presentations with sets constructed to illustrate each
scenario so that senior management could “experience” the scenarios. Actors were hired to improvise
events in the future scenarios, and videotapes were produced to describe the alternative futures.
Outcomes
The sessions produced several outcomes—both tangible and intangible. They included the
eventual definition of the Corporate Charter and change in the company’s mission statement,
identification of key themes and insights, the creation of a platform for management discussions, and
a mind-set shift for at least some managers.
Corporate charter The insights from these sessions and the discussions they sparked resulted
in the eventual definition, in 1999, of the UPS Charter, which guided the company until 2002. The
Charter incorporated the change in the company’s purpose from “serving the package-delivery needs
of our customers” to “enabling global commerce,” a move that reflected both the more global nature
of the business as well as its intended focus on end-to-end supply-chain solutions. It also included
detailed strategy statements. According to Eskew, “The Charter served as a springboard for a series
of events, starting with the decision to go public in November 1999, and then for the company’s five-
year strategic plan.”
Themes and strategic conversations The scenario-planning sessions also led senior
management to define several “themes” for UPS’s future. These themes included (1) a proactive shift
directly to the end consumer, eliminating usage barriers; (2) leveraging this end-consumer
positioning to win additional business-to-business customers within the demand chain; (3) a focus on
customer solutions that integrated goods movement and financial and information services; (4)
identification of opportunities to be selectively captured across entire demand chains, with integrated
solutions between companies; and (5) the maintenance of a global growth perspective.
The themes and the scenarios themselves provided a common vocabulary for discussions at
Strategy Advisory Group meetings, as well as a guide for investigating growth opportunities and
competitive strategies. Senior managers would pepper their discussions of acquisitions and other
growth alternatives with phrases such as, “That seems like a ‘Regressive World’ option,” or “That
would move us more toward ‘Global Scale’ or ‘Brave New World.’” They also developed a shorthand
for referring to the scenarios. “Global Scale Prevails” was “asset heavy,” whereas “Brave New
World” was “asset light.” Looking back on the process, Eskew commented on the influence of the
scenario sessions on their thinking:

We came out of the first scenario-planning session understanding that it would be difficult
to say which way the world would go. We all liked the top-right quadrant, the “Brave New
World” scenario, and didn’t like the top-left quadrant, or “Tangled Paths” scenario. Left to our
own devices, we would probably have ended up in “Global Scale Prevails,” focusing totally on
physical assets and missing more virtual opportunities. We thought that we should try to
move to “Brave New World,” but we had no control over how the world was going to turn
out. What impact would the Seattle protests at the World Trade Organization meeting have on
the scenarios, for example? A few years later, we wondered about the impact of the terrorist
attacks in New York.
Mind-set shift A more subtle impact was the change in mind-sets. As Rogers put it, “The
session got us thinking far beyond the business-planning horizon.” Higberg believed the sessions had
a more subtle impact as well:
As much as anything else, the scenarios are a mind-set, a place where you’re going to live, a
context. If the world shifts, we’re at least ready for some of the options ahead. If the
competition does things differently, how do we respond? If there’s a major disruption in the
economy, what do we do? Out of the scenario-planning exercise, we got much richer outcomes
than if we had only done competitive analyses, based on trend lines and a view of the world as
all about just slugging it out for market share. Without scenario planning, you don’t see the big
changes until they are history.
However, other participants in the 1997 session were less positive. Some felt that the exercise lacked
realism. One of them observed: “I don’t think that way. I’m a marketing guy, not a process guy. I could
see the four alternative quadrants, but for some of them, I just couldn’t believe that they could happen.”
Use of the Scenarios
The scenarios provided, in Higberg’s view, the backdrop for strategic decisions at UPS; there was
no formal or mechanical link. The acquisition of Mail Boxes Etc.® provided an example of the subtle
interplay of the scenarios with strategic choices. Coming out of the 1997 scenario-planning session,
senior managers realized the importance of establishing a retail presence to serve more proactive
consumers and had begun to pilot a company-owned and operated retail store concept. After
considerable analysis of the business and financial aspects of the deal and as the wisdom of moving
toward virtual assets in the “Brave New World” scenario became even more evident, UPS instead
decided in 2001 to acquire Mail Boxes Etc.®, a franchised network of retail stores providing shipping
and business services.
The evolution of the decision to build a service-parts logistics business also illustrated how
strategic choices were made at UPS against the backdrop of the scenarios. After the first scenario-
planning session and the change in purpose to “enabling global commerce,” Eskew had asked the
CSG to explore new opportunities. Strategy Advisory Group members could not agree on several
proposals. Although they fit with the new purpose and at least two of the scenarios and met return
on investment (ROI) and other key thresholds, they were felt to be too far from UPS’s core
capabilities. Finally, the CSG recommended that UPS scale up the small service-parts logistics
business that had come with the 1995 acquisition of SonicAir. This business, which managed returns
processing, spare-parts fulfillment, equipment refurbishment, and warranty repairs, appeared to fit
with the expected support needs of the then rapidly growing technology business sector in the asset-
light “Brave New World” scenario. After the dot-com crash, the CSG reanalyzed the market and
determined that there continued to be significant unmet customer need for a single point of contact

for fixing fulfillment and repair problems in the more traditional “Global Scale Prevails” scenario as
well.
As these examples demonstrate, UPS’s use of the scenarios in evaluating options did not follow a
formula. At times, the scenarios seemed to be used to support almost any investment, using a
particular quadrant to justify the decision. Managers rationalized the decision by arguing that UPS
was following the scenario-planning guidelines of not betting on one and only one quadrant. Eskew,
for example, explained: “Even though Brave New World would say go virtual, we made investments
in assets that didn’t fit that quadrant.” Higberg was clear they recognized the dangers of betting on
one quadrant or one official future:
The key is not to fall in love with one quadrant. The acquisitions that worked best were the
“no-brainers,” or those that were able to work in all four worlds. If we’ve made mistakes, it’s
because we bet on the upper-right quadrant, totally. For example, in the 1997 session we
assumed the dot-com world would materialize into an enormous fulfillment market for UPS.
The strategies that were just focused on that upper-right quadrant, such as e-logistics, did not
work out because of timing and the dot-com crash. We learned we should go for options that
can pay off in multiple worlds, such as brokerage activities, air-freight forwarding, and
service-parts logistics.
At the same time, despite acknowledgement of this warning, at least one observer indicated,
“There seems to be a gravitational pull toward one of the futures.” Senior Vice President of
Worldwide Sales and Marketing Kurt Kuehn explained some of the inconsistency among the
different views:
It’s a chicken and egg kind of thing. UPS is big enough to influence the direction of the
world, so perhaps there is a value on betting on a particular future. In fact, we have to make
bets because the world doesn’t move perfectly to one quadrant. Or maybe we accept the fact
that all four of the quadrants will coexist simultaneously, and we have to figure out how to
prosper in each one.
Strategic Plans
The third major step in the UPS strategic process occurred when Eskew became CEO at the
beginning of 2002. He recalled:
The Charter had seen us through the 1999 IPO and up to 2002, but it needed to be refined.
Jim Casey’s company was going to be 100 years old in 2007. Our job in 2002 was to start
planning then to position the company to be where we need to be in 2007, to plan for future
capabilities and accomplishments, and to identify missing pieces. After all, nothing happens
overnight in a company like this.
In addition, Eskew was worried about whether all the Management Committee members were
aligned in their expectations for the future, since many were new to their assignments: “I knew we
needed to create a future together and felt that if we didn’t focus on these longer-term issues in an off-
site, we would keep talking only about the day-to-day responsibilities and numbers.” One CSG
manager described another reason for the planning session: “Prior to the off-site, there was no
framework that aligned the various corporate initiatives and projects with the strategy. We had no
control over the 300 or so functional projects; they were being run on their own. We needed a separate
effort to pull them together, since that was not the purpose of the scenario-planning exercise.”

Eskew focused the session on qualitative, not quantitative, expectations. He observed:
Strategy development is not necessarily about numbers. Yet it is very hard for operationally
minded execs to get beyond the numbers. In fact, there was almost a rebellion at the off-site.
They wanted me to tell them the numbers. I did my best at that meeting to stay away from
numbers. Instead, I described the future verbally. I wanted to talk about capabilities and what
we needed to build for the future. I didn’t want to frame the discussion with an ambitious
growth-rate number. Now, of course, we have quickly added numbers to the plan because we
can’t operate without them. It just isn’t our nature.
Centennial Plan
To prepare for the off-site, managers were given an assignment: come to the meeting with 40 to 50
predictions about UPS’s future. According to one observer, “The diversity of opinions was
astounding.” There were different assumptions about the future size of the company, its profitability,
the percentage of business that would continue to come from U.S. domestic small-package delivery,
and whether UPS would be a truly global company or a U.S. company with international operations.
The group distilled the predictions to a manageable set. They then reached consensus on what
became known as the Centennial Plan. The Plan included three components. The first was a
qualitative set of “Goals and Characteristics for the year 2007” that addressed issues such as the UPS
brand, competition, growth and profitability, people, customers, operational efficiency, cost control,
and quality. Second, the group developed an overarching sense of corporate direction, with the goal
of creating a global, unified company with “one vision and one brand.” This objective underscored
the need for continued integration of the dispersed logistics units into one cohesive group.
Finally, senior management worked backwards from the proposed UPS of 2007 to identify a set of
four Strategic Imperatives:
• Winning Team: attracting and developing a highly skilled, diverse, and aligned global
workforce
• Value-Added Solutions: providing customers with value-added services combining
movement of goods, information, and funds
• Customer Focus: building customer loyalty and expanding UPS’s services worldwide
• Enterprise Excellence: creating an environment of high-quality service and value
Strategy Road Map
To ensure implementation of the four Strategic Imperatives, which were considered “skeletal,”
individual Management Committee members were assigned responsibility for each of them.
Imperative teams were formed the next month with team members from the various functional staff
areas.

The teams added detailed measures and goals to each of the imperatives and broke them down
into 24 more discrete projects, or “critical initiatives”; these initiatives, in turn, were supported by
more than 100 specific projects. Under the “Winning Team” imperative, for example, there were
initiatives to improve employee and labor relations indices and employee turnover ratios. Together,
the entire set of critical initiatives became known as the Strategy Road Map.
According to one senior executive, “We believed that everything the company did from that time
on should tie into those imperatives. If not, we needed to question the value of the new project.” At
the same time, the Strategy Road Map had no direct connection to the scenario-planning sessions.
Rogers observed: “The Strategy Road Map was constructed in consideration of the scenario-planning
process. You’ll find consistency of thought between the two but not a direct linkage. Why? They are
different types of exercises. You need different types of people involved in each one. There are some
of us who have had a foot in both, but not many.”
Strategic Implementation
The Management Committee established a process to oversee and manage the Strategy Road Map
and implement the Centennial Plan. A Project and Program Oversight Committee was responsible for
providing project management support and rigor to the initiatives, applying standards, monitoring
progress, resolving resource conflicts, and aligning the functions with the critical initiatives. This
support was considered necessary because, in one CSG manager’s view, “If these projects were easy
and compartmentalizable, we would have already done them.” Project priorities were set by the
CEO, since, as another CSG manager commented, “not all initiatives are created equal.”
McDevitt’s Role
Within the next few months, progress on some of these initiatives seemed to stall. Therefore, in
March 2003, Eskew asked John McDevitt to join the Management Committee from his post of vice
president of Air Operations to be in charge of “strategic integration.” Perspectives on what this role
meant varied. To some managers, McDevitt was “the coordinator of strategic initiatives”; to others,
he was “the champion of strategy execution.” Still others saw him as a neutral “tiebreaker on the
Management Committee.” According to one senior manager, “McDevitt was brought in to help
resolve deadlocks. Before that time, Eskew was the only one who could do that at the Management
Committee level, and he needed help.” McDevitt’s role, according to Eskew, was “to oversee these
efforts and put in the discipline we needed to accomplish the 2007 plan. He made sure that the four
strategic imperatives were actually aligned and executed and that development activities were
moving forward at the right speed, with the right support, and with the right sense of urgency.”
McDevitt confessed that he had a real challenge defining the job when he took it on: “In the
beginning, I jokingly told people, ‘Don’t ask me what I do. At this point, I don’t know. But when I do,
you’ll be the second to know!’” He elaborated:
The job involved a lot of change, since various parts of the organization were working on
different projects and often using competing metrics. Roles were not always consistently
defined. There were also different opinions about what we were trying to accomplish and how
to get these imperatives operationalized. My responsibility was to make sure that all the teams
delivered what they said they were going to deliver. I also made sure ideas went from being a
gleam in the eye to reality
An Example: Trade Direct
McDevitt’s role in the Trade Direct project, a critical initiative under the Value-Added Solutions
Imperative, illustrated his contribution. Trade Direct was a new service offering that would take
goods manufactured abroad and link them into the U.S. delivery system, seamlessly addressing
customs, regulatory, logistics, and information-processing needs. The project involved two groups:
the Supply Chain Solutions logistics group, which would handle the movement of the goods from
China, for example, to the U.S., and U.S. Operations, which would move the goods into the UPS
physical-delivery system, bypassing warehousing and obtaining large savings for customers. The
project had been in the planning stages since 2000, and despite agreement on the opportunity,
different parts of the organization were at odds over conflicting priorities and goals.
To get the project moving, McDevitt took over direct ownership, since in his view, “We clearly
needed a Management Committee member to come in and drive it.” He took several steps to get the
project back on track: “We set up meetings with all participants and uncovered the problems. For
example, we needed an approach for coming up with the funds to cover IT costs. The issues were
elevated and made visible to the Management Committee, and we made sure accountability was
assigned.” McDevitt believed he was able to do this because “I had access to all of the players because
I reported directly to the CEO.” He attributed his success with Trade Direct and other initiatives to
“accountability through visibility”: “I worked through the staff that already existed. I went to
imperative team meetings and met separately with team leaders below the Management Committee
members. Then, every month, there were report outs on the Strategic Imperatives at the Management
Committee meeting. Nobody wanted to be behind. That’s just in the DNA of UPS.”
Scenario Planning: Horizon 2017
After considerable strategic progress, Eskew announced at the 2004 Management Conference that
UPS needed to embark on another scenario-planning exercise to look further into the future. Kuehn
described the reasoning: “We found ourselves in a situation where the timing of some of our plans
was beginning to go beyond 2007. We needed to revisit the scenarios and recalibrate our compasses,
since the magnetic poles had moved a bit around globalization and trade flows, for example. We had
to be sure that we were not chasing a straw man.” Eskew added:
It was critical for us to look as far down the road as we could at all the factors and forces
affecting our future to think about the kind of capabilities that were needed and the roles that
UPS might play to meet the needs of current and future customers. There was too much
ambiguity. The old scenarios were becoming dated and hard to recognize. We needed to paint
some new pictures so that we could refine our strategy for the next decade.
At the same time, there was concern, voiced by Higberg and others, that “we certainly didn’t want
to just repeat the 2007 exercise.” There was speculation that the scenarios would not change
drastically, although the implications might be different. Most, however, believed that “we would be
more sophisticated the second time around.”
Process
The Horizon 2017 session, as it came to be called, was similar to the 1997 session in format and
process, with three important variations. First, Eskew and the CSG decided to take the scenarios and
implications deeper, to regional levels as opposed to a single global picture. Second, to prepare for
the Horizon 2017 session, the preparatory interviews were even more extensive and added the
perspectives of academics, consultants, politicians, and key customers, selected from a list of those
who pushed UPS the hardest and had a clear idea of what they wanted from UPS in its supply-chain
efforts (see Exhibit 7 for sample questions). The interviews resulted in the definition of the key issue
for Horizon 2017: “The future(s) of UPS’s world market and major regional markets in 2017.”
A third variation involved participants. As before, participants from operations were excluded.
Rogers explained the reasoning: “We weren’t going to pull operations folks from the field to do this
touchy-feely stuff. It’s very hard for them to suddenly break out of their day-to-day tactical
responsibilities. And besides, most staff personnel have had operations experience during some part
of their career.” Because they were concerned that familiarity with the 1997 scenarios might bias the
thinking and development process, management deliberately limited the number of participants and
facilitators who had been part of the 1997 sessions. Finally, participants in this session were more
globally diverse and were from lower levels in the organization. As Higberg put it, “We wanted a
balance of seasoned veterans at UPS with people young enough to be here in 2017.”
Eskew kicked off the session and made it very clear that this was not a strategic plan for 2017. He
noted: “Plans for the next one, three, and five years would be more robust and more detailed than
scenarios. Scenario planning is more about helping UPS see forks in the road and figuring out which
one to take.” Over the course of three workshops spaced over four months, the participants
developed drivers, the scenario framework, and scenario characteristics.
Axes of uncertainty While the axes of uncertainty chosen by the participants addressed
demand and marketplace characteristics and were thus similar to the axes from the 1997 session, the
Horizon 2017 axes incorporated more complex facets of each. This time, the horizontal axis was the
range of possible business models and demand characteristics, moving from traditional, proprietary
business models and focused, incremental demand to a more proactive, open, and collaborative
world of commerce. The vertical axis addressed the global and regional business environments,
which ranged from bordered, chaotic, restricted, and fragmented to borderless, harmonious, free, and
holistic.
Scenarios These axes formed the framework for four scenarios (see Exhibit 8 for Horizon 2017
scenario characteristics). In the upper-left quadrant was the “Company City” future dominated by
large corporations, with a growing middle class and the proliferation of powerful, integrated supply-
focused technologies. The lower-left quadrant described a “Bordered Disorder” world, with a highly
regulated, protectionist environment with slow growth in developing nations, guarded intellectual
property and technology, and an increase in security threats and environmental and financial shocks.
In the lower-right quadrant, “Connected Chaos” defined a future full of global unrest, “amoral”
commerce, and informal connectivity that was difficult for governments to control. Finally, the
upper-right quadrant, called “Networks without Borders,” defined a highly connected, stable world
with low barriers to market entry and fast-moving technologies aimed at consumers.
The participants then drafted story lines and provided more detail for each of the four scenarios.
Subsequently, consultants turned this work into cohesive, internally consistent scenario stories at the
UPS global level and provided broad descriptions of the four scenarios at the regional level. These
documents were then distributed to participants for review prior to the third session. Finally, the
participants met in regional teams to define implications for technology and infrastructure initiatives,
growth strategies and options, and workforce development at both the global and regional levels (see
Exhibit 9 for Horizon 2017 implications and strategies). Unlike in the 1997 session, the participants
also identified early warning signals to indicate movement toward one scenario or another. However,
the system to monitor the signals was, according to one CSG manager, “loose” (see Exhibit 10 for
Horizon 2017 early warning signals).

As it had in the first scenario-planning exercise, the Strategy Advisory Group served as both an
incubator and a skeptic for the process. It reviewed the results as the teams progressed through
critical points and had many discussions around the scenarios, their implications, and possible
strategies.
Results
The 2004 session produced scenarios that had more similarities than differences when compared
with the 1997 scenarios. For Higberg, this was not a concern. “I was more worried that it would be a
90-degree turn rather than a 10- to 20-degree change. Roughly 60% of the characteristics of the
scenarios were the same as in 1997. The other 40% were what’s interesting.” Some of the hypotheses
developed in 1997, such as industry consolidation and continued growth of the Internet, had become
reality. In addition, some of the huge open technological issues had been clarified. However, there
were some surprises; they included the rise of safety and terrorist threats and the fall of the dot-coms.
Despite the lack of major changes in direction, Higberg was convinced the session was valuable: “It
validated and reaffirmed our direction. It also provided a much richer understanding of regional
nuances.”
In March 2005, senior management was still digesting the scenarios that had been produced. Since
most of the company was focused on executing the Centennial Plan and Strategy Road Map,
discussions about implications were limited to the Strategy Advisory Group members and staff in
CSG, Marketing, Public Affairs, and Investor Relations.
Senior Management Reactions
Senior managers differed in their views on the value and applicability of the process. Kuehn
believed the sessions had value, since “they helped get our eyes above the horizon a little bit and be
more sensitive to the major forces shaping the world.” Other managers saw value in using the
scenarios to fine tune their tracking of the competition and to define appropriate lobbying initiatives.
McDevitt also found the scenarios helpful: “We don’t want to just plod along. The scenarios helped
us see where the opportunities are. Also, once we have them, we can look back and see where we
were accurate in our work, and we can see what did and did not materialize.”
Eskew continued to believe in the merit of the sessions:
Our goal is not to predict the future but to start thinking about the ramifications of the
various scenarios, so that we can align our planning behind them. The exercise allows us to
more effectively build in midcourse corrections and backup strategies as we create the next
three- to five-year strategic plan for the organization. It is a significant undertaking and a big
time commitment. But, in our business we can’t afford to be caught flat-footed by trends—
trends that we could have anticipated—but that sneak in under our radar screen.
More tactical, operationally minded members of the Management Committee questioned the
worth of the exercise. They found the exercise too abstract and difficult to apply. These managers,
one executive observed, tended to see the exercise as “pipe dreams, daydreaming, and happy talk.
They had a hard time suspending disbelief long enough to free up their thinking.”
These differing opinions were not surprising, for they reflected a fundamental tension in the
company. One observer commented: “The mixed perceptions on the immediate value of the exercise
reflect the tactical and strategic dichotomy that lies at the heart of the UPS character. UPS at its best is

a mix of execution and vision.” Or as Kuehn put it, “If only 10% of the managers get it, maybe that’s
okay.”
Participant Reactions
Participants in the sessions also had a variety of reactions to the exercise. Some participants
struggled with the process. According to one: “At first, everybody had trouble seeing the possible,
since most managers in the company are so focused on the short term. It was also difficult to keep the
perspective in mind that this was not about UPS but rather about how the world affected UPS. It was
irrelevant that UPS existed.” In addition, despite the desire to limit the transfer of knowledge from
the 1997 session, it was difficult to keep the two exercises separate and distinct. One participant
commented: “The two axes caused problems. They were very similar to the previous versions, and
the names of the 1997 scenarios were well ingrained in our minds.”
There were several other concerns with the sessions. Most revolved around value, purpose, and
goals. Some participants were skeptical about the value of the sessions. According to one: “Scenario
planning looks pretty, but does it have any impact on what people do?” Another admitted the session
had had no impact on his work. A third participant observed, “It was hard to understand what
scenario planning was all about. It was very clear that sessions were not to be used to develop
strategy. And we didn’t really feel we were in a strategy process in the first meeting. Instead it felt
like we were in Saturday Night Live. It was wacky. It felt fun, but frivolous.” However, he went on to
acknowledge that the impact of the session was more subtle and affected his own thinking process: “I
used to lay out a series of steps and say, ‘Here’s where we need to go, here’s the plan.’ What I had
never done is say, ‘If this happens, is the plan still right?’ Now, I’ll say, ‘Let’s look at what might
happen if our competitors do x. How would things change? Are we prepared?’”
Strategy Road Map Status
In January 2005, shortly after the conclusion of the 2004 scenario-planning sessions, the
Management Committee members spent a day reviewing the status of the Strategy Road Map. Since
roughly 50% of the members who had been at the original meetings in 2002 had retired, the session
also served to give the new members a chance to hear the plans directly from the CEO.
Prior to the meeting, McDevitt and Eskew had handed out homework assignments. They asked
each of the members to review the Road Map and their assignments, the original 2002 direction, and
the current status of the initiatives. Members were expected to report on the status of the projects, the
importance of the effort, and what needed to be added or dropped. In preparation for the meeting,
McDevitt went to the teams and asked them the same questions. Books were prepared for the
meeting that included a report on each critical initiative, comparing the two perspectives of the
Management Committee members and the teams to highlight whether they were in agreement.
Management Committee members, who had not seen the book beforehand, spent the day—after
receiving a brief summary of the strategic process, including a short overview of the November 2004
scenario planning—going through each initiative, item by item. The Strategy Road Map was then
refined, as needed.
McDevitt commented on the outcome of the session, “After reviewing the book, we found that we
weren’t that far off course. I felt comfortable that we could move forward appropriately. This was the
team that would personally take responsibility for the initiatives, since they will for the most part be
here in 2007.” When asked if his work was done, however, McDevitt replied, “While the exercise was

very beneficial, I can’t say it’s complete. You never know when the next Trade Direct will come up.
Even though we are much more attuned to these cross-functional issues and have achieved a certain
degree of strategic integration, there is a strong tendency to go back to your area and focus there.”
In fact, the need for someone with McDevitt’s responsibilities was currently under review. With
the retirement of UPS’s global transportation chief in mid-February 2005, Eskew had asked McDevitt
to take on that role. But he had not resolved the future of McDevitt’s strategic-integration
responsibility. McDevitt had argued that he should keep the old responsibilities in addition to his
new ones as transportation chief, since he believed that the needs of the old job had changed. But
Eskew was not convinced of the wisdom of that recommendation.
UPS: Beyond the Centennial
Before resolving the question of McDevitt’s role, Eskew wanted to place the decision in the larger
context of strategic planning at UPS. He had two primary concerns. First, he was worried that the
strategic-planning process might need changes to keep UPS on the leading edge. The company had
managed to transform itself several times over the past almost 100 years. But could it continue to do
so with the current processes? Did there need to be a clearer, more direct link between the different
components of the strategic process, for example?
The second concern specifically involved the scenario-planning exercise. Eskew knew that the
exercise had helped him see the future differently, but he was not sure of its organizational impact.
He was not convinced that the scenarios were really forming the foundation for future strategic
plans. Were managers thinking broadly and creatively enough? How could they incorporate the
possibility of wild-card events that they had not even considered in the last session? Were they doing
enough to monitor early warning signals? Should participation be broadened to include field
management? Or, was scenario planning an exercise that only really benefited senior managers and
strategists of the company?

۳۰۶-۰۰۲ -۱۶-
Exhibit 2 Organization Chart
Source: Company documents.
Mike Eskew
Chairman and
Chief Executive Officer
* + ^
Jim
Winestock
Senior Vice
President,
U.S.
Operations
*
Bob Stoffel
Senior Vice
President,
Supply Chain
Group
* +
David Abney
President,
UPS
International
* +
John McDevitt
Senior Vice
President,
Global
Transportation
Services, Labor
and Strategic
Integration
* +
Scott Davis
Chief
Financial
Officer
* +
Kurt Kuehn
Senior Vice
President,
Worldwide
Sales and
Marketing
* +
Lea
Soupata
Senior Vice
President,
Human
Resources
* ^
Dave
Barnes
Chief
Information
Officer
*
Allen Hill
Senior Vice
President,
Legal and
Public Affairs,
General
Counsel and
Corporate
Secretary
*
John Beystehner
COO of UPS and
President of UPS Airlines
* + ^
Vern Higberg
Vice President, Corporate
Strategy Group
+
* Member of the Management Committee
+ Member of the Strategy Advisory Group
^ Member of the Board of Directors
Christine
Owens,
Senior Vice
President,
Communica-
tions and
Brand
Management

Exhibit 3 UPS Timeline of Selected Key Dates in the Strategic-Planning Process
1907 United Parcel Service (UPS) founded in Seattle, Washington
(as American Messenger Company)
1991 Corporate Mission and Strategy Statement introduced
1996 Strategy Advisory Group and Corporate Strategy Group formed
1997 First scenario-planning session
1999 UPS Charter completed and broadly communicated
2002 • Management Committee off-site, resulting in Centennial Plan
• Strategy Road Map developed
2004 Second scenario-planning session
2005 Management Committee review and update of Strategy Road Map
Source: Company documents

The UPS Charter
OUR VALUES – Our enduring beliefs
We believe that integrity and excellence are the core of all we do.
We believe that attention to our customers’ changing needs is central to
the success of UPS.
We believe that people do their best when they feel pride in their
contributions, when they are treated with dignity, and when their talents
are encouraged to flourish in an environment that embraces diversity.
We believe that innovation fortifies our organization through the
discovery of new opportunities to serve our people and our customers.
OUR PURPOSE – Why we’re in business
We enable global commerce.
OUR MISSION – What we seek to achieve
We fulfill our promise to our constituents throughout the world in the
following ways:
We serve the evolving distribution, logistics, and commerce needs of our
customers worldwide, offering excellence and value in all we do.
We sustain a financially strong company, with broad employee
ownership, that provides a long-term competitive return to our
shareowners.
We strive to be a responsible and well-regarded employer by providing
our people with an impartial, rewarding, and cooperative environment
with the opportunity for advancement.
We build on our legacy as a caring and responsible corporate citizen
through the conduct of our people and company in the communities we
serve

OUR STRATEGY – The UPS plan of action
Create the future though One Company. One Vision. One Brand.
We will continue to expand our distribution and supply chain solutions to
synchronize the world of commerce – the flow of goods, information, and
funds.
We will expand our position as a trusted broker between buyers and
sellers worldwide.
We will harness the appropriate technology to create new services and to
strengthen our operations and networks.
We will attract and develop the most talented people whose initiative,
good judgment, and loyalty will help realize our company’s mission.
We will continually study customers’ behavior, anticipate their needs, and
design our products and services to exceed their expectations.
We will create a practice of innovation that leads to sustainable growth.
We maintain an environment that enables us to treat every customer as
if they are our only one.
We will leverage the UPS brand to maximize brand loyalty among all
constituencies.

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306-۰۰۲ -۲۰-
Exhibit 5 1997 Scenario Characteristics
Focal Issue: ìThe future of UPSís global business in an ever-changing competitive environmentî
Demand Characteristics
Market Environment
Regional/
National
Tangled Paths Brave New World
Regressive World Global Scale Prevails
ï Strong local and regional government regulations
ï Restrictions on flow of goods
ï Technology available and governments struggle to regulate
ï Consumers demand more variations in products
ï Highly competitive market, with non-traditional niche
players
ï Strong local and regional government regulations
ï Restrictions on flow of goods
ï Technology a mix of proprietary systems
ï Traditional supply chain and product offering
ï More traditional competition from domestic and regional
players
ï Deregulation and globalization
ï Scope economies vs. scale
ï Technology with open standards and fluid systems
ï Customization of goods and services
ï Virtual organizations, non-traditional competitors
Global
Traditional
Consumers
Pro-sumers
ï Deregulation and globalization
ï Scope economies vs. scale
ï Technology adopted at a slower pace, proprietary systems
prevalent
ï Traditional consumption and consumers
ï Industry consolidation of competitors

۱۷.۷۸۳.۷۸۶۰
306-۰۰۲ -۲۱-
Exhibit 6 1997 Scenario: Implications and Strategies
Focal Issue: ìThe future of UPSís global business in an ever-changing competitive environmentî
Demand Characteristics
Market Environment
Regional/
National
Tangled Paths Brave New World
Regressive World Global Scale Prevails
Global
Traditional
Consumers
Pro-sumers
ï Logistics solutions based on ability to manage
through government regulations
ï Local, regional brand identification for ìsolutions
companyî
ï Extensive involvement in government affairs to
reduce barriers to trade
ï Limited demand for logistics solutions; maintain
transportation focus
ï Local, regional brand focused on operational
excellence
ï Extensive involvement in government affairs to
reduce barriers to trade
ï Marginal value for logistics, maintain transportation
focus
ï Global band with local flavor focused on operational
excellence
ï Limited involvement in government affairs to
maintain level playing field
ï Global, value added solutions aided by robust,
customized technology
ï Global brand focused on solutions, premium
offerings and agility
ï Limited involvement in government affairs to
maintain open markets

Exhibit 7 Sample Questions, Excerpted from Interview Questions for 2004 Session
External Non-Customer Interview Questions
• What external factors will affect the transportation and logistics industry over the next
decade?
• What will deliver success (for transportation and logistics companies) 10–۱۲ years out, and
how will that differ from today?
• Paint me a picture of how transportation and logistics may look in 2017. Which current
competitors will be strong players, and what kinds of new entrants do you see emerging?
External Customer Interview Questions
• What will make a company successful in your industry in the next decade? (What’s going to
be different?)
• If we could answer one question about the future to help your company succeed, what would
that question be?
• What is going to stop being true in your industry over the next decade?
UPS Management Internal Interview Questions
• How would you describe success for UPS over the next 10–۱۲ years? What would it look like
for us? What would be the results?
• How would you like UPS to be viewed within the industry? Within the financial community?
Among customers? Among employees?
• If I could answer any question for you, what would you want to know? What would you like
to know that would give UPS a jump on the competition?

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306-۰۰۲ -۲۳-
Exhibit 8 Horizon 2017 Scenario Characteristics
Focal Issue: ìThe future(s) of UPSís world market and major regional markets in 2017î
Business Environment
Traditional,
Proprietary,
Incremental
Company City Networks Without Borders
Bordered Disorder Connected Chaos
ï Domination by global corporations, driving integrated
trading environment
ï Governments offer quasi-monopolistic market access to
large companies
ï Regulations protect stronger and longer-lasting IP
ï Powerful integrative supply-focused technologies
Harmonious, Aligned,
Free, Fluid, Borderless
Commerce, Biz Model, Demand Pro-Active, Open,
Collaborative,
Chaotic, Fragmented, Restricted,
Friction-laden, Bordered
ï Informal, underground connectivity
ï Geopolitical tensions and tight regulations
ï Local arrangements work better than global approaches
ï Ad-hoc and virtual organizations challenge traditional
arrangements
ï Terrorism and financial crises create barriers
ï Nationalistic environment with social and political unrest
ï Local and regional distribution centers and few global
supply chains
ï Guarded proprietary IP and technology
ï Seamless commerce with collaborative networks
ï Demand driven by wealthier, more informed customers
ï Rising healthcare, educational standards and literacy
around the globe
ï More peaceful, better connected, but faster world

—
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306-۰۰۲ -۲۴-
Exhibit 9 Horizon 2017 Implications and Strategies
Focal Issue: ìThe future(s) of UPSís world market and major regional markets in 2017î
Business Environment
Traditional,
Proprietary,
Incremental
Company City Networks Without Borders
Bordered Disorder Connected Chaos
ï Extremely competitive environment leads to consolidation
ï Business partners to be carefully chosen
ï Education, health and financial support for workforce
ï Global brand, socially responsible company
Harmonious, Aligned,
Free, Fluid, Borderless
Commerce, Biz Model, Demand Pro-Active, Open,
Collaborative,
Chaotic, Fragmented, Restricted,
Friction-laden, Bordered
ï Demand will be uneven and difficult to forecast
ï Modular and adaptable technology for local needs
ï Portfolio is localized by regional and segment needs, but
experience is uniform globally
ï Decentralized decision-making, with local accountability
ï Competitive advantage from efficiency, cost management
and security
ï Regional political relationships necessary
ï Brand focused on security and trust, with local flavor
ï Workforce shortages, more unionism
ï Maintenance of close ties with dynamic markets
ï Focus on confederations, collaborations, and alliances
ï Nimble and agile brand
ï More diverse, global workforce

————
Exhibit 10 Horizon 2017—Early Warning Signals
Focal Issue: ìThe future(s) of UPSís world market and major regional markets in 2017î
Business Environment
Traditional,
Proprietary,
Incremental
Company City Networks Without Borders
Bordered Disorder Connected Chaos
ï EU expands again and again
ï More lax enforcement of anti-trust laws
ï Fewer trade restrictions/tariffs
ï Increase in company sponsored migration
Harmonious, Aligned,
Free, Fluid, Borderless
Commerce, Biz Model, Demand Pro-Active, Open,
Collaborative,
Chaotic, Fragmented, Restricted,
Friction-laden, Bordered
ï Global institutions under increased attack
ï Resurgence of nationalistic cultures
ï More trade restrictions/tariffs
ï More ìguest workerî programs
ï Bilateral trading agreements rescinded
ï Volatile currency valuation
ï Retreat to regional economies
ï Increase in number of refugees
ï Increasing adoption of EFT
ï Increasing rates of literacy
ï Growing global virtual communities
ï Freer movement of people
****