Globe trotter Featured

7:00pm EDT November 19, 2003
In an age when CEOs change companies more often than professional athletes change teams, it's refreshing to see a 97-year-old company that's chalked up only nine CEOs in its history.

It's even more impressive when you consider that this is a company that went from a two-man messenger and small package delivery service for local shops in Seattle to a $32 billion supply chain management business that serves 200 countries and employs more than 360,000 people -- just 50,000 shy of the population of the city of Atlanta.

The man behind much of that international expansion is Michael L. Eskew, who in January 2002 was named chairman and CEO of United Parcel Service Inc.

Eskew was part of the team that initially expanded UPS into Europe in 1976, helped begin the company's first intercontinental air service between the United States and Europe, and led the campaign to launch UPS's own airline, which today is the 10th-largest airline in the United States with 257 of its own planes and 315 chartered aircraft.

Although he's been CEO for less than two years, Eskew has long been a vocal advocate of embracing the rapidly expanding global marketplace. In his eyes, CEOs who want their companies to thrive can no longer just do business in their city, state or even country. Like it or not, it's time to get global or perish.

"We have large and small customers that are now doing business well beyond their natural trading borders," says Eskew. "What was only in Chicago in the past is now in Los Angeles, New York, China and London."

Crossing the sea

Eskew joined UPS in 1972 as a wide-eyed Purdue University graduate with a bachelor's degree in industrial engineering. After a few months of "laying out parking lots," as Eskew says, he donned the famous brown uniform and drove the brown delivery truck, which the company calls "package cars."

"They let me go out and deliver packages," Eskew wistfully recalls. "You never forget those great experiences of seeing what customers expect from us."

Eskew rose through the ranks during the '70s and '80s, watching as demand for air parcel delivery increased and federal deregulation of the airline industry created new opportunities for UPS. But deregulation also led established airlines to reduce the number of flights and abandon some routes altogether.

To avoid a delivery disruption, UPS began to assemble its own jet cargo fleet. As a result, its worldwide growth started to blossom.

By 1985, UPS Next Day Air service was available in 48 states and Puerto Rico. That same year, UPS began offering international air package and document service, linking the United States and six European nations. In 1988, under Eskew's direction, UPS received authorization from the Federal Aviation Administration to operate its own aircraft, thereby officially becoming an airline. Formed in less than a year, UPS Airlines became the fastest-growing carrier in FAA history.

In 1989, its international air service reached more than 180 countries. Just four years later, UPS reached 4 billion of the world's 6 billion people -- more than twice the number of people that can be reached by any telephone network.

"We've made our moves because the customers have asked us to take them there," says Eskew, explaining the strategy behind UPS's global expansion.

That strategy is relatively simple, he says, but it's not so easy to execute. Successful implementation lies in the consistency of UPS's operations, from Boston to Beijing, right down to how the trucks are loaded.

"If you would open the back of one of our package cars in Europe, you'd realize they look a lot like they do in the U.S.," Eskew says. "If I'm in Berlin, there's a package on the shelf that came on the ground from France, one that came in the air from France ... But it's an integrated network, all integrated and synchronized in the back of that package car."

Choosing partners

This global expansion, however, has hardly been from the ground up. Since 1999, UPS has made at least 25 acquisitions of supply chain and logistics companies domestically and worldwide. The best known of these domestic acquisitions is the one of the 3,000 Mail Boxes Etc. stores, which most franchisees have renamed "The UPS Store."

Eskew says all acquisitions must meet three criteria -- the market must have the potential for growth; it has to leverage UPS skills such as its brand, technology, people or its information networks; and it has to fit UPS's strategy.

"Our strategy, simply stated, is to enable global commerce," Eskew says. "If we think it takes our customers around the world, gives them touch, makes them more successful, lets them do more things, that's our strategy. If those acquisitions meet all three of those guidelines, we're in the market."

Putting a face on UPS in these new markets, however, requires different marketing campaigns. In March, Eskew unveiled a redesign of the company's famous shield logo to go on the company's vehicles, facilities and uniforms worldwide. And its latest advertising tagline -- "What Can Brown Do For You?" -- has been successful domestically, but is not used everywhere.

"Markets develop differently in different lands," Eskew says. "In some lands, domestic markets are not as important and not as developed as they are here in the U.S. In some countries, the express market is not as developed as it is here as in the U.S. On the other hand, in some countries, we may enter as a supply chain player. In terms of our brand, our brand plays great all over the world, but our commercials are tailored to the country."

Eskew estimates supply chain management is a $3 trillion business worldwide, compared with the relatively paltry $60 billion U.S. small package delivery market. So it's no surprise that in the last decade, the UPS management team has diversified its services to include consulting and logistics, as well as a financing arm to fund supply chain projects for customers.

To support these new global initiatives, UPS has spent at least $1 billion a year for the last 15 years on technology, and Eskew says it will continue to do so. Its Web site, www.ups.com, is accessible in 21 languages and dialects, and contains dedicated content for 104 countries.

The result? Last year, operating profit more than doubled for the company's international segment.

"It's not just a trend, because it can't be stopped," Eskew says. "In the last two years, we've seen horrible terrorism, a war and various health threats. And none of it has stopped world commerce. Global trade has kept moving forward."

"Constructive dissatisfaction"

One word you won't hear out of Michael Eskew's mouth too often is "I." Every accomplishment, every achievement, begins with "We." When asked whom he admires in business, his answer is his employees and the eight CEOs who held the post before him.

"I've been at UPS for 31 years, so that's the only culture that I know," Eskew says. "We are a team company, and there are 360,000 of us. I don't deliver any packages myself anymore. I don't sort any of them and I don't develop technology or fly airplanes. It takes all 360,000 to make this place work.

"When all 360,000 understand where we're going to go and understand our vision and understand we're one company with one vision, we've pulled together great."

To illustrate the UPS culture, Eskew borrows a phrase from UPS founder Jim Casey, who in 1956 told his management team that they always needed to be "constructively dissatisfied."

"It's part of our DNA," Eskew says. "We don't want to run ourselves down, but we can never be satisfied, and that's really what it's all about. We've always had the best service, we've always had the best people in our industry, but we have to be constructively dissatisfied. We can get complacent, and Jim would not want us to be."

What also seems to be part of Eskew's DNA is the ability to adapt to change. From 1913, when Casey's American Messenger Service was nearly driven out of business due to improvements in telephone service and the automobile, to an increasingly global marketplace today, UPS under Eskew will need to be as nimble in the coming years.

Eskew is looking forward to it.

"A lot of people think they need to change jobs to see different things, and luckily for all of us at UPS, the company keeps changing," Eskew says. "We're not in the package delivery business anymore; we are a technology company, we're a supply chain company, we're an integrated, synchronized commerce company."

HOW TO REACH: UPS Inc., (800) 742-5877 or www.ups.com