The Business Times

Leading with head, heart and guts

From experimenting in a science lab to building a global culture, Deutsche Post DHL's Frank Appel takes change by the horns.

Anita Gabriel
Published Fri, Nov 27, 2015 · 09:50 PM
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FRANK Appel, chief executive of the world's leading mail and logistics firm Deutsche Post DHL Group, may have thrown in his white lab coat for a corporate suit some two decades ago, but it appears the former scientist was not done experimenting - on his career. He has done a job volte-face twice: From a career that began with a PhD in neurobiology (he was involved in spinal cord regeneration research), the 54-year-old made a drastic move to management consultancy by joining McKinsey in 1993.

"I had thought that in science, people would be interested in content," the no-nonsense Hamburg native remarks.

"But I discovered that some are interested in fame - as in who made what. That wasn't right for me and I was frustrated," he admits with unusual candour after spending the best part of an hour-long interview keeping his family life off-limits except for a tersely-uttered "I met my wife in a lab in Munich". Job disenchantment set in at a time when the global chemical pharmaceutical industry - a natural progression for Dr Appel then - was facing hard times.

As it turned out, he would find what he was looking for - teamwork - in a field afar, in McKinsey.

"At McKinsey, I was never asked about revenue and utilisation but only about client impact and how the team was doing. I liked that," says Dr Appel, who is a member of the Singapore Economic Development Board's (EDB) International Advisory Council and was in town for a biannual session of the council.

Then, at the age of 39 and as managing partner in McKinsey, he would make another bold switch to join postal and logistics behemoth DP-DHL in 2000. That didn't happen out of the blue; the then-chief executive of DP-DHL, Klaus Zumwinkel, whom he would eventually succeed several years later, was one of his clients at McKinsey.

"I enjoyed being a scientist but I don't miss it. I am still interested in what's happening in the field," says Dr Appel, who has clearly found his groove in his current occupation where there are "interesting opportunities to build a global culture".

The CEO experiment

The ambitious pursuit would yield remarkable results for Dr Appel as he made his foray into the corporate world, in the global post, express, freight and logistics giant which made 56 billion euros (S$84 billion) in sales last year.

"I have done three jobs - scientist, consultant and now, executive. I probably would have missed something in my life if I had not done them."

One can consider Dr Appel rather fortunate as, according to him, 95 per cent of all experiments tend to fail. "Yes, that's what I have learnt as a scientist... there's a high level of frustration."

Dr Appel, whose contract is due to run through 2017, took over the reins of the world's largest employer - it has nearly half a million staff - in 2008, when the going was tough.

"Morale (in the firm) was low," he recalls, as his predecessor Mr Zumwinkel had stepped down after 18 years at the helm amid investigations for tax evasion, for which he was convicted a year later.

"He was a great leader but had tax issues. Overnight, the company had changed (CEOs)," he says, adding that "it wasn't particularly thrilling to be in that position".

There were operational headaches too, owing to the global financial crisis which was "one of the toughest periods for the firm", and had prompted a restructuring of its operations. Its US operations were haemorrhaging money, which pushed the firm to lay off tens of thousands of people and exit its domestic ground and air express delivery service.

In turn, through a "realistic and pragmatic approach", Dr Appel managed to cut excess capacity, make substantial cost savings and turned around the operations by building up the international business in the world's largest express market.

The international express business in US, according to him, has since "grown nicely", even outperforming the market.

Asia on the crosshairs

Like many of his peers at the helm of global firms, Asia was on his crosshairs. He resolutely led the company's expansion into Asia, set up its biggest Asian express hub in Shanghai, and expects the region to contribute, by 2017, 30 per cent to total revenue from some 20 per cent now.

With Strategy 2015 done and dusted and much of the crisis-induced fire-fighting out of the way, the firm now has a freshly drawn-up five-year roadmap to navigate a booming e-commerce segment, rising digitalisation and positive momentum in developing and emerging markets.

But could muted global growth, led by a slowing economic powerhouse China, be a killjoy for the giant's business which hinges on bustling macro economics and trade?

"You should not trust too much what economists say on the short term but focus on the fundamental trend.

"And that is about the rising middle class in Asia, which is not over. So, I'm not concerned," he replies.

State-owned to global player

DP-DHL was born out of several major corporate manoeuvres by Deutsche Post AG, once a staid government-controlled entity which post-privatisation turned into a global juggernaut. Five years after its listing on the German bourse in 2000, Deutsche Post would no longer be majority-owned by the state and is now nearly 80 per cent-owned by mostly international institutional investors.

In 1998, the acquisition-hungry firm scooped up a 25 per cent strategic stake in express company DHL International and four years later turned it into a wholly-owned unit. In 2009, the firm was rebranded as DP-DHL.

Today, the group is led by a six-strong management board, the members of whom, according to Dr Appel, have complementary traits. "Some are good at managing volatile situations and are superb at making tough decisions and some are extremely compassionate for the people in the organisation.

"If you have the right blend of people in the organisation, you will make the right decisions. My role is to create this team with head, heart and guts."

Risky bets, a definite no-no

DP-DHL itself has been on experiment mode with several initiatives, all of which bear Dr Appel's measured approach of "don't take big bets as they are too risky; start with a pilot first".

"Brilliant ideas sometimes don't fly. So our job is to have a pipeline of good ideas." he says.

One of those ideas was rolled out in the autumn of 2014, on the sandbar island of Juist, off the north coast of Germany, where DP-DHL launched the world's first unmanned aircraft - the Parcelcopter - to deliver medication to a customer. This research project on drone delivery service is part of DP-DHL's efforts to deliver supplies where traditional options may not be available, such as in a disaster situation.

The logistics giant is not alone. Elsewhere the Finnish postal service has recently begun testing drone delivery for online purchases, while closer to home, Singapore Post completed a package drone delivery trial last month with the hope of doing so in future for e-commerce firms. However, it could take a while before drones are used for normal day-to-day deliveries given the legislative stumbling blocks such as distance limits - rules for autonomous vehicles differ across the world.

"We are curious to learn more new stuff and innovate the processes," says Dr Appel.

For now, the most exciting possibility is the potential and usefulness of drones in disaster situations, such as the devastating earthquake in Nepal in April this year. "If we had drones, we could have provided water, food and urgent pharmaceuticals to the victims as helicopters are too expensive," he says.

Here in Singapore - a leading logistics hub which according to DHL's own Global Connectedness Index is the world's third most connected country - the company has established its first innovation centre outside of Germany in Tampines LogisPark, which will very soon launch the most automated warehouse in the world.

"That's quite a technical challenge and it will be a test to see if we can do more automation," says Dr Appel.

As part of its green initiative - last year it achieved a 23 per cent carbon efficiency, bringing the firm a step closer to reducing its carbon footprint by 30 per cent by 2020 - the firm bought a startup that makes electric cars. There are 250 hybrid delivery vans on German roads today and growing, and according to Dr Appel, they will eventually be exported to other countries.

Not all hunky dory

There are bumps. For the third quarter, Deutsche Post AG's profit plunged 71 per cent after it booked 345 million euros in costs from a failed attempt to overhaul the software system for its freight forwarding network, a key growth unit, leading the firm to cut its 2015 forecast and referring to it as a "transition year".

Unfazed, Dr Appel has said that the firm is intent on upgrading the software and "make this renewal business-centric".

Is he worried about the volatile economic backdrop?

"I'm not too stressed. It's a volatile business environment and it's important to create flexibility in the short term based on long-term aspirations.

"We need to ride the cycle and think of what to do when volumes start dropping, which is not what we are seeing at the moment," he says, adding quickly that "it's not just about delivering at-the-moment good results but to build a sustainable leadership culture that lasts longer than my own 10 years".

There could be another reason for his steadfast optimism. While Europe is the firm's biggest revenue contributor, the company is not solely dependant on the outlook of any one particular region.

"There is always some growth (in the regions where it operates) and it's changing and we can balance that. So, while we never get maximum growth, there is always a blend. We have a natural hedge against volatility in any specific market."

Globalisation cheerleader

Without a doubt, logistics, an industry that has surpassed US$4 trillion in terms of market value, is a global value proposition. It is not surprising then that Dr Appel is a fervent globalisation advocate, not least because he heads a business which has as its lynchpin, the free flow of goods and services.

"Globalisation has been the peacemaker for the world in the last 50 years. It has led to more employment, better infrastructure and education."

Still, there are many who would disagree with Dr Appel's rosy take on the controversial issue of globalisation, particularly those who fear the loss of jobs at home or its impact on the survival of local businesses.

"I don't believe in the downsides. There is no factual evidence that protectionism has helped anybody.

"It's more popular to say one is against change as it's easier than to say, let's go for it and adapt." No doubt, that's a creed that Dr Appel has lived by all his life.


CEO, Deutsche Post DHL Group

1961 Born in Hamburg, Germany


1989 MSc in chemistry, University of Munich

1993 PhD in neurobiology, Swiss Federal Institute of Technology in Zurich

1989-1993 Scientist involved in spinal cord regeneration research at Swiss Federal Institute of Technology

1993 Consultant with McKinsey & Co

1999 Partner, McKinsey & Co

2000 Deutsche Post managing director of corporate development

2002 Management board member, Deutsche Post

2008 Deutsche Post DHL CEO

Hobby mountain biking

Three-pronged life philosophy

1) Find somebody in life. "I found my wife and am very happy"

2) Integrated life: "I have enough time for family and career"

3) Make a difference: "To hope that I make tomorrow better than today"

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