WB Interview: Michael Critelli

The departing CEO of Pitney Bowes has steered the mailroom firm through a period of repositioning and 'domino' acquisitions.

by Nick Loney, World Business
Last Updated: 23 Jul 2013

Halfway through our meeting, Michael Critelli pulls out his wallet and begins to place its contents - excluding cash - on the table between us. "How did this credit card get to me?" he asks rhetorically, demonstrating a point. "We've got a machine that fixes these cards to a backing at high speed and high reliability." He puts down some photos. "What about these? Well, now we have a machine that sends out digital photographs and greetings cards." Then comes his Blockbuster video card. "We've also developed a new way of putting DVDs into envelopes," he says.

The message is clear: Pitney Bowes may be the company of the mailroom, but it is not content to stay there. The firm that made a fortune out of franking machines has serious ambitions to become more involved in the wider "mailstream", as Critelli calls it. This refers to all physical and digital mail that flows across organisations to their customers and back, and encompasses the entire process of document creation, production, distribution and management. "Postal voting is another example," he says. "We've just sold a $1.5 million system to a county in Florida that was one of those that had problems in the 2000 election. Voting by mail has doubled in the past 10 years."

Critelli has stopped off in London en route to South Africa. Although the setting is grand - we're in a plush room at the Savoy - the man himself, who this month will step down from his dual role as CEO and chairman to become Pitney Bowes' executive chairman, is modest and understated. He speaks openly and has an air of seriousness that has the effect of making those around him feel lightweight in comparison. He's relaxed and very polite, but doesn't smile easily and is clearly not a joke-cracking, back-slapping type of boss. This mixture of earnestness and benevolence lends him a mildly academic air: it's easy to imagine him in front of a room of students, Powerpoint to hand, delivering an in-depth lecture on the history of the US postal service.

One of the main topics occupying him today is acquisitions. He's something of an expert on these, having presided over a large number since 2001 as part of Pitney Bowes' aggressive expansion strategy. Realising that if it stuck to its core mailroom business it would face long-term decline, the company had no choice but to pursue growth in other areas, says Critelli. It has made more than 60 acquisitions in the past six years.

But the words acquisition and success don't go together in the same way as, say, strawberries and cream, and many companies acquire in haste only to repent at leisure. Critelli admits that Pitney Bowes has been guilty of this in the past. "It was a popular strategy to diversify widely. We picked good companies, but sometimes we didn't know what to do with them." Since then, the company has adopted a different approach, for which Critelli has a ready-made simile. "You can liken it to a game of dominoes in which one rectangle has the same number as the one to which it is attached and one that is different," he says. "With every acquisition we make, we seek to lock in capabilities that we already have, but also to add new capabilities."

In order to move quickly, Pitney Bowes ensures it always has several hundred million dollars in petty cash to hand. But it refuses to set itself strict targets in the number or value of acquisitions it makes. Such an approach could lead to acquiring for the sake of it, says Critelli. "We don't have a budget for acquisitions. We target over a five-year period and we will average around $300 million a year for acquisitions. But some years it will be less and others more."

One of Pitney Bowes' key tests of the suitability of an acquisition is whether the purchase attracts interest from one of the company's existing business units. "If we can't find somebody in the company who wants to own the acquisition, it's a good sign that it's too far-field."

Pitney Bowes began life in Chicago, where Arthur Pitney formed the Pitney Postal Machine Company in 1902, using his patented double-lock, hand-cranked postage stamp machine. Six years later, Walter Bowes, an English emigrant and founder of the Universal Stamping Machine Company, began selling stamp-cancelling machines to the US post office. In 1920, shortly after the House of Representatives passed a bill authorising mechanical stamps on first-class mail, the two men joined forces to create the postage meter (also known as a franking machine), which combined Pitney's double-locking counter with Bowes' system for wrapping postage payment, postmarking and cancellation. This enabled businesses to print their own postage without using stamps for every item, while the US post office used it to track the money it collected from delivering mail.

In subsequent decades demand for the postage meter grew rapidly, propelling Pitney Bowes on to the Fortune 500 list in 1962. The loss of its monopoly of postage meters forced the company to diversify into other mailroom products during the 1960s and '70s, and by 1980 it had a $1 billion annual revenue; 10 years later its revenue topped $3 billion. The rise of web-based communication during the 1990s appeared to threaten the existence of traditional postage and packaging firms, but although correspondence mail - letters, postcards and telegrams - declined, the range of products sent through the mail increased dramatically, as innovative retailers realised there was a huge appetite among consumers for shopping online.

Critelli, who became Pitney Bowes' CEO at the beginning of the dotcom boom, recognised that things were changing and set about repositioning the company. This was achieved partly via his 'domino' acquisition strategy, through which Pitney Bowes has steadily accrued businesses offering a variety of web-related products and services (the newest and largest of these acquisitions, the $408 million purchase of location intelligence firm MapInfo, was announced in April).

But Critelli's goal of transforming Pitney Bowes from a mailroom company into a mailstream company could not be achieved through acquisitions alone. He disposed of chunks of the company he believed stretched it too far away from its core competencies. "In my first few years, I sold or spun off just about everything," he says. "I wanted to give us credibility with investors, customers and employees, and that meant getting rid of parts of the company that didn't have that credibility." This included mortgage servicing and real estate divisions, and a business that leased out aeroplanes, railcars and barges.

The final part of Critelli's rebuilding work focused on changing the way Pitney Bowes operated on a day-to-day basis. The company shifted its operations from a mechanical base to a computerised system, and also established the Advanced Concept & Technology Group (ACTG), a unit responsible for identifying and developing new products outside, but adjacent to, its main product areas. Today, 24% of Pitney Bowes' revenue comes from areas it wasn't involved in four years ago. The work of the ACTG has been associated with the influential business book Blue Ocean Strategy (2005), which urges companies to seek "uncontested market space" away from bloody red oceans of intense competition. Critelli cites ACTG's development of the StampExpressions machine, which enables people to design and print their own postage from their desktops, as a classic example of a blue ocean strategic move.

But he insists that blue oceans can also be found closer to home. "Before we came along, the mail consolidation industry, for example, was an occupied market," he says. "There were several hundred pre-sort houses, but they were small, fragmented and usually operated only in single cities. So the blue ocean concept was not that nobody was doing it, but that nobody had come in with a nationwide offering that not only pre-sorted mail but improved its quality."

Critelli was given an early lesson in the dynamics of responding to change when he was a schoolboy in the 1960s. He recalls how his father, a typesetter, anticipated the computerisation of the printing industry. "My father could see that he had to learn to become a computer operator if he was to survive until retirement," he says. "He gave up his recreational activities, including his bowling night, to attend classes. I remember him sitting at his desk studying in our house while his friends were off bowling. They did not adapt to the changing conditions - my father did and survived until retirement age, when he took a buyout package."

As a young law graduate fresh out of Harvard, Critelli was taught another lesson. He and a colleague were assigned to look after the interests of one of their firm's biggest clients, the owner of a large construction company. The young Critelli believed that the best way he could serve his client was to save him money. His colleague adopted a different approach.

"The client had three daughters and all three sons-in-law were employed by the business," he says. "There were also uncles and cousins working there, too. The most important thing in the owner's life was for somebody to take care of all the aggravation associated with having this huge family around the business. My associate realised this and took care of all the relatives' parking tickets. The owner saw me as replaceable and my colleague as a business partner - and when a partnership at the law firm came up, my colleague got it, not me."

And the moral of the story? "Number one: the client defines what is valuable. Number two: the soft skills you have are often more important than the technical skills."

Critelli joined Pitney Bowes in 1979 as company attorney. He later became general counsel of the company, in which role he stayed for five and a half years, before moving across to head the financial services division in 1993. Just over a year later, he was appointed as one of Pitney Bowes' two vice-presidents and became CEO in May 1996. "So my progression from general counsel to CEO was two and a half years - too short to master what I needed to master." The company's solution was to give him a minder. "They paired me with Marc Breslawsky, one of the unsuccessful candidates for the CEO's job, who became COO."

Unsurprisingly, Critelli says his biggest achievement was "taking the company through a number of transitions without blowing it up". His worst decision, he says, was clinging on to his relationship with Breslawsky for too long, when both men were ready to work independently. "Marc clearly wanted to be a CEO and was capable of being a CEO. The obvious and natural thing was to make him CEO of the company's office systems business, and have that as a separate listed company. I did that about 18 months later than I should have."

What were the consequences of that? "Well, for one thing we ended up doing the spin-off in a recessionary environment, which was a lot more complicated. There were also a lot of industry changes in that year and a half, so we'd be a lot further ahead now if we'd made the move earlier."

Critelli's tenure as the CEO of Pitney Bowes will have lasted exactly 11 years when he relinquishes the role on 14 May, making him one of the longest-serving chief executives in the US. He insists that his new role as Pitney Bowes' executive chairman will enable him to actively influence the running of the company, while simultaneously adopting a more "strategic, external" role. By this, he means influencing the on-going reform of postal services in the US, Europe and elsewhere, as well as spending more time identifying market opportunities in areas such as healthcare, government services and corporate social responsibility. He also says he would like to do more to influence the wider policy climate in the US, particularly in the areas of corporate governance and enterprise role management.

His replacement as CEO will be Murray D Martin, who has been the company's president and chief operating officer since 2004. Like Critelli, Martin is a Pitney Bowes veteran, having been at the company for 19 years. In his current role, he is responsible for all the company's business lines, as well as global procurement and sourcing, and the ACTG.

Critelli serves as chairman of the board of three non-profit organisations, including the National Urban League, which promotes the economic empowerment of African-Americans. He also spends a lot of time helping his three children pursue their respective ambitions. "I have a 20-year-old son who wants to be involved in the performing arts - some kind of combination of film and comedy," he says. "My second son, who is 16, is one of the top 20 chess players under the age of 21 in the US. And my daughter is a keen musician." His demeanour changes when he talks about his family. He visibly relaxes and even laughs when I ask him when he last beat his son at chess ("none of us has beaten him since he was nine").

Right on cue, his wife, who is travelling with him to South Africa, appears just as Critelli is preparing for the photoshoot. A friendly and vivacious woman, she joins me in watching the shoot, during which we chat about everything from the manners of Parisian waiters to whether New Yorkers would ever stomach an equivalent of London's congestion charge and the chances of Hillary Rodham Clinton winning the Democrat nomination for the US presidential race.

Then suddenly it's all over, the photographer is packing up and it's time for the Critellis to catch their flight.

WHO IS MICHAEL CRITELLI?
1970: Graduates in communications and political science, University of
Wisconsin
1974: Harvard Law School
1974: Law firm Ross & Hardies
1976: Law firm Schwartz & Friedman
1979: Company attorney, Pitney Bowes
1988: General counsel
1993: President, financial services
1994: Vice-president
1996: CEO
1997: Chairman and CEO
2007: Executive chairman

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