Commentary & Analysis
FREE SPECIAL: Convergence or Assimilation
David Dodd Xplor 2001,
By WhatTheyThink Staff
Published: October 15, 2001
David Dodd Xplor 2001, the Global Electronic Document Systems Conference & Exhibit, will begin October 28th in Orlando, Florida. Most of the exhibitors and attendees at Xplor 2001 will be companies and individuals who develop, manufacture, or use the technologies and tools for creating, producing, and managing business documents. Today, most of the products and technologies that will be on display at Xplor 2001 are used to create and print documents that record individual business transactions – invoices, credit card statements, mutual fund statements, insurance benefits descriptions, and similar documents. This kind of printing is typically referred to as "transactional printing," and, until quite recently, transactional printing meant documents printed at low resolution in black and white. For this reason, most graphic arts industry analysts, consultants and other industry participants did not consider transactional printing to be a competitive threat to graphic arts industry firms. Recently, I wrote about the "convergence" of transactional printing and promotional (i.e. graphic arts) printing that is now occurring, and I expressed the view that, if this convergence continued to gain momentum, it could dramatically alter the competitive landscape for graphic arts industry firms. In this case, "convergence" is one of those benign-sounding terms that describes a set of circumstances that are potentially very unpleasant when viewed from the perspective of graphic arts industry companies. In the television series, "Star Trek: The Next Generation," the crew of the Enterprise encounter a race of android-like creatures known as the Borg. The Borg travel around the universe "assimilating" all of the civilizations they encounter. When a civilization is "assimilated," its entire knowledge is added to the Borg "collective." But there is a slight problem, at least if you’re not a Borg. When the Borg assimilate a civilization, they end all independent life in that civilization. I do not mean to suggest that the convergence of transactional printing and graphic arts printing will completely destroy the commercial printing industry or the graphic arts industry, nor am I contending that the firms that participate in the transactional printing or document systems industry are the competitive equivalent of the Borg. But I do believe that this convergence will create significant strategic challenges for graphic arts industry firms. To understand why these challenges are likely to arise, we must first define clearly and specifically what we mean by the "convergence" of transactional printing and promotional or graphic arts printing. Then, we must identify those forces that will propel this convergence forward. The convergence of transactional printing and promotional printing essentially means that the equipment, technologies and workflows that have been used to perform transactional printing have become capable of producing documents that are very close in quality and cost to documents that are printed using traditional graphic arts production technologies and processes. Of course, convergence is supposed to be a two-way street, and it is accurate to say that some technologies and equipment that have originated in the graphic arts industry are also capable of processing and printing business transaction data. But, clearly, most of the improvements have occurred on the transactional printing side of the equation. This convergence will manifest itself in two distinct, but related ways. First, transactional documents will be adapted to perform some of the functions that had previously been performed exclusively by promotional documents. They will, in other words, become more marketing oriented. Second, the equipment, technologies and workflows that, until recently, were used exclusively to produce transactional documents will begin to be used to produce documents that are completely promotional in character and function. It is this second aspect of convergence that potentially creates the most serious challenges for graphic arts industry firms. The question, of course, is whether the convergence of transactional printing and promotional printing (even if technologically feasible) will continue and gain momentum. Are there forces at work in today’s business environment that will tend to favor the specific capabilities offered by a transactional printing approach to the production of printed material? The answer, I believe, is yes, and the most significant force in this regard is the growing importance and use of customer relationship management (CRM) and one-to-one marketing philosophies and strategies. Customer relationship management has already become an important facet of today’s business landscape, and there is every reason to believe that it will be an even more powerful force in the business environment of the future. According to a recent study by eMarketer, Inc., companies spent $3.9 billion on CRM software in 2000 and are on track to spend $10.4 billion in 2001. Research firm IDC recently estimated that the worldwide CRM applications market will grow from $6.2 billion in 2000 to $14 billion in 2005. IDC has also recently estimated that the total revenues generated by the CRM services industry will grow from $61 billion in 2001 to $148 billion in 2005. These statistics demonstrate that, in rapidly increasing numbers, business organizations are making CRM and one-to-one marketing philosophies core components of their competitive strategies and operating practices. Companies that embrace CRM and one-to-one marketing strategies make fundamental changes in their approach to marketing communications. One of the most important characteristics of CRM-based marketing strategies is that they make extensive use of personalization technologies to create and deliver customized marketing communications to prospects and customers. According to a recent survey conducted by Cahners In-Stat Group, large and medium-sized businesses (those with 100 employees or more) plan to nearly double their use of personalization technology over the next year, with about 43% having it is place by 2002. While that percentage may seem somewhat low, the number is growing rapidly. In a September report, Datamonitor observed that global investment in personalization technologies will reach $2.1 billion by 2006, up from $500 million in 2001. Enterprises committed to CRM and one-to-one marketing continue to use mass marketing techniques and materials, but for more limited purposes – to raise brand awareness, to establish brand identity, and to entice prospects to begin an interactive "conversation" with the enterprise. This growing emphasis on personalized communications with customers and prospects will obviously affect how CRM-focused enterprises use printed material in their marketing efforts and what kinds of printed material they will favor. For the foreseeable future, at least, most companies will need to use printed material as part of their CRM programs, because they will have some customers and prospects that either are not online at all or that simply prefer to receive communications in printed form. But, in greater and greater numbers, companies will demand that printed communications be as capable of customization as other forms of communications (such as web pages or email). The technologies for creating customized printed documents have been used for several years by companies involved in transactional printing. Graphic arts firms, on the other hand, have been fairly slow to adopt and use variable data printing technologies. As the demand for personalized communications continues to grow, transactional printing firms may be better positioned than graphic arts firms to produce the customized documents that CRM-focused enterprises demand. This is both the challenge and the danger of convergence.