Commentary & Analysis
Google, Wal-Mart and Commercial Printing
By Michael Josefowicz September 26,
By WhatTheyThink Staff
Published: September 26, 2005
By Michael Josefowicz September 26, 2005 -- The models for sustainable success are by now pretty clear. They are based on the basic rule of marketplace success: get the right thing to the right person at the right price at the right time. Google delivers the right information to the right person for free, 24/7. Wal-Mart delivers the right product to the right person at the lowest price and the item is (almost) always in stock. The idea is very simple. The execution is very hard. Google and Wal-Mart dominate their markets because they deliver. Google and Wal-Mart dominate their markets because they deliver. The idea is very simple. The execution is very hard. Google is my shorthand for all enterprises on the Internet, both tiny and huge. Wal-Mart is the shorthand for retail, again both tiny and huge. Both create value with a computer-driven intelligence network that delivers actionable information on what people are doing in the real world. Both have a way to use that intelligence to constantly improve their customers' experience. For both, the created value is the intellectual capital created by their networks. Google monetizes that value by becoming the de facto best advertising vehicle ever invented. It enables anyone to deliver an advertising message exactly when the customer wants it. Google has built the infrastructure that allows producers to "break through the clutter" by delivering information the consumer wants to receive. Junk mail and spam cease to exist, if the recipient wants to read it. Deliver the right customer experience to the right person at the right time for the right price. Wal-Mart invests the intellectual capital of their network by selling physical products, at very low margins in very large quantities. They have near real time data on what is bought at every Wall Mart all over the world. With that information, they can tell what their consumers want and don't want. They are conducting a 24/7 survey based not on opinion, but on the reliable indicator of consumer spending. They couple that with a business structure that allows them to restock the hot sellers and eliminate the slow ones. And they have the overriding mission to continuously drive costs out of the business transaction and the buying power to negotiate rock-bottom costs, so they can continuously improve their customers' experience. The experience of Google and Wal-Mart tell us that the combination of knowing what people want and making it easy for them to buy it from you works in the real world. What does this have to do with the printing industry? Everything. Arguably what people want are design-rich color printed products anywhere, anytime. The technology is now in place to give them that experience. The only thing missing are the network relationships. The only road for a strictly offset print provider is better, faster, cheaper. First, in trying to understand what your printing customer needs, don't focus everything on ROI. Every serious commercial organization is being pushed by the logic of the marketplace to the Wal-Mart, Target, Costco, Starbucks model: deliver the right customer experience to the right person at the right time for the right price. If you can offer a print based solution that will help your client get closer to that goal, be confident that someone in your client's company wants to hear about it. Your job is merely to find that person. Second , offset printing as practiced for the last 50 years, has relatively little to offer this new business model. Of course there will be a continuing need for offset, but it's pretty clear by now, that offset is a declining, or at best, stable market. The only road for a strictly offset print provider is better, faster, cheaper. The faster you move to "lights out" , completely automated, super efficient production and customer service, the better the chances you have of being one of the few winners. Third , Digital and hybrid printing is the killer technology. Hybrid is the ability to deliver the right combination of digital and offset product to the right customer at the right time for the right price. Data-driven digital printing is perfectly designed for the emerging business models. Print has again and again demonstrated its superiority in traversing the last mile to the consumer. It is also unparalleled in its ability to create a lasting customer experience that leverages word of mouth advertising and becomes a part of the consumers environment. Think about packaging, books, posters, calendars, POD and other print artifacts that live in the real, as opposed, to the virtual world. Print is unparalleled in its ability to create a lasting customer experience that becomes a part of a consumer's environment. You've heard this for at least five years, why believe it now? Remember reading about the desktop revolution for many, many years, and then within one two-year period everyone switched to a Mac? Or a couple of years hype about the internet, then the dot.com crash, and three or four years after that the customer experience in the businesses of finance, books, used books, travel, real estate, and selling cars have been completely reinvented. If you are a print-for-pay manufacturer, ask yourself, how many new offset clients have you found in the last few years. How many new digital print customers have you found? And what are your profit margins on each kind of job? What does it mean that Fedex purchased Kinkos? Do you really believe it was only to get outlets to fight the UPS stores? Or might it be possible that Fedex, a world leader in logistics, sees the opportunity to capture a significant share of the printing market--both digital and offset? Have you found yourself competing with FedexKinkos for substantial commercial accounts? And what will it mean that Staples, Office Max and Office Depot are now all in the game? Do your customers really see or care about the quality difference between offset and digital printing? Do you believe that energy prices will stop rising and U.S. Postal Service rates will stop going up? What effect might this have on the cost of the "print and distribute" model of manufacturing? Do your customers really see or care about the quality difference between offset and digital printing? It May Have Already Tipped As Malcom Gladwell argues, tipping points are a little like flu epidemics. They don't happen everywhere at once. They start in very small places, and if all the factors are right, spread with amazing speed. I believe that all the factors are right, albeit at different speeds in different places. Look at some of the indicators. A critical mass of quality digital manufacturers are in place and have spent a year or two going up the learning curve. My primary area of experience is watching Xerox, but I bet that Kodak, and HP-Indigo are in a similar situation. The beta versions and version 1.0 are long gone. Version 2.0 and 3.0 of digital printing systems are now in place. The printers who get it have developed the expertise to routinely produce digital printing that works. The printers who haven't gotten it yet, are probably already too late, and will have to join the party through mergers or acquisitions. As an educated print buyer, I can now routinely purchase, or produce in my office, digital printing, without fear of failure, and with little hassle. The printers who haven't gotten it yet, are probably already too late The cost of entry has been lowered to the point that a whole new class of producers have emerged. At Print 05, I met a fellow who told me that he had 3 employees in 1000 sq ft of space in a small town in Kentucky. He has a Xerox T250, a Nuvera, and the ExactBind binding system. He spent the last 20 years not in the printing business, but when the cost of entry became low enough, he decided to make the jump. He told me that in less than 5 months from starting, he's been able to put $60,000 in the bank, by doing between one and one hundred copies of black and white and full color paperback and hardcover books for individuals, schools and commercial organizations. He recently bid against Jostens for a yearbook and won. Also at Print 05, I met someone from a design studio in Ohio, who was so frustrated by their inability to find a print for pay supplier that was easy to work with, that they were purchasing a T250 from Xerox. He has already developed and sold a number of innovative data-driven digital solutions to substantial clients, and wants the option to produce them himself. It's faster than finding and negotiating with a print for pay manufacturer. In New York, I recently talked to a printing broker who has been at it for more than twenty years. She has an Epson 9000, an addressing machine, and a small staff to do fulfillment. She's been regularly getting a couple of new digital customers every month, doing small jobs in her facility, and brokering larger jobs to a trade shop that has a Xerox DocuColor 2060, and another trade shop with a NexPress 2100. The cost of data driven retail and e-commerce functionality is low enough for everyone When my independent dry cleaner enters all my transaction data into a point-of-sale computer and every enterprise has a website, it's clear that the internet is widely accessible. Wal-Mart spent hundreds of millions building their computer systems. Now, every business can access computer functionality for a small fraction of the cost. Duplicating the logistics system, while considerably cheaper, is still daunting. The irony is that it's disruptive innovations that power tipping point adoption. Innovation usually comes from small groups Large and mid sized organizations very rarely have the time or vision to innovate disruptive solutions. Their main concern is, very correctly, to manage risk. Disruptive innovation, by it's very nature is very, very risky. It is usually best done in very small centers of creativity that can afford to make very big mistakes. By the way, the industrial technology underlying digital printing has been a welcome and notable exception. The irony is that it's disruptive innovations that power tipping point adoption. Once the cost of entry is low enough for failure-tolerant creatives to get in the game, the sheer volume of innovation explodes. And from that volume, the best will be identified by the market and become the killer applications of tomorrow, If your company already "gets it", don't worry about innovating, worry about continually improving your customer's experience. That's already a more than full time job. But at the same time, keep scanning the horizon for the potential killer apps that you can take mainstream. Look at things like the Xerox PIXI awards, to the design schools, and to the "small" players that might not seem to be worth the investment of time or attention. The killer apps of the next few years have probably already been invented. Your job is merely to find them and sell them to your customers. Remember that Google was invented by two graduate students at Stanford, not IBM or Microsoft.