Commentary & Analysis
The Tipping Points, New Customers and the 800 lb Gorilla
By Michael Josefowicz November 15,
By WhatTheyThink Staff
Published: November 15, 2005
By Michael Josefowicz November 15, 2005 -- In a recent article on ODJ, Frank Romano points out that more digital equipment was sold in eight days at Print 05 than was sold in the previous eight years. The tipping point has been reached. The evangelist stage is over. The early adopters have already been identified. Now the game begins in earnest. What's next? It's always very dangerous to predict, but I think a couple of things are becoming clearer. Advertising and global corporations are a mature market. If you already have a foothold, congratulations! Just keep getting better and more efficient. Keep improving your customer's experience and you'll probably do fine. If you're not yet in the game, getting on many companies' approved vendor list is going to be increasingly difficult. And no matter what, be prepared for brutal price competition. In the most visible of the new digital markets, the marketing and direct mail industries have already picked up most of the low-hanging fruit . My impression is that many of the successful, expanding digital installations are in companies that started with a history in direct marketing. It's a natural. Anyone not already in that game is now playing catch up. The public sector is crying out for document life cycle streamlining and is under increasing pressures to become more efficient. The next to go pretty quickly will be transactional printing supported by contextual advertising. Every company that is now sending out paper statements is moving towards electronic statements. But the reality is that they will have to work with paper for quite a while. That means they have to contain costs that come straight from the bottom line. Contextually accurate advertising on statements that have to be mailed anyway. It seems like a "no brainer". Consumers and small business are coming into play. But Fedex/Kinkos, Staples, Office Max and Office Depot are perfectly placed for that market. They have a overwhelming presence, real expertise in logistics and deep pockets. Perhaps their greatest advantage is a business model that allows them to make a profit from small transactions and fast service. There's lots of room in this space, and it will continue to grow explosively. But the competition will get more and more fierce. Sooner or later, some printer, or someone else, is going to bring appropriate solutions to public education. And then there is the 800 pound gorilla--the public sector--education, health and government, or EHG. It's worth noting that Adobe now gets about 30 percent of its revenue from the use of PDF to transform document processes, and that Xerox has a newly invigorated XGS division whose mission is to streamline document life cycles in large organizations. The public sector is crying out for document life cycle streamlining and is under increasing pressures to become more efficient. Every governor or mayor that wants to keep their job will be under increasing pressure to deliver lean government that delivers the goods. So how might a commercial printer ride this wave? First, understand and respect the needs of the public sector. Unlike a for-profit business, they cannot isolate their best customer and focus their resources on improving that customer's experience. The public sector is required by law to serve everyone. And when it comes to serving everyone, digital media has to be closely integrated with paper based communication. Maybe someday, for a relatively small number of people on the planet, the digital divide will be a memory. The $10 computer will be here and Wi-Max will make connectivity ubiquitous. But not today, and probably not for quite a while. If you have connections in EHG, focus on how to leverage them quickly. If you don't have a presence now, think about how to get it. It will probably require partnering with other companies and some kind of network based solutions. But, at least for a little while, the market is wide open. How long that door will remain open is anyone's guess. Consider just one illustration of how digital print partnered with other capabilities, can lead to explosive, internet-style growth. Suppose our amazing communications industry, including printers, brought their skill to bear on what might be the most serious communication problem we have. In the education space, Grow Network/ McGraw Hill redesigned the paper based reporting of standardized test score results. They radically improved the information that parents and teachers received about their students' performance. In the heyday of the dot.com boom, Grow was originally conceived as a web based information delivery system, But the founders quickly understood that serving everyone requires paper delivery of information. Abandoning the typical "traffic summons" style of typical public sector reporting, they replaced it with redesigned full color documents that effectively tell parents what a score meant and what they could do about it, Grow built a very expensive and sophisticated software system and used the output data to drive digital print in addition to web-based delivery. The process is a couple of orders of magnitude more complex than "variable data." Grow built true data-driven print output at a massive scale. What might it mean for printers to take the capability of digital print, and put it in the hands of teachers. In the process, Grow, a dot.com start up, was purchased by McGraw Hill, and today produces tens of millions of clicks on digital output devices all over the country. They are doing very well by helping to improve the customer experience of parents, students and teachers --the "customers" of the K-12 education industry. Their print output vendors are doing just fine. Education is a communications industry. There is a body of knowledge and a set of values that have to be efficiently communicated. In the public K-12, space it has to work for everyone. As of today, it's a business that has lots of broken parts. The huge amounts of money spent are not producing the results the society increasingly demands. Something is going to give. So suppose our amazing communications industry, including printers, brought their skill to bear on what might be the most serious communication problem we have. What might it mean for a global advertising agency to pursue a contract with a major school system to improve the customers' (read students') experience? And what might it mean for printers to take the capability of digital print, and put it in the hands of teachers. How long will it be before textbooks, or a more effective substitute are printed on demand, customized to each class, and produced on site or near site. This is only the top of the tip of the iceberg. All businesses are beginning to recognize Corporate Social Responsibility as a core value. Doing well by doing good may turn out to be the best way to sustainable profitability. Sooner or later, some printer, or someone else, is going to bring appropriate solutions to public education. And when they do, still another major industry will be reorganized.