In late February, I joined a few of my industry analyst colleagues at an X-Rite/Pantone briefing at Pantone’s New Jersey Offices. X-Rite President & CEO Tom Vacchiano was in the building and took time out of a busy schedule to provide us with an update on the company’s strategy.
WTT: Tom, it has been some time since your last two major acquisitions, GretagMacBeth and Pantone. Can you give us some background on why those acquisitions were important to the company’s overall strategy?
TJV: Sure. First a little background would probably be helpful. In 2006, GretagMacBeth merged with X-Rite, and there was a definite plan behind that merger. We felt we could substantially reduce the duplication and overlap the two companies had in the marketplace and use the intellectual know-how of the two companies to transform the industry. To be perfectly frank with you, the concept of PantoneLIVE, which we announced on March 1 of this year, is part of what we dreamt about in 2005 and 2006 when we brought the companies together. The color industry and the instrument companies all had a lot of the same offerings for the same customers, and the customers were telling us at that time about all the cool new things they would like to do. We thought it would be great to support these customer requirements, and began working out how we could do them, and how best to allocate R&D and marketing resources. We were constrained by the competition and replacing old products, and we didn’t have enough of our imagination targeted toward taking those next big steps.
So I sat down with the CEO of X-Rite at the end of 2005, and we talked about the digital transformation, how we could plug into that and change the game. We thought we could pool our resources to do some of the cool things customers were asking for.
WTT: Then how did Pantone come into the picture?
TJV: In 2007, when Pantone became available as an acquisition opportunity, we saw it as a perfect complement to what we are trying to do. Not only is Pantone a great brand and affiliated with color, but it did two things: Pantone connected us to the design community. Prior to that acquisition, we were in labs, prepress or on the converting/printing side, but we were not well-known on the design and brand side. The Pantone acquisition gave us access to millions of designers and creators at the top of the value chain, and also brand owners who knew Pantone quite well.
Secondly, with this acquisition we foresaw the opportunity to create the ability to communicate from design to brand owner and back, and from brand owners and product managers to converters and printers in a digital community—of course we weren’t using the term “cloud” back then. The fact is that Pantone is the language of color; if we owned Pantone, our ability to take their brand and methodology and our technology and science, and connect the dots, it would give us the capability to deliver something like PantoneLIVE. Unfortunately, it has taken us more time than we imagined to get all of this done, both because it is a lot of work, and because the recession did set us back a bit. But we are delighted that our vision in 2005/2006/2007 is now taking tangible steps forward with the announcement of PantoneLIVE and that we are able to take the first substantial steps in implementing the vision. PantoneLIVE is only the start, not only in packaging, but across other verticals as well, including textiles, plastics, home décor, auto, etc.
WTT: What were some of the things that transpired subsequent to the Pantone acquisition?
TJV: Over last four years, we have been rationalizing our product lines, which is important within the PantoneLIVE scenario. Standard measurement processes for X-Rite and GretagMacbeth, which were built on different strategies and different reference points, were implemented, first with CxF and then with XRGA. We knew we needed a common color communication platform upon which to build PantoneLIVE and that was an important step. By bringing them together as a single platform or standard, we had the foundation necessary to do something along the lines of PantoneLIVE. We had to do this in blocks; we had to build a foundation.
WTT: With PantoneLIVE, your initial focus is on the packaging industry. Why did you choose that industry and what is the strategy for the other verticals you support?
TJV: We started with packaging because we felt we had more of the support the brand owners and converters needed, and also because it is a segment that would likely be an early adopter in and experimenting with some of these solutions. We saw a number of important actors in this segment wanting to give this a try. This is the kind of market you need to begin to make progress. We also had great partners. For example, Sun Chemical saw the power of the trifecta of X-Rite/GretagMacBeth/Pantone, and that is why they sold us their intellectual property around SmartColour, and why they said, “Yes, we will let you guys take that lead, and we will partner with you as a preferred ink supplier.” They understood there was potential to do something that they couldn’t do on their own. Esko is also an early and valuable partner in this effort. At the end of the day, our plan is to continue to broaden the partnerships to create an overall ecosystem that can provide the solutions that brand owners, designers and converters were looking for. One way to think about this is that the kernel of the idea was like a caterpillar, and with all of us joining together, it is morphing into a butterfly.
WTT: So how do the partners fit in, especially the early ones we have been discussing?
TJV: Sun is basically focused on what their core business is, selling as much ink as they can and they support that by being an important partner in the PantoneLIVE initiative. Esko is providing prepress solutions and working to extend those up the value chain to brand owners and down the value chain to converters. They believe by plugging into PantoneLIVE, it will give them greater opportunities. We are also working with a variety of hardware and software companies, printers, and service providers, creating a broad group of partners so we can achieve the dream. The vision is to be able to design, approve, communicate and produce/convert at 99.9% accuracy with a digital workflow, increasing the speed from concept to the package on the shelf, improving the ability of brand owners to catch trends and implement them in packaging faster. In addition, improving the cost and efficiency of the supply chain is huge. PantoneLIVE will include a range of professional services that Pantone/X-Rite has not offered before, and we are in the beginning stages of defining those, some through internal resources, some through partnerships, and we are also seeking acquisition candidates in these areas. So we will be substantially improving our portfolio and our presence through this process.
WTT: So talk to me a little more about how you see this changing the supply chain.
TJV: We have been doing a substantial amount of R&D to not only measure color, but to also measure color and appearance, communicate both and render it digitally so it is a true metaphor for reality. We can give the tools to a designer who is creating out of his imagination, put it on a digital display that renders it so it is so real that when it is approved by the product manager or brand owner, the package or product can actually go directly to production, whether it is the graphic arts production of an image or industrial product; that is the direction we are going. With PantoneLIVE today, we can represent the appearance of a color on a specific substrate with a conversion process and a set of inks. This is just the start. We will be able to take that start and expand to multiple kinds of substrates with multiple conversion processes with multiple colorants. This is just the beginning, just a small step toward our dream.
WTT: As I understand what you are saying, PantoneLIVE has the ability to remove many of the physical components now required in the packaging supply chain, the physical models, the shipping and courier services, things that add lots of cost and time to the process.
TJV: The requirement to construct physical samples in the design process will go away over time. Already, we are working with a Japanese motorcycle company that is using our process to reduce their need to generate physical samples in half by being able to display such realistic 3D designs digitally that they don’t have to do clay mockups for about half of what they do. We are just getting started, but step by step we are moving beyond color, to extended and augmented color and full appearance. We believe this will revolutionize the packaging supply chain, and we will be migrating the same capabilities into other verticals over time. It’s an exciting time, and it is rewarding to see these years of work come together in a framework that enables the communication of exact and accurate color, with no confusion, regardless of where you are in the supply chain. We believe this is a true game-changer.