Economics & Research Blog
Dr. Joe's Secret Notes about Digital Printing from OnDemand Expo
On March 4,
By Dr. Joe Webb
Published: March 8, 2008
On March 4, I participated in a panel at the OnDemand Expo in Boston. It was hosted by Xerox and moderated by Gavin Jordan-Smith. Also on the panel were Gina Testa, Vice President, Channel & Business Development, and Larry Zusman, Manager Worldwide Marketing for XMPie.
A few days before, Gavin sent me a list of questions to review. He just wanted to prep us to make the panel flow better. I started to read them while on a plane, and somehow it just made sense to compose answers. I might get some inspiration for a column or presentation in the process.
I brought the notes with me to the event, Gavin saw them, and ripped them away from me (okay, I exaggerate just a little). He claimed he didn't have his original list of questions and needed mine. He may have actually been concerned that the answers given during the discussion be natural and that I might possibly start reading from my notes. Good judgment on his part. Little does he know I would have printed them out in 18 point type if I was really going to do that.
The event went well, I believe, and I promised to put my notes up here on the WhatTheyThink Economics & Research Center notes page. So here they are. Enjoy.
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The sea of change continues to drive our industry. Is this a Good and Bad situation?
There has never been an industry or economic situation that was predominantly one or the other. What's quite different now is that print never really had a competitor like it does with new media. Previously, a rising industry volume could be counted on with increasing population growth, education, incomes, and a knowledge explosion. Increasing education relies on electronic media for communications, incomes rise with a free flow and rapid exchange of information, the knowledge explosion is now global, and populations in emerging economies are more likely to skip a robust "print era." The same trends and conditions that once attracted communications to print now drive it away. Rising incomes also increase awareness and interest in environmental issues, and we're seeing that play out in the industry now, not in our own sustainability issues, but also in a conscious effort to avoid use of print.
You all interface with printing companies daily, what do you see as the top 3 issues they are currently having today?
What I say doesn't matter. When we asked commercial printers in a survey this past December about some of the issues, they cited things like profitability, revenue growth, and economic conditions. I've never been involved in a survey where a concern about electronic media was at the top of the list, no matter how the industry was being brutalized by it. "Green" initiatives appear to be getting more concern, and we'll have some data about that soon, but I suspect it will be for many printers more an issue of compliance to stop losing sales to printers that have already made the effort to establish their credentials. It's more concern about protecting one's business than a competitively pre-emptive act.
Too many printing companies may, if they have not already, start feeling a recession; what can they do?
Printers have been blaming the economy for their problems for decades. There's been a recession in the commercial printing business since the middle of 2000, yet there are many printing companies that are doing well, growing faster than the economy. Many of them are picking up the business of competitors who have gone out of business or can't compete cost-wise because of bad financing or improper equipment. Others are buying the "books of business" from closing printers.
What's really a problem is a fact of human nature. When the printing industry is in a secular growth trend, every owner is a genius whose wise judgment caused their sales to rise. When it's in decline, it's the economy's fault. You actually have to be a genius when demand is declining. There are printers who have decided that they are going to buck the trend and be true entrepreneurs in the process because they see opportunities when others don't, and for many of them their sales are rising.
Becoming an expert in printing communications today is more than putting ink or even toner down on paper, what actions can a printer take to differentiate their value prop?
Since most printing companies are small, it always starts with the owner. There is still a lack of knowledge and unfortunately a lack of interest in what's happening with digital media among many of them, and even in understanding how different information deployment methods work together. You need to become an expert not in communications, but in how communications are implemented and why they are structured the way they are. We're very good as an industry in understanding how to print but not knowing why to print. Why printing is used is not as easy an answer as it used to be.
Applications: What do they mean? A customer solution or a technology or for that matter a combination of both?
It's always been a combination of both, but the applications were so established that people had forgotten the assumptions about why you need or how one might use a sell sheet, or a brochure, or any other printed item. Now we're bombarded by alternatives, and the printing industry has never stepped back and questioned why a sell sheet or brochure worked, and why people wanted them, and the purpose they served. There are new and interesting ways to accomplish those same tasks, and some of them involve print, and some don't.
Basically, applications are a preplanned set of processes that fulfill a desired goal.
Would you say that most commercial printers in the market today are now digital print believers? Why? Why not?
They've started to see it. First, vendors made a hard sell in the early days that digital printing was for variable printing. Even though they never really said that, printers felt that if they didn't have customers who asked for variable there was no reason for them to even look at digital. I think that notion is disappearing. Second, the image quality has changed significantly for the better, even though many customers had decided that before the printers ever did.
There's an old rule of thumb that I developed that many have heard which is "printers don't buy new technologies until they lose business to it." For many years, printers were led down the garden path by technology vendors who minimized product problems or concocted strange stories about a “waiting huge market” for the output from their products. They also saw those vendors have serious financial problems that did not exactly build their confidence in their products. Printers protected themselves from financial ruin by letting someone else buy the new technology. If it worked, they could always buy it. If it didn't, they didn't own it, so it didn't matter. If we date the color digital printing era as starting in 1993, it took years to get over the inflated promises and bad equipment of that time.
What do you think is on the mind of the “new-to-digital” printer-for-pay company as they walk the OnDemand floor?
There are always three basic things, and they have nothing to do with the performance of the equipment. They are "Do my current customers want this? Can I attract new customers and new work beyond my current base of business? What kind of employees will I need to recruit and train to run it?" They know that digital printing works now, but the question is how it will change their business for the better, especially when the overall industry is still contracting.
Some printers are not sure that the digital print opportunity is “real” or lasting. What would you say might happen to those printing companies?
There are many printers who will not "go digital" because it is not necessary for them to do so or they cannot, because the technology cannot yet handle what they produce. I'm thinking of things like newspaper inserts, magazines, large catalogs, specialty items, etc. That doesn't mean there are not opportunities for them in using it for selective binding projects or narrow targeting geographic or other audiences.
It's important to resist the idea that you'll survive if and only if you “go digital” for a couple of reasons. First, there are myriad ways to be profitable in the printing industry, and they often involve a geographic or market segment expertise. Second, the equipment or technology is just a tool. Just because you own something does not mean that you can make a business about it. Its kind of like saying if I buy a Ferrari I automatically become a race car driver, when I actually get nervous when I see the speed limit get close to 70.
Digital printing technology is a tool and gateway to satisfying a growing range of market needs and opportunities, but not the only one.
We heard that some printers are concerned that digital print is quickly becoming a commodity – especially as technology advances and big box office stores set up print shops…. Any comments?
Print has never been a commodity in the textbook definition of the word, though we like to claim it is. A commodity is something that is used to create something else of greater value. From the past few years, the way commodity prices like oil, grains, minerals, have risen, the discussion of the printing business would be quite different, don't you think?
If by commodity you mean that print is sold as an undifferentiated good, with little discernable difference between suppliers of those goods, then the sense is absolutely true. Back when print was a craft, there were real differences in the skills of operators from the typography to camera work to prepress to platemaking to printing and the bindery. Technology has increased the predictability and of all of those processes. Mediocre printing in the 1970s and 1980s could not be sold today. The quality of mediocrity has increased because the range of variation between good and bad has narrowed considerably. It's Adobe's fault. It's Quark's fault. It's Microsoft's fault. Now it's Xerox' fault, too. It's Pantone's fault. It's the fault of any technology that automated workflow, created consistency, or increased productivity.
This means that production capabilities of printers are generally the same, and that the differentiators that are used to select printers will be price (just like everyone else for everything else they buy) and the total cost of working with that printer as experienced before and as anticipated in the future. Trust and reliability are good selling points. Differentiation opportunities can be anywhere between the initial concept of the print job (where most printers are never included) to the delivery of the output to the target audience of the content creator.
How would you advise a new-to-digital printer to ensure their business plan success?
Consider how they would use the technology in their very own business. I used to annoy digital printing vendors in the 1990s with a question, after they would make their sales pitch about what a great product it was, and it was this: "Tell me how you're using it in your business at [INSERT VENDOR NAME]." I never had anyone give me a good example, and they would do their best to change the subject. You have to eat your own cooking and use it as an example to your customers and prospects about how effective it can be.
You also have to be willing and able to understand your client's needs in a very specific way to give them ideas about how to use it in their business. It's a hard discipline to learn and it's another indication that having staff with design or agency experience rather than technical printing experience or traditional sales can be of great value.
Technology is definitely a factor in driving market adoption; what's new in the digital print business?
Is it really technology? Or is it that there is a better integration of existing and improving technologies? Or is it that content creators are becoming agnostic about the print process used or do they actively seek out digital printing when they might have been reluctant to before?
There is no doubt that workflows, RIPs, personalization software, desktop publishing software, papers and nearly everything that touches the digital printing process have improved in their quality or in the experience of digital printers in their use. There is still much to learn and there will be improvements all of the time. I don't know if it's possible to pick an area because the digital printing process is so young. One might consider it to be where web offset was in the late 1960s and early 1970s. It existed, but really had yet to make its mark on the industry the way it would 10 to 15 years later. Digital printing is still developing a base from which to grow.
Is there an easy way to make money in this exciting market?
If there was an easy way to make money, no one would be at the show, they'd all be at the beach. There is always risk in the market. Whenever it seems easy, it probably means there's a big change ahead, or that you're about to get a rush of competitors you had never seen before because they've realized it's easy too. It should never be easy, and when it feels that way you should worry that you're missing something important.
And there's my other maxim: Stay ahead of the clients, not the competitors. Keep coming up with ideas that the clients can use, and always alert them to what's working elsewhere. Do your best to keep an eye on trade shows your clients might be involved in and suggest programs that they don't have the time to think of themselves. Competitors? To be worried only about direct competitors is to be myopic. You'll end up ignoring the dynamic changes in the communications market that are affecting the decisions print buyers are making every day.
Any advice on getting started?
Assume that you are starting a digital printing division from scratch, totally separate from your current non-digital business. Study what is needed to succeed in that business today, a year from now, and so on. Eventually, it is likely to be your entire business, and saddling it with baggage of your old business is a serious mistake. It is a very different business and should be on its own from the start. Forcing it to do so will be difficult but will create a more robust, resilient business from the outset. Funding it properly so that it can stand on its own is essential.
Make sure you have the right people in the business. Be sure to compensate the people in the correct manner. The digital sale, especially large variable printing jobs, require a close, long-term relationship with the client. Sales cycles are longer and much more involved. They may involve product managers, marketing managers, and outside providers such as agencies and designers. This is not the kind of work that lends itself to the kinds of traditional print compensation plans.
Sales management techniques that focus on number of calls per day or number of proposals or bids submitted or full commissions based on sharing the profit margin of a job will undermine the business in the long run.
What would you tell a commercial printer who has digital print capabilities yet is struggling to grow his business?
Look at your business from scratch, again. Graphic communications is changing constantly, and it's probably not a bad idea to redesign your business every 18 months. Re-examine every assumption you have made, even the ones that seem silly to do so. Look for anything that can give you a competitive edge or a new idea for your customer. Re-examine your personnel, and always be training. Make sure you have a diversity of ages in your business so that you become more aware of the personal use of technologies by different generations. Make sure you have people who know why people print and what their alternatives are, not just how to print.
It will be a tough printing market for many years to come, and digital printing will be one of the bright spots, but it will be a real battle against non-print media that only the best prepared will survive and do well.