This week, TrendWatch GA was contacted by an industry writer doing a piece on our Special Report entitled "The Seven-Year Itch: The Most Dramatic Trends Mined from the TWGA Historical Database." What caught his eye was the fact that, in our press release, we stated that over the history of our surveys, "internal plant productivity" has been on the steady decline. As difficult as times have been for the printing industry, he found this to be surprising, and this was number one on his list of questions.

The answer, of course, was that there is less work to go around these days, and when printers’ presses aren’t busy, who cares about internal productivity? When there is capacity on press, and plenty of hours to get the work done, the productivity challenge disappears. Ironically, in this industry, you want to see concern about internal plant productivity. That means printers are busy and need to figure out better and better ways to manage their production. But that’s not the case today. The trend line is going down — not up.

This is one of the issues industry suppliers must take to heart. Often, the first thing off their lips when selling new equipment is productivity, productivity, productivity. But if printers aren’t concerned about productivity, then all the make-ready features, all the bells and whistles, don’t make a bit of difference. Suppliers have to find a new way to sell equipment.

A Wild Ride

This was one of the fun things about developing "The Seven-Year Itch." Often, what we know of the industry is taken from one piece of data or another. And as the data accumulate in our minds, there is always the tendency to thread them together as we remember them and as we interpreted them at the time. But "The Seven-Year Itch" blasts away all that. It is the industry’s history — and, consequently, future — in all its stark reality, in pictures that anybody can understand. As a result, this study is one of the most fun we’ve ever put together. (Well, for us as analysts. I’m not sure it’s would be considered casual reading by those outside the industry.)

We developed this study because, after seven years of collecting industry data, we wondered what we would find if we plotted all of that data — on business challenges, sales opportunities, business conditions, and planned investments — over that seven-year period. What trends would we see? What categories are increasing? What categories are decreasing? Where are there strange dips and spikes? And what does this tell us about the industry: where it is, where it’s been, and where it is going? As we filtered through the data, it was, in fact, quite a ride.

Another aspect of the data that we found particularly interesting was in the sales opportunities and planned investment sections. In spite of the transition in this industry, many of printers’ perceived sales opportunities and planned investments didn’t change from six months ago. That tells us that they are focused on economics, period. They aren’t making other moves. They are not investing in anything… at least not much.

What story does this tell us? Not only is the graphic communications industry in transition, but a lot of available technologies on the table are at saturation or don’t have a lot of life left in them. The ones that do are few and far between. Those that are showing consistent growth can be seen in our historical data, but their scarcity took even us by surprise.

Nowhere to Run

What does this signal for suppliers? Unless you are on board with one of the technologies on an uptick, you’d better figure out a new business. Or at the very least, a new sales strategy. If you think business hurts now, it’s only going to get worse. Even when the economy bounces back, it will not bounce back to its former level. It will bounce back to a new industry, where all the rules have changed.

Some of the data shouldn’t be as surprising as it looks. It’s exactly what we would expect to see from an industry in transition. Graphic communications is no longer print-centric. In every aspect, from quick printers who want to be digital printers because the copy shop business dried up; to service bureaus who want to be printers because the prepress business moved upstream to the content creators, their former clients; to printers who want to be graphic designers because the printing business has changed and, in a growing number of cases, has migrated to alternative media; to graphic designers who want to be printers because their own clientele is cannibalizing them.

It’s a chaotic situation, and the only companies that seem to be winning are those focusing on value-added services: new products and services (translated "profit centers") designed to solve customer problems that often take graphic arts firms into new areas. But it’s amazing how few companies are actually doing it. All of the industry analysts are reiterating the importance of this approach to business. At Graph Expo, we were surprised by the consistency of this message. We were saying it, too. The only difference is that we've been saying it a longer.

Good News, in the End

But even as nearly all of the industry trend lines head down, and as the industry as a whole has struggled during this transition, the good news is that, in our most recent TrendWatch GA Printing (#16), there were still 17% of graphic arts firms saying that business is "excellent." While these firms are in the minority, this trend has been on an upward tick for the last three surveys. There are companies who understand this industry transition, and how to adapt to it, and they have shown that they are able to survive, and even thrive, in an economy such as this.

All of this said, what do we see for the printing industry five or 10 years from now? In the end, we’ll have a smaller but healthier industry. It’s just that the infrastructure won’t be what it has been —for either printers or suppliers. The industry will capitalize on technologies that will evolve beyond today. This new environment will afford new opportunities, and some of the new technologies we will see today will be assisting as part of larger infrastructures for driving new applications.

Where we sit right now, the problem is that the industry is built on a traditional structure catering to a certain volume of manufacturing that isn’t going to be needed. There will be continued consolidation of existing businesses, both in the supplier and provider arena, and a refinement of business models. Industry players will survive, but only those who "get" the new business models will be around to see it.