To say that Michael Makin joined Printing Industries of America/Graphic Arts Technical Foundation (PIA/GATF) at a challenging moment is to understate both the difficulty of the challenge and the size of the effort that Makin has had to make in rising to it. When he accepted the position of chief executive officer in August 2002, the industry was already deep into a slowdown that would thin its ranks and rob its trade associations of members and revenue. PIA/GATF, a patchwork of local affiliates and individual memberships, still had not smoothed out all of the kinks from the consolidation of the two groups three years earlier. Changes roiling the industry were forcing the association to ask itself tough questions about its mission and methods—even its relevance to the needs of the printing firms whose interests PIA/GATF claimed to represent.
Makin had the right credentials for his high-pressure, high-visibility role at the PIA/GATF helm. An association management professional, he had been president of the Canadian Printing Industries Assn. prior to joining PIA as chief operating officer in January 2001. Today he directs a smaller but stabler organization that has refocused its objectives and retooled its service offerings. WhatTheyThink asked him to discuss how change in the industry has driven change in what is still its leading trade group.
"Even at 35,000 plants, printing would still be the largest industrial sector in terms of number of firms, with more establishments than McDonald’s, Taco Bell, Burger King, and Kentucky Fried Chicken combined."
WTT: Forecasts from PIA/GATF have projected that the industry could lose 800 plants and 20,000 employees in 2006 and see the disappearance of as many as 8,000 firms by 2015—a decline that would leave between 35,000 and 40,000 plants in operation. Do you expect these projections to hold up?
MM: It can be hard to give a definitive answer to questions like these because a lot of this information is tracked by statistics gathered after the fact. We don’t have any empirical evidence that the loss will be as cataclysmic as 20,000 employees, and the industry is not contracting in terms of sheer output. But, because the industry has grown more efficient at producing more work with fewer people, it’s entirely likely that fewer people will be employed in it at the end of 2006 than at the end of 2005.
A number of plants around 35,000 is a relatively reasonable expectation as the industry matures and consolidation continues. But, even at 35,000 plants, printing would still be the largest industrial sector in terms of number of firms, with more establishments than McDonald’s, Taco Bell, Burger King, and Kentucky Fried Chicken combined. Remember, too, that with the advent of digital and variable-data printing, businesses using these technologies are starting up every day because the barriers to entry are not significant. Printing is the quintessential American business, and it’s not going anywhere.
WTT: Some say that the industry's “shake-out” was inevitable and that when it is over, the industry will be better off because only the strongest and best-managed firms will have survived. Do you agree that the industry will get better as it becomes smaller?
MM: It would be simplistic to think only in terms of leaders versus those just hanging on. Printing is a highly diversified and fragmented industry that provides a critical, quintessential communications service. Looking at the numbers in aggregate is not all that revealing.
"The industry still is primarily made up of small and medium sized entrepreneurial firms that have built their businesses on sweat equity and knowledge. Many of these companies have made it through rough times more than once."
It's true that in many although not all markets, there is overcapacity, and that this tends to shake out some of the smaller players. But the industry still is primarily made up of small and medium sized entrepreneurial firms that have built their businesses on sweat equity and knowledge. Many of these companies have made it through rough times more than once, and for that reason, they are better positioned to survive in the long run. So, a marginally smaller industry will be made up of players that are more resilient than otherwise.
WTT: What has happened to the size of the PIA/GATF membership over the last several years?
MM: As the universe has become smaller, we are left with fewer potential members to recruit. Much of the industry's attrition has occurred in the small-printer segment, which is always the "sweet spot" for PIA/GATF because these are the kinds of firms that we can help to grow. Over the last decade, our total membership has declined by just under 3,000 companies. Today we represent 11,000 firms, which still makes PIA/GATF—by far—the world's largest organization for printers.
WTT: Are you seeing any growth in the number of PIA/GATF “profit leaders”: the best-managed firms that consistently earn higher profits than the industry average?
MM: The percentage of “profit leaders” tends to remain consistent over time. Because the nature of the business is changing, it’s harder to be a profit leader. Today we see more and more printers struggling with profitability. The role of PIA/GATF is to help printers understand that by joining the association, they can be more profitable—and we have empirical evidence to demonstrate that when they join, this is what happens.
The industry as a whole has become much more sophisticated about the issues of remaining profitable. Printers are realizing that saying “I’m a commercial printer” is no longer a successful business model. This isn’t to say that the landscape won’t continue to be littered with companies that can’t succeed. But awareness is growing that as a printer, you must get smarter, stop relying on intuition, and become more attuned to your customers’ needs.
WTT: Some of PIA's 26 affiliate organizations have been impacted by declining membership and dues receipts, reduced participation in revenue-producing activities such as educational programs and trade shows, and other problems linked to the shrinkage of the industry. How must the affiliates, like their printer members, change their business models to assure their survival?
"The industry as a whole has become much more sophisticated about the issues of remaining profitable. Printers are realizing that saying 'I’m a commercial printer' is no longer a successful business model.
MM: Ever since 9/11, the entire association community—tens of thousands of associations in all industries—has had to reevaluate itself. As an association for printing, our greatest challenge is to make sure that we are relevant. We believe that the technical expertise of PIA/GATF is our edge—no other organization in the printing space can match it. Our local affiliates benefit from being able to offer that expertise to their members.
But it's true that times are very difficult for associations, and all of our affiliates are looking long and hard at their operational structures. All of the locals have very passionate boards of directors that are committed to their survival. The whole business model is something that they explore on a regular basis—for instance, the need to add revenues from sources other than dues. They are all working very hard to maintain their relevance and to create new value for their members.
WTT: When you visit the affiliates, what do they describe as their biggest difficulties? Their biggest opportunities?
MM: They're concerned about shrinkage in the membership base because of plant shutdowns from consolidations and other causes. They're also focused on making sure that the new generation of owners is committed to supporting the local affiliates utilizing the services they offer.
The affiliates' professional staffs are independent business men and women who are running their associations like businesses. They know that a not-for-profit designation doesn't mean that we can't have a business orientation or strive for a positive bottom line. I can report that PIA/GATF has been in the black since I have been on board as CEO. Prior to that time, the aggregate performance of PIA and GATF was not always positive.
WTT: What is urgent in government affairs?
MM: On the legislative front, we're spending $1 million on issues that affect all printers: keeping government out of their back pockets; making sure that environmental regulations aren't pernicious; revising depreciation schedules for computer equipment; opposing "death taxes"; and many others. We've also spent more than $500,000 on promoting postal reform, and the goal of achieving consistent, predictable postal rates remains a top priority. The U.S. Postal Service and printing are inextricably linked, and we don't want to provide multimedia competitors to print with a very convenient excuse for not printing and mailing.
"The affiliates are running their associations like businesses. They know that a not-for-profit designation doesn't mean that we can't have a business orientation or strive for a positive bottom line."
We're also attempting to limit the damage from an environmental development that we think could have a cataclysmic impact on most printers. As a result of a court decision in a lawsuit brought by the Sierra Club, the federal Environmental Protection Agency and the states will be forced to implement mandatory guidelines for the control of VOC emissions. These irresponsible and egregious measures could affect 90% of all printers, even the smallest-quantity VOC generators. We aren't saying that printers should be allowed to pollute, but we will work with the EPA to restrict the applicability of these needlessly burdensome guidelines.
WTT: At the GAIN Web site, PIA’s Digital Printing Council proclaims 2006 as “The Year of Digital Print.” Exactly how has the year earned that distinction?
MM: PIA and GATF have been at the forefront of digital printing and variable-data printing for many years. 2006 saw the launch of numerous GAIN initiatives in this area for education and market research, and from now on, information about digital printing will be a perpetual core of our offerings to the entire membership. Starting at the end of this year, all 11,000 members will have access to publications and other services that once were limited to members of the Digital Printing Council. In this way, we'll remain the definitive source of information about digital printing.
WTT: Are conventional printers—who make up the bulk of PIA/GATF’s membership—really buying into digital output, or are the adopters mostly newcomers who have never been “printers” in the traditional sense?
MM: Digital printing still is not the majority process—less than 15% of the industry's $165 billion in annual revenue comes from digital print. Nevertheless, we are seeing more and more commercial printers taking an interest and investigating their options. It's an exciting, growing component, and the digitization of the industry, including variable output, is going to continue.
The adoption rate is hard to pin down anecdotally, but as I travel around the country every week of the year, virtually all of the printers I'm visiting are exploring or narrowing down the choice of a digital device for their plants. They are doing the ROI and cost-benefit analyses, and they're realizing that digital and conventional processes are not mutually exclusive—that in fact, digital output can be a wonderfully complementary service for any sheetfed or web offset lithographic printer. There are very few ostriches in this industry who are putting their heads in the sand about digital printing.
WTT: As a partner in the Graphic Arts Show company, PIA/GATF has a large stake in the success of Graph Expo 2006 next month. How is Graph Expo shaping up this year in terms of booth space sold, advance registrations, and anticipated attendance?
MM: We are in amazing shape for Graph Expo, with exhibit space reservations and advance registrations far ahead of expectations. It's going to be an outstandingly successful show, and it will be critically important for all vendors to the industry to have a presence here. Graph Expo 2006 truly will be an event not to miss.