There has been much chaos and confusion in our industry in the past two decades. According to every credible source, collective industry sales are declining. Offset printing, which rode a 60 year wave of process dominance, has been declining since 2007. Digital print sales, as well as a variety of ancillary services, are growing but not fast enough to stem the tide of total industry revenue decline.
While digital print sales are growing they compete in a hypercompetitive marketplace against other digital technologies that use distribution channels facilitated by internet and satellite technologies. Digital print, as a medium alone, is still heavily reliant on the 200+ year old US Postal Service. Not that the Post Office hasn’t put enormous effort into changing, it may turn out to be too little, too late.
There has been much fanfare about making the transition from being a print services provider to becoming a marketing services provider. While this is certainly a strategic direction that is, at least, directionally correct, it is by no means the only strategic alternative available. Many print CEO’s have plunged headlong down this path without a clear understanding of their goals. Put more plainly, without a clear picture of what their companies were going to be, do, and provide to customers as they rode the transition curve toward the vision of becoming a marketing services provider.
There is much confusion about strategy in our industry…and it’s been around a long time. I entered the industry (and the workforce) in 1974. I joined WR Bean & Sons in Atlanta, GA. Bean was a third generation family run company that was a pioneer in web offset technology. It was operated at the time by two brothers, Theo and Bill, grandsons of the founder. Theo was the President and CEO. He had the view that the market followed the technology and was the primary force moving the industry forward. His strategy was to be a technology leader, carve out a niche, be the best at it and enjoy the rewards. Sound familiar? Using web offset presses, 24 pockets (it may have been more but I don’t remember) saddle stitchers with in-line mailing, and their key southeastern US location the brothers were able to become a very good regional magazine printer for Time Inc. We became the regional printer for TIME, Sports Illustrated, People, and US magazines. A few years later, Theo sold the business to Quad Graphics for a healthy sum.
Theo Bean was a smart man, successful by most measures. Was his approach to strategy a good one? How would you tell? The answer is yes, especially for the times. Why it was a good approach is described in the following list.
- It led to superior profits for the rest of the time he owned it.
- As long as customers, in this case major publishers, had no other geographically viable option for weekly magazines going into the southeast US he was the only game in town.
- The huge investment and learning curve that took the brothers years to build was a staggering barrier to all competitors but the very largest, emerging national printers like Donnelley and Quad.
- The value chain, or the internal activities and processes used to meet the customer’s need, was unique in the southeastern US market, at least in Bean’s configuration.
The Bean strategy was not about the technology even though they were web offset and large page count binding and mailing pioneers. It was more about a set of choices that created something unique where a competitive advantage could be sustained and yield superior profits for years. Customers would have had significant difficulty finding comparable value to serve their needs elsewhere. Competitors were daunted by the time and money demanded to match Bean’s offer to the market.
Without saying so I have just outlined the fundamental tenants of building superior competitive strategy. Would Bean’s strategy have been sustainable for a long time? It would have worked for another 10-15 years. Why? The magazine printing segment of the industry had started its consolidation in the 1970’s and one way or another Bean, operating on its own, would have been unable to keep pace with the changing demands of customers and the financial demands of the technology. By the 90’s the segment had consolidated to 3 remaining large players who all used the same technology, had the same value chains inside their operations, and were in a downward spiral racing to be the “best”. You could make good money printing magazines in the 60’s, 70’s, and early 80’s. Even the mightiest struggle to achieve adequate ROI in today’s industry. The same scenario has played out in the catalog, insert, book, check, business forms, and financial printing segments of the industry. I’m sure there are others that I didn’t mention.
Why have I taken 800 words to get to this point? I needed an example that a lot of people in today’s industry might understand and identify with. Especially we Baby Boomers who still own most of the surviving companies left today. We’re the ones in the most trouble because the younger generations taking on leadership roles don’t have the same bad habits and biases we do. They didn’t grow up in an environment where an enterprising pressman with no business experience or sales skills could scrape together $15,000 and open a print shop. We had an environment where the industry grew on the back of the longest peacetime economic expansion in history. We operated in an environment where you had to be lazy to fail until the mid-90’s when the sea started to change with the advent of the internet.
What’s the point? My point is this. The same chase of technology without strategy leads to the same commoditization of marketing services as it did to all the industry segments prior to digital technology and the internet. Bean succeeded because of good timing, good salesmanship that started with Theo himself, and the fact they got just about all criteria for good competitive strategy right.
The print industry has been homogenized by technology and operating practice for a long time. Best practices: the quality movement; superior customer service, and competing on speed or turnaround time have been extolled by consultants for 30 years. They have made a positive difference. But, they were easy to copy and replicate. Whatever competitive advantage a company may have created in pursuit of these has been short-lived. In the process, the added costs of these competencies, once everyone caught up, did not serve to raise prices but to reduce margins. Competing to be the best became a “race to the bottom”.
Now, let’s turn back to today’s world. There is no shortage of suppliers, vendors, manufacturers, consultants, and writers extolling the virtues of becoming a marketing services provider. I’m not criticizing or blaming them. In their shoes, I am comfortable in saying I would be doing the same thing. Here’s the problem. The same technology is available to everyone. The prevailing buzz and expert advice is available to everyone, much of it free. There is a talent issue but that is resolvable if you’re willing to pay the right people to get the help you need to find and develop talent.
So far this sounds like the beginning of another race to another commoditized print industry segment.
I started with a question. Is strategy necessary? Can it help to avoid or, at least, forestall commoditization? The answer is absolutely! More to come…