It is not necessary to change. Survival is not mandatory. W. Edwards Deming
Half of the printing companies that were in business in 1995 are gone. We are losing 1,000 to 1,500 more per year. And…since those firms are gone, i.e., they didn’t survive; it seems likely that they failed to change in some way that might have led to their survival.
When we are no longer able to change the situation, we are challenged to change ourselves.
Anecdotally, it is probably safe to assert that many of the non-survivors perished when they ran out of time waiting on things to return to normal. Unable to change a world where the internet came into being and we have seen, not one, but two recessions since 2000; they were unwilling or unable to change themselves.
Leadership is about making choices in times of change. Change can be externally induced on an organization by environmental forces like economics, technology, demographics, regulation, and competition. Change can also be internally induced within an organization by its leadership’s desire to create better results or to get out in front of changes in environmental forces.
Thinking about what we have seen in the last couple of decades in our industry, the difference in the 27,000 firms we have lost since 1995 was likely leadership. All of us probably know of an exception or two that can be written off as bad luck. But, for the most part, those companies failed from lack of leadership. Someone, the owner(s), didn’t step up and make a choice to make a difference.
There is almost universal agreement that the decline in the number of printing companies isn’t over. At this point, we don’t know who will be around and who will not. It is a safe bet that those who are around will be those owned and led by leaders who step up and accept that the old days are gone and will never return. Acknowledging to themselvesandtheir companies that the environmental context in which they operate is beyond their control, they will step up and make decisions that give their firms the chance to survive and thrive again.
Our industry enjoyed unparalleled growth and success through the middle of the 1990’s and even into the early 2000’s. Demographics and technology combined to produce the longest peacetime economic expansion in recorded history. It was relatively easy to get into the printing business and you had to really screw up to not stay in business and live a solid, upper middle class lifestyle. The major approach to strategy was to build a broad set of capabilities that enabled the printer to produce most customer orders. (I jokingly refer to this as the “field of dreams” strategy.) Most printing plants were designed for flexibility and range of product. This requires a steady, consistent product mix to be highly profitable. Because only a few in the general commercial space focused on target markets that helped smooth out the natural seasonality in print demand, this strategy seldom produced high levels of profitability. Most owners felt good about their efforts if the tradeoff between good and bad months of the year yielded even a small bottom line at year end.
All of this began to change in the middle of the 1990’s with the internet and waves of digital technology coming after. We didn’t fully appreciate it at first but we had begun competing with alternative media options that seemed to have compelling economics, at least on a cost per message basis.
As demand for print began to shrink, our economic models began to break down on us. Staffing and equipment decisions we thought were necessary as “general commercial” printers now became a noose around our collective necks. Company counts and, eventually, total industry sales began declining. Except for about one out of every 4 firms, we became a no-profit industry.
In the face of all this we are confronted by one key choice: to change or stick with the status quo. I don’t like the odds of going with the status quo. How much longer will 75% of the remaining companies (the non-profitable ones) remain non-committal to true and deep-seated change in their value propositions and business models?
Why are they waiting? I know of some of the reasons. You probably know more.
- A number (the percentage is shrinking) still hope things will get better.
- Many still have debt tied to equipment on which demand is shrinking. Their cost structure is forcing them out of business. Therefore, their time and energy is spent trying to sell enough offset print to last until the debt is retired.
- Then, there’s the “phantom equity” issue. Many owners have defaulted on perhaps their most basic responsibility as CEO. They have allowed sales people and the sales organization, in general, to control the relationship with customers. As a result, they have drifted into a state of not knowing what is changing in their customers worlds. While never having created additional legal owners or requiring the pay-in of personal capital, they have ceded control of too much of the company’s day to day operation and failed to provide needed strategic direction. They have created “phantom equity” where the power of the sales person, particularly the high producers, rivals that of the CEO/owner.
- Many, the majority now, simply don’t know what to do next. Their efforts to educate print buyers about digital printing have made little difference. They don’t really understand variable data, cross-media, social media, mobile, wide-format, whatever. They don’t understand, and don’t trust the IT types required to make this stuff work. And, it’s no wonder print buyers don’t understand when we can’t explain it. (If the print buyer did understand, what difference would it make?) Ninety percent of our sales people don’t embrace digital print and other media. They fear their companies won’t deliver so they, at best, try to sell new capabilities in a half-hearted way. They are afraid of jeopardizing their income streams from offset commissions.
- Lastly, at least on my list today is the fact of poor financial performance. This has left many owners with little cash in the bank and meager free cash flow. Changing will require investment in both people and technology.
When faced with the challenges listed above it’s easy to understand why owner/CEO’s are so reluctant to begin the change process. The hurdles to be jumped are daunting. There’s no road map, no formula to be copied from others. You can buy the same technology, both hardware and software, that others who have made successful transitions into the multi-channel communications world have purchased. But…that won’t make the difference because it’s not the difference.
This may sound like an indictment but it’s not meant to be. I personally believe our industry in a restructured form will become robust, vibrant, and more profitable again. Contrary to some, however, I don’t think the business model known as “general commercial printer” will survive in any meaningful way. Having said that, those remaining firms that have the characteristics listed above will need to undergo significant change. The ones that survive will spend 4-5 years undergoing a transition into a new business model. They will have realized, as Victor Frankl said, they must change themselves because the debate about whether the industry and its environment have irreversibly changed is over.
Change in turbulent times requires three things:
1) Courageous, purposeful leadership
2) A strategy for what to become – What are we moving away from? What are we moving toward? How are we going to get from here to there?
3) A sound, reliable process for creating and executing that strategy.
There’s no avoiding this and, perhaps, this is why the laggards to change have not moved forward yet. It’s hard and most of us don’t know how to do it. Does that ring a bell with anyone?