Seeing Into The Future – State of the Industry
I recently sat down with Tom Tetreault from Digital Output Magazine at ISA and talked about our outlook on the industry. While only parts of this interview are incorporated into the publication’s “State of the Industry” article series, I thought I’d share the entire interview here.
I encourage you to read this series, which is available online currently in the August 2011 edition of Digital Output, and continuing in several parts, including an in-depth Roland DG profile to appear in the October issue. (Look for it by mail or online at www.digitaloutput.net at the beginning of October.)
And while the economic events of the last week (ugh!) may change this outlook, it was a snapshot of the moment. Enjoy!
Top view of the world as a result of last year; how are you looking at business?
There were some positive and some negative things that came out as a result of going through 2009. Starting with the negative was the tightening of capital credit. It stopped capital equipment purchases. Not only were there delays in purchasing because people wanted to hold on tighter to their money or didn’t want to take a risk in investing in their business, but in a very real way credit tightened up to the point where it was very difficult for people who wanted to buy to get access to capital. That was a big negative for us, being in the equipment side of the business.
What happened in 2009 really forced us to reevaluate our business, to figure out what to do next and how to do it. With declines in business, how do you manage infrastructure and expenses wisely to reset the business? This type of event really forces you to reevaluate. Professionally, I learned more in that period from 2009 to 2010 than I have in my entire career, in terms of how to take a cold look at the business and figure out how to run it better as a result.
On another positive note, R&D didn’t stop. When production turned down the volume, it didn’t mean that R&D turned down the volume. Roland DG was continuing to develop products, to look at the market, and look at the market differently. The products that we had in the pipeline for a fast growing economy weren’t the same products that we developed in the tightening economy.
Going forward, what is the market and global impact on business and opportunities like?
As a supplier to the industry, regardless of what type of business you are in, you have to find out a way to deliver value. For us, we are a products-driven company. If you try to add a product that doesn’t add value, differentiate, or offer the customer something unique, then you really shouldn’t be out there.
Something like metallic ink for us was really unique. As early as the week before it launched people were still saying “˜I’m not ready to invest.’ And then we came out with something that was unique and differentiating, that the guy down the street couldn’t do, and all of a sudden we were hearing “Let’s buy it.” For me it really reinforced that you need to offer unique value and a meaningful differentiator for the customer, not just a selling proposition.
What about on the sales side, how did you attack the market and did it change?
Our channel has been largely left untouched. Some of our guys had to do the same thing we did, which was re-evaluate their businesses, maybe take some cost out of the business, and run it better. And they did. I think we came out of it together stronger and more well-rounded as companies. Not just from Roland DG’s perspective, but from our network of companies, dealers, partners, and so forth.
Customers need to do the same thing. They cannot continue to run their same businesses, deal on price and not try to take any cost out, or not continue with R&D. Customers do R&D too; they’re figuring out what new products they can sell and markets they can go after. They might even say, “˜If I invest in this new machine it might open a whole new set of applications that I can go after.’ If they stop R&D, it can be dangerous for them. I see this dynamic on multiple levels, from ours all the way down to Main Street.
Into the new year, any new competitive threats or new opportunities you were unaware of in the past year?
ISA is here and it is a big show for us. We’re launching three new products, and it’s important to note that they’re not just evolutionary products that replace existing technologies. All of them represent new markets, new applications, new business for us and our dealers, and, more importantly, incremental revenue for our customers if they decide to invest in new technology. These new products are not replacements for the existing technology that they are buying. They give them additional places to take their business. If you are trying to look for a diversification strategy, you want to have more legs under the table. If you are focused on just one application or serving one market segment, and you add a whole new market segment, then you can invest and grow the business. It’s important that these products are ground breaking and new for our customers.
So you are diversifying and minimizing threats?
Yes. We’ve learned a lot by moving into the packaging, membrane switch and specialty printing markets with our UV technology. We are still applying that same logic to whatever new markets are out there. We can continue to develop products for the sign market, but we would also like to have a diversification strategy that goes into the packaging market, the label market, and the commercial printing markets as well.
So you are leveraging the core technologies you’ve developed?
We are. And what’s really interesting is that some of those core technologies are starting to work together. This new printer that we have includes some 3D technology from a completely different side of our business. This integration of technologies is starting to happen. We even see the potential for selling an engraving product and a printing product together that adds some real value to both processes.
Is the consolidation that’s happened in the past several years in the industry good or bad for the market?
It’s part of the natural business cycle of any industry, market or economy. It’s good in many cases to eliminate confusion and simplify choices. Anyone that walks into the cereal aisle can be overwhelmed by too many choices. I think that we sometimes want some clearer choices that are easier to make. Consolidation also happens as the Internet flattens out access to information. So our markets have started to consolidate. There are blurry lines between the sign and screen markets, blurry lines between traditional retail sign, packaging, and label markets as well. Those used to be very well contained little environments and now a lot of commercial printing has some tie overs to large format. The co-location of ISA and IRGA is not unusual. GlobalShop co-located with the POP show is another example of where consolidation is occurring. That kind of consolidation is a good thing for manufacturers and customers.
The risk is with fewer players, innovation may be stymied and price issues will occur.
We see that less. If you still have a competitor, you still have to try and innovate. If you are serious about being a successful company, you want to continue to deliver value to your customers. You have to do that to be a well respected company. So I don’t see that trend emerging; there’s no one out there yet that’s a Microsoft.
Interesting responses I’ve heard from others: consolidation is good short term and long term because the net of it is that typically consolidation ends up with vertical solutions and opportunities on the peripheral, and a lot of the entrepreneurs in the groups that were affected by the consolidation drop out and start out with new ideas and compete with those that were left.
We’ve seen it.
I started a thread in a Linked-In forum* a while ago to look back over the last few years at the number of companies that have consolidated: EFI and VUTEk, EFI and Rastek, HP and Colorspan, HP and Scitex, Scanvec and Amiable merging into SAi. The list goes on and on. The one that affected me back a couple of years ago was Gretag Macbeth buying The Graphic Intelligence Agency, then X-Rite buying Gretag Macbeth. There’s a lot of this going on. It might accelerate and decelerate based on business cycles. But, overall I think it’s a good thing.
The subtitle for last year’s State of the Industry article was “Resolve, Reorganization, and Rebirth.” How would you define this year’s State of the Industry and why?
“Phoenix Rising.” I feel like the growth is coming back. Or, alternatively, “Hope is still alive.” Everyone is optimistic and trying to move forward with business, and we believe that the underlying economy is supporting that to a certain degree.
Thanks for reading,
Rick
*Note: Linkedin Group requires membership, so I’ve listed my post below:
This got me thinking about other industry consolidation over the past decade:
EFI/Vutek
Vutek/Inkware
INX/Triangle/MegaInk
Oce/Rastergraphics
Creo/Scitex
KPG/Creo
HP/Scitex
Kodak/Creo
HP/Nur
HP/Colorspan
HP/Indigo
EFI/Jetrion
EFI/RasterPrinters
Gerber/Spandex
EFI/Best Color
Scanvec/Amiable
GretagMacbeth/GIA
X-Rite/GretagMacbeth
X-Rite/Monaco
Esko Graphics/Artwork/Barco/Kongsburg
SignSupply/EastWest/Royal Banner
TreckHall/Signware/Mondrian
MacDermid/Autotype
Sericol/Inca Digital
Oce/Onyx
Comments are welcome on others mergers/acquisitions as well as suggested changes. This could be fun post to comment on (hint, hint…)
