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Thriving In a Zero Sum World

3 Mar, 2015

I recall an educational meeting I attended early in my career.  A respected professor from a prestigious University told us how fortunate we were to be part of an industry that was both recession resistant, and locked into decades of growth.  He presented two reasons.  First a reoccurring revenue business model, and second was the fact that nearly all the processes that ran business were built around the use of paper.  He was right on both points, but that was decades ago.  The reoccurring model is still true.  The second, however, has been permanently altered by technology. 

It is now nearly universally agreed that the decline in office pages is here to stay.  We are living in a “Zero Sum World” and the rules for success have changed.

The fundamentals: These have always been important, but now they are critical. Many of us have taken an “interruptive approach” to the fundamentals that we have come to call the “Johnson Model.”  We need to be more serious about the execution of these principles in our core business. There are parallel business opportunities we will want to explore, but before we can even think about adding new business we must have our core operation in order.

Services:  Today we must provide more services for existing and new accounts. While there is still opportunity in equipment sales, there is now a clear limit and dealers need to take their customer service to new levels in order to succeed. A successful OE dealership cannot simply rely on copy and print sales alone. Moving toward a services business model that comprises strong MPS, and 30-40 percent IT services should be the goal for long-term stability. The reason I stress the MPS part is that it is closer to our core business and knowledge base.  

Many dealers will say, “I’m in MPS.”  The fact, however, is that less than 20% of available print is under our control, including pages generated on MFPs.  To be successful it must be structure as a services business; not an extension of copier sales.  Properly executed, it offers substantially improved scale of existing resources, but to fully capitalize we will need to improve the automation of processes and information gathering.

The arena of IT Services offers almost unprecedented growth. The industry is expected to surpass $320 Billion by 2020. Yet along with this enormous opportunity comes the need to develop new skills and knowledge to succeed. How do you take advantage of this opportunity?

The choices are no secret:  1) acquire an IT organization; 2) build an IT organization from scratch; 3) partner with an IT services provider.  I’m going to suggest that partnering offers the fastest and safest path.

Automation:  In a recent conversation with a very successful dealer we discussed the different processes that they felt they had automated. It became clear early on that what was being viewed as automation, was in fact a digitally enhanced manual system. Fully integrated ERP systems are no longer a luxury.  I can hear almost everyone saying, “But I have an ERP now!”  

I’m not trying to be controversial, not really.  Systems that are designed for a very narrow and specific business are not true ERPs.  As we diversify our businesses these systems become more and more a detriment to fully automating our processes. More importantly they restrict the free movement of knowledge. It is account knowledge that will become the true differentiator in the “Zero Sum World.” Without the right tools you can never hope to competitively scale your business to compete in the changing environment.

We need to find systems that will actually do the work for us.  The idea that we download something into spreadsheets, do an analysis, and then pass that on to someone else is not automation. Having a separate system to administer your Managed Services does not automate all account knowledge.  What is even more troubling is these systems will actually make an eventual transition to a real ERP harder. The reason is that these “industry specific systems” are creating multiple and often-incompatible data bases that will need to be dealt with when you try to bring them together... making that transition more difficult, and expensive.  

We need to take people out of the process everywhere we can.  We are capturing more and more data, from which our customers expect us to provide them with answers. We need to begin to consider the impact our internal systems have on our ability to turn data into knowledge and support our customers, not just our cost.

Higher Market Segments: If you have not already made the investment to enter the production space, do it now!  Most suppliers have an offering in their line, if yours doesn’t add another vendor that does. One mega trend is that work, and thus print, is coming closer to the point of need.  This is evidenced in the decline of administrative workers, and the rise of the knowledge worker in private industry. As this continues (and it will) more complicated jobs are being done on demand and in smaller bites.  This is driving pages that used to be done outside the company, inside the company, and creating more opportunity for the production products that most vendors now offer. If you have already done this, then consider the emerging new “ink based high-end” that some companies are bringing to market.  It is another investment area, but the upside and volume opportunities are one of the few high growth areas in the business. 

There is drawback. This is not the traditional office space we have been used to. It is more aligned to manufacturing, and solving the imaging side of production.  The decision hierarchy and process is completely different to the office. This last segment is not for everyone, but it is important to know where this is all leading.

Not so long ago, a dealership could expect reasonable growth even when not doing our very best.  When page volume was growing at 20% or more per year, it was reasonable to expect that next year would be at least better than last.  Today growth must come at the expense of another’s loss.  We are now 7 years into the Zero Sum World.  The noticeable drop in volume started in 2008. It’s really not a question of survival, but of how to thrive and excel.  Honestly, it’s the only way to survive.

Note: Ed will be speaking on "Thriving in a Zero Sum World" in a conference break out session March 11, at the ITEX Expo in Ft. Lauderdale, Florida, held March 10 -12.  Visit http://www.itexshow.com for detailed agenda.

Author: Edward McLaughlin, CEO of Vaderus, LLC, which brings together dealerships with an innovative approach for shared profitability while retaining local management and brand identity. Ed has 40 years of experience in the Information & Imaging industries including past affiliations with: Sharp, Ricoh, NeXT Object Channel Partner, Canon, 3M Company, and Sperry Rand Corp. He is also a member on the Board of Advisors for Continuum Managed Services. At 215 378-3639 or http://edward.mclaughlin@me.com

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