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Office Document Solutions: Blazing a Trail of Disruptive Innovation

9 Mar, 2004 By: CAP Ventures imageSource

Office Document Solutions: Blazing a Trail of Disruptive Innovation

office equipment industry is maturing, and contains few untapped opportunities
for accretive growth. The value of office equipment technology has shifted away
from traditional speed and feature comparisons, focusing more on network
compatibility, price and service reliability. Although price may not be the most
critical factor in the decision-making process, product parity and the mature
nature of the office equipment industry have made this a key differentiator
among existing sales channels. This trend has commoditized office products,
which rely on volume in unit sales and printed pages to sustain current market
leaders. Vendors’ excessive reliance on the price-per-page selling model is a
prime example of the effect of this trend.

Industry Dynamics

Rapid development and innovations in digital technology have accelerated the
business cycle that dictates how and when markets mature. New ideas in the form
of products and services evolve rapidly in this state of hyper-competition,
enabling new markets to form, mature, and decline more quickly than at any other
time in history. Disruptive innovation is most often the catalyst driving the
rise of new markets and the decline of established markets. Starting quietly,
disruptive innovations initially take root in the least profitable segment of a
market, and then move up the market to eventually reshape industry boundaries
and competitive dynamics.

Leading players in the information technology (IT) industry continue to develop
new, often complex and capital-intensive solutions to address the communication
problems that still plague organizations. Customers and vendors are beginning to
realize that increased performance alone is not enough to improve the way people
work. Organizations are demanding more intuitive and convenient tools that
integrate well with existing systems while providing clear and immediate value.

office document solutions market is beginning to take shape. CAP Ventures
estimates that the office document solutions market was worth approximately $200
million in the United States in 2002, and expects it to grow to approximately
$880 million by 2006. Although this segment accounted for only a fraction of the
worldwide market for IT services and solutions, it offers a substantial revenue
opportunity for office equipment providers.

The Power of Disruptive Innovation

Innovation is the spark that expands the availability and adoption of new
products and services that provide unique, previously unrealized value. In
today’s accelerated business cycle, the future of every company is determined by
its ability to innovate effectively. Organizations that initiate the innovation
curve for new markets often become leaders in those markets, gaining first-mover
advantages and early leads in market share, brand awareness and expertise.
Referencing “The Innovator’s Dilemma,” there are two distinct categories of
innovation: sustaining and disruptive. Each is defined by unique characteristics
including the organizational strategies and requisite business models that drive
product, service and market development in new and established markets.

The Office Document Solutions Opportunity

As office equipment manufacturers and vendors search for new growth
opportunities, they are presented with a limited number of adjacent markets from
which to leverage their existing technologies and competencies. Three key areas
that many of today’s office equipment providers are turning to for growth
include office color, on demand production printing and office document

growth in office color products represents a significant near-term opportunity,
success in deploying these products depends heavily on the ability to replace
similar black & white devices. To date, color adoption in office environments
has been slow to occur. This is likely to change as hybrid devices are
introduced into the market.

core imaging technology for copiers and printers has been successfully extended
into the on demand printing market, allowing select providers to carve a
significant niche in the categories for color copiers and light duty black &
white production printing equipment. Nevertheless, while the on demand market
has provided incremental growth, it is much smaller in terms of device
placements than the mainstream office equipment market. Although still robust,
growth in digital production print markets is also slowing in terms of unit

Another opportunity being pursued by office equipment providers is the emerging
market for office document solutions, particularly document management-related
applications for routine business processes. The market for office document
solutions draws on products and services from multiple segments of the
technology industry, including desktop and network computing, as well as
supporting software and hardware for dedicated document management including
MFPs and related workflow tools. CAP Ventures believes that this opportunity is
likely to hold the greatest growth potential for office equipment providers in
the long term.

Office Document Solutions Current Market

The office document solutions segment is currently beginning to take shape.
Mainstream adoption is likely to take at least three to five years as new,
integrated applications are first introduced, field tested and improved upon.
The distribution channels for these solutions will also need to evolve, with
more emphasis and resources focused on building the requisite consulting and
services models to fully address this opportunity. Rapid innovation in MFP
technology and the introduction of embedded applications will help to simplify
the development of vertical applications that will define many document
solutions. The simplification of this technology will aid in customer education
and market development, spurring greater customer pull and lessening the market
development requirements for MFP resellers in the coming years. The players most
likely to benefit from the office document solutions market opportunity include:

  • Office Equipment Manufacturers & Subsidiaries who will benefit from continued
    equipment sales and new professional service opportunities through new and
    existing direct channels.

  • Office Equipment Resellers, Direct & Independent will benefit from continued
    equipment sales as well as the ability to offer unique, local professional
    services particularly within the small to medium sized business segment of the

  • Mega-dealers will also be able to support solution opportunities within larger
    accounts that require nationwide coverage in countries like the United States.

  • Facilities Management Companies will be able to leverage their existing
    infrastructure and enhance their service offerings with professional services
    that emphasize the use of MFP and other appliance-based technologies in
    workgroup environments.

  • Hybrid MFP Dealers/VARs will be able to leverage their existing expertise in
    networking technology along with their credibility among IT-focused
    decision-makers to expand their solutions offerings into the document
    solutions space.

are times in virtually any market when the products and services available
surpass the needs of mainstream customers. This creates gaps in the market that
offer new opportunities for disruptive innovations. To be successful, disruptive
innovations must meet a relatively unique set of unmet needs with significantly
lower cost, and performance that is lower than the offerings of incumbent market
leaders, but of sufficient quality to meet low-end market needs. After taking
root in undemanding applications, these innovations can be improved through
sustaining innovation to capture a share in the mainstream market.

the end, market-leading companies who focus solely on offering best-in-class
products usually lose their dominance to companies that offer simple,
inexpensive products and services that are adequate for the task at hand. As
most former market leaders can attest, the most devastating threats can come
from below.

- - -

This document has been abstracted from the CAP
Ventures white paper entitled Office Document Solutions: Blazing a Trail of
Disruptive Innovation, which examines the opportunities for the office equipment
provider, identify strategies that they can employ for growth and long-term
profitability in the office document solutions market and target document
management processes for routine business communication. For more information
about CAP Ventures white papers, contact Stewart MacDonald at 781.871.9000 or

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