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Founding Principal of Strategy Development Talks Shop

30 Jun, 2010 By: Tom Callinan imageSource

Founding Principal of Strategy Development Talks Shop

Wanting to get another credible perspective on the marketplace today, imageSource magazine invited Tom Callinan, founding principal of Strategy Development, a leading management consulting and advanced sales training firm, to share his viewpoints on the industry at large, his company, and the advancement of MPS.

ImageSource (IS): Tom, tell us what Strategy Development is seeing in the industry now.

Tom Callinan (TC): We have defiantly seen a shift in the sales consulting to MPS. As you know, when I founded the firm over four years ago, we were the only consulting firm (or nearly) in the MPS space, and it was difficult trying to convince dealers and resellers that MPS was for real.  Today, with declining unit placements and lower margins, MPS is clearly the growth strategy. We have partnered with InfoTrends to develop an MPS Sales eLearning program, and it’s getting great traction, while we’re also seeing strong growth in our service consulting business; Mike Woodard’s service experience has more scope than most in the industry and the word of mouth endorsements are creating a demand for his consulting.

(IS): As the economy strengthens, do you think unit placements & margins will bounce back?

(TC): That is a great question in that many industry players are now stating that they are in a great position once the economy recovers.  Since the end of March, most can’t say that the economy has not bounced back to some degree. Pick up any financial publication and you’ll see that the industrial and consumer demand is strong and corporate earnings are increasing significantly. Those macro events may help get more leases approved but they will not materially impact unit placements or margins.

We could spend the entire interview on this one questions, so I’ll just make two points.  First, the way we communicate is the primary driver of unit placement decreases in the A3 space. Electronic communication drives output to printers (A4 units). Unless you think our communication method will change, there is no chance of A3 unit volume snapping back.  If you read the unit placement predictions from the major research firms like InfoTrends, IDC and Gartner, you’ll see a continued decrease in A3 units.

As far as margins, unless manufacturers get a new perspective on their business model, margins will continue to decrease. If you reviewed the financial statements of the OEMs you would find that some of them are bleeding red ink in their direct operations; some of those operations are quite substantial. When you have a manufacturing mentality—where you have hundreds of millions of dollars invested in factories and you need to allocate that cost across widgets coming out of the factory door—you want as many widgets as possible. Forget the fact that unit volume is falling by around 50% for the period from 2008 to 2013; we’re going to keep making the same quantity of widgets. Some OEMs see their direct operations as the best approach to move those widgets. A dealer is (hopefully) focused on profit running their company and selling more widgets may or may not lead to their profit model. But with a direct operation, you simply design the compensation plan of the sales force to drive widget placements. I am not saying all manufacturers take this approach as I think there are a couple that run sound direct operations that compete fairly with their dealers. But if you do have large direct operations driving widget sales, they are going to drive down the margins in the market where they have share.

(IS): Why do you think many industry players talk about the good times returning once the economy strengthens?

(TC): I think most people are comfortable in environments where they’ve achieved success, and they try to over simplify how they achieved that success without a lot of reflection or actually studying the market.  It’s easy to blame the industry fall-off on the economy because it has really impacted a lot of industries. I do believe the poor economy accelerated and highlighted our changing industry, yet it may actually become a favor in that it will force companies to change—it made reality painfully obvious. It also hit certain areas—like leasing and product availability, as OEMs cut back manufacturing to conserve cash—that will rebound slightly.

From my perspective, the best way to stay informed of what will occur in the industry is to read the research reports published by reputable firms like InfoTrends, IDC, and Gartner. I encourage attendance to the InfoTrends’ Solutions Summit in Chicago in November due to the amount of research data you’ll receive with participation at the summit.  As far as the manufacturers, my belief is that they all believe they will be the survivor—and the dominant player. If I ran an OEM, I would think that way as well; the alternative is ugly. I cannot believe there is an OEM that doesn’t subscribe to at least one of the leading research companies’ data and clearly see the industry from a higher level than any one dealer. The OEMs know that unit volume is declining and that there is far too much capacity in the manufacturing space; they cannot all survive anymore than all of the distribution - dealers and direct operations - will survive. I know this interview isn’t all on the OEMs, but when you look at them you can see some great strategies: strong A4 product depth, product extensions into production, and even partnering with complementary products, like printer companies.   Believe it or not, the aforementioned direct operations are also a benefit in that they do provide distribution points—the OEMs just need to focus on profit at the direct level. So I think the OEMs put out a positive message as they are implementing long term plans that fit with the changing industry.

(IS): You’ve talked of research firms but no mention of Photizo. What do you consider them?

(TC): I am aware of Photizo, but frankly, I am not sure what they are specifically. I categorize them more as a trade show company first, as putting on shows seems to be their primary focus. From one perspective, they have used gorilla marketing effectively in that they have gotten their name out there, but I have also seen them position themselves as a research firm, consulting firm, training firm, publisher, besides advertising the heck out of their trade show. They are very aggressive yet that attack type marketing can also create some confusion. So, the bottom line is that my perception of them is not one of a research firm and that is why I did not mention them. Moreover, when I want research I want a total and neutral perspective on the market. Firms like InfoTrends have decades of data on unit placements, both A3 and A4, print behavior, software adaptation, and buyer behavior. Trying to talk about one segment of the market without a perspective on the entire market is impossible. Therefore, for reliable research I go back to InfoTrends, IDC, or Gartner and get decades of data that spans the entire space.

(IS): Since you are mentioning trade shows, are there any you favor over others?

I realize your parent company puts on the annual ITEX trade show, yet regardless of this interview, to me, ITEX really is the most important trade show for the industry. From my perspective, the largest benefit of a trade show is the networking, and with close to 2,500-3,000 qualified industry decision makers attending, ITEX is the Big Kahuna.  Your company also does a great job of vetting your educational courses and makes certain that your speakers provide value to the audience. The low entrance fee of around $100 also demonstrates your desire to get participants to the event for their benefit. You look at other shows, including Photizo, and all or most of the speakers are vendor representatives that are event sponsors. I am sure every OEM has a well crafted message but I cannot imagine that message doesn’t include their product being the best solution. If I spent a five figure sum to speak you can bet I would be giving a commercial wrapped in some high level information! ITEX uses instructors vs. commercials. Presentations are a collaborative mix of consultants, researchers, dealers, and vendors.

Additionally, I think the BTA does a phenomenal job on the regional level. Brent Hoskins and all of the volunteer Board have really energized that organization. I can tell you from our relationship with the BTA, that their members are what drive all of their decisions. If they don’t feel their efforts will provide value to their membership they will not pursue the endeavor. Like ITEX, the BTA really vets their speakers and makes certain that the educational tracks provide value. There are numerous free webinars from the BTA (InfoTrends, IDC and Gartner) where you can get great information. Visit their websites. For information on Strategy Development, visit us at www.strategydevelopment.org.

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