Building a better digital model
Tuesday, May 13, 2008
Its been 15 years since Benny Landa, the founder of Indigo and pioneer of digital print, said: Anything that can go digital, will go digital. Print is no exception.
His prediction rings true today. Digital quality has shot up, costs have dropped, and more and more printers have joined the digital revolution. The technology has evolved beyond being merely an alternative for short runs into the driving force behind sophisticated service-based business models.
A move into digital print is more than an investment in a glorified photocopier. To maximise its potential, a printer must rebuild its entire business model from the bottom up to reflect the cataclysmic shift from providing a commodity to a value-based service. The applications and technological advances of digital are well documented but a successful adoption of digital print requires a change in outlook.
Nick Devine, managing director of print consultancy The Print Coach, says there are two print realities within one industry. He contrasts the fortunes of North American print giant Quebecor World, which filed for bankruptcy protection earlier this year, with successful UK printer/print manager Communisis.
Both companies operate within the same economic conditions, with the same technology available to them in the same market, but with very different results. Devine believes that the success of companies like Communisis lies in their adoption of a customer-centric business model.
Digital print empowers the traditional printer to offer this client-focused approach to print. Shorter runs, quicker turnaround times and personalisation are the commodities within digital print and the building blocks for a value-added service.
“In today’s print environment, you simply cannot survive if you compete on the basis of cost alone,” says Devine. “The printers that are succeeding have built their business models on finding solutions for their clients, being a one-stop shop for their print campaigns.
“They are talking to their clients about business, not just print and staying ahead of their customer, not only the competition. This solutions-led, customer-centric business model is what differentiates a successful printer from a failing printer.”
Scotland’s oldest printer, Stewarts of Edinburgh, moved into digital print in 2004. In 2007, it posted the second-highest operating margin in the PrintWeek Top 500. Operations director Kenny Murray says the biggest challenge was gearing up the business to sell a service rather than a commodity.
“You are essentially becoming a service provider rather than a printer,” he says. “And that involves a totally different approach to your clients. Your business model is about how to add value rather than how much volume you can drive through your presses.”
The battle in traditional commoditised print has been fought on price. Printers lower their margins to get ahead in an increasingly competitive environment, but the price-driven model is plagued with low levels of customer loyalty, low margins and loose relationships with clients.
Adding value is the key to offering a successful service and the key to a digital print model. Short runs are a commodity; print-on-demand is a service. By developing their business models to offer a service proactively offering clients solutions to their problems digital printers can not only add value, but also secure loyalty.
Phil Thompson of digital printer Resource Print Solutions says: “Some printers will think digital print is just a way of covering shorter runs but it is far more. Applications in the digital market are different to those in traditional print, and so is your role.
“We try to get as close as we can to our clients offering a consultancy-based service on top of print. Success in the digital world is about understanding your clients’ market and helping them to reach their customers; you are no longer just providing a static commodity.”
It has been said that today’s successful printers are not just printers they are marketers, consultants, data managers and designers as well. This is true to the extent that digital print sells products and applications; it involves constant interaction with your clients and a solutions-led approach to sales.
Valentin Govaerts, senior vice president and general manager at Xerox Europe, says that success in digital print is about understanding the business process of your clients. “You have to ask what digital print can do for people and understand exactly what your customer needs and how you can use the opportunity for personalisation and print-on-demand to meet those requirements,” he says.
So what are the fundamentals of the digital offering? Without a doubt, personalisation is a key benefit. NB Colour Print installed an HP Indigo 5500 last month to meet the demands of its clients for shorter-run lengths in the brochure and leaflets sector. According to managing director Robert Anderson, the company is already looking at ways of offering personalisation to complement the shorter runs. “We can now produce bespoke brochures with significant added value for our clients and offer them a total partnership in their marketing strategies.”
Thompson adds: “The onus is on the printer to find value in personalisation and realise the premium that digital print offers. We are involved with our clients at a much earlier stage in the printing process than with a traditional print business model; we like to be there from concept to creation.”
The first step to take is to identify a potential market. This will initially involve looking at existing clients and ascertaining the key markets, segments and products that can immediately be offered. The digital print model means targeting sales at specific audiences. The sales model is no longer horizontal across a wide range of industries intended purely to fill the presses. Devine believes success is about identifying a niche and targeting that specific area. He argues that 50% of total volume usually comes from 5% of customers and 5% of total revenue from 50% of customers. The trick is, he says, to find a niche where you can find the 5% of larger customers.
Identify your geographic market as well. While web-to-print enables orders to be received from across the globe, the digital print model encourages a close relationship with clients and local service is integral to the maintenance of these relationships.
Integral to the move towards a service-based business model is acquiring the right skills to drive the business forward. Devine says that it may be necessary to recruit new sales staff. “You have to ask yourself: what is my strategy, how quickly do I want to grow this business? With good training you may see an improvement in sales results, but if you want to target rapid growth, you may need to recruit. The new sales staff do not necessarily need a print background. They will be talking business.”
Stewarts managing director Terry O’Hare adds: “When we invested in digital, not only did we train existing staff to be realigned to the new way of thinking, we recruited new staff with specific skills in areas outside our traditional remit such as marketing and IT.”
Digital press manufacturers can help with business training. Xerox’s ProfitAccelerator, Indigo’s Digital Selling Skills and Canon’s Business Builder are just three examples of packages offered to printers when they purchase a digital press.
Entry into digital may not be as costly as traditional print, but the investment in new presses, web-to-print solutions and data manipulation software will yield little return if you do not adapt to harness its true value. Without the customer at the centre of your business model, there is nothing to focus on.
- Build a business model around the digital print offering Think about the applications it offers and how they can be used for profit. What additional add-on services can you offer that you could not before?
- Make your business model customer-centric Examine a client’s business and ask what you can do for them, approach them with ideas and show them you understand their business
- Have value at the centre of your proposition and move away from a basic cost-base Look at what niches you can fill and what sectors your existing clients operate in. Then expand from those sectors into other areas
- Ascertain how quickly you want to grow and what you need to achieve that growth Is it a case of training up your existing employees or will you need to recruit new staff with business- specific expertise?