In a break from our usual format, this issue’s interview was conducted by EFI chief executive Guy Gecht, who spoke to Quad/Graphics chairman, president and chief executive Joel Quadracci in a ‘fireside’ chat at EFI’s annual Connect user conference in Las Vegas earlier this year.
Quad/Graphics was founded in 1971, after Joel’s father, Harry Quadracci, went into business on his own with a rented press and a borrowed binder. Today, the US-headquartered business boasts around 20,000 employees, spread across 70 print sites in North and South America and Europe, and generates sales of almost $4.5bn (£3.6bn).
So we felt that the powerful insights from the leader of one of world’s biggest print businesses warranted a special exception. Not because the scale of the Quad business is eye watering, but because the challenges, and opportunities, he and his business face are those faced by the leaders of every print business, large or small.
Guy Gecht So, can you tell us a little about the business?
Joel Quadracci I kind of talk about the company in chapters. So, let’s go back to childbirth. Mine, which was in 1969, and the company’s in ‘71. We had the same founders [laughs]. So I grew up around the company. My father put a second mortgage on the house and went into business. The whole premise was that he had come from a printing company [WA Krueger Company] and wanted to do something different; where the management and employees were in it together. So from a very early time it was not only a family-owned, but an employee-owned company as well. Because he had the idea that if you’re an owner in the company you’re going to work for the good of the company as opposed to just a pay cheque. Because of that, he formed a wonderful culture early on and so I talk about 1971 till about 2010 as chapter one of the story. It includes the founding of the company, but also all the things that he did strategically to make it successful today, which really came down to investing in the latest technology, listening to the customer, and always understanding what problems they were having that maybe they didn’t even know about. He also realised that you’ve got to think about equipment in economic-life terms, not mechanical-life. And that’s even truer today – part of the challenge the industry faces is that many people, many companies, look at technology in terms of mechanical-life. In theory, you can have a printing press going for 50 years if you maintain it, but it doesn’t mean you should. Because if a better technology comes along and it’s that much more productive, to be the low-cost producer, which is key to surviving the ups and the downs, it’s crucial to be on the latest technology.
If I may, just to make sure we are clear, that was up to 2010?
Yes. So, chapter one was really technology-driven, innovating constantly. And it was all greenfield growth. It’s hard to believe that he grew it from ’71 till he passed away in 2002, to an almost $2bn company. One customer at a time, one plant at a time. So chapter two came along, and I became chief executive in 2006, that was a great year. 2007 was fun. 2008 everything blew up, and here we are. Disruption started happening and we recognised that things had to change. If we were going to be successful we had to be the consolidator in the American marketplace. We knew that there were going to be opportunities, because of the strength of our balance sheet and because we had the best platform in the country: 12 major printing plants, most of them over a million square feet, all with the latest technology. But a lot of the industry, companies like Worldcolor, had stopped investing over the years so when the recession hit they didn’t get through and went into bankruptcy. And so [in 2010] they approached us to acquire them – remember we were $1.8bn, they were $3bn. So we would have had to go public [float the business] at the same time. These were all the things my father taught me not to do: don’t go public, don’t buy broken down printing companies and don’t consolidate the industry. But I think if he were here today, he would say that is exactly what had to happen. And so we realised that we better be ‘doing the doing’ here or the ‘doings are going to be done’ to us. And so we acquired Worldcolor and went public to protect the balance sheet. And the family got behind it, because we are still a family company, because my father was smart enough to say that he didn’t ever want it to be public, but if it had to be, he wanted the family to retain control. So he created two classes of stock early on, which meant that while the family got diluted to 33% equity, we have 82% of the voting control. Because if you’re going to consolidate like we did, you have to play the long game. You can’t play it a year at a time because in chapter two we acquired Worldcolor and then soon after that Vertis came along and asked us to acquire them. After a couple years of telling them no, they finally said can you take us through bankruptcy and end the pain. And then we acquired the last big one, Brown Printing Company, which was a stranded asset. So we’ve kind of nailed down chapter two with all this consolidation. I know this sounds easy, but the hard part of this, the really tough part, and I think it’s happening worldwide, is that when you have an industry that’s resetting, shrinking, it’s tough for the entire industry. And a lot of times it’s very hard to do and it can get very messy [before the consolidation happens], like with Polestar in Europe, when suddenly it just ceases to exist. And no one is immune. We’ve closed 36 printing plants in the past six years. If those 36 printing plants were one printing company today, it would probably be north of a $2.5bn business. So those presses, those plants, a lot of them should have been closed years ago. We melted the equipment down, we made a deal with junk dealers, steel guys, and said, ‘you remove it, you can have it’ [to take them out of the market]. And the thesis was: let’s move our customers to the best platforms and fill that up. And the plants we keep, let’s invest in them and continue to do what has always made Quad successful by having the best platforms. So last year was the first year we weren’t doing a major integration. Before we started I had black hair, I looked young, and now I’m a little haggard and have silver hair. But now we’re tuning up the Ferrari and it’s really starting to show and we’ve moved into chapter three, looking at ‘how does Quad play with its customers?’ I mean we do magazines, catalogues, retail inserts, books, in-store signage and in the past three years we built a $200m packaging business. And our client-base is changing. And what I learned from my father is follow the pain of the clients. Chapter one and two are about printing really good products for clients, chapter three is about helping them sell more stuff. And so that is where we are today and I know that’s a very long answer to your first question...
Well I can think of at least 10 follow-up questions, so thanks for that...
Back to child-birth?
[Laughs] Okay, but seeing as you made so many changes in chapter two and acquired so many companies, if I’m a new customer or an investor, how would you describe the company now?
Quad is a printer. We’re not trying to be one of these people that says, ‘Oh, we’re going to pretend not to be a printer’. However, what I’d tell you is I’m going to help you sell more stuff. I’m also going to help you streamline the process. And so when you look at digital disruption over the past 10 years, it’s been about everybody shifting marketing spend to digital. The big agencies call it omni-channel. What omni-channel should mean is ‘do every channel all the time’, but what they [the agencies] really meant was put it on Facebook or Twitter. They thought they didn’t need print anymore. That was what was happening, and so we saw a big shift. And if I tell you what’s happening today, what our customers are struggling with, it’s that they realise now that it [social media] is starting to wane. Not that it’s not an effective media, it absolutely is, but they’re over-spending on it. There’s a crisis of measurement going on, because all these channels, and if you look at how customers are structured – even in the marketing department: you have your mobile people here, your online people here, you have TV people here, you have print people here – there’s no measurement across all that. They’re all measured within their silos. And the same happens online. And so, if you’re a printer, you’re in a great position to solve this problem. Because when people are doing campaigns in this day and age, from digital all the way to conventional, they’re probably managing 10 to 14 different agencies. And even though a lot of those agencies might be owned by the same parent company, they don’t integrate together. And so it’s very hard to do a connected campaign.
If you go back to what happened to print: when the computer came along and then the Macintosh, we were the first company of size to go completely direct-plate in the 90s. And when that happened? Printers had to become experts at managing digital content. We got rid of these pieces of film and were suddenly exchanging very big digital files. So we had to come up with our own compression technology. And so, we became very good at workflow. There was also a lot of debate about what formats the advertising industry was going to use. So people on the floor just figured it out as they went along. Which meant we were changing workflows very quickly. So we had to become very process-oriented and that’s when we really launched heavily into lean manufacturing. Because we had a network [of plants] all over; if you’re going to keep changing these workflows with your customers, and you have plants all over, you better be singing from the same tune. And so, printers became very good at managing that. Then when internet 1.0 came along, everyone was amazed: you would buy a book on Amazon and the next time you went online, they put another book like it in front of you. They were talking directly to you, one-to-one. And printers were sitting in the corner saying, ‘hey, look at us. We’ve been doing that for 20 years’. Direct mail, through inkjet technology, or selective binding, has been doing that for 20, 25 years, one-to-one marketing was not new. And Quad was very early on that. We started selling it to people and you would see these response rates spiking through the roof when you used variable data combined with traditional print. And so now fast-forward to the next step in technology: the smartphone. Well, guess what, our customers were struggling with the content and how to format it. Well, we knew how to do that. And the other thing, the QR code came along, where suddenly you could connect mobile with print. I convinced the postmaster general at the time to give our customers a postal discount if they used a QR code in print. And the reason he wanted to do that was he wanted to show that mail was still relevant. The reason I wanted to do it was because we knew the interconnectivity of print and mobile would be powerful and print is the [buying] ignitor. And the reason that [the discount] was important was because postage is the biggest cost for our customers. So he accepted that if there was a QR code, they would get a discount. But the codes were just sending customers to a webpage that wasn’t even formatted. So we started working with our clients, saying let us help you format it. Then we started to share what we learned from direct mail and said let’s put that QR code next to a product and when you snap it, a video demonstration of the product triggers. And this was a tool company we did this with initially. And they had a 20% increase in sales with products that had a QR code and a video demonstration. And so they said: ‘well you guys do all our photography, could you do the video for us?’. So we hired the talent, we invested in the technology and today we’ve made thousands of online videos. So you fast-forward to chapter three and marketing and print are about evolution now and it’s about adapting. I think it’s actually gone to the next level which is: how does it [print] play in the creation of all the channels? Every marketer I talk to, every CMO, every CEO, whether they know it or not, is frustrated because they realise everything is not integrated. But it has to be integrated and if you want to be one-to-one focused with your clients and get those responses out of your spend, you need to cover wherever your client is going to interact with you. And so we call it multi-channel. Because omni-channel is pretty much just Twitter and Facebook. We call it multi-channel because you’re not going to do all channels all the time; you’re going to look at the data and let the measurement tell you where to spend the money and what data to use to drive your customer.
So, we’re sort of changing the story with our customers. We’re saying that we want to be that person to help you integrate. And the reason we can do that is the legacy of what happened with printers. We know one-to-one marketing, and we know digital content management, and we know about measurement.
One thing that’s really clear is that as technology shifted, instead of playing defence, you’re actually playing offence in your investments in technology?
It’s connecting the dots and trying to do it ahead of the curve.
And what else did you do that was different?
Well, I think that first of all, a lot of this was hard work and taking a lot of gambles. I like to say there’s no finish line in business. Well there is, but you don’t want to find it right? And so you’re always having to look at the roadmap and move faster and the pace of change today is outrageous. I think fear drove a lot of it, too. In this day and age, we have to be honest in saying that it’s a scary place right now. Accepting that is a good thing, it drives a sense of urgency that you can’t just wait for the map to appear for you. You want to be the person who is bringing it [a map] to people and drawing it for them. You’re going to make mistakes, we make lots of mistakes, but if you don’t make mistakes it’s probably because you’re not actually pushing it. I mean, back in the day, when we were just a publication printer, we had to tell Newsweek magazine which pages could be four-colour, right? Because we didn’t have eight-unit presses. But my father realised, if we can go to an eight unit press, for just an incremental amount of investment, then we could give them four-colour throughout. That was unique at the time in the States. And so again it’s about asking: what does the customer need, and what is the technology available, and how do we incorporate the two of them. The challenge is the same, it’s just the technologies and language that is different today.
And giving them more value as opposed to just giving them more cost?
And solving the problem.
On the subject of change, now that you’re a public company – has it lost the family business feel?
No, not at all. I’m second-generation and you see families split apart a lot when they get bigger. Generation two: I’ve three siblings, but there are 10 grandchildren in generation three and so it gets more complicated. But a lot of family companies blow up because people aren’t brought along for the ride. So we spend a lot of time making sure that they’re along for the ride. Worldcolor, all the big acquisitions, the big decisions, they were there every step of the way.
So, at what point did you understand that you were going to be the successor and how did your brothers and sisters take it?
Well, it was kind of an ‘oh shit’ moment. Pardon my language. When my father passed away in 2002, I was in my early 30s and running sales, and my uncle, who was 12 years younger than my father, took over. He was an engineer, he started QuadTech – he was kind of the technologist – I don’t think he ever saw himself doing it [being CEO of the entire company]. But he was the perfect person to come in during the disruption where the original founder had passed away. Because everyone thought Harry was Quad and Quad was Harry – without him, what happens? Well the reality is he built a hell of a culture that sustains itself. So, I got put in that position of: okay, I know this may not be long-term – and I was actually installed by the outside board [in 2006], not by the family. Because they sort of were watching, listening and realised that at some point I have to be ‘the one’ because I’ve always been very passionate about it and my uncle didn’t necessarily want to do it, but it was timing. So they were very supportive of it, and they continue to be very supportive of it. But it was scary because I was young. I’m 48 as of last week and I’ve been a CEO of a multi-billion-dollar public company for over 10 years. That’s not easy.
Tell me about it.
And it’s scary.
I’m still trying to figure it out on my eighth year as a CEO. You talked about chapter one, when your father ran the company, and chapter two was you – what were the main things you learned from him?
Well, I think number one was never be complacent. But again always look to how to you connect the dots that people aren’t seeing, right? Also, one of the key things I learned from him is the CEO should be the chief salesperson. All the way to the end, he was the chief salesperson whether it was a $100,000 account or a $100m account, he was involved if the salespeople asked. And his point on that was: everyone comes to you with an interpretation of what their customer is saying. You know, your sales executive will tell you this is what the customer said, but they’re putting filter on it. It’s their perspective, and they’re not exposed to all the other things that the CEO might be. So the raw data is what he always told me was important to get. You listen to your people, but you also listen to the raw data [the customers]. And that’s what drove him to spend his capital in smart places. So I would say that that was probably the biggest learning. Without customers, life would be so easy [laughs], but the customers are the ones that determine your success and you’d better know what they want, even if they don’t know it yet.
Let’s talk about chapter two. You acquired quite a few companies, and let me ask you a question that people always like to ask me, who are you going to buy next?
Haven’t I bought enough? You’ll see some things this year that speak more to chapter three. And that’s that ability to have the right talent and the right capabilities to navigate online and offline and really play that role of the integrated agency. What’s great about being a printer is we own the heavy iron, which is a big part of people’s spend. We’re also a really big invoicer of people, so we get access to the C-suite in a lot of the big companies and agencies, so we’re positioned to be able to have the conversations and say: let me tell you why I can help you with the problems you’re having. And the change is happening a lot faster than we thought, just read the newspapers. I mean, retailers got crushed and this year, every marketer is under extreme pressure. Look at the average life cycle of a CMO. It’s dropped like a rock. In the past two years, almost every retailer had a whole change of C-suite. So, never waste panic. Never waste tough times. Because that is when people are willing to try things and do things differently.
So, just to understand what you said on the acquisition…
Did I avoid your question?
You did. So your priority is not necessarily capacity, it’s more about how you deal with chapter three?
I think that is accurate. Although I do think there will continue to be a lot of consolidation in the industry. So chapter two, part of it which is heavy iron and print, is still happening all over the world. As long as there’s overcapacity, there’s going to have to be rationalisation in whatever form. But for us, we’ve done a lot of heavy-lifting here, and it will have to make a lot of sense. Capital is scarce, right? It’s very valuable, and so right now I want to make sure that I’m building the presence that my customers want me to have.
You mentioned a few things about mail, packaging, in-store signage, what is really successful for you right now?
Right now it’s all the above. Because right now all those products are the execution of the campaign. We used to get a phone call and a marketer would have a campaign, but we never really knew what the rest of the parts were. We were just an output [provider] for part of it. Today we’re not just putting retail into a catalogue or direct mail, we’re doing the in-store signage. We have a whole in-store group and we built the packaging company in just the past few years. We didn’t do that just to get into packaging because it has growth characteristics, we got into it because I believe packaging is a part of every campaign. So as we are talking to people and asserting ourselves to say don’t just talk to us when you’re ready to execute the output, we want to talk to you about the campaigns you want to develop in the future. And so, let’s talk about it from packaging to in-store, all the way to online.
Which makes absolute sense.
If I could just tell a quick story, we worked with a small grocer, and sometimes small is good because they don’t have all the structure in the company to prevent you from doing big things. They have 20 stores, growing like a weed. We convinced them to give us money and do a test and we’d take over the complete campaign, from social all the way to printing in-store. This test campaign was going to be over the ‘final four weekend’ [a big US College basketball weekend]. They wanted to see if they could sell four things, to see if it would be impacted by a connected multi-channel marketing event. They wanted to sell baby-back ribs, Pabst Blue Ribbon beer, pizza and avocados for the final four weekend and these stores happened to be in more-collegiate areas. And so, three weeks ahead of time, we wired three of the stores with mobile beacons and just watched smartphones go in and out. And the reason for that was to create a baseline of measurement because when your cell phone is on, especially as most people walk around with Wi-Fi, it sends out a signal. And so we discovered that those three stores had loyal customers that were shopping 1.7 times a week. Furthermore, we started geo-fencing digitally around the competitor stores, so that when the social, the mobile offering happened, if it was clear you lived closer to the competitor then your offer would go up, because we wanted to convince you to drive a little further to our store. We took over social, everything, mobile, online, we took over retail inserts, direct mail, it was all connected. The net result of this was that we increased sales of all four products by at least 10%. It would have been more but they ran out of pizzas [laughs]. The other thing we could show them was a heat map of when they shopped. Because their assumptions were wrong. Most people think you’d shop in grocery stores after 5pm, but college students are already at the bar by then. So they were shopping at different times. And the next step was we could actually tell them where in these stores they visited with the mobile beacons, to help show them where they should do product placement because the people who bought baby back ribs, say, were more likely to buy anti-acid than avocados or something like that. So they could use this to change the layout. So that’s where it’s going, and that’s real. It’s happening quickly, but that’s what we talk about when we talk about campaign and owning the execution of it. We’re having lots of conversations with people who never knew Quad do packaging because we’re so new to it. But they’re exposed to all this other stuff that we do and suddenly they’re saying, boy we’ve never talked to a packager like this. We want to bring people we never would have brought to the table to talk about a campaign and how packaging could play into it.
What other trends do you think we’ll see in the next few years?
I think multi-channel’s the thing to watch and integration of channels is the talk. It’s understanding attribution of what channel drives what, and what is the interconnectivity between the two. And if you’re a printer, you’re in a really good spot to actually impact this because you own the execution. And again a lot of the big agencies are trying to figure this out, but their structure is such that it’s hard for them to contribute in the same way.
Last question. What is the one thing people do not know about you?
Whenever you’ve got the title of chairman, CEO, there’s always this ‘okay, these guys are hoity-toity’. I’m completely not that way, we just have a normal life. On the weekends right now you can find me running a chairlift up a ski-hill because my daughters are into ski-racing so I volunteer to help run the hill and do timing. I’m just another person and if you saw me outside of work you’d say, ‘who’s that?’. I like that.
A UK perspective
In a follow-up briefing to Guy Gecht’s interview with Joel Quadracci, PrintWeek had the chance to ask a few questions
We have a lot of consolidation going on in Europe. Is that something you might get involved with?
We have a huge operation in Poland, it’s a beautiful operation, one of the larger offset plants in Europe. But I look at western Europe, and I think it’s going to be a tough room. The problem is that when an industry has to shrink, it has to be allowed to shrink. And downsizing or closing a plant in western Europe is very difficult as you probably know. It’s probably why Polestar finally liquidated because you’re not really allowed to shrink. We’ve been asked if we want to play a role and help consolidate western Europe, but I don’t know if I know how to do that because of the laws that exist there. So we’ve developed what I think is one of the most amazing platforms in Europe [in Poland], but European consolidation is going to be a tough road I think and I’m not sure what it’s going to look like. If you think I’m wrong I’d love to hear that.
We have a company in the UK, that has been run by the same family since 1851, Linney Group, do you envisage a Quadracci in charge in perpetuity?
I interact with a lot of family companies, because they’re unique. I would love that if it were possible, but the family has to want it. We operate as if it will be a family business for a long time to come, but I won’t be around to tell you in a hundred years if the plan worked.
You spoke of the importance of measurements, but when clients still think of measurements in terms of social media interactions, or website impressions, rather than outcomes – how do you approach those conversations?
The problem is budgets. Search is something that a lot of customers throw an awful lot of money at. The problem is that in a lot of organisations, that huge budget is the responsibility of a low-level planner. I had one customer that spends $100m on print and $120m on search, and our analytics suggested they should be spending nearer $50m-$60m on search and use analytics better. There’s an awful lot of waste in the system and a lot of online channels that clients are wasting money on – people need to let the analytics tell them what works and what doesn’t. But a lot of people are scared; they think if they don’t spend on digital, people will think they’re crazy, but if they cut back on print it makes sense because print is dead – the clients that are going to win are the people that recognise they need to understand the interaction between channels and focus on outcomes not delivery methods. It’s not a difficult conversation to have with clients, they know it’s a problem: someone said that 50% of their marketing spend was ineffective – they just didn’t know which 50%, because they’re measuring in silos. So we as an industry are in the perfect position to give them the tools to know what works.
You mentioned your duty of care to the employees, do you feel a duty of care towards the wider industry?
Duty of care towards the industry was something my father was a big believer in. When QuadTech developed technology, we sold it to our competitors – not just to help cover the cost of R&D, but to help drive the industry forward. The same holds true today, but that’s not the same with every company. I think you get into publically traded companies these days and many have a much shorter vision and they are more insular, more inward-focused and that’s a big challenge in the US industry. I can’t do it alone, everyone has to lead the industry forward – but we’ll continue to have that belief. It’s a great industry and as much as people want to write it off, it’s not going away. In the words of Monty Python: I’m not dead yet!