Debating the Decision to Reinvent

These days, is it enough to be just a printer? Over and over, printing company executives hear from vendors, industry analysts, consultants, and the media that offering only ink-on-paper products will surely lead to their extinction. This refrain then concludes with the advice that only ancillary services that enhance the value of print comprise their ticket to prosperity.

This longstanding recommendation, combined with key industry trends, make a compelling case for reinvention.

"The number-one problem facing printers today is lack of adequate sales volume," says Robert H. Rosen, president of R.H. Rosen Associates, Inc., a New York City-based graphic arts consulting firm. "There's simply not enough volume to go around."

This endemic problem, Rosen adds, is made more conspicuous by 10% to 15% evaporation of certain types of commercial work. As a result, he explains, "A lot of printers are in a permanent pinch: not having enough business to cover fixed costs and provide a margin called profit."

Many industry watchers agree that printers face a growth and profitability crisis.

"Many companies, which realize that they can no longer compete or survive as the low-cost producer of a commoditized product, believe that it's necessary to reinvent themselves to become a differentiated service provider," observes Dennis Castiglione, president of Procom Management Group, Cleveland.

A case in point is The Instant Web Companies, Chanhassen, Minn. "We recognized that we were not going to win the low-cost game by operating as an envelope converter, web printer, and letter shop, none with clear brand identity," recalls Jim Andersen, the company's president and chief executive.

Andersen and his management team decided to consolidate the company into one location, trimming its total size to 650,000 square feet from 800,000 square feet, and building an integrated workflow solution for direct marketers. The consolidation included an $8 million investment in capital, but the company then reaped double-digit sales growth, with sales climbing from $84 million in 2001 to $91 million in 2002, then growing 38% in the next year. Not only that, but in the past 20 months the company added 180 manufacturing jobs.

"The companies with staying power continually investigate new opportunities and directions," reports Ron Seavey, managing partner of The Open Approach, Westmont, Ill., a consulting firm that works with printing companies and print buyers. "The industry continues to change, so printing companies that don't reinvent themselves won't last."

Seavey contends that many printing company executives make the mistake of thinking that mature industries don't change.

James Cozart calls reinventing the "Darwinism" in the business world. Says Cozart, vice president of sales, marketing, and technology for Mail-Well's new Commercial printing segment, "Either evolve as your customers evolve, because customers do change, or plan not to survive."

Mail-Well, an $1.8 billion organization based in Englewood, Colo., is undertaking a massive reorganization and refocusing initiative. It began two years ago to transform itself from being a holding company of acquired printing companies into a unified organization that offers a string of services, from design through print through distribution, to customers at every level, local, regional, and national.

"The model of just putting ink on paper doesn't work anymore," adds Tim Burton, chief executive of Burton & Mayer, Inc., Brookfield, Wis. "I admit that our focus had always been on the pressroom, but we found that our customers are more focused on delivery methods. Now, fulfillment has become more important than presswork, although high print quality still matters to us."

Successfully reinventing a company is no small matter, and the act itself offers no guarantee of success.

"About three-fourths of all recent business expansion/diversification programs have failed to produce the expected financial gains," reports William K. Lavelle, a principal of Point Balance, an executive education and management consultancy with offices in Philadelphia and Nashville. Lavelle and his business partner G. David Dodd co-authored a book titled Making Value Added Services Work.

While reinventing a company–-to offer more products and services, and be more appealing to the marketplace–-may be a competitive necessity, it's not a silver bullet.

"The sobering truth is that in 90% of the cases, reinvention is purely a marketing ploy, with really no substantive difference between the old company and the new one," charges Tim Dalton, head of Dalton and Robinson, LLC, Hewitt, N.J., a graphic arts consulting firm that focuses on process management.

Adds Rosen, "Unfortunately, most printing executives view reinventing as a way of looking for a magical specialty. I work with many companies that are defined as industry profit leaders and it's astonishing how few of them have a single product specialty. Instead, they specialize in simply giving customers what they need and want."

Compounding the difficulty of successful reinvention, says Rosen, is that most printers have an ineffective sales effort, which no reinvention effort can save. "Reinventing presupposes that a company knows what its customers want and can respond to that need," he says. The secret then is not in the product or service offered, but in the deployment of resources in an intelligent, impactful way.

While there's no fool-proof recipe for successful reinvention, there are staple ingredients to consider, as reported by consultants and printing industry executives interviewed for this article.

1. Develop and define a workable strategy. "Don't make investments in the hopes that you'll attract customers," says Lavelle. He adds, "To make sure the need exists, start by writing a strategy that defines why your company should reinvent."

However, keeping your eyes open to the future doesn't mean closing them in the present, says Stuart W. Margolis, president of H.R. Margolis Company, Bala Cynwyd, Pa., a certified public accounting firm that specializes in the printing industry and prepares the Ratio Studies for the Printing Industries of America.

"We see printers reinventing themselves today for what they need to be 10 years from now, which we think is dangerous," says Margolis. "Companies need to accurately assess the market's readiness for new services today and not jump too fast into the future."

2. Shift the selling focus, observers agree. In Rosen's view, the old method of trying to convince customers to buy more must be replaced with a concerted effort to identify and solve business needs.

"It's not enough anymore to merely have a capability," says Castiglione. "You need people who can sell it and service it, which requires a dramatic reinvention of the sales and service model." Specifically, he says, crafting a winning sales proposal for a total package of solutions requires having excellent written communication skills, along with a comprehensive understanding of a client's process.

3. Listen to customers. Advises Seavey, "The best way to reinvent yourself is to talk with your clients. In short, the company that comes up with the solutions the customer wants gets the business."

Burton agrees, saying, "Do your homework. You can't just claim, 'I've got this.' Unfortunately, it's not that easy." Listening to customers led Burton & Mayer to offer customers retail signage, fulfillment, and Internet-based ordering. "It's still a tough industry," says Tim Burton. "You can't always recoup your investment costs, so you must be very careful in analyzing opportunities."

Adds Castiglione, "Many printers pursue new offerings based on gut instinct, thinking they know what the customer wants. They won't invest a few thousand dollars to research market needs and expectations, even though they face the risk of many thousands of dollars, even millions, in terms of lost business."

4. Focus on fixing the real problems. Significant and lasting change must address real issues, says Tim Dalton, which means understanding a company's operating structure. He says, "People fail at this because they're not good at evaluating processes and procedures and making changes. Also, there's so much pressure on production that many companies just don't have the resources to assign workers to solve problems."

In addition, he says, company managers tend to fix what they know how to fix, not what needs to be fixed.

5. Brace for endurance as reinvention is not for the faint of heart. Mail-Well, to cite one example, began its reinvention effort two years ago, which ultimately cost $10 million and countless employee hours. "This process is not painless, and it requires constant commitment," Cozart concludes.

Mail-Well developed a system called Vista, which stands for Vision Information Standards and Technology in Action, encompassing a database of 175 standard operating procedures based on a uniform chart of accounts, budgeted hourly cost accounting, estimating, and shop-floor data collection for each of the company's operations.

In all, the Mail-Well network consists of 35 companies, ranging in size from $5 million to $180 million, operating a total of 86 printing facilities.

"We took the time to lay the foundation because we needed a consistent measurement system to serve the wide scope of our customer base," recalls Keith Larson, Mail-Well's executive vice president of sales and marketing. "About 80% of our customers are located within 200 miles of any of our plants, which means we can offer the convenience and flexibility of a local provider, backed by the resources of a large company."

6. Involve employees. No effort will succeed unless employees are behind it, says Andersen, who adds, "We'd never have achieved success without our employees' concern about our customers."

Including employees in the process was key to The Instant Web Companies' effort. Employees were continuously informed via meetings and included in discussions and decisions, reports Andersen. "The hardest part of the process was integrating the three different cultures in place at the various companies. We kept underscoring the point that we were not going to win the commodity game and that change was crucial."

Mail-Well faced a similar situation, says Cozart. "We turned to our front-line employees for help because they're closest to the customer and the process."

7. To ensure sustainable growth, at least momentarily shift the focus away from the short term. Sound like heresy? It may, but the fact is that major changes require a dedicated focus.

"Sales at The Instant Web Companies initially dropped by $7 million, but we planned for it," reports Andersen. "We knew that consolidating and integrating three disparate units would be complex and painful, so we kept our focus on the long term by serving our existing customers the best way we knew how while trying not to worry too much about increasing our sales."