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Dickeson--Becoming a Model Student

May 1999
Lotta talk these days about the business "model." Entire industries and individual enterprises are being driven to reconsider their operations and to make major changes in their functions and methods.

Nowhere is this more prevalent than with those businesses directly confronting the Internet phenomenon, such as booksellers, travel agencies, auto dealers, stock brokerages and so on. And now printing companies, also, should review their long-standing business model.

Already, supply-chain linkage—where demands of the publisher pass to paper and ink suppliers, to printer, to color separation and to distribution list maintainers—is now under study by a few printers.

Demand/supply shortening via the Internet will alter the old supply chain model and promote the "just-in-time" model. Communication definitions and standards are developing that will enable publishers, mills, list houses and printers to anticipate their needs and requirements. Precision in communication is a first, positive step in changing the supply model.

Some printers are already moving away from emphasis on capital investment in press hardware to digital front-end equipment for receiving and processing art, copy and layouts to proofing. From proof approval, those printers proceed directly to plate preparation, without the use of silver-based film. This modification of the front-end process model has been gradually occurring over the past decade and gains momentum daily.

Need for Customization
With the proliferation of the shorter and shorter run lengths needed for customization of publications and catalogs, the prime emphasis of the older model is moving away from press. It's being diverted to the "back-end" of the process: binding and shipping.

Attention must now be directed to process manufacturing controls of makeready, unplanned stoppage delays and raw materials waste. Press-rated gross speeds, as an investment driver, are no longer the dominating consideration as they were in the past.

Thoughtful printers are also calling into question many facets of the time-honored financial model of the printing business, reconsidering the wisdom of investing capital and time resources in an industry with over-capacity, an environment that competitively drives pricing down to yields of 4 percent (and less) of profit on value-added after tax.

As the result of mergers and acquisitions, the old model of family entrepreneurial management is passing from the scene. "Family" is giving way to "corporate." But many are discovering that corporate model printing is a mixed blessing. Although decisions are more objectively (at least, less subjectively) made, decisions also get submerged in internal political games and personal power objectives.

The current acquisition and merger mania is reminiscent of the late 1960s, when conglomerates pasted together disparate businesses with stock swaps. Most of those marriages failed in the '70s and '80s, when anticipated synergies didn't materialize and cash ran out.

Have we, in printing, learned from that history lesson—or are we doomed to repeat it? Will acquisitor companies slash mid-management personnel at the acquired companies to reduce overhead cost? If not, whence comes synergy? Central sales force? Or centralization for what is a collection of custom service/manufacturing enterprises—addressing a wide gamut of markets, of customer needs—lacking threads of compatibility?

Where there is homogeneity of market, process and product among combined companies, there well may be cost-reducing purchasing, managing, marketing and sales synergies. Where commonality is lacking among combined companies, it is difficult to grasp the effectiveness of the conglomerate model envisioned.

The Pricing Model
Most certainly we must review the "mark-up" model of pricing the conversion service that we provide. It is obsolete. Commercial printing is not a "commodity" manufacturing activity. We're not engaged in wholesaling or retailing books, business forms, inserts, brochures and magazines.

Commercial printing is now a conversion SERVICE, not a manufacturer of proprietary shelf items. The new model must focus on the value-added, customized service being supplied. The old model directed concentration to internal "virtual" costs for price determination. The new model directs pricing consideration to a) the customer-perceived value added, and b) alternative media and competitive price constraints.

Henry Ford stuck with his Model T even in the face of technology and market changes. His Model A came too late to protect his earlier market dominance. The message of history is clear. We're in a time of near revolution in marketing and technology. We must adapt our models. The alternative is unacceptable.

—Roger V. Dickeson

About the Author
Roger Dickeson is a printing productivity consultant based in The Woodlands, TX. He can be reached via fax at (281) 419-8213 or e-mail at roger@prem-associates.com.
 

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