Stivison–Are the Barbarians at the Gates?

The pressure today is for CEOs to generate big numbers, quickly, or be replaced by somebody who promises faster results. This inevitably encourages short-term thinking and zig-zags in business direction, at the expense of building long-term strength.

But the quest for short-term profits has not panned out. In fact, the industry’s financial numbers have been disappointing. Despite the overall economy’s bull market, the printing industry has recently seen a NASDAQ stock delisted, and the PI/Compass 30 Stock Report shows the printing industry significantly underperforming against the Standard & Poor’s 500 Composite. Forgetting comparisons with other industries, the vast majority of our leading companies are performing significantly below the levels attained by their stocks last year.

Folks are scrambling for explanations and there are no comfortable answers. The firms “right-sized” and redesigned processes years ago. They achieved “critical mass” through acquisitions. They put in new technology infrastructure and enterprise management systems. They rationalized their supply chains. Why, then, aren’t the stocks of more commercial printers doing better? It can’t all be attributed to the individual CEOs, because the pattern cuts across so many firms as to qualify as an industry-wide trend.

In many cases, the problem is not lack of sales. Generally, sales are up. Could the problem be as simple as unrealistic expectations? Could it be that the profit projections based on assumptions of new critical mass, economies of scale and new technologies were simply unrealistically optimistic? Could it be that if a few major competitors all go on an acquisition spree—or all adopt new technology—at the same time, that no single firm leapfrogs the competitors? Could it be that all the process redesign and new technology have only bought a new, albeit higher, level of competitive parity?

There is a genuine risk that rather than acknowledging which expectations might have been unrealistic and simply need to be adjusted, that too much effort will be squandered looking to lay blame. Worse yet, effort and money will be squandered trying to fix something that isn’t really broken. Often, the easiest and most visible fix is a new CEO.

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