We see equipment and we get excited. With their new technology—turning cylinders, all kinds of devices that deliver brighter colors and higher resolutions—these machines transform us into to six-year-olds on Christmas morning again.
We’re often so smitten by these shiny machines and their capabilities that we forget to ask ourselves a few questions:Do our customers currently buy that capability?
Do our customers need it?
Can we convince them of this need?
We also forget to examine whether we can generate revenue and profit from such investments.
“Buy it and they will come” has long been a popular mantra in our industry. It worked really well through the 1970s and ’80s when print was a dominant industry; one that was healthy and growing. Many of the largest print companies standing today were built using this so-called “strategy.”
The wind started to go out from our sails in the 1990s as the digital revolution swept our industry. Two aspects of the digital revolution had lasting effects:
- new digital communications vehicles emerged that siphoned revenue away, and
- new variable digital printing (VDP) technologies—like shiny Christmas-morning packages—lured printers once again into another buying spree.
Unfortunately, the seeds of change did nothing to alter the printer’s thirst for metal, or plastic as it has now become.
New technology adoption typically follows a set of inflection points that determine its ultimate success. These key points include hitting a critical price point that enables widespread adoption. This critical mass, when achieved, can generate momentum to leverage what economists call “the network effect.” If successful, the technology displaces existing technologies, becomes ubiquitous, and then commoditized, before being put out to pasture to make way for the next generation. It’s the circle of life.
VDP technology providers did a fantastic job not only developing new products, but also selling printers on the necessity to “lead the digital revolution.” Further, they supported printers’ investments with seminars, sales training, and even joint sales calls. So, of course, we printers dove in head-first without giving much thought to the three questions above.
I contend that VDP was commoditized before it was widely adopted by the user base. In much the same way the stock market succumbed to what Greenspan famously described as “irrational exuberance,” so too did our appetite for shiny new digital objects. Prior to the point of critical adoption, our market was already burdened with excess capacity.
Barriers to entry were low, borrowing was cheap, and a swarm of players entered the market. In many instances, the business case was, “This is so cool, it can print my name in a cloud!” Some players may have approached their purchases analytically (I think I heard about someone who is said to have performed a discounted cash flow analysis, but that’s just a rumor I haven’t been able to verify).
Here we are, roughly two decades later, and where do we stand? Some companies have been able to get a return on their VDP investments, and there are fantastic case studies to prove it. PODi and other groups do a great job of organizing these resources and disseminating information.
But overall, we as an industry have failed to realize the technology’s original promise. Many in our industry consider it a loss leader, a “have-to-have” to qualify for the work they really want.
Technologies are converging. Offset and digital are being mashed up into things like four-color hybrid imaging
, and new inkjet systems are challenging the status quo—presenting promises similar to those of two decades ago.
So, how will we all respond this time? Are we as eager to unwrap these new toys, or have we matured? Perhaps this time we’ll ask some questions of our customers, do some forecasting and put together a business case to validate our investment.
We’ve been through the economic collapse this time, so perhaps we’ll be more responsible. Or perhaps our banks, like grown-ups with kids on Christmas morning, will ensure that we are.