MSP: Path to the Future or Rotten to the Core?

Is your business becoming a marketing service provider (MSP), or is it in the process of dying?

It’s a stark choice, but one you’ve heard before and one being heard incessantly by those trouncing around GRAPH EXPO 2012 at McCormick Place this week.

Our industry is a tough one—always has been; always will be. If you consider the print industry within Porter’s five-forces framework and you’re reading this blog, you’ll probably conclude that you were either born with ink in your blood or you inhaled far too much type wash back in the day and have since become too fuzzy in the head to look up to see the “EXIT” sign.

By way of quick background, Harvard Business School’s Michael E. Porter introduced his “Five Forces” analysis as a practical tool for industry analysis and strategy development, claiming it to be much more rigorous than SWOT analysis. Porter’s forces include horizontal competition, such as the threat of established rivals, the threat of substitute products and the threat of new entrants to the market.

In our business, I’d say the competition is fierce, digital substitutes are growing, and I’ve talked about low barriers to entry in the past—nothing here looks too bright for us printers.

Porter’s fourth and fifth forces are vertical competition and include the bargaining power of customers and suppliers. Given the swarms of reverse auctions and RFI/RFQ mania besetting our industry, customers seem to have plenty of purchasing leverage. Although a lot of consolidation and restructuring has taken place, suppliers don’t seem to have fully gotten their act together just yet, however.

So, four out of five of Porter’s forces probably should be keeping you up at night, thinking about how to shift your business, find market power and exceed the normal returns of the industry. Conveniently, there are technology providers out there feeding you ideas, products and training to help you get there.

And some of this can be beneficial. But it can also be suicidal.

A lot of direct mail printers have quite rightly set themselves along the path of becoming a MSP. This evolution has everything to do with defining the core of your business and outlining a strategy to extend that core in new directions to better position the company for growth and profitability. Typically, this is done by leveraging products, customers or market channels in different ways, while evolving your existing skill sets to address the new landscape.

The thinking behind the MSP evolution is this: if you’re an expert in direct mail, you might be capable of providing expertise in email or social media execution.

Chris Zook, a partner at Bain & Co., has written some fantastic books on “the core.” Here are two of Zook’s major takeaways:

1. Know your core.
2. Ensure the excellence of your core before you extend it.

The first part is simple (or at least simpler), but in defining your core you need to guard against the blind spots that come with self-evaluation. Your suppliers, customers and company board members can offer third-party validation and different perspectives. They’re free and valuable sounding boards.

The challenge in addressing the second point comes from the risk of narcissism and overconfidence. Your assertions of excellence need to pass the sniff test, and you need to correctly define your core.

The ability to follow data instructions and successfully print and mail doesn’t necessarily mean that you can do the same thing for email and social media programs, manage campaign analytics and develop marketing strategies. Nor does it mean that your sales team/channel will be capable of selling those services. And if you miscalculate your core as you extend it, or if you lack true excellence in your core, you’ll quickly dilute it and disappear with the dinosaurs.

When I speak with some vendors, I’m not sure they realize this. Perhaps they do, but they’re trying to extend and grow their current business model. At SPC, our core has certainly moved far away from ink on paper, and we are delivering some of the most complex loyalty welcome kits in the market. But print is still a part of our core, and we’re developing new solutions to make print communications more impactful and successful.

We’re excited to once again have the print community convene in Chicago to celebrate what we do and look ahead to new avenues for growth and opportunities. As we evaluate new ways to grow our business, let’s not forget our core. The perils of this are as ominous as being stuck in time.