The Blueprint

Selling Uptime

In response to my previous post a couple people inquired about "selling uptime" for printers.  If you are placing reprographics devices in an FM uptime is important, but since the devices tend to be used occasionally it my be difficult to sell this concept.  Customers expect the device to be up all of the time.  If it isn't it is a problem.

In a production environment reprographers accept that equipment will be down for repairs or for standard maintenance activities, but since a reprographer depends on the availability of these machines to make a living uptime is critical.  For this reason, most companies have "backup machines".  The problem with backup machines is reprographers tend to have more equipment than they need.  This leads to underutilization and more space requirements.  This is good for keeping printer factories running, but not necessarily running a profitable reprographics company.  I'd be curious if major airlines had backup planes before engine manufactures such as Pratt & Whitney and GE Aircraft Engines started selling uptime?

Some companies that service their own production equipment claim that they have more uptime than OEM service.  I've never seen any statistics to support this, but they have more direct control over how they manage their resources.  From what I have seen the best practice for self servicing equipment is to focus more on preventative maintenance rather than fixing a machine when it breaks.

If I ran a company whose core business is servicing equipment in an increasingly competitive market...I would start selling device uptime versus standard monthly service contracts with no performance guarantees.

Solutions to Escape Commoditizaion

In a previous post I mentioned a Harvard Business Review article on "Strategies to Fight Low Cost Rivals".  There was an excellent example of a company that escaped the commoditization trap.  Orica traditionally sold explosive materials such as dynamite.  When they were faced with aggressive price competition from low cost providers they changed their business from selling quantities of explosives to removing quantities of rock.  They combined their products, their expertise and a value proposition that fit their customers real needs.  Selling dynamite satisfied Orica's needs, removing rock satisfied their customers needs.  Customers wanted to remove rock so they could build bridges and roads.

In a previous life I used to sell products to companies that manufactured durable goods: construction equipment, machinery, military equipment.  We saw some interesting models developing:

• Jet engine manufactures went from selling engines to engine up time for airlines.
• Ship builders went from selling ships to selling the transportation of goods from one location to another.
• Makers of industrial refrigeration equipment went from selling temperature differential per cubic meter.

Every one of these industries sold product but there was a service component.  They grew their expertise on the service end and stopped selling products.  They started selling exactly what the customer wanted in a value proposition that they understood.

How does this apply to the AEC Reprographics market?  That is the million dollar question.  The companies that can figure this out and transform their business can escape the commoditization trap.

I don't have the answers, but here are some ideas:

• Instead of selling printing and delivery - why not focus on the volume of content, where it needs to go and how fast it needs to get there?
• If you are selling printer service, why not sell printer up-time (probably more valuable in a production environment than an FM)?

Whatever direction you take there will always be objections and problems.  That doesn't mean you should continue your pursuit.  I'm sure when Pratt & Whitney decided to start selling up-time instead of engines there were lots of people who said it couldn't be done.  Now that is the standard in the industry.

Planning Horizon

I attended a Gartner Group conference in 2000 where presenters were talking about a "planning horizon".  How far out can you predict what will happen in your market and how will changes affect your business.  People were saying 12 to 18 months was a good planning horizon back then.  I believe this was inflated by dot-com hype, but one thing is certain.  Changes in the market aren't slowing, they are accelerating.  I would challenge anyone to accurately predict what will happen in the market more than 24 months out.  When you make changes in your business or long term commitments you need to ask "What happens if significant changes come about 24 months from now?".  "If I make an investment will it pay for itself in my planning horizon?"

Invitation to Start a Relationship

In the last couple days a reprographer was questioned by an owner on additional "digital services" charges.  These services were comprised mostly of indexing and document management fees (no DWF conversion fees).  The architect on the project is supportive of the services being offered.  The owner has invited the reprographer and the architect to a meeting to explain in detail these charges.

Is the reprographer worried?  Absolutely not.  He is excited to have the opportunity to demonstrate the value his company is providing for these fees.  He is also prepared to remove the fees, but also remove the services.  His firm is prepared to provide only traditional "repro" services, but knows the owner want more than just printing.

He and the architect know the value provided by these services.  They are also prepared to site specific examples of how these services save the owner money and ensure a more efficient construction project.

When you get such a call, your first reaction may be fear that you will lose the job.  You should see it as an opportunity to have a conversation about the valuable services you provide and why it is worth every penny to the owner.  If handled right this conversation could lead to a valuable business relationship.

Value Based Pricing versus Cost Plus Pricing

Most reprographers not only print construction documents but they also ship them.  They either take their customers preferred courier account number or use their own overnight courier account to do the shipping and then bill it back to the customer.  I have found that in most cases around the globe the reprographer determines the cost of shipping and bills that back to the customer with a markup (or they negotiate discount from the courier).  In many cases the reprographer puts the method of delivery, including the name of the courier company (FedEx, DHL or UPS), on the invoice.

I believe this practice marginalizes the value provided by reprographers.  It furthers the believe that the value reprographers provides is simply "dots on paper".  Reprographers get the right content to the right people when they need it.  This is very often lots of content to many people in a very short period of time.   This is a specialized business.  I don't see it as "printing".  I see it as construction content logistics.  Putting "dots on paper" is a small part of the value provided.

If you are providing this valuable service to the customer why should it matter how it gets there.  They are outsourcing this service to you because of your specialty.  Reprographers make sure it gets done right.  If you find innovative methods of getting it there more cost effective (i.e. digitally sharing work with other locations, or sharing with partners) that is your prerogative.  You can choose to keep the profits or pass them on to your customers as savings (or both).  The only thing that should matter to the customer is:

1. The fact that you meet the expectations set (i.e. the right information gets to the right people on time)
2. The price you charge for the service is as good or better than the next best alternative (i.e. What your competition would charge or how much it would cost to do it themselves)

How you get it done is your business.  You should not take customers courier account numbers.  This adds additional cost while taking away from profits.  You should not show on your invoices what service you use.  It shouldn't matter as long as you deliver on time and the price for delivery is competitive.  If you digitally distribute content to an office closer to the point of need and print it locally you should still charge an overnight (or even same day) fee for getting there.  It is your right as a for-profit business to utilize technology to find more cost effective and innovative methods of meeting your customer's needs.

Fonts and A Road Less Traveled

It is easy to follow the leader or do things the way they have always been done.  When we take a different path we can experience things that we would have never experienced if we had maintained the status quo.

This is exemplified by Steve Jobs in a powerful story told in a Commencement Speech at Standford University.  Steve tells the story how he dropped out of college, but decided to keep taking some courses.  He didn't drop out because he didn't want to learn.  There were other factors that affected his decision.  He chose to take classes he enjoyed rather than the classes he was previously required to take.  One of the classes he took was calligraphy.  Ten years later when Apple was designing the Macintosh (the "Mac") he decided to incorporate fonts into the design of the Mac.  Microsoft soon followed Apple's lead with the Windows operating system.  Fonts became a norm in operating systems.

If Steve Jobs hadn't taken a road less traveled and dabbled in calligraphy, we might not be using fonts on computers.  At the very least, the introduction of fonts would have come many years later.  For those of you who struggle with fonts in your business - you may have wished Steve Jobs didn't take calligraphy.

You never know how taking a different path will affect your future, but if you never take a road less traveled you are certain to maintain the status quo.