The Blueprint

If It Can Be Digital...It Will Be Digital

When Antionio M. Perez was hired as the CEO of Kodak he noticed the offices were full of signs that said "Expand the Benefits of Film".  He asked a room full of film factory workers how many had digital cameras at home.  About 40% raised their hand.  He quickly changed the signs to "If it Can be Digital...It Wll be Digital".

Every industry that had an analog base is moving quickly to a digital base.  If you are in AEC reprographics you are determining how to provide more digital services.  Some are moving towards display graphics because of their competency in wide format printing.  This may be a smart move or may not.  Time will tell.  One thing is certain is that world will go digital also.  If you are providing display graphics you are in the marketing and advertising ecosystem.  

Here is a picture I snapped yesterday in Chicago O'Hare airport.  Notice the sign hanging to the left.  Notice the large LCD screen to the right of it.  I was watching people at a restaurant nearby and I noticed that people were watching the LCD screen.  An LCD screen can display multiple advertisements.  The owner of the screen can charge more money for more frequent advertisements, or more money for certain times of the day.  They could even charge a fee to advertise during certain infrequent and unpredictable events such as a winter storm when everyone is trapped at the airport.  Do you even need the hanging printed sign?  The point to this is as Perez said.  It will be digital.  If you are moving into the display graphics business you should ask the question whether you are going into the display graphics business of the advertising business.  How long will the print business last before it goes to more digital than print.  If you want to play in that market then what staff, skills, know-how, technology, and partnerships do you need to acquire be successful in that business.  

Will Printing Decrease?

Many in the industry are wondering if printing will decrease over the long-term.  I think most believe they know the answer.  I came from the manufacturing industry where we sold software that facilitated a decrease in centralized printing.  We sold document distribution software that was in many ways similar to planroom software.  We allowed end users (or document consumers) in the manufacturing plant to get web browser access to engineering content.  Once they had access to this information they could view it online, order prints from the central printroom or download and print it.  Once our software was installed the traditional processes of ordering prints from the printroom and "pushing" physical engineering drawings to the document consumers decreased substantially almost immediately. This caused a dramatic drop in the amount of printing being done in the central printroom.  So the printing decreased?  Not exactly.

Once the document consumers had more efficient access to the content they were more likely to print it.  There were times when a document consumer just needed to look up a dimension.  In this case they didn't print the drawings.  If they needed the document to do work they printed it.  In fact they printed it, used it, and threw it away.  If they needed the same document the next day they printed it again.  We didn't collect exact statistics on whether the net printing decreased or increased, but there were some undeniable facts:

• Centralized printing decreased dramatically
• Printing on demand increased dramatically (it was non-existent before)

The same trend is happening in the construction market right this minute.  Are you positioned on the right side of this shift?

What Everybody Ought to Know About Market Segmenting

In a previous post I talked about the difference between fidelity services and convenience services.  In the AEC reprographics industry this is mostly divided between design (A/E), and construction (C).

A/E = Fidelity

C = Convenience

For the industry to be successful it is important that the services provided to these two different market segments be differentiated.  They should be differentiated by service, quality and price.  Here are a couple of comments I have heard within the industry over the past few years.

"We don't sell to contractors because they are too cheap."

"I was forced to lower the price with my largest revenue customer [Architect], because he found the price I was charging to another customer [GC]."

"My customer would never accept the quality from that brand printer because they have high standards.  I don't understand how the other guy gets away with it."

"We are losing bids because we just won't lower our price to the ridiculous prices that are being thrown around."

"I can't service the GC's at the cost structure I have in place."

"Those guys don't understand the value we provide."

"I just bought a shop in another city and they were selling the services for too low of a price so we went in and raised the prices to what they should be."

"I can't believe the other guy won a bid at that price.  How can he do work at that price?"

When you take a step back and say what are the market requirements of each of these market segments and are you matching our services and price to those markets?  

Quality - Architects and engineers typically demand high fidelity.  The documents produced represent their work.  They want it to look as professional as possible.  Contractors don't care about the quality.  They just need to be able to read the dimensions and understand what is expected of them.  To satisfy architects you should be producing documents on the highest fidelity 600DPI printers(at least).  To satisfy contractors you could use a lower quality 400DPI printer.

Service - Most companies who service architects and engineers spend a lot of time going back and forth with their customers making sure that all of the required files are present; making sure the right revisions are in place; and sometimes providing proofs to make sure the quality is acceptable.  Contractors usually require you to simply print the documents that they gave you.  There is very little back and forth and double checking.

Price - An architect or engineer is willing to pay more to make sure that their work product is represented correctly.  Since it is their name on the documents they do care about the attention to detail and service that is provided.  They are buying fidelity.  They want a "triple shot, extra hot, no foam, caramel macchiato."  The fact that they are often not spending their own money is also a factor.  Contractors are looking for convenience.  They want the drawings printed quickly and cost effectively.  They are generally not willing to pay extra for the attention to detail, at least as it pertains to quality.  There is value in the content management and revision control, but that service needs to be separated from the printing as they see printing as a necessary evil.  They just want a cup of coffee and they can't understand why anyone would pay four bucks for a cup of coffee!

Those who understand that they are not providing simply printing to the AEC industry, but meeting the unique requirements of specific market segments can find hidden profits.  Those who cannot differentiate between these market segments will be either overpricing their services and loosing business, or underpricing their services and losing money.  Either one means decreased profits.  In some cases you should be lowering your prices and in other cases you should be raising your prices, but you must also describe in detail what the differentiated services are for that price (i.e. resolution/DPI, quality control, turnaround time, etc.).  There are many details to be worked out and expectations to be set or reset with customers.  You also must have the internal process to make sure you can execute.  Sure some say "it won't work in our market".   What's the alternative?

Napster is to iTunes as FTP Sites are to Digital Services

Before there was iTunes there was Napster.  Napster was hugely disruptive to traditional music distribution model.  People getting  away music for free!  Even respectable law abiding citizens were downloading illegal music for free.  It wasn't just because the music was free.  It was convenient.  It was easy to search for the music you liked and get the instant gratification of a download.  At the time Napster came about the next best thing was going to the store and buying a CD.  What if I only wanted one song?  What if I wanted it now?  The cost of distribution was too high to get the song.  The old model was out of date and inefficient. 

Steve Jobs and Apple introduced the iPod and iTunes.  He offered the same convenience for a reasonable price - $0.99 a song.  For that price the law abiding citizens would rather pay $0.99 and be legitimate.  Would Apple have been a successful if they came out with iPod and iTunes before the Napster revolution?  Maybe, but it would have been a lot harder.  Napster created pent up demand.

Many people in the reprographics industry complain about the hidden enemy "FTP Sites and CD-ROM distribution".  Maybe some of your customers didn't find the cost of the convenience of your service desirable so they decided to invest in their own technology.  Now that they have tried to do it themselves are they more or less interested in digital services.  I would argue that many would not go back to the inconvenience of analog distribution, but are disillusioned with the headaches with performing and maintaining digital content distribution services.  To sell your digital services you can't lead with "why printing is better".  You may overtly or covertly get the door shut in your face.  You should lead with how you can perform the services more efficiently and more cost effectively than they can.  There is one important point.  The pricing will have to appetizing.  It has to fit the same buying mode as iTunes.  For example "for $0.99 a song I'm willing to NOT use Napster".  You customer will have to say "based on that proposal we are willing to NOT create CD-ROM's and hosting an FTP site".

Amazon's "Digital Services"

An interesting tidbit from a Washington DC periodical Daily Biznow.  Amazon's first quarter sales are up 18% over last year (close to $5 billion).  Here's what's really interesting.  Now 42% of their revenue comes from electronics such as the Kindle rather than books. 

I posted about an HBR article about Amazon in October of 2007.  Jeff Bezos and his management team's emphasis was on helping customers find the right content at the right price in the format they prefer.  It seems that more people are preferring the digital content.  There are a lot of simularities with the AEC reprographics market.  If you are in the business of only printing there is a limited and declining market.  If you are in the business of giving people choices as to how they get content there is a growing market.  Printing still is the preferred option, but having the choice is important.  

Turbo-Charged Inkjet Technology on the Horizon

Almost exactly two years ago I had a post on the Memjet technology.  It seemed that this technology had promise, but the road from prototype to production is often a longer than marketers and consumers would like.   At the CES show they are demonstrating technology for the office market and make claims that products will be available in mid 2009.  Memjet representatives have been sighted at wide-format tradeshows as well including the IRgA trade shows.  Below is a video of the Memjet technology being demonstrated at the 2009 CES show.

Approaching Infinity

A fascinating interview with Eric Schmidt, Chairman & CEO of Google, on Charlie Rose.  In discussion about Moore's Law Eric says "in 15 years computing power will be 1,000 times cheaper and faster...... I have a grandson.  He will be 18 in 15 years.  He will have all of the worlds information every video, every movie and so forth on a single hard drive.  if he started watching it, he cannot finish watching it in 85 years."  

 

What will your business look like in 5, 10, 15 years and how will these changes in technology change the services you offer your customers?

Google is Charging for Downloads

Google is brilliant at finding ways to monetize the distribution of digital content.  Today they are allowing "partners" on YouTube to charge for downloads.  They are not yet getting a cut from the fees as it is an experiment.  Watch and learn from Google.  There are many parallels to what is happening with the distribution of AEC content and the distribution of music and video content.

It's Not as Far Fetched as it May Seem

Here is a funny video published by TechCrunch showing a 1981 report on the news being delivered electronically.  Funny unless you work for a traditional news paper (i.e. New York Times or Chicago Tribune).

Most newspapers have and continue to hold-on to the old business model.  They have tried to change, but are too reluctant to break with the past.  Most news is funded by advertising.  In the 1980's, the newspaper was a good place to spend advertising budget. Today Google is getting more and more of that budget.  Companies are still spending money on advertising and people are still reading the news.  Its just a different business model.  I personally read the newspaper less and less.  I get more of my news digitally.  I don't think my children will read newspapers.

Imagine a news report recorded today about the construction document distribution industry being shown 20 years from now.  What would people in 20 years find funny?  My 16 year old son has never seen rotary phone (shown in the video).  20 years from now few will remember a diazo machine.  What will the business be like?  What will it be like in 5 years?

Exponential Times...

Mike Duff, reprographer extrordinairre, sent me the following mind numbing video clip.  Below are some interesting claims from the video.

China will soon become the #1 english speaking country in the world.

India has more honors kids than America has kids.

The top 10 in demand jobs in 2010 did not exist in 2004.

1 out of 8 couples married in the U.S. last year met online.

The first commercial test message (SMS) was sent in 1992, today the total number of text messages sent every day exceeds the total population of the planet.

Years it took to reach a market audience of 50 million
...radio 38 years
...TV 13 years
...Internet 4 years
...iPod 3 years

It is estimated that a week's worth of the New York Times contains more information than a person was likely to come accross in a lifetime in the 18th century.

For students starting a 4 year technical degee 1/2 of what they learn in their first year of study will be outdated by their third year of study.

Fiber optic cable bandwidth is tripling every six months and is expected to do so for the next 20 years.

By 2013 a supercomputer will be built that exceeds the computational capabilities of the human brain.