WEEK 07

COMMERCIAL PRINTING

Overview: The structure of the commercial print industry is being radically transformed by the forces of industry consolidation. This trend towards consolidation is fueled by the twin impacts of technological convergence and aggressive overseas cost competition. But the strategic uncertainties facing the industry mean that any form of prediction about the future is likely to inaccurate.

The structure of the commercial print sector is changing

The structure of the commercial print sector is rapidly being transformed. There is increasing consolidation of medium sized print businesses in order to enhance the benefits of higher equipment utilization rates and to spread the risk of high capital costs of plant and equipment. Equally, to protect relationships with customers, dedicated commercial printers are also being required to satisfy short run digital printing requirements. This conflict between offset printing (mass manufacturing) and digital printing (mass customisation) has the potential to reduce the ability of commercial printers to focus on core competencies and business strengths. On top of this, the commercial print sector is reeling from the impact of global competition especially from countries with significantly lower labour costs. 

Private equity companies are likely to exacerbate current trends

In response to these developments, there has been an expansion of dedicated print management organisations that are establishing a one stop shop for customers to procure all types of print, including mail-house facilities. Some of these are being leveraged through the use of private equity companies. The use of such equity to consolidate print related commercial activities could have a significant impact on the commercial print sector at three different levels; consolidation of distribution, consolidation of procurement and consolidation of printing itself. The impact of private equity companies in the industry is likely to drive costs down further. Overseas procurement of print collateral could become a key feature of such strategies.

The strategic uncertainties facing the commercial print sector are considerable

There are significant uncertainties facing the industry all of which could have serious impacts on the commercial print sector. For example, some industry players have raised the question whether the introduction of a carbon emissions trading scheme might reduce the competitive position of non-local printing (if the cost of carbon is factored into the transport costs). Or, perhaps new technologies will be invented that will reduce the volume of paper based substrates (such as the use of e-ink technologies). These uncertainties and the threats and opportunities that arise from them are all real.

The challenge is to contribute to customer success

To protect their competitive position, commercial printers have to continually and creatively find ways of ensuring the value of their business is not perceived purely as a run to the bottom on costs. In a high capital intensive industry, this is not easy to do. A core ingredient of success is to deliver service offerings that become more vital to the communications value-network functions of their customers. Commercial printers need to show how they contribute to the success of their customers, other than by simply providing services at the lowest possible cost.

Close person to person relationships are fundamentally important

Development of close customer person-to-person relationships may be key to understanding and delivering what the customer wants. Many customers may be happy to hand over the entire problem area to a business that genuinely understands the customer needs and the variety of technological needs to address them. Printers need to build on their existing client relationships.

Clustering and value networking offers a way forward

The only way to develop effective developmental strategies in a mature industry such as the commercial print industry is to search out and apply new knowledge applications. Most often this can only be done by undertaking networking functions beyond the level of each organisation. No one organization in its own right can develop solutions to problems that result in sustained re-positioning of an industry. Strategies that involve network exchanges between a cluster of organisations are most likely to deliver the benefits required to transform old business systems and structures. This might require businesses to completely reconceptualise what business they are in and what value they can offer to customers in a new world.

KEY IMPLICATIONS

• The structure of the commercial print sector is likely to change in the coming years with more entry of private equity companies likely to result in continued consolidation and convergence of technologies on less paper and more electronic deliveries.
• However, addressing problems of cost competitiveness in a mature industry like commercial printing can only deliver partial solutions to the problem of profitability and sustainability.
• The strategic uncertainties associated with the commercial print sector mean that making business strategy decisions based on future predictions is not likely to be a successful strategy. The uncertainties will increase rather than decrease in complexity.
• The only way to address these types of challenges is for commercial print organisations to form value network entities that lead to data, information and knowledge sharing between organisations
• From such networking functions new business opportunities are most likely to emerge. There is no way of predicting what might emerge, because emergence of new opportunities can only arise from the networking functions and not from any pre-determined view about what is most likely to deliver benefits.