III. Business Model adjustments
As Charles Darwin put it first, and best: “It is not the strongest of the species that survive, nor the most intelligent, but those most responsive to change.” That’s an important principle that underlies every natural process on this planet, including industry evolution. In our industry, that means it’s not just the big players who will survive. Any printer who is to survive has to respond to change in our marketplace, and many have already glimpsed a way forward. Value-added services offer the promise of higher margins and additional revenue growth. As value-added services will make up an increasingly larger part of printers’ revenues, printers are transforming themselves into business communications service providers. Of course, the transformation is only worthwhile if we do not give away those services for free. Many of us still have a tendency to think “I’m getting a large volume on this job, so I’ll throw in the services.” But we should not be shy to sell services, even if we are not used to it. That’s how IBM makes money today.

So we have to change our business models to sell what our customers are now looking to buy. Is it simply print? Or is it confidence in their documents, or improved marketing communications to reach their consumers?

We have to take the traditional supplier role of anticipating our customers’ needs one step further – we need to know where consumers, the customers of our customers, are heading. Once we know that, we take on the role of trusted consultant, of partner. We become indispensable, able to accompany our customer at more touch points in their supply chain as we evolve along with them.

At Transcontinental, to better assume our role as a consultant and partner, we’ve developed our market-team approach. We divide our sales representatives by market sector – for example road maps and atlases, or educational books – so that they can become experts in that market, advising clients of industry trends and consumer tendencies.

That’s just one example of a value-added service that we hope will strengthen and cement our role as marketing advisor and business partner to our customers, whether they are corporations, publishers, or major financial institutions.

Now, if we’re going to build our services rather than our size, that growth is going to centre around talent.  In the end, all business operations can be reduced to three words, people, product and profits. People come first. A printing company isn’t presses and telephones; it’s pressmen, sales agents, and everyone else who helps you advance the ball.

So if you’re going to spend money on your company, spend some on the people you pay to get the job done. Empower your employees to think for themselves, report on their contact with customers, help you eliminate inefficiencies and see opportunities. Empower your leaders to encourage that input, coach their direct reports for success, and improve your processes. Empower your company to think like its customers and grow organically alongside them.

But those points could apply to almost any company. Turning to print, there are two issues I’ve observed in my 15 years in this industry that are particular to it, and have been my pet projects to overcome.

The first is that up until maybe five years ago, it would be fair to say that the salesperson was the point of contact for the client and determined the pricing of print jobs. That meant that one person, the salesperson, often made more money than the company on a particular job. That’s crazy!

Today, more and more, the customer belongs to the company, not the salesperson. Although they continue to be very important, salespeople do not own the customer. If a company is to grow – and grow profitably – it will need to have multiple points of contact at different levels of the organization with customers, to reinforce the service relationship.

The second observation I’d make about this industry is the mentality I call “build it and they will come.” That is, buy the presses and finishing equipment, then fill it later with print jobs. That has been a major driving force toward the overcapacity and pricing pressure we’re experiencing today. When times get tough, such as they are now, the thinking is “lower prices to keep the presses running – at any cost.” We all know – or if we didn’t already know, we’re learning fast – that nobody wins in a price war.

So how should we try to apply the new business model, the printer-as-partner approach, especially in the current climate of extreme pricing pressure? At this point I’d like to share three thoughts on how we try to apply this model at Transcontinental.
 
Number 1: We don’t lower prices by adding capacity. That’s skirting the problem and directly making it worse. Instead, we replace presses with more efficient machines – that is, we spend money to save money – without adding capacity. In several recent cases, we’ve replaced two or three older machines with one new, more efficient one. But we’ll wait until we need more capacity before adding it.

Number 2: We help our customers with their workflow, so they can cut their costs internally or, in some instances, outsource part of their work to us. We now do a lot of premedia work for our customers.
And Number 3: We develop, then offer customers more printing and value-added services, so they deal with fewer suppliers and get a lower, aggregated price from us. The more touch points in their supply chain we have, the more indispensable we become.

Conclusion
At Transcontinental, we’ll be unveiling a new business project in November, the continuation and extension of the Horizon 2005 project we launched back in 2001. Because I’ve spoken frankly and honestly today, the new plan will reflect, as much as possible, what I’ve talked about here, with the ultimate goal of adapting to our new business environment in print as well as in our print media operations.

But beginning Phase 2 of Horizon 2005 doesn’t mean we think we have all the answers. In fact, it is an admission that we don’t. I told you at the top of this speech that over 550 years into this industry we’re still learning and adapting. The important thing is not just to recognize the issues, but to find solutions to those issues and then execute, execute, execute. If much of what I’ve said today seems like old news to you, you’re already ahead of the game. Congratulations, and I’m sure we have something to learn from you.

At Transcontinental we hope and believe we’re on the right track, and we’re willing to take the risks involved to execute our ideas, to turn our beliefs into action. I am sure many of you also have great business plans and are doing the same. And as you do so, never forget that every company, no matter how big or small, is a work in progress.