Product Diversification and the Digital Print Industry
It’s no secret that the print industry has been struggling for many years, however, it’s a long way from dead.
Decline of an industry
The decline affects not just Australian but also global businesses, as publishers move content to digital platforms and advertising is increasingly driven by alternative platforms and media. And it’s not just books or advertising that are no longer being produced on paper. Newspapers in Australia have been closing head offices and publications almost monthly over the past few years.
A 2016 report into the Australian printing market by IBISWorld placed the industry’s revenue at A$8bn annually and employment at 32,122 people. While this is still substantial, a decrease of 2.3% in annual growth from 2011 to 2016 means a revenue decline of around A$181M.
Challenges for printing
The mere shift from paper to digital is the main – and irreversible – challenge, which affects print service providers more than publishing companies who can rely on other revenue streams. The hardest hit are companies solely providing printed products but not services.
Newspaper groups are often both print service providers and publishers, but waning interest in paper does not always mean clients are losing interest in articles. Business can continue as per usual, albeit with smaller operations as the print presses are switched off.
Rising costs are another major challenge for digital print. New machines come out every year and the competition between Canon, HP and other manufacturers – utilising different inks, stock, run lengths and processing capabilities – creates great opportunities for continuous expansion of products. But they come at a price as these presses are ever more sophisticated and expensive.
Nevertheless, in a well-oiled company with an efficient production department where you can possibly run these printers most of the day, you can turn a profit and cover the lease. But the reality is that most companies relying on externally produced content have cycles and are left with quiet periods. Often too quiet!
Diversification is key
The need to diversify for digital print companies is not new and has been around for a long time. Many print companies are also media companies and offer IT services, media and advertising, alternative content and services – and are very successful at it. If you already ship print products daily, why not create your own shipping company and then start selling shipping services to other industries? If you have a talented bunch of IT staff, why not create a sub-entity and offer IT services?
Many companies have already done this successfully and some of the largest print and media companies in Australia offer all of these services as stand-alone entities, often with the larger group’s branding.
Back to basics
There have been countless articles about the diversification needed for companies to survive by looking for value-added services to become a one-stop-shop for customers.
So why aren’t more digital print companies doing it? Looking at a few case studies over the years, the answer might simply be that we have lost sight of Business 101 and the principles needed for making a business survive.
We know we live in an ever-changing world and the rate of change is rapidly increasing. Technology drives these changes and I think we often get side-tracked by the new world, losing sight of what makes a business succeed. There are the innovative products or entrepreneurial individuals who can make a success of just about anything, but the old business truths often overlooked are ownership and customer service.
Ownership and customer service
These two requirements are as valid today as they were hundreds of years ago. But business unit leaders or management teams often lack the responsibility for ownership (2). Good leaders and managers are needed to set the vision, from which a strategy can be formed.
The process includes constant revision of where you are and analysing the marketplace. For example, do you start offering advertising as a value-added service? If the company decides yes, there will be a range of actions and things to consider. While you might already have leads in existing clients that could form the basis for building an alternative client base, this is often where these plans stop. So the product or service is launched without a plan, strategy and/or ability, and the first client walks away because the product offering is poor. And there goes the second part of business basics – customer service. You have not only damaged the reputation of your new product, but also your existing relationship with a current client.
Completing the plan
Only with ownership and proper leadership can you adequately flesh out your plan: the products you can offer effectively, how to communicate with your clients, your in-house skills, cost structure, risks, cost of ownership of offering this product, required infrastructure, knowledge gaps, what competitors are doing in this space, potential pitfalls, lessons learned by others etc.
By integrating this strategy into the rest of the business you will also be able to analyse opportunities and possible uncomfortable truths about the company and industry. For example, do we have the right cost structures, equipment and products? If you have an existing and constant client base, you may conclude that you should not be trying to deliver the services you are selling. Perhaps you should you become a print management company? In this way, you keep your clients and relationships but outsource the actual printing.
Despite those ideas, concepts and discussions with merit, it is still solid leadership and good business acumen that will manifest the risks and opportunities. These insights will lead to a vision for implementing a strategy to maximise new opportunities.
- Surviving “the Printing Industry’s Perfect Storm”— And its Aftermath;Diversification in the Print Industry
- Hill C, Jones G, Schilling M, Strategic Management: Theory: An Integrated Approach, Cengage Learning, Jan 2014