Transformation Affects Everyone—Time Is Not on Your Side!

After the recent PRINTING United event in Dallas, it is now evident that the importance and timeliness of business transformation is not just for service providers—it is also for hardware and software manufacturers. In my recent interview with Gavin Jordan-Smith of Ricoh, you can hear and almost feel the direction that many equipment suppliers are beginning to take to prepare themselves and their customers for the future. The most important thing to realize is that as technologies and markets change, the speed at which a company addresses transformation can position them as a leader or laggard going forward. Examples of this can be seen in these two formerly leading companies, both with roots in Rochester, N.Y., grappling with their transformations while their customers are having to do the same.

Kodak

Kodak was once synonymous with Imaging. In fact, it once was a “Kodak moment.” As things began to change, they were slow to recognize and transform. In 1997, Kodak had a market cap of almost $30 billion. Today it is about $118 million, a significant reduction. Their transformation truly started around 2005 but was in full force in 2012 when they filed for Chapter 11 bankruptcy protection. Ultimately, with the delay, this became a very hard transformation which included many cuts and even the selling off of their flexo group, now known as Miraclon. Today, Kodak is beginning to show signs of stability and new life. This good news is a result of the receipts from this sale, the resultant debt payoff and the appointment of Jim Continenza, as executive chairman and CEO, to lead the transformational rebirth going forward.

A few early indications of this shift are starting to surface. First, Kodak is starting to view their print divisions, both Inkjet (EISD) and their Nexpress group, as a more unified offering instead of competing as independent groups. Additionally, Prinergy, their flagship workflow software which was getting long in the tooth, is apparently being updated along with a move to the Microsoft Azure cloud as their new Prinergy VME (Virtual Machine Environment). Each of these steps on its own is fairly significant, but viewed as part of the whole is an indication that a positive transformation with an eye on growth is on its way, and I am sure there are more exciting things coming.

Xerox

Once the leader in digital printing, Xerox had a similar market cap of about $30 billion in 1997. Their transformation to date has been a little more strategic, gradual and less destructive than Kodak’s. Their transformation started in earnest with the acquisition of ACS in 2010 and subsequent splitting off of the rebranded Conduent services business in 2017. They recently announced that they are selling off their interest in the 57-year-old FujiXerox (FX) joint venture. Xerox will receive $2.3 billion for their share of FX; that’s almost 28% of their pre-sale market cap ($5.7 billion), bringing them up to almost $8 billion. 

This new move is significant for a number of reasons. Fujifilm, as a part of the longstanding relationship, has supplied many enterprise and entry level production printers to Xerox. The agreement of sale with Fujifilm does include some arrangements for future exchanges of both equipment and IP. What they will do with that windfall, however, could determine their leader/laggard position going forward. As an aside, considering the June 2019 announcement that Xerox and HP have “an expansion of the companies’ business relationship” could help mitigate the effects of a fading Fujifilm partnership, even if there isn’t a merger. With the recent discussions of an HP acquisition by Xerox—or vice versa—considering the Xerox current market cap is about 30% of HP’s value, it would be an interesting but not impossible challenge and transformation.

In these two cases, if you look at the difference in market cap changes in the two companies between 1997 and today, you can see where the more strategic and timely transformation of Xerox to date has had its obvious benefits.

These are only two supplier companies. However, many, if not most, supplier companies are affected by the market changes. For example, most of the digital printer and MFP manufacturers like Xerox, Canon, HP, KM, Ricoh, etc..., are also affected. They are all having to find new revenue sources to replace the increasingly declining clicks on those machines as enterprise and business customers move to more digital communication workflows. They are also seeing a need to expand their product lines to include production inkjet devices, and software connectivity to support a more holistic workflow environment. How quickly each of them addresses their transformation, will dictate their position going forward as well.

So how do you transform your company to address the market changes? The longer you wait to acknowledge the new market realities, the harder it will become to transform your business. In the end, cutting costs can bring you to short-term profitability, but strategic transformation can bring you profitability, and more importantly, growth for the long term. Is it time to transform your business?

More to Come …

I would like to address your interests and concerns in future articles as it relates to the manufacturing of Print, Packaging and Labels, and how, if at all, it drives future workflows including “Industry 4.0.” If you have any interesting examples of hybrid and bespoke manufacturing, I am very anxious to hear about them. Please feel free to contact me at [email protected] with any questions, suggestions or examples of interesting applications.