Arriving in Boston

After a long delay, I arrived at my hotel at about 2am this morning, and was leaving for the OnDemand show by 10:30. I felt pretty good despite the travel and weather, and was really looking forward to it. I was not disappointed.

The Digital Print Podcast

After spending a little time on the show floor, barely enough to get disoriented, I participated in the podcast that Xerox hosted on various issues surrounding digital print. It was a pretty good time, though it was a bit journalist heavy. There weren’t any printers there. Still there was some interesting dialog.

It was less than an hour long – a bit short I thought – so the answers to Gavin’s questions were kept short. Some major items that shook out were whether or not printers had to become “solutions providers�? who did way more than print in order to survive. Some said yes, others said printers had to concentrate on doing what they did best. I think the truth is that all printers will have to adjust and find new things to be good at, but they won’t all have to be good at everything.

There was also discussion about how pricing tactics among quick printers were very destructive, and they need to learn to price on value (along with learning what value it is they provide) and thus preserve that value. Otherwise they are going to live a life of pricing torment.

There was a lot of other discussion, and you’ll be able t hear the whole thing at In The Balance.

Xerox lays an egg with second life

I was at Xerox’s very swanky get together this evening at Fenway Park. On the quality of the outing as a whole, Xerox gets an ‘A’. No cost cutting or schmaltzy efforts to make things seem fancier than they were, and quality goods all around.

But, the press conference was a different story. First Mr. Firestone delivered a pretty typical speech about the blah blah blah about their products. I don’t mean to be negative about Xerox here, all speeches of this type are too detailed and lack really grabbing value statements that connect with people. Hence the blah blah blah. Lots of companies do it, usually because they employ people like me who feed them a lot of detailed stuff and they just pass it on to the masses.

The rest of the presentation was in “second life�?, a virtual world where avatars in a virtual world were purportedly interacting with Xerox equipment. It was actually more like a spoof of a spoof of faculty put on by a bunch of middle school nerds, actually put on by baby boomer nerd wannabes. The characters were not flattering, the script was stilted, and overall the effect was very, very poor.

The consensus between Adam Dewitz, Frank Cost and I was that if they’d hired a few 14 year olds they could have saved a bundle and had a funnier show. Maybe a giant dragon pooping out Kodak logos or something.

On the bus back to the hotel, I ran into a Xerox guy who explained that the point of the presentation was to poke a bit of light-hearted fun, not to be a cutting edge marketing masterstroke. In that it succeeded somewhat, but it still felt like old-media people clumsily using new media.

[UPDATE] I spent some time the next day with Xerox’s PR folks, and learned some interesting stuff.

So tomorrow I have the day to look at the show and learn what’s new.

Digital printing is growing very rapidly, and it’s getting a ton of buzz in the print community even though despite huge growth the overall business is still quite small. Most people I talk to believe that digital print will overtake everything eventually, the question is how long it will take.

Our president, Karl Fritchen, raised an interesting point the other day. Apparently, the digital press folks have chosen the office copier business model when it comes to toner. That is, the press manufacturer supplies the toner and the customer has to buy it from them. This is way different than ink, which is sold by entirely separate companies. Naturally the printing company doesn’t want to be stuck with a single source, so they are resisting this business model. They want the offset/gravure/flexo model where consumables are sold by many companies, and they retain more control. Off hand, I don’t blame them.

But is innovation the real product of the future?

More and more, it seems that innovation is the real product of the future. It isn’t good enough to make a great product, you have to keep improving it. Open source software is a great example of this. The software is free, but it still produces revenue streams for people who implement it for customers, maintain it, etc. Offhand you might think that really the customer is paying maintenance, but really they are enabling the continuous innovation of the product. Even proprietary software usually involves a maintenance fee to ensure upgrades, and really, isn’t that fee paying for the development of the upgrades?

For those who don’t innovate, someone will duplicate the functionality of their product, either illegally as an exact copy or legally as in ways that don’t violate IP laws, and offer it for a lower price. They can only retain their share through attempts at rights management (see Sony) or by innovating fast enough to maintain their superior value.

And remember, software companies have pretty low incremental cost for each copy shipped - the cost of goods sold. Think about hard goods and their costs of goods sold.

The “big iron” style printing presses don’t evolve that rapidly. The technologies change, but not at the pace of higher tech products. So the model of investing in a new design, and then selling copies has worked. Enough copies of a design can be sold to pay for the development. But, are digital presses closer to software? I’m no expert on digital presses, but I do know that there is a tremendous amount of technical wizardry that sits between my pdf file and a printed piece of paper, most of it existing as software in one form or another.

But how do you pay for that innovation?

I remember an R&E Council meeting a long time ago - 1999 maybe - where Harry Quadracci ranted a bit at the manufacturers. He was upset because we’d given printing nothing really innovative or new. Not enough money was being spent on R&D, and because of that printers had no new equipment worth buying. I think he was right.

So, if software companies can’t really afford to keep developing new products without ongoing maintenance revenue, and they have very low costs of goods sold, how are the folks who make equipment doing it? Especially when more and more of that equipment has complicated computerized control systems that run on software? If you take the consumables revenue from these companies, which almost certainly is where a lot of their income comes from, how will they fund development?

The nice folks at Xerox have invited me to attend an event they’re hosting at OnDemand. It’s a roundtable/focus group about what will be important to commercial printers and their customers when it comes to the transition to digital. About a dozen folks from the industry will be there from various backgrounds. I’m really looking forward to it, and discussing issues like this.