For the past year and a half, Madison Advisors has been tracking and reporting on the fact that the enterprise market is shifting away from traditional, paper-based communications to alternate channels — including web, email, intelligent voice systems and short message service (SMS). In addition, we've been working with large print service providers (PSPs) to guide them in understanding what this shift means to their business and how their strategy must change if they want to be positioned for the future.
Recently, I participated in a strategy session with a major provider in which the discussion centered on how to grow its printing business. Looking at the overall market for communications and information delivery, this provider saw the same trends that we have been reporting — print is on a long and steady decline as the medium of choice; the print industry's capacity far exceeds the market's needs; and price competition continues to erode margins and growth opportunities.
In discussing ways to address this challenge, we heard a refrain that has become common in all our discussions with PSPs: "But printing is our core competency. That is what we do. We're good at it," and "What do we need to do in order to continue to drive our presses?"
These three statements, and the question, lie at the heart of one of the industry's greatest challenges.
In his book Dealing with Darwin, high-tech business consultant and author Geoffrey Moore (Crossing the Chasm, Inside the Tornado) uses the phrase "Core and Context" to describe the dilemma a business faces when its core competency no longer serves to differentiate it. In short, Moore's thesis is that no matter what your core competency, or your perception of it, it is the context of the market that determines its value.
In a commoditized market, value becomes equivocal to price, and the ability to differentiate a company from its competition slowly erodes to simple economics. Print service providers (PSPs) are caught in this dilemma today, and for the past several years, Madison Advisors has been advising our service provider clients on the need to shift from the PSP model to a marketing service provider (MSP.)
Many PSPs have adopted the language of MSP or customer communications management (CCM) in their branding and collateral. The challenge is that their self-image, their value proposition and their core competency all revolve around print. When they talk about value, they talk about print. When they talk about new services, they talk about them in relation to print. When they talk about expanding, they talk about adding more print devices. Yet, print no longer differentiates them from the competition.
That's a bold and provocative statement, but it's true. With few exceptions print has been totally commoditized. If it weren't, PSPs wouldn't be scrambling for margin in a declining market, fighting excess capacity being sold at marginal cost.
For those of you in the business, the answer is that you must develop core competencies other than print. You must develop or purchase strong competencies in IT. You must develop or purchase strong competencies in service delivery and integration. You must develop or purchase strong competencies in campaign strategy, planning and execution. In short, you must become a true marketing service provider. Above all, you must develop a sales staff than can understand and embrace the larger value proposition, connect with clients and position you as a partner that brings real value well beyond print.
Services such as multi-channel campaign management, list acquisition and analytics, integrated campaigns with email, pURL-driven sites, QR codes and mobile devices are now competing for your clients' dollars and for the attention of their customers. You must fully understand these channels, evolve services to embrace them and extend these services into your clients' operations with portals and other web-based tools to make it easy for them to connect with you.
Print will not disappear, but it will never again drive the communications value chain. It will be just one of many delivery channels that serve as the final stage in a fully integrated set of strategy, data, IT, creative and production/delivery services.
You can no longer afford to wrap your identity around print, and the change must go deeper than simple branding. The market will not be kind to those who talk about communications but, at their core, are still just printers.
TERRY FRAZIER [terryfrazier@madison-advisors.com] is a principal analyst with Madison Advisors, an advisory firm that specializes in print and electronic communications. He provides project-based advisory services designed to assist clients with business strategy and technology selection decisions. For more information on Madison Advisors, visit www.madisonadvisors.com.
