Thursday, March 01, 2007
PrintForecast Sold to WhatTheyThink.com
The formal announcement will be on Monday, March 5.
You can access the audio of my recent interview of Randy Davidson where we talk about WhatTheyThink's acquisition of Electronic Publishing, PrintPlanet... and my new role. http://members.whattheythink.com/home/wttnews070305.cfm
My industry blogging will move over to PrintCEOblog.com and also a special blog being set up on the WTT page that will be devoted to the new Center. http://www.whattheythink.com
The free newsletter, PrintForecast Perspective, is being discontinued. The podcast PrintForecast Contrarian View is being reformulated and redesigned for delivery at WhatTheyThink. At this time, the format that we will use has not been determined.
This is quite an exciting time for WTT. For years, I believe, what has been going on there has been underestimated by the industry old guard, and it's building up quite a brand, reputation and business. I have been pleased and honored to be part of that, first with "Fridays with Dr. Joe", since moved to Mondays, the economic webinars, and the GraphExpo and Print events. I was dragged kicking and screaming into the Internet by my then business partner Jim Whittington, and I have to say... he was more right than he even suspected at the time. Now that WTT's base is over 50,000, it's quite the industry heavyweight. I'm excited to be part of it.
Thanks so much for your support for PrintForecast Perspective.
Thursday, February 08, 2007
Why Telling Businesspeople to "Embrace Change" is Meaningless
Its corollary is “change or die.” The advice does little to improve businesses or improve businesspeople. We will die whether we change or innovate or not. We're sorry to break the news to you this way, but it was the only free newsletter we were sending you at the time. When you choose to embrace something, it also means that you can choose to let it go. Whatever you embrace does not necessarily become organic to the organization. It is just embraced. What kind of value can it have if you can choose to let it go?
They must be telling us to embrace change for a reason. What is the goal of this advice? It is to have businesses, their owners, and managers, recognize that they are in a dynamic marketplace. The advice assumes that they are ignorant that marketplaces change, even though the signs of change are all around them. Because the marketplace is dynamic, managers need to be constantly aware of how those unstoppable forces create opportunities, make current products and methods obsolete, and more importantly, affect their customers and prospects. They already know that. Can you imagine an industry seminar or event that was promoted as "Come to find out how our industry will stay the same"? People read industry magazines, visit web sites, go to trade shows and seminars precisely because they are concerned about change.
The advice is also myopic and not as generally applicable as it sounds. There are things that should never change. Strong financial controls. Good employee recruitment and relations. Emphasizing long-term and sustainable profitability. Performing your work well. Understanding your costs. Knowing your customer's needs and goals. A reputation for being reliable and trustworthy. Change? Why would we want to change these things? What kind of change is it that we are supposed to be “embracing”?
Many small and mid-size businesses were started by owners who had a particular vision for themselves and their businesses. Over the years, circumstances, market forces, and trends, affected the nature of that vision's implementation, and the owners navigated them accordingly to their capabilities. Eventually, the business looks nothing like it did when it started. That's good... that's because it changed. For businesses to survive three or five or ten or twenty years, it had to be able to confront change. Telling a business person to “embrace change” is like telling them to “embrace breathing.”
The central process that businesspeople use to navigate the marketplace is planning. Too often there is a regular admonition about the inability of printing businesses to plan, but nonetheless they manage to survive and outlast the seminar programs about planning and the people who admonish them. Planning in small businesses tends to be more culturally-based and transmitted by actions, not by documents. The issue becomes whether or not that culture can detect changes in its customer prospect base and its overall market, and profitably adapt. It's not whether or not it embraces change. Planning is a process by which we prepare for anticipated changes to our businesses, customers, competitors, and the marketplace. This is why it's so important to conduct the planning process effectively.
Business owners deal with change every day. They hire salespeople to go into the market with the job of changing the ingrained purchasing habits of their new sales prospects, and are willing to make changes in their business to accommodate the new customers. An employee quits; a new employee joins. A customer is gained, an old customer goes out of business. New equipment is purchased, old equipment disappears. Remember, we're the industry that went from letterpress to offset to digital, from hot type to cold type to desktop publishing, from black & white to process color to digital color, from press proofs to off-press proofs, to digital proof. Name the function, it's changed.
A problem arises when managers ignore the changes around them or are not sufficiently tuned into how those changes might affect them. The issue is not whether they embrace change. Not a single manager or owner whom I have ever met does not want their business to change, to be more successful, to be more efficient, or to satisfy its customers better. To want things to improve is to want things to change. Yet, sometimes managers have a deaf ear to the marketplace or even to their own business. This is not a problem with change. This is more a problem with the ability to detect change or the ability to create change.
We should not misdiagnose a lack of desire for change as an inability to embrace change. Desire for change always needs to be accompanied by capital and knowledge. Managers and owners are faced by so many options that it is usually hard for them to choose, and that is always complicated by other considerations of people, customers, timing, and other resources. Some business owners may seem to lack the desire for change, but what they really have is an inability to know what changes to implement, why they should be implemented, and may not be able to gather the needed resources and people. Some of these owners know that the cards for change are stacked against them, and for that reason decide to hold on to their business as long as they can until things turn in their favor, knowing full well that such circumstance may not happen.
What is the right advice? It's definitely not to “embrace change” because businesspeople deal with intended and unintended changes every day. The right advice is to make sure that whatever planning process is employed, even if the most informal, that it is more robust than it was before and is capable of detecting change sooner and point to the best long-run options for a profitable and proactive response. That planning process must include good controls and the ability to act decisively to be sure that the desired results are attained. No one should be creating opportunities that satisfy your customers' emerging needs other than you. If your planning process does not enhance your ability adapt to a marketplace and provide renewable and superior value to your customers, then it's not worth planning, or being in business, at all.
Embrace change? Sorry. We're business people. It's part of everything we do.
Thursday, February 01, 2007
In Creative Destruction, the Media Reports only the Destruction, Especially About Itself
Challenger, Gray & Christmas, the company that compiled these data, is not responsible for the context of how it eventually gets reported. CG&C is a famous outplacement firm that handles searches for the world’s biggest companies, and its top executives. Years ago, they started to track announced corporate layoffs. That is, any time a major company would report downsizing activities, it would track them and issue a press release. It brings them great publicity, and they use it very well, supplying talking heads for all kinds of news broadcasts. In this case, there were “17,809 job cuts, up sizably from the 9,453 cuts announced the prior year, according to the job outplacement tracking firm.” The press automatically went into sky-is-falling mode.
Let's look at the real data, compared to last year:
- excluding newspapers, publishing employment is up by 12,000, according to the Bureau of Labor Statistics
- total publishing employment including newspapers is essentially flat, up about 700 employees
- ad agency employment is up by more than 11,200
Blame technology, desktop publishing, the Internet, aging of the workforce, or whatever. This is the creative force in “creative destruction” and it's never reported in the media at all. Markets are a constant give-and-take of growing and declining trends and businesses. When growth occurs in small businesses, or in the “new economy,” no one seems to notice, though the figures are just fascinating.
Self-employment and microbusinesses trends in other content-creation businesses is booming. Between 2001 and 2004 there were 16,000 more self-employed and microbusinesses in advertising, and 29,000 more in design services. Of course, some of these people might be considered unintentional entrepreneurs, but if this kind of employment is rising at the same time payroll employment in these industries is also rising. This is a sign that for most of these workers, being self-employmed or in a microbusiness is now the manner to which they have become accustomed.
More astounding is that when we compare this kind of employment to the total number of employees, self-employment in publishing was 7% of the publishing workforce in 2001. By 2004 it was 9%. In 2006 we estimate it was 10%. By 2010, we expect it to be 12%.
In graphic design, the percentages are even more eye-opening. Employment in microbusinesses or self-employment began to outnumber payroll employees in that industry starting in 2000. In 2004, there were 40% more designers in freelance mode than there were in payroll mode. We expect that this number will continue to grow.
In the end, it seems like lots of these jobless publishing folks are finding jobs in their own publishing industry, and often a different corner of it. One company’s layoff is someone else’s new hire. Remember, these employees can also exit the workforce, change industries, but usually end up working for a smaller and more nimble company in the same or related industry. Many of them, it seems, become self-employed.
This is a longer term trend that started in the 1990s; it's not new at all. People who follow “big media” or live in that environment have to come to terms with the creative part of creative destruction, and realize that it's the bad news that is no longer newsworthy. The revolution has started without them.
Planned Media Job Cuts Up 88% in 2006
creative destruction (in the first paragraph)
Thursday, January 18, 2007
What Will 2007 Hold for Printing Shipments?
Every day, we review forecasts, and sometimes we joke there are often more forecasts than there are real data. There is one aspect of forecasts that continually befuddles us: the “consensus forecast.” This means that someone has taken all of the forecasts that were available and averaged them together. If there were true consensus, the forecasts would not have to be gathered in the first place. And if forecasting was something important, why would one want to average a bunch of bad forecasts together hoping that something good would come of it. One can't make a good stew with tainted meat and rotting vegetables.
Forecasts that are statistical in nature use historical data to forecast the future. The data are just numbers that resulted from business activities at a particular point in time. The conditions of that time are probably different than what will be in the future. While all trends have historical roots, it is much too simplistic to just extend past trends into the future. There's something comforting about “predicting the past.” It ignores that marketplaces, in the long term, are dynamic. There is one benefit, however.
When in high positions, executives can find it difficult to distance themselves from the daily heat of the corporate battle. Some managers fall into a habit of assuming the last thing that they heard was correct and was the most important thing they will hear affecting their business.
For that reason, having a statistical forecast of trends that might be embedded in one's business or market ensures a sense of detachment required for good planning.
PrintForecast.com runs three different models on the industry shipments data series we maintain. One is a straight-line model. Another detects seasonal patterns. Yet another fits an exponential curve equation to a data series. They are nothing more than arithmetic exercises, no matter how sophisticated they seem.
By constantly reviewing the literature of the markets that feed communications demand, such as what is happening in direct marketing techniques, publishing, advertising, graphic design, photography, telecommunications, broadcasting, and other fields, one arrives at a general understanding of what is happening in our industry today, and what forces will impact it in the future. It's easy to let the hyperbole of technology and its marketing affect forecast decisions. Again, including a basic statistical forecast in the process helps one to better understand the issues.
Good forecasts require a combination of approaches, but someone, sometime, has to put a stake in the ground and proclaim what the forecast is.
Our forecast models for 2007 show three scenarios. For comparison, this past year's inflation-adjusted shipments will be about $91.4 billion. Model 1 estimates that shipments in 2007 will be $92.9B. Model 2 says $92.7B. Model 3 says $82.3B. We can say with great confidence that all of the models will be wrong. But that's the first step.
Models 1 and 2 have formulas that more heavily weigh the recent past than distant history, just like that executive who values the last thing that was heard in a casual hallway conversation. Model 3 has a longer term view, and in light of the past five years trend, and not the last five months, forecasts more pessimistically—about -11% less than the other two forecasts. The consensus of the models would be $88.6B, if one takes comfort in that. It almost sounds reasonable.
So what forecast should one use? $91.4B? $92.7B? $82.3B? $88.6B? All of them. A company needs to prepare itself for whatever the marketplace can hurl its way. Knowing that Model 3's forecast of an -11% decline in shipments is part of the mix should create a process of asking and answering hard questions.
We should also remember that not a single statistical forecast produced in 2000 would have projected a scenario of industry shipments decline as it actually occurred. Any planning exercise should include the possibility of a totally unlikely industry scenario. Sometimes that's called disaster planning. No, it's part of any thorough planning process, not just disasters.
What's the official PrintForecast.com forecast? $89 billion. Any resemblance to the consensus forecast is purely coincidental. It's actually where our dart landed.
Thursday, January 11, 2007
Industry Consolidation: Not as Simple as it Looks
If prior consolidations were primarily waves of generational or monetary exuberance, today's are generally defensive. There is a desire for synergystic retrenchment, as businesses combine, eliminate redundancies, cherry-pick equipment and personnel. These mergers do not contain an ingrained desire to create new markets or new opportunities or to ride new waves of demographic, economic, or technological change. They are a search for ways to adapt familiar tools to a confusing marketplace.
Big name consolidations are how the other half, or more accurately, the other five percent, live. The rest of the industry consolidates by the forces of the marketplace. Printing businesses go bankrupt; or, they close one business, and join another printer in a new venture; or, they close up shop and become print brokers. Trade typographers closed and became desktop publishing businesses or service bureaus or graphic design studios. This small business turmoil does not get much attention, but it is of greater volume and frequency than most realize. Department of Commerce data consistently show in the range of 3,000 print businesses closing and 2,000 print businesses opening every year for more than a decade. These are not “newbies” to the printing industry, these are signs of an industry that is always restructuring itself, under the radar. The bulk of these businesses are long-time industry workers and owners closing one business entity and starting another, cleaning up their financial and marketing sins, believing that a fresh start with a new partner or in a new place or with a new name, and better yet, a new strategy, will keep them in the printing game where all their experience resides.
We've often used the old phrase “things take twice as long and cost twice as much” when describing market adoption of new products to our clients. The same holds true for the synergies companies announce at the times of their deals. The fog of enthusiasm later becomes impatience.
As far as “big” consolidations go, Harvard professor Michael Porter offered an interesting observation years ago, based on his research. More than half of all acquired companies fail, and end up being divested or closed about five years later. Consolidation has risks, and they are beyond the normal risks one encounters in day-to-day business. Many of the mergers are financially successful after a short time, but do not have a strategic resilience to them. Getting things re-organized dominates strategic thought, not the marketplace. There is a point where all the rewards of balance sheet clean-up and reconfiguring are essentially complete. Then there's the next step: facing a changing marketplace with a winning long-term strategy. Sometimes that's two years or so into a merger before it gets properly addressed, and often the company gets sold again to someone else who can supply a strategic base when the financial gurus jobs are complete.
By consolidating, companies add significant transition risk to their businesses. These do not appear on their financial statements, but the results of the unmanaged risks do. An indecisiveness invades the business, especially among middle management who are unsure of their own jobs, but unsure of the strategies that guide their decisions. Is it the strategy of the acquiring company, do they follow the guiding principles of their prior company? Or is there a new strategy based on the assumed strengths of the new combination.
Indecision and lack of resolution often costs more than making bad decisions. Bad decisions are obvious, but their cures are just as obvious. Lack of clarity from top management, however, is corrosive, and only feeds informal political structures that do as they please until someone tells them otherwise. Fear of making bad decisions in front of new management only makes things worse.
There are other transition risks. These often materialize as undone work, customers ignored, new initiatives that are delayed, executives unavailable to direct their workers because they are tied up doing transitional "things." New budgets, new forecasts, and especially, new staffing plans take time away from running the business.
Transition also creates upheaval among the employees...many of them leave and go to competitors. This is good and important, from an industry vitality perspective, as many of them go to smaller companies. While it's hard to shift from working for an industry behemoth to a smaller company, these employees often do well there, bringing a level of experience that the smaller companies could not normally attract. Many times, they bring customers. Because management in merged companies cannot give their employees immediate straight answers about the viability of their jobs, they will start looking for employment elsewhere. Often, it's not that management doesn't want to give a straight yes or no answer about the jobs of their underlings...it's that there are no answers to give at that particular time. The managers themselves may not even be certain about their jobs.
Transition uncertainty also weighs on the customers. It's hard to have employees, concerned about their jobs, working with wary or confused customers.
How does one deal with this? Starting out with a vision for what that newly merged company looks like in a marketplace at least five years from now, and then directing the reorganization toward that end. If cuts are coming, better to make them swift and hard so that the new business gains a footing, even an uncertain one, early. There's nothing worse than a constant parade of "black Fridays" where people look in their check envelopes for the legendary pink slip. Providing timetables with goals reduces some of the anxiety that can undermine productive work. Admitting mistakes, or even admitting that there will be mistakes, certainly helps. Getting the focus off the company and onto the clients and the competition is essential. For that, speaking and acting with clarity and decisiveness is necessary. When your own company is in upheaval while navigating a changing marketplace, the presence or lack of management talent becomes evident. Is your business up to the task?
Thursday, November 30, 2006
Reader is Skeptical of Printers Getting into New Media, and with Good Reason
Ray Roth of High Volume Printing magazine sent this note:
“...I can't envision very many commercial printing companies making a profitable leap into video and e-book production. The answers to success and increased profitability for a majority of midsize and large printing companies is much closer than a video editing room. In fact, for the last several years, GRAPH EXPO and PRINT visitors have had an opportunity to see first-hand demonstrations of practices and processes that not only are closely related to what they currently do but also command significantly higher margins than a typical print job. Although PIA/GATF, NAPL and GASC blow their horns about large-format printing and mailing and fulfillment, too many printing companies turn a blind eye to these opportunities. Besides the nice impact these services can provide to a company's bottom line, most printing companies already have customers that [are] buying these services from another source. Until I learn otherwise, printing companies are better off fulfilling more of their customers' needs with additional services more closely aligned to what they presently do.”
Ray is absolutely correct from a printing business perspective. The print business must continually innovate in its core business. Printers are not in control of market prices, but they are in control of their costs, hence the need to emphasize productivity and new ways of approaching the marketplace that changes costs and creates new benefits for clients. In the longer run, however, the print business owner has to deal with the realities of marketplace demand. There is a time when the core business proposition no longer provides what clients desire, and those businesses die and are replaced by others that do.
This is what separates owners from entrepreneurs. Let's assume that the advice given to printing businesses to define themselves as being in the communications business is fully correct and in the spirit of Ted Levitt's classic Marketing Myopia. (It's not, but let's assume that it is). There, Levitt implores business leaders to define their businesses broadly. The famous example is that railroads were not in the railroad business, that they should have defined themselves as being in the transportation business. If one believes that redefining a business requires allocating resources to back that up, then one must insist that these businesses invest in the technologies and capabilities of the innovations that will put them out of business.
The skills and business knowledge of a print business owner are directly tied to what they know best. This is, like all specialized knowledge, a blessing and a curse. The blessing is that the knowledge and experience is what uniquely suits them to run a business well at a certain time and place. The curse is that those skills and competencies exist in a changing environment. Railroads would not have been competent at running airlines, even though a reading of Levitt suggests that railroads should have seen the airline opportunity. Investor Warren Buffet has cited that even airlines can't run airlines, with his famous quip that “any right-minded capitalist who had seen the Wrights' contraption take to the skies in Kitty Hawk might have shot it down and saved investors 100 years of agony.”
All executives have a core technical competency that makes them excel at what they do; and all of them find the need to change and hire people or buy companies with different competencies because of marketplace change. But there is never a guarantee of success in this endeavor. So the skepticism that printers can handle a leap to video is well-founded. In fact, straying into odd businesses can lead to the risk of starving the healthier core business of needed capital investment, and that should not be taken lightly.
So the thrust of the close of the piece was not to encourage abandoning print and making a rush to video embedded in e-books or whatever the future holds. Instead, it was intended to inspire a look at the technologies and dynamics of the communications business as it unfolds. There are many new media products that require a mastery of graphic implementation for which print experience is an excellent foundation. The print business that can offer a communicator the ability to deploy content in various channels will still often be, in its heart, a print business. Over time, those new abilities would open new markets and new customer bases that could be built on top of that foundation, ensuring its long-term survival.
“More Print Than Not”
Tuesday, November 21, 2006
More Print Than Not
Desktop publishing is more than software, it's a series of connected events that make Moore's Law so interesting. It's the incredible decreases in prices and sharp increases in capabilities of equipment that have made it so. A $1000 scanner is almost considered “high-end” in today's digital photography world, and has features and capabilities when combined with modern software that are far more capable than a $200,000 scanner of 1980. The range of equipment has certainly expanded. A 5-megapixel camera can often be found for less than $200. A 1 megapixel camera in the 1980s was $25,000 and was virtually limited to industrial applications.
These changes are small compared to the destruction of barriers to the costs and time involved in content creation that they caused. Designers just used to design. They'd need a prepress practitioner to translate their work into print, and the costs involved seeded the market conditions that would make desktop publishing explode, and be taken for granted today. Of course, it needed an enabling platform, and that turned out to be the Mac, introduced in 1984 to great fanfare. I remember sitting in on an interview with a big New York ad agency in 1990 that saved $100,000 in typesetting costs their first year after adopting desktop publishing.
There were other transitional aspects that proved interesting. Designers who used desktop publishing found that their clients were getting confused. Desktop publishing output of job mock-ups created to test ideas or layouts looked like they were almost final. In the past, clients were given drawings and sketches, often colored using markers, so it was obvious that they were getting ideas-in-process. Now they were getting output that looked final, and would start nit-picking fine design issues or complaining about text kerning, when it was too early in the process to even consider those items as the final concept had not even been settled yet. Designers had to be careful. Other designers found that their ability to create near-final mock-ups quickly was actually landing them jobs. As clients were auditioning a parade of designers to work on a new campaign, the ones that showed up with near-final looking mock-ups rather than rough drawings and sketches appeared to be more skillful, thoughtful, and time-efficient. Because pitching a new client was risky, the amount of time and effort to allocate to prepare for a meeting had to be carefully weighed. Clients felt that because the designer took the time and the effort to make the mock-ups was a sign of their potential commitment to the project. The fact that the desktop published images looked “more final” was a competitive advantage against “traditional” designers. In fact, those desktop-produced mock-ups were produced in far less time. Some designers used the “extra” time to produced mock-ups of yet more alternative approaches for the prospect client.
Printers and typographers had similar experiences. A typesetter found a simple solution: output work in process on blue paper just to remind clients that what they just received was not final. Clients were used to getting bluelines as proofs in the past, and this was a subtle message that the desktop publishing output at that stage was similar. Just think, however, that a job had to go all the way to film to even have a blueline. Jobs took time, and time was money, and things took twice as long and cost twice as much as expected, too often.
By the time the project got to the blueline stage, the supposedly last round of changes and revisions were identified and approved. Then the final proofs would come in, with yet another reminder of how much further changes would cost in time and dollars, and those would be substantial. Author's alterations could become contentious as to who's fault it was, client or printer, but good printers prided themselves on how they always had signed-off proofs at each stage of the process. They could charge appropriate rates to go back and restart the work or augment what had already been done. Some older typographers would claim, privately, that author alterations were half of their billings, and the most profitable part of their business.
These topics are brought up now, because it is often assumed that non-print activities comprise more of the print shipments dollar than ever. This is now part of the industry's common wisdom. It is clearly not true to anyone who can remember all of the time and monies clients would have to spend just to enter the print process at all. All of the camera work, paste-ups, mechanicals, proofs, scans, more proofs were not billings for ink-on-paper, even though that was usually the job of printers. Because desktop publishing has extracted the equivalent tasks from the printing industry and put them in the hands of designers and non-printers, it is actually more likely that ink-on-paper actually comprises a greater part of the value of commercial print shipments than ever before. None of the “value-added” services that are frequently discussed in the business come close to the costs of design, production, and other prepress that were naturally embedded in all print billings of the time.
When one studies the productivity of the industry, there is a curious crossover period in the 1990 area. Prior to that time, our industry's productivity exceeded that of other manufacturing businesses. After that, it has been consistently lower. It is not a coincidence that significantly improved versions of Adobe PhotoShop and Illustrator hit the market at that time. The loss of high-margin prepress tasks is something that the industry still seeks to economically replace. Most of the “non-print” or “value-added” billings that are regularly referenced in today's industry literature and publications do not have the same economic impact, nor the reliable flow of daily revenue.
So here it is more than 20 years later, and we're still feeling the effects of Aldus PageMaker, even though the product has long ago been replaced by QuarkXpress and Adobe InDesign. Desktop publishing is now such a natural part of the printing business one wonders what we would do without it. There would be no digital printing without desktop publishing, and neither would there be computer to plate systems, except in the most extreme circumstances.
But what's next? It's clear from Adobe's recent acquisitions that video, especially mobile video is at the top of their to-do list. We may not think that holds any future for us, but e-books with embedded video have to be created, produced, and managed by some business entity. The management of images and design elements that work in media of all types have to be coordinated as well. These were all at the heart of that old prepress business, but we didn't know it at the time. That workflow that we had, and the trade practices that were built around it, was a barrier to the creation of print jobs. Desktop publishing smashed that barrier down, reducing production costs and creating a more flexible and richer creative environment, despite the obvious and notable problems with standards and consistency it had, and essentially solved, along the way.
Economists sometimes refer to what happened as “creative destruction.” That's a strange phrase, in light of our industry, as desktop publishing's creative destruction elevated the capabilities of creatives to the point where once sophisticated and costly prepress tasks are now almost thoughtless mouse clicks. It actually created more creatives. There are more creative businesses, workers, and freelancers than before. More is expected of designers, in terms of their skills and creativity, and their access to imaging technologies, than ever. It's our task today, as entrepreneurs and an industry, to find where the next opportunities of creative destruction will be, and lead their charge.
Desktop publishing revolution background
1984: Apple's Super Bowl commercial announcing the Mac
background on “creative destruction”