Thursday, July 27, 2006
What Will Commercial Printing Look Like in 2008? 2011?
For the past two weeks, subscribers to PrintForecast Contrarian View were provided with a review of two dissimilar forecasts created by our proprietary forecasting models. Using the broadest measure of the number of commercial printers from the U.S. Department of Commerce, one forecast shows today's approximately 35,000 establishments declining to 28,000 by 2011; the other shows the number of establishments remaining about the same.
Forecasting models come in a variety of flavors. Some are very conservative and minimize historical changes and develop an average forecast. Other models, however, place significant emphasis on the most recent trends. The two models we used for this exercise occasionally result in surprising consistency; there are often two paths to the same destination in forecasting. Other times the models will produce markedly divergent projections. Understanding how they got there is quite revealing. The scenarios were presented to PFC-CV subscribers in greater detail and analysis over the last two issues.
But here are the highlights for 2011:
Forecast Scenario 1: 28,000 establishments, $66 billion in shipments
Forecast Scenario 2: 35,000 establishments, $53 billion in shipments
They are quite different, and they are both legitimate statistical forecasts. Neither of them will be right, most likely. The examination of alternative scenarios, however, is an important element of a beneficial strategic development process. No one can accurately forecast the future with great certainty. Most times, future trends are clear but the timing is not. The way management prepares itself to deal with changes in the marketplace is to create scenarios of differing market conditions and to think them through, company function by function. This aids in the creation of a robust strategy that can withstand market uncertainties. It also allows management to develop contingency plans that they can implement at the appropriate time.
Among the questions that this exercise can help explore are...
How many sales people do we need?
Do we need branch offices?
How aggressively do we pursue new markets?
Do we have to change our product mix?
Is it time to consider a merger with another company?... among many other strategic options.
The first forecast projects a decline in the number of small (<$2 million in sales) and mid-size (between $2 and $10 million in sales) establishments, and only a negligible decline in large ones (>$10 million in sales). Because most industry shipments are from large plants, the decline in establishments is somewhat mitigated. Overall shipments, however, are about 30% lower than today.
The second forecast projects a significant downsizing of the industry with large and mid-size establishments shrinking to become small and mid-size businesses. This is not so unrealistic considering the kinds of printing technologies that have become available that significantly reduce the amount of production staffing, especially important as costs need to be restructured in what will likely continue as a hostile environment for print demand and print pricing that demands significant productivity enhancement. Did we say hostile? A 40% decline in demand would definitely earn that category.
In coming weeks, we'll be taking PrintForecast Contrarian View subscribers through our thought process that leads to a final forecast of the commercial printing market. Whether you are a printer or supplier, understanding alternative scenarios and what they mean can lead to a deeper understanding of the industry, your business, and the strategic challenges ahead.
Forecasting models come in a variety of flavors. Some are very conservative and minimize historical changes and develop an average forecast. Other models, however, place significant emphasis on the most recent trends. The two models we used for this exercise occasionally result in surprising consistency; there are often two paths to the same destination in forecasting. Other times the models will produce markedly divergent projections. Understanding how they got there is quite revealing. The scenarios were presented to PFC-CV subscribers in greater detail and analysis over the last two issues.
But here are the highlights for 2011:
Forecast Scenario 1: 28,000 establishments, $66 billion in shipments
Forecast Scenario 2: 35,000 establishments, $53 billion in shipments
They are quite different, and they are both legitimate statistical forecasts. Neither of them will be right, most likely. The examination of alternative scenarios, however, is an important element of a beneficial strategic development process. No one can accurately forecast the future with great certainty. Most times, future trends are clear but the timing is not. The way management prepares itself to deal with changes in the marketplace is to create scenarios of differing market conditions and to think them through, company function by function. This aids in the creation of a robust strategy that can withstand market uncertainties. It also allows management to develop contingency plans that they can implement at the appropriate time.
Among the questions that this exercise can help explore are...
How many sales people do we need?
Do we need branch offices?
How aggressively do we pursue new markets?
Do we have to change our product mix?
Is it time to consider a merger with another company?... among many other strategic options.
The first forecast projects a decline in the number of small (<$2 million in sales) and mid-size (between $2 and $10 million in sales) establishments, and only a negligible decline in large ones (>$10 million in sales). Because most industry shipments are from large plants, the decline in establishments is somewhat mitigated. Overall shipments, however, are about 30% lower than today.
The second forecast projects a significant downsizing of the industry with large and mid-size establishments shrinking to become small and mid-size businesses. This is not so unrealistic considering the kinds of printing technologies that have become available that significantly reduce the amount of production staffing, especially important as costs need to be restructured in what will likely continue as a hostile environment for print demand and print pricing that demands significant productivity enhancement. Did we say hostile? A 40% decline in demand would definitely earn that category.
In coming weeks, we'll be taking PrintForecast Contrarian View subscribers through our thought process that leads to a final forecast of the commercial printing market. Whether you are a printer or supplier, understanding alternative scenarios and what they mean can lead to a deeper understanding of the industry, your business, and the strategic challenges ahead.
Thursday, July 20, 2006
Before You Start Planning for 2007...
It's summer and the printing industry is in its seasonal slow period, so printers and suppliers executives and managers are often on vacation or keep light schedules. Soon that will change. Many companies on calendar fiscal years are about to start their budget and planning process for 2007.
I've always found it interesting that companies will use the words "budget" and "planning" as if they are interchangeable. I've asked printers and suppliers "do you have a plan?" and then they tell me about their budgets, and nothing else. While budgets reflect how resources will be expended, they do not explain the reasons behind the deployment of those resources. These need to be expressed in words. Budgeting alone is not enough. Without a good planning process, companies, especially small ones, often get into a habit of working on an incremental basis, going from problem to problem, opportunity to opportunity, and don't have a true plan which is especially needed for businesses today.
Now, I'm not one for those bureaucratic processes that some companies call "planning." It's often a process of filling in boxes on papers with numbers created to get through an approval process, rather than the result of an introspective and proactive process. Planning sometimes includes the writing a high-sounding mission statement that no one really cares about. These are easily recognized because they include words like "mutual," "environment," "community," and uses the words "profits" in a manner that makes it seem like a secondary objective, or even less than that.
Most small businesses do not need a sophisticated plan; one sheet of paper will do. The owners of small business always have their reasons for being in business well-etched into their heads. It's more that others in those businesses need to know why things are done the way they are done. These small business owners must be sure to display that plan in the open, for all to see. Many family companies don't do this, and when they need employees to rally around their company, employees wonder "why do they talk to us only when they are in trouble?"
All plans are based on assumptions, and sometimes what was a reasonable assumption at an earlier time will not be at another time. When it doesn't make sense, change it; just don't fall into the "strategy of the month club." That can only make things worse.
In larger companies, the planning process sometimes becomes intensely political. Not that politics in organizations is bad, because those informal structures called "politics" are often quite efficient at getting things done, and must be there. Effective companies have strong political infrastructures that are directed toward shared goals. That's one reason why some companies do better in crises than others.
I'd be worried when politics goes bad, and includes the denial of obvious realities, the promulgation of odd expectations, or the underestimation of competitive action. All of these get companies into trouble. "No, you can't put that number down," I've heard in planning meetings, "because Executive X has already promised that it would be Y% higher." "Competitor A just underprices everything," I hear, only to find out that Competitor A makes money at those lower prices, and has managers who are decisive and are great implementers of tactical actions.
Many companies fail to separate goal-setting and true planning. They're not the same. I've seen too many situations where sales people are given high goals and told to "make it happen," only to find that they have no resources and no training to do so. Worse yet, that impossible Herculean performance was put in the budget as fact.
Basically, budgeting focuses where dollars go over a fixed, and relatively short, period of time. Yes, even five years is a short period of time in the history of a company. In a greater sense, planning documents determine where something more precious than money, time, will be expended, by whom and for what reasons. Time, it has been said, is the only non-renewable management resource. Once it is lost, it is gone forever. Planning exists not because dollars are scarce, but because time is scarce.
Go into planning for 2007 with these concepts in mind: the difference between budgeting and planning, and the difference between planning and goal-setting. They all work together, but confusing them only creates problems greater than any plan can solve.
I've always found it interesting that companies will use the words "budget" and "planning" as if they are interchangeable. I've asked printers and suppliers "do you have a plan?" and then they tell me about their budgets, and nothing else. While budgets reflect how resources will be expended, they do not explain the reasons behind the deployment of those resources. These need to be expressed in words. Budgeting alone is not enough. Without a good planning process, companies, especially small ones, often get into a habit of working on an incremental basis, going from problem to problem, opportunity to opportunity, and don't have a true plan which is especially needed for businesses today.
Now, I'm not one for those bureaucratic processes that some companies call "planning." It's often a process of filling in boxes on papers with numbers created to get through an approval process, rather than the result of an introspective and proactive process. Planning sometimes includes the writing a high-sounding mission statement that no one really cares about. These are easily recognized because they include words like "mutual," "environment," "community," and uses the words "profits" in a manner that makes it seem like a secondary objective, or even less than that.
Most small businesses do not need a sophisticated plan; one sheet of paper will do. The owners of small business always have their reasons for being in business well-etched into their heads. It's more that others in those businesses need to know why things are done the way they are done. These small business owners must be sure to display that plan in the open, for all to see. Many family companies don't do this, and when they need employees to rally around their company, employees wonder "why do they talk to us only when they are in trouble?"
All plans are based on assumptions, and sometimes what was a reasonable assumption at an earlier time will not be at another time. When it doesn't make sense, change it; just don't fall into the "strategy of the month club." That can only make things worse.
In larger companies, the planning process sometimes becomes intensely political. Not that politics in organizations is bad, because those informal structures called "politics" are often quite efficient at getting things done, and must be there. Effective companies have strong political infrastructures that are directed toward shared goals. That's one reason why some companies do better in crises than others.
I'd be worried when politics goes bad, and includes the denial of obvious realities, the promulgation of odd expectations, or the underestimation of competitive action. All of these get companies into trouble. "No, you can't put that number down," I've heard in planning meetings, "because Executive X has already promised that it would be Y% higher." "Competitor A just underprices everything," I hear, only to find out that Competitor A makes money at those lower prices, and has managers who are decisive and are great implementers of tactical actions.
Many companies fail to separate goal-setting and true planning. They're not the same. I've seen too many situations where sales people are given high goals and told to "make it happen," only to find that they have no resources and no training to do so. Worse yet, that impossible Herculean performance was put in the budget as fact.
Basically, budgeting focuses where dollars go over a fixed, and relatively short, period of time. Yes, even five years is a short period of time in the history of a company. In a greater sense, planning documents determine where something more precious than money, time, will be expended, by whom and for what reasons. Time, it has been said, is the only non-renewable management resource. Once it is lost, it is gone forever. Planning exists not because dollars are scarce, but because time is scarce.
Go into planning for 2007 with these concepts in mind: the difference between budgeting and planning, and the difference between planning and goal-setting. They all work together, but confusing them only creates problems greater than any plan can solve.
Thursday, July 13, 2006
The Money's in the Making
For decades there has been a concern about the graphic arts business attracting new workers to replace those who leave, but more importantly, to ensure that the industry is vibrant and innovative. One of the indicators of the attractiveness of an industry to workers is the wages that it pays. The printing industry often competes with its own print - buying customers for new workers. That is, many young workers find themselves choosing among industries such as publishing, advertising, graphic design, and printing. Now that the 2004 industry wage and salary data have just been released by the Commerce Department, we have a more current look at what those workers see. We dug into the historical industry data and we came up with some interesting findings.
We took the average wage for all workers in the broadest grouping of the printing and creative industries and adjusted them for inflation to make historical comparison possible. Since 1988, the first year that data are available to us, the average industry wage in the creative markets has gone up about 12%, while pay in the printing industry has gone down slightly. The best year for creatives was 2000, where the increase compared to 1988 was up to 17%, at the peak of the Internet bubble. Printing wages barely moved at the time.
Historically, the average creative wage is typically 50% higher than the average printing wage (binding and finishing workers wages keep the average print wage down, most likely). From 2001 to 2004, however, the difference in the average wage of a printing employee and a creative employee had crept up to 57%.
Content creation markets pay more, a lot more, plain and simple. The question is whether or not this is even relevant. Content creation businesses are vastly different than job manufacturing businesses. The nature of what is done is not always comparable. The skills of the employees are quite different. Sure, there is occasional overlap, such as the need to use desktop publishing software, and administrative tasks, but the essence of the businesses are not the same, and that is reflected in their overall structure.
During the Internet boom, we were often told that new media managers liked hiring printing industry personnel. Among the reasons they cited were that the print workflow was disciplined, and had a beginning, middle, and an end. In other words, our workers knew what needed to be done, and had a sense of deadlines and urgency that other workers did not always have. Part of that discipline was to understand how to react to last minute changes and still get projects done on time.
Making the industry attractive to new workers, as well as retaining the workers we need, is a complex issue. It's always up to individual print businesses to do what makes sense in the long run for their business, especially in hiring and training workers. Good workplaces attract good employees.
This is not an issue that will change overnight, or even a couple of years. The modernizing of the printing business is an ongoing effort, with constantly moving targets. It is clear that smart capital investment in new technologies and workflows are essential to improving the situation that these historical wage data so starkly indicate.
This list below shows wage differences when compared to the entire commercial printing industry. For example, book publishing employees earn 47% more than commercial printing employees; quick printing employees earn about 23% less than the commercial printing average.
80% Advertising agencies
65% Periodicals Publishers
59% All creative
54% All publishing
47% Book publishing
22% Graphic design services
14% Miscellaneous publishing
13% Folding paperboard box mfg
12% All packaging
6% Digital printing
6% Commercial lithographic printing
6% Commercial gravure printing
3% Commercial photography
0% All commercial printing
0% Book printing
-1% Newspaper publishers
-22% Commercial screen printing
-23% Quick printing
We took the average wage for all workers in the broadest grouping of the printing and creative industries and adjusted them for inflation to make historical comparison possible. Since 1988, the first year that data are available to us, the average industry wage in the creative markets has gone up about 12%, while pay in the printing industry has gone down slightly. The best year for creatives was 2000, where the increase compared to 1988 was up to 17%, at the peak of the Internet bubble. Printing wages barely moved at the time.
Historically, the average creative wage is typically 50% higher than the average printing wage (binding and finishing workers wages keep the average print wage down, most likely). From 2001 to 2004, however, the difference in the average wage of a printing employee and a creative employee had crept up to 57%.
Content creation markets pay more, a lot more, plain and simple. The question is whether or not this is even relevant. Content creation businesses are vastly different than job manufacturing businesses. The nature of what is done is not always comparable. The skills of the employees are quite different. Sure, there is occasional overlap, such as the need to use desktop publishing software, and administrative tasks, but the essence of the businesses are not the same, and that is reflected in their overall structure.
During the Internet boom, we were often told that new media managers liked hiring printing industry personnel. Among the reasons they cited were that the print workflow was disciplined, and had a beginning, middle, and an end. In other words, our workers knew what needed to be done, and had a sense of deadlines and urgency that other workers did not always have. Part of that discipline was to understand how to react to last minute changes and still get projects done on time.
Making the industry attractive to new workers, as well as retaining the workers we need, is a complex issue. It's always up to individual print businesses to do what makes sense in the long run for their business, especially in hiring and training workers. Good workplaces attract good employees.
This is not an issue that will change overnight, or even a couple of years. The modernizing of the printing business is an ongoing effort, with constantly moving targets. It is clear that smart capital investment in new technologies and workflows are essential to improving the situation that these historical wage data so starkly indicate.
This list below shows wage differences when compared to the entire commercial printing industry. For example, book publishing employees earn 47% more than commercial printing employees; quick printing employees earn about 23% less than the commercial printing average.
80% Advertising agencies
65% Periodicals Publishers
59% All creative
54% All publishing
47% Book publishing
22% Graphic design services
14% Miscellaneous publishing
13% Folding paperboard box mfg
12% All packaging
6% Digital printing
6% Commercial lithographic printing
6% Commercial gravure printing
3% Commercial photography
0% All commercial printing
0% Book printing
-1% Newspaper publishers
-22% Commercial screen printing
-23% Quick printing
