Is it really this bad?

[Peter Kiddell]

Over the last month or so I have been travelling the country talking to businesses in the wide format and PoS industry with a view to clients of mine investing in UK companies to take advantage of the eventual upturn and consolidate business in the meantime. This has meant that I have seen the real financial positions of these companies and it is scary. Reductions in turnover of 40% over 2008 are not uncommon and loss making being the norm.

Companies are being crushed by unresponsive banks who will only invest in no-risk situations, customers who demand lower and lower prices and the most damaging of all print management companies/brokers who demand ridiculous premiums that eliminate any profits.

I am getting similar messages from Europe. Not all is gloom of course some companies are maintaining and increasing sales but margins are reducing.

Is this sustainable? Do companies have sufficient reserves to ride it out? Who will be the next casualties be?

[Peter Kiddell]

I have just skimmed through FESPA's Revolutionary Manifesto and some of the answers are in there, when I have time I will read it in detail. We are in the image business and most of us have to change our image to succeed.

Bit sad when you have to answer your own question!

[Marcus Timson]

Interested in your opinions of the manifesto! Thanks Peter...

[Marcus Timson]

Great point that - why not talk about the economic pressure we are all under? Surely it can only help if we all talk about it!
According to the Economy Survey - the rest of this year will not improve by much but we have definately bottomed out. I think the steep decline has hit the ocean floor and whilst it is not exactly bouncing back, the negative direction the marketplace was pointing has levelled. Or am I being too optimistic? The market has understandably responded to the uncertainty of the recession by a wholesale reduction of overheads, spending and minimising risk. This is out of necessity and a responsible reaction. The worry I have is that innovation ceases to take place and without innovation, you don't get constructive and sustainable business growth. Fundamentally, I believe that innovation is the only genuine driver for economic growth and as long as our community innovates and we have initiative, ambition and innovation we have the chance to push through this challenging period. The Economy Survey states that the market believes recovery is on it's way, but not until we are well into 2010. The banks were the problem in getting us into this mess and despite huge injections of cash, they continue to be the problem in kickstarting confidence and encouraging entrepeneurs. I don't mean the kind of insane innovation that the idiots in the financial sector introduced - but sustained and disciplined innovation. I personally feel very let down by governments who have not demanded that the banks behave commercially and responsibly by helping companies and individuals to progress. There is a school of thought that would contest that recession is the making of some businesses and industries (many dow jones superstar companies were founded during recession) but some revolutionary thinking and action is needed to safeguard print businesses who are suffering from price pressure and lack of work - and the rise of the price focused print broker! A change of image is now essential. the Revolution was not just a marketing gimmick - it had some thought behind it!

[Aki Alenius]

Hello!

I just joined this network and immediately found this topic that interests me a lot. The crisis in the financial sector has of course affected us all. However here in Finland the situation of our banks is not so bad as it is in most of the European countries. This could be a result from the previous financial crises that we had here in the early 90`s when many of our banks had huge difficulties. Our banks seem to have more responsibility now than before.

I also believe that in times like these innovation and leadership skills are being tested. Those who have the ability to react in to changes quickly will survive. I believe the worst is behind us but the signs of recovery are still weak. It seems to me that wide format printing services is one of the first to suffer when companies cut down their marketing budgets and even if there are some sings of recovery it will take time before they have the courage to increase the bundgets back to normal level. I hope that in Q2 2010 we are back to some sort of normality, but before that some of us will fall to bankruptcy.

It would be good to hear how bad the situation is around Europe, and is the market consolidating?

[Marco Roos]

Hi all,

This is certainly a very interesting discussion. I would like to share my opinion with you. I am working in the large and wide format printing industry for more that 15 years now and have seen things changing all the time. Things that happen in the wide format printing industry (both digital and analog) today are not a surprise to me. You are right that prices changed a lot but the question if that has been triggered by the economic situation alone or would have happened anyway. It certainly 'helped' a lot, but my opinion is that it would have happened anyway. Emerging markets in any industry tend to stabilize when technology becomes a commodity. Just imagine you have been producing CD players or DVD players over the last 15 years..... We are producing large format images with a technology which was exclusive and (relatively) expensive to start with. Today things are a lot easier and the demand has grown but the install base grew even faster.

The current economic situation will force companies to turn from a high-profitable business with a lot of room for improvisation into companies with highly efficient workflows and high level sales people. In Europe we see a lot of print companies looking for specialties and new markets. Also we see people with a totally different (business) background getting involved in print and sign companies. All the big print service providers I talked to over the last months are looking for partnerships to 'fight' against the low prices and create a situation where they can virtually offer any kind of service to their customers.

I foresee another upcoming crisis in our industry within the next 5 years. The current situation leads to unacceptable low prices. Blaming print buyers for that is not fair: someone started to give them the idea those prices are possible and apparently gave them a low price. These low prices will cause issues for companies when they have to replace their equipment in the next 3 years, there is no money left to put aside for a new printer. The companies that have the reserves to ride it out are lucky, but they will never get back to the selling price they got before and the question is if they are capable of investing in new equipment to catch up with the latest technology. Even if we get back to the same volume in term of square meters or feet, the revenue will still be lower.

Also about 'green': going green requires an investment from the print company, today it is a luxury but in the near future it will become a necessity under the pressure of printer manufacturers that will tell the world they're green and also the world that believes green is key. Green is an economic thing as much as an ecological thing. Having to invest after barely surviving the current crisis is probably too much for a lot of companies.

This story isn't particularly positive but I am convinced it is realistic. Downsizing isn't probably the worst option as well as investing in efficiency and sustainability. Getting more agile and re-inventing your own market and services will be key for companies that want to survive. There is a lot more to do for printing companies when you listen to print buyers, their problem is project management, brand identity and agility and I am convinced that a future of high revenues lays in services around the print project. Even more than it is today.

The product created with the help of a print or by using a print is becoming more important. The idea of the print itself being the product definitely died during this crisis......

[Marcus Timson]

How important is innovation?

[Marco Roos]

I think innovation is key for the moment, but if everyone would innovate all the time, the normal work wouldn't be done. We need left-brainers to produce the today's commodities and right-brainers to pioneer with tomorrow's commodity. ;-)

What you've got today is what you earned yesterday, it's all about what you will have tomorrow.

[Peter Kiddell]

In discussions like this eveybody is correct to some degree. Clearly innovation is crucial, so crucial that it should be a business tool that is in constant use. A very few companies manage innovation in a way that combines the left and right brains of different people in an organised fashion. By bringing together designers, engineers, accountants, sales people and others it is surprising what differentiating opportunities can be developed. My company has applied this approach and generated significant income streams. In the current challenging market having multiple income streams provides security. Being different is the key and these differences are created by managed innovation.

[Marcus Timson]

Accountants! Like the concept of bring together all of the different skill types - so you think innovation needs to be controlled and disciplined?

[Marco Roos]

I completely agree with Peter: as soon as your company is big enough to have left and right brainers in one organization, you will have to balance innovation. Small companies that are completely innovative and don't have any commodities, tend to sell innovations or partner with large, left-brained, companies to sell their innovative services and/or products.

Another interesting question is to ask: what exactly is innovation. Which new products qualify for being innovative? Left brainers as you call them ;-) are people that think they're creative and innovative, right brainers think they're emotional and often have problems with large organizations. They also have problems with selling their innovations. The question is then: are you innovative when you are able to turn somebody's idea into a product by using left-brainer procedures or are you innovative by inventing stuff than you can't sell? ;-)

[Peter Kiddell]

Controlled and disciplined is not the approach. Managed innovation is about recognising, refining, market testing and taking to market. Unlike R&D where you produce a product and then take it to the market, managed innovation is about understanding how the a company can use its resources to satisfy a need in the market. So often we do not recognise what skills and resources are within a company and its people. Managed innovation is the key to unlocking these and providing a solution to a market need. No company is the same even with identical kit serving the same market. It is the people and their ideas that can make a huge difference, if the company structure allows it to be so.

Innovation is not a solution on its own, it is the spark that sets off the process. That spark can come from the lowliest office clerk or the MD, they both have the same validity. Managed innovation will ensure that the idea provided by the clerk is not swamped by that of the MD.

Neil's comments about unrealistic pricing amplify the need to seek applications and markets that are outside the commodity trap. Now is the time when we are not pulled out with work to gather disparate thinkers together, suspend judgement and see what ideas surface. It may be one thought can increase profitability by a percentage point. Innovation is about turning dreams to reality. The biggest problem is often senior management who are so full of thier own importance and unwilling to accept ideas from their subordinates that they behave like the Generals on the Somme. Those who don't think this is a war don't understand the game.

[Johannes Frank Johannesson]

I agree that this is a war and your thoughts about senior management. To many sign companies has owners how are in this business and do not understand this industry and the important of being ahead and think for new things.
If your front line week and you have to go too far back you are in risk of loosing the battle and it will be harder to bush forward again. :-)