November  2018:  “All Talk and No Action?”

The half-century history of the printer market has been a never-ending quest for new devices and new applications that create more pages and more images to put on more sheets of paper. It started with the mainframe. Then it progressed to minicomputers and branched into word processors. Vendors finally struck pay dirt with the PC and the Mac. But after that, the focus shifted to other types of devices, from digital cameras and early Internet appliances, to smartphones and tablets. And the latest gizmo to enter the printing ecosystem is the smart speaker.

I’m talking about those small Internet-connected speakers with voice recognition and voice synthesis. Amazon created the market when it released the Echo in 2014. And Amazon is still the top vendor, with 65% of the global installed base. But sales are growing for Google Home, Apple HomePod, partner products that utilize Microsoft’s struggling Cortana, and products in China that leverage technology from Baidu. And what had been primarily a US market has gone global, with China now a strong #2 in sales.

Worldwide sales of smart speakers should hit about 75 million units this year. To put that in perspective, smart speaker placements in Q3 of 2018 were about two-thirds of tablet sales. But smart speaker sales are growing by triple digits, while tablet sales are declining by single digits.

In all honesty, it’s still anyone’s guess at this point how big an impact smart speakers will have on printing. But this hasn’t stopped HP, Canon and Epson from starting to hype such gizmos as a possible “next big thing” for hardcopy. But we’ve heard that stuff before, so what are some of the salient points to be considered?

The Technology Is Good Enough. Forget those horrible experiences with voice assistants on 800 phone numbers. The voice recognition and synthesis technology in today’s smart speakers is generally up to the task ... after one gets the hang of how Alexa or Siri wants you to pose a question. In fact, the vast majority of smart speaker owners are quite satisfied with their devices. And interestingly, consumers are far more inclined to use a smart speaker than to use that same technology on a smartphone.

It’s a Consumer Thing. Yes, Japanese vendors have enabled stilted voice commands on some office MFPs for years, but when it comes to smart speakers, it’s all about consumers and the home market. Despite some push into the business arena — think Amazon’s Alexa for Business — very few smart speakers today are being used in the workplace. And in a world of open offices and shared workspaces, who really wants to hear lots of coworkers talking to smart speakers, especially for mundane tasks like printing?

A Confusing Trajectory. Close to one-fifth of US consumers already own a smart speaker. Nearly half of them couldn’t imagine living without the devices, and over two-thirds say their smart speakers are more useful than they expected. At the same time, sales of smart speakers in the US are forecast to peak already in 2019. And with prices as low as $19 and a questionable post-sale annuity stream, the economics of selling smart speakers remains unclear.

Narrow Usage. Smart speakers are good at providing a very simple voice-enabled user interface to control other devices (thermostat, lights, etc.) and to access web content. But the content being accessed is pretty limited. Playing music and listening to the radio are way ahead at the top of the list, followed by asking random question, accessing news and weather, and setting alarms. Amazon is hoping shop-by-voice will be a big winner. But a recent survey found just 2% of Echo owners had tried it, and only 10% of them had become repeat shoppers.

Skills Aren’t Apps. Because users aren’t expecting a lot from their smart speakers, demand for added-value software “skills” is pretty weak. Even super users — those who use the device at least three times a day — aren’t doing tasks that require much intelligence. Yes, Amazon has seen the number of Alexa skills surpass 50,000 pretty quickly, and there are several hundred thousand Alexa developers today. But only 35% of US Alexa users have enabled a third-party skill; 67% of Echo customers use three or fewer skills; and 61% of all Alexa skills still have no user rating.

Print Potential? Printing anything with a smart speaker requires a skill. Each platform needs its own skills. The only printing skills available today are those from HP, Canon and Epson. And those skills do almost nothing that has much value or utility. Yes, Amazon’s new “skill connectors” could make printing a more modular feature readily available for use by other skills. But it remains to be seen how many smart speaker users want to print, and how much they’ll print in light of current usage patterns and dynamics.

Frankly, I assume whatever limited printing that will be generated via smart speakers will merely replace a tiny fraction of the printing that would previously have taken place on a PC or even with a smartphone. My bottom line is this. Printer vendors are way more interested today in the potential smart speakers may have for their businesses, than smart speaker vendors and their customers are interested in what printing might add to the smart speaker user experience.

October  2018:  “Learning, Not Yearning”

I occasionally read an article that strikes a chord; one with insights that resonate with my take on the MFP market. But sometimes those articles languish on my desk longer than they ought to. A case in point is a story I tore from the November 1 issue of Fortune last year. Written by Geoff Colvin, the article was called How Intuit Reinvents Itself. The story was part of the annual Fortune 50 issue, which ranks “the companies best prepared to thrive and grow revenue rapidly in coming years.” The only company at all related to printing on the 2018 list is Adobe.

The overriding theme of the story was how Intuit — widely known for its QuickBooks, Quicken and TurboTax software — “stays on top by constantly rethinking its business model and getting every employee involved in the creative destruction.” With $6 billion in revenue and 8,200 employees in FY2018, Intuit is described as “simultaneously more profitable than glamorous start-ups and growing faster that established incumbents.”

What hit me as I digested this article is that MFP vendors could learn a whole lot from the way Intuit succeeds, especially at a time when hardcopy companies are struggling to maintain the status quo, resisting meaningful diversification, or dabbling in highly questionable new ventures. Xerox used to have some of that same spark and ingenuity way back in its heyday (a half century ago!), and HP arguably does more than other vendors to push some printing boundaries, but the industry as a whole is mired in malaise.

Colvin provided a plethora of important lessons and takeaways on how Intuit still does what it does so well, even after 35 years in business. But I’ve distilled these points down to a half-dozen ideas I think have particular relevance to today’s hardcopy companies ... and to their leadership.

1.  Top-down transparency.  Colvin made clear that transparency and accountability go hand in hand at Intuit, and it starts at the very top. CEO Brad Smith posts on the wall outside his office his own unedited performance review, plus a breakdown of how he spends his time. And that’s after the whole package has been e-mailed to each Intuit employee every year. It’s hard to underestimate how such openness and implicit humility (and humanity) inspire employees and executives at every level of the firm, particularly when trying to navigate a changing environment and competitive clashes. Yet what passes for management “transparency” in the hardcopy industry is too often as clear as mud.

2.  Continuous self-disruption.  Colvin portrayed controlled self-disruption as the critical way Intuit forestalls uncontrolled exogenous disruption. Intuit disrupts its own business, not in response to a crisis, but as a way to prevent one. It’s that mantra that enabled Intuit to prevail over competitors in the 90s, when Windows supplanted DOS, and in the past decade, with the rise of mobility. Now Intuit is doing it again, as it shifts to being an open platform ecosystem that supports over 1,400 apps and more than 600,000 accountants ... and most of their clients, too.

MFP vendors talk about platforms, ecosystems and apps, but in the ”I want it, I need it, I deserve it” tone of a petulant child. They have too little awareness of how tiny their opportunity really is or how to exploit it.

3.  Customer behavior is the truth.   Colvin described Intuit’s Aha! moment. “The underlying reality is that you can’t believe what customers tell you, as most companies learn the hard way. Customer behavior is the truth.” And the key tool at Intuit to discern that truth is the “follow-me-home.” Intuit does 10,000 hours of anthropological observations annually. CEO Smith himself does upwards of 100 hours each year. In the printing world, Xerox did this in the early days, and HP did it in the Digital Workplace era of the 90s, but such observation is noticeably missing today.

4.  “Savoring the surprise.”  This is Intuit’s term for digging into research findings that seemingly make no sense. Colvin said this approach has several times helped Intuit reinvent itself before competitors caught on to what was going on in the market. But most organizations — and I’d put MFP vendors squarely in that category — do the opposite. They ignore information that doesn’t fit their accepted paradigm, or they convince themselves the data are wrong or irrelevant.

5.  Tiny teams and fast decisions.  Being early to discern a disruptive trend is just the first step. Intuit relies on tiny (i.e., three-person) “discovery teams” that report directly to a divisional manager in order to move ahead quickly with new ideas. Those teams get intensive weekly coaching from a general manager or even the CEO. And the idea is that decisions should be made in 24-48 hours. Compare that to MFP vendors, who triple-check every whim with everyone, from legal, to Japan, to sales, to engineering. They’re more often looking for reasons not to decide.

6.  Permission to make mistakes.  Lastly, the whole process at Intuit is predicated on admitting mistakes without negative repercussions, while learning lessons from those mistakes. As Colvin concluded, ”Change get unblocked when top managers routinely admit mistakes.”

Hey, MFP vendors ... Are you listening?

September  2018:  “Dabblers and Dilettantes”

When I started The MFP Report 23 years ago, a top concern was how much research, studying, and analysis I needed to do before I could write a single word for that very first issue. Maybe I was humble; perhaps I was just insecure. But I had tremendous respect for those I hoped would read and subscribe to my newsletter. I knew I had to do my homework if I were ever to be credible and if The MFP Report were to be useful. And it was then and always has been just me.

So when I see MFP vendors today dabble in adjacent but complex product categories or move further afield from their core businesses — seemingly without doing the requisite work those tasks demand and in spite of the vast resources these companies have — I get annoyed. News flash, vendors. Don’t wing it! Real shortcuts are few and far between. You can’t just pull a new product, business strategy, or professional service out of your corporate backside!

Yet that’s what I’m seeing almost every quarter — and sometimes every month — from far too many petulant hardcopy companies that are scared, frustrated, and want an easy path to new riches. There are so many examples of arrogance, entitlement and narcissism. But the reality is that credibility and success in one domain do not guarantee prevailing in another domain, even an adjacent one. In fact, lucrative and long-standing success in one business may well prove to be an impediment to success elsewhere in that it can blind a vendor to how difficult it is to create a new market and build a new business.

Some of the biggest hardcopy industry pratfalls easily demonstrate my point. There was Xerox’s wasted effort to enter the lower reaches of the BPO market with its ill-fated purchase of ACS. There was also Lexmark’s unbroken streak of overpaying for small ECM companies it was unable to effectively integrate or help grow. And years earlier, there was the multibillion dollar dead-on-arrival collaborative push by Canon and Toshiba into the SED flat panel display business.

But those disasters were somewhat reasonable gambles when compared to a string of smaller but even more suspect product initiatives that have emerged since then from deep within the bowels of multiple print and imaging companies.

Look no further than Konica Minolta, which has done a good job appearing to be the most dilettantish hardcopy company of late. The easiest target is the Workplace Hub, the pre-announced, undelivered thing no one can explain or figure out how to sell. Yet somehow, it’s going to bring in a billion dollars five years from now. And it doesn’t stop there. Konica Minolta is also on track to replicate that kind of “success” with products ranging from ideation software and digital receptionists, to healthcare management applications and hospitality robots. And AI, too.

Of course, Ricoh isn’t very far behind, with its what-were-they-thinking, a-day-late-and-a-dollar-short investments in unified communications, digital projectors, virtual self-service holograms, LED lighting, digital cameras, and more.

Other vendors have tended to dabble less, probably more due to a lack of resources than a wiser sense of restraint. But Sharp is still working on its good-luck-with-that conference room Assist Bot. And Toshiba in the US remains enamored with digital display signage, despite its lack of core technology or competitive advantage.

Yet other failures exist much closer to the core imaging business, particularly as regards those ever-popular pushes into ECM and vertical solutions. Does anyone but Xerox’s new CEO really think Xerox has a chance in hell to challenge Dropbox with its moldering DocuShare platform? And why is it that there are almost no MFP-connected vertical solutions anywhere in this entire industry that integrate with the leading infrastructure applications that are used in those vertical markets?

The good news — if you can call it that — is that there are common factors that help explain how hardcopy vendors have ended up being such dabblers and dilettantes when it comes to diversification. A very most significant factor is the delusionally tenuous idea that just because MFPs are used in offices, and these new things are also for offices, that constitutes synergy. Wow!

More generally, MFP vendors have assumed creating products is harder than marketing and selling them. They’ve believed that product novelty guarantees success, or that a me-too product will prevail just because of its brand. And they seem compelled to force fit new products into old sales channels. Such obvious errors are all but assured because hardcopy vendors willingly ignore much more relevant and focused competitors in those new market spaces. And because MFP vendors are oblivious to their real competitors, they fail to appreciate — let alone communicate — how their own new products are sufficiently different or more compelling. It’s so much simpler to say, “Stand back world, I’m here!”

The other good news is there are some noteworthy exceptions:  HP’s industrial 3D printing push; Canon’s medical systems; Fuji Xerox’s healthcare business; Brother’s industrial inkjet unit. We just need to see more of those would-be winners.

August  2018:  “Time to Close the Printer Patent File?”

The oft-repeated story that the Commissioner who said back in 1899 that the US Patent Office should be closed since “everything that can be invented has been invented” is apocryphal. But I’m starting to wonder if a variant of that sentiment might not be true when it comes to technologies associated with hardcopy devices.

I know, I know. That’s overly simplistic and cynical, even for me. But stay with me. Consider the main axes along which one might posit there is either a need or an opportunity for technological improvement in the design of MFPs and printers. It all basically come down to print speed, image quality, hardware cost, output cost, device management and serviceability, connectivity, application integration, user interaction, and lifecycle environmental considerations.

Let’s take a look at each of these, particularly from the perspective of what changes might spur organic growth in overall placements, total pages, or relative market share among vendors. My main focus here is on the consumer, SOHO, office and light production market segments; not commercial, production or industrial markets.

It’s best to start with the economic drivers:  purchase price and running cost. In theory, dramatic reductions in either might spur added sales or usage, respectively. But it’s far from clear there’s much price elasticity left in these segments of the hardcopy business. Nor is it clear whether vendors or channel partners would pass any savings on to customers, or pocket most of it.

So the industry could spend a bunch of money on R&D, only to find that delivering modest reductions in hardware prices or page costs to customers simply reduces the total size of the printing revenue pie. That would limit the upside to possible large shifts in market share among vendors. But as HP has learned with its PageWide technology, that’s tough to accomplish.

It’s much the same thing with device management and serviceability. Yes, technical improvements in these areas could help lower operating costs, but it’s anyone’s guess whether customers would ever see much financial benefit or react to those changes. Vendors (e.g., HP) who talk about reducing service costs are generally advising dealers to pocket most or even all of the savings

I also don’t really see significant pent-up demand for devices that are faster or that produce better quality output. Both metrics have long been in the “good enough” category. Further improvements are likely to prove costly to develop and implement, and they’re unlikely to spur new sales or usage. So why bother? And it’s pretty much the same when it comes to reducing energy usage, carbon footprint, or waste.

That leaves device connectivity, integration with solutions, and the overall user experience. This trio is a bit different. Yes, there’s some reason to believe significant improvements in any or all of these areas could shift sales amongst current suppliers. At the same time, such improvements are unlikely to boost total placements or pages.

Moreover, these types of secondary innovation are not being drive from within the confines of the hardcopy industry. They’re really more a case of MFP makers picking and choosing from developments in mobility, app creation, wireless connectivity, web standards, voice recognition, and ergonomics. And while such improvements have helped advance the overall usability, flexibility, adaptability and personalization of MFPs, there’s little evidence so far of any fundamental growth in overall sales, usage, industry economics, or vendors’ market shares.

Whether or not they say so publicly, incumbent hardcopy vendors have been behaving in accordance with the points I’ve outlined above. They’ve been cutting R&D spending. Keep in mind as well, a lot of what gets classified as R&D has more to do with manufacturing and manufacturability, rather than fundamental research.

A lot of the real research vendors are funding — for better or worse in many cases — is in completely unrelated domains. Consider the story this month on two of Konica Minolta’s so-called BICs (“Business Innovations Centers”), which have just announced an Ideation Platform in Europe and a Value-Based Care Platform in the US. It’s anyone’s guess if this R&D will pay off, but the investment clearly has little to do with print.

I’m also not waiting for some white knight to sweep into the hardcopy industry and disrupt the incumbents. The last one who tried that was Memjet ... and we all know how that turned out. In fact, look no further than the story this month on the development by researchers at Harvard of something called “acoustophoretic printing.” It’s a completely new printhead technology that uses sound waves to eject droplets of liquid. But the focus is biotech and industrial applications, and it’s unclear if any meaningful benefit might obtain when it comes to putting ink on paper.

None of what I’m arguing from a logical or strategic perspective is contradicted by the fact that hundreds of print-related and MFP-related patents continue to be filed each year. That just goes to show there’s modest correlation between patent filings, R&D and business acumen.

July 2018:  “Will the Last MFP Tech Provider Please Turn Off the Light?”

We’re coming up on the two-year anniversary of HP’s current attack — its seventh in two deal.

One of the biggest and most underappreciated changes I’ve seen over the past quarter-century in the hardcopy market is easy for vendors to overlook, and it’s transparent to buyers and users of MFPs and printers. I’m talking about the massive consolidation and overall decline in number of embedded technology vendors who wholly or partly serve the needs of this industry.

In the mid-90s, when I started The MFP Report, there were a few dozen companies developing various embedded technologies and components for companies who were creating the latest MFPs and printers. New companies entered the business, even as others got acquired. These firms offered processors, specialty chips, printer languages, image enhancement software, color management tools, fonts, whole embedded controllers, customized external RIPs, and more.

So it’s interesting and important now to look back and see how the hardcopy industry got from there to here in the span of a couple decades. Some of the factors are obvious, but others are a bit more elusive, even in retrospect.

First, the demise of some technology suppliers had little to do with the hardcopy market or how it evolved. Instead, the problems were internal ones. It takes more than a few technical folks with an idea to succeed. Some companies were too small, underfunded or lacking in business acumen. Others overpromised and undelivered.

Second, MFP vendors individually got much better during the first decade of the march toward multifunctionality about developing and doing more on their own. These capabilities were mostly gained from internal development, hiring and licensing, rather than acquisition (e.g., Kyocera buying Peerless). The net result was there was less need for so many outside suppliers.

Third, there was an increase in collaboration among hardcopy vendors in selected technical domains, which obviated or at least curtailed the need for new commercial alternatives from outside firms. This happened with Internet printing (Printer Working Group); mobile printing (Mopria); security standards (IEEE); and other related technical imaging standards (TWAIN, PDF).

Fourth, the number of individual purchasing and procurement decisions has decreased. Some of this is from consolidation among printer/MFP vendors:  fewer companies; fewer models. More importantly, vendors now use fewer engines to satisfy a range of speeds and features, and engines are increasingly shared for color and B&W devices. In addition, vendors have developed flexible and expansive controller architectures that work for much of a product line, eliminating lots of previous one-off products and deals.

Fifth, the overall size of the office hardcopy market — in terms of unit placements — is relatively small compared to many other categories of IT and electronics hardware. This isn’t so much an issue for embedded software, but it’s a bigger challenge for companies wanting to develop and sell custom or application-specific silicon. With chips, it’s all about economies of scale.

Sixth, there’s the “elephant in the room.” Placements of print devices have been heading down for years. The consumer market — which accounted for the bulk of unit sales — has undergone a quiet semi-collapse. Placements in the office market are on a more gentle decline, but it’s anyone’s guess if the slope of that decline will remain gentle for very long. New technology suppliers do not target shrinking markets, and incumbent suppliers diversify.

Seventh, these trends and developments have inexorably led to consolidation among the panoply of hardcopy tech suppliers via mergers, acquisitions and plain old exits. Ironically, M&A activity has been both a cause and an effect. Companies pair up in a declining market, and a smaller market supports fewer suppliers.

So where does that leave the industry today? It’s sort of a mishmash. There are very large companies like Intel who have succeeded selling standard chips for use in MFPs and printers. Meanwhile, big specialty chip vendors, like Marvell and Synaptics, don’t appear to be developing any new hardcopy chips. And huge diversified IT companies, such as Adobe and Qualcomm, get only the tiniest sliver of their total sales from embedded software designed specifically for hardcopy devices. However, that revenue can still add up to some tens of millions of dollars.

Old hardcopy standbys are gravitating away from their original OEM printing businesses. The Fiery unit generated barely one-fourth of EFI’s nearly one billion dollars in sales last year. And embedded printer fonts were perhaps one-third of Monotype’s $236 million in revenue in 2017.

And there are still those relatively few and small embedded tech vendors still out there, although their place in the office and consumer printing markets is a tiny one. We’re talking about companies like Global Graphics and Artifex.

So all of this raises two fundamental questions. Are there still important technological challenges left to be addressed in the hardcopy business? And if there are, will vendors be the only ones left to develop the requisite technology?

June  2018:  “Has HP Already Won the War?”

We’re coming up on the two-year anniversary of HP’s current attack — its seventh in two decades by my count — on the business and product norms of the A3 office MFP market. In fact, it’s actually been only about a year since HP shipped most of the models that comprise its new A3 lineup. So while HP still has a very long way to go when it comes to achieving substantial market share and revenue in the A3 MFP business, HP has already largely succeeded in turning the tables on competitors when it comes to redefining the conversation with channel partners and end-user customers alike. The MFP competition is now very obviously and awkwardly in a reactive mode. And that’s a big deal.

HP has done two things well. It’s redefined the industry conversation with dealers by focusing on how to lower service costs by reducing labor in favor of more highly automated device monitoring. And as a corollary to that message, HP touts to end users that its “printer-centric” MFPs have fewer parts and deliver better uptime than “copier-centric” models from competitors. More notably, HP has shifted the conversation with end users to focus foremost on making sure hardcopy devices are secure network denizens.

Let’s be clear, HP isn’t the first vendor to emphasize either lower cost of service or better device security in the office MFP market. In fact, both items are pretty much in the “mom and apple pie” category. But HP has been touting these twin themes better, louder, more aggressively, and more consistently than anyone else for a couple years. That’s left competitors sounding pouty as they protest, “We did it first!” or “Me too!”

Look no further than Ricoh’s ConvergX dealer meeting and Lexmark’s dealer roadshow in June. Both vendors found themselves with talk tracks that were implicitly created to counter the messages HP has been out there telling the world. And these vendors aren’t the only ones. Xerox says a lot of the same things as regards security, and other vendors are responding, too.

A couple of things have really helped HP. First, at a time when competitors have had to tap dance around explaining lower revenue or weaker profits (or both), HP has recently had a string of strong quarters in which most metrics in its printing business have been heading in the right direction. So HP’s reputation has been rising.

Second, HP has actually been spending money on advertising for its A3 MFP business. We’re not talking big bucks like P&G or GM or AT&T, but the bar for ad spending in the printing world currently rests on the floor. Whether it’s The Wolf video vignettes, its Step Aside Copier print ads, or its various online ads, HP is investing in getting itself and its twin themes known in the market.

It also doesn’t hurt that while HP has been doing all this, competitors have struggled to string together a few words about their new products or express coherent thoughts about what their next act will be. And then add to this the embarrassing soap opera that’s consumed everyone at Xerox, and the major missteps over at Ricoh. Is there any wonder dealers and customers alike are tuning in to what HP has to say?

But this isn’t the end of the story with HP. It’s just as interesting what HP hasn’t been saying this time around in the context of its latest MFP push. HP’s themes of better security and greater reliability evoke a better way of doing what every other A3 vendor already does. And in stark contrast to its various prior pushes into this market, HP this time isn’t trying to upend any tried-and-true norms.

Think about it. HP isn’t saying a word about customers switching from A3 devices to A4 models. It isn’t saying copying is stupid (although copiers still are), or that customers really only need printers and a few network scanners. There’s no change-the-world mantra about switching from laser to inkjet technology. And there’s definitely been no overt message about reducing page costs in the office printing market.

Having said this, HP continues to struggle with the if, how and when of where its new line of A3 PageWide inkjet MFPs fit in the overall marketplace, in a dealer’s portfolio, and in a customer’s office. On one hand, HP has come up with this really obtuse positioning of its 40 to 60 ppm PageWide models being equivalent to other 25 to 45 ppm “price class” laser devices without ever explaining what that means. Customers are meant to understand they can get 40-60 ppm inkjet units for prices that are comparable to 25-45 ppm color laser MFPs. But do they get it?

One has to take HP’s price claims on faith since it doesn’t disclose hardware or page pricing. Some buyers may even think HP is saying its 40-60 ppm PageWide MFPs are no better than 25-45 ppm color laser MFPs. And while HP says its A3 PageWide devices deliver “low-cost color,” that’s purely a subjective measure. A customer can’t quantify the savings without going to an HP dealer and obtaining a full-blown proposal.

As for HP’s overall lower-cost-of-service pitch, that’s strictly for dealers, who are pretty much being advised to pocket the savings and share just a few crumbs with customers. Yup, there’s raising the bar (which HP sure wants to do), and there’s rocking the boat (which HP is loathe to do).

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May 2018:  “Dominoes in Reverse”

The “common wisdom” in the hardcopy market has long been that we’re heading towards a last round of bottom-up industry consolidation, with the first vendors to go likely to be the smallest and weakest companies. But what if that’s only half-right? What if we’ve gotten it backwards? Yes, consolidation is almost certainly coming, but maybe it’s going to be a top-down affair.

I can now postulate multiple paths by which all of the world’s largest hardcopy vendors could in rapid succession be on the buying or selling end of a massive consolidation tsunami that takes just a year or two to finish. All we need to start is for that first big domino to fall. Hello, Xerox!

After all that’s happened at Xerox this year, the ultimate fate of the company is anyone’s guess. What’s clear now is that outside agitators are firmly in charge at one of the largest and certainly the most iconic printing company in the world. And that’s created an unexpected industry disequilibrium that can’t last all that long. In fact, remaining a healthy independent company seems to be the least likely outcome for Xerox.

Messrs. Icahn and Deason, the new Xerox CEO, and the mostly new Xerox Board of Directors are on the same page when it comes to the idea of shopping the company around. And it’s a pretty good bet HP’s door will be the first on which the new Xerox folks come a-knocking. After all, it was HP that apparently approached Xerox late in January about a possible last-minute deal. But at the time, the old team at Xerox was deeply enthralled with Fujifilm as its one true love.

But consider now that HP is worth about $36 billion, has $4.3 billion in cash, and could raise or borrow many billions more. Meanwhile, Xerox is worth closer to $7 billion, has about $1.5 billion in cash, and is probably hasn’t ruled out using Tinder to look for its next transaction.

Then there’s the messy matter of Fuji Xerox. It’s too soon to tell, but at this point one can’t rule out a formal break between Xerox and Fujifilm. And protracted litigation — either over the failed transaction, the breakup fee or the Fuji Xerox “crown jewel” lockup — is somewhere between possible and likely. But HP may be the only incumbent hardcopy vendor that could acquire Xerox without needing to buy Fuji Xerox as well.

Think about it. HP’s A4 business is far too important for Canon to throw it away in a snit. And between its Samsung A3 laser devices, its own PageWide A3 inkjet models, and its production systems, HP could do without a lot of what Fuji Xerox makes for Xerox today. HP could cherry-pick what it needs from Fuji Xerox or others to fill the gaps. Xerox would also certainly bolster HP’s coverage and gravitas in A3 and graphics.

With Fuji Xerox then untethered from Xerox and in need of a top-tier partner outside of Asia, Fujifilm could very well team up with Canon. In fact, I can make a pretty good case why Canon would benefit mightily from buying either Fuji Xerox (with over $9 billion in sales) or perhaps even Fujifilm (with about $22 billion in revenue). Canon and Fuji are successful in printing and increasingly well diversified. Sure, Canon’s like your grandma when it comes to doing deals, but it has over $5 billion in cash and a $45 billion market cap. And pairing Canon and Fuji would create a Japanese colossus with sales nearing $60 billion.

Now let’s turn to Sharp, or should I say Foxconn? Sharp last fall brazenly proclaimed it wants to buy its way from also-ran to the top-tier in printing, and Foxconn is certainly the kind of sugar daddy that could pay the tab. So if HP doesn’t buy Xerox, then Sharp certainly could and might. Or Sharp instead might opt to purchase Ricoh. Foxconn could easily afford such a deal — Ricoh is worth around $7 billion today — and a confused and flabby Ricoh would definitely benefit from some Foxconn-style discipline and direction.

That leaves Konica Minolta in search of a beau. Our hunch is this vendor would rather spend its slimmer budget at the high end of the market. EFI would be easy pickings for less than $2 billion, and it would move Konica Minolta towards its goal of being a production and industrial print powerhouse. Conversely, one could also make a case why either Konica Minolta and Brother or Konica Minolta and Epson would be nice complementary pairings, and it’s possible that any of these three could be the buyer.

That takes care of the biggest hardcopy vendors, but what about the smaller ones? That’s where my revised top-down consolidation scenario has a major impact. Instead of companies like OKI, RISO, Toshiba TEC, Kyocera or even smaller niche print vendors being the first to be bought up by bigger vendors, these companies could end up left on the sidelines. And in a hardcopy industry dominated by leviathans, smaller vendors would face even steeper odds of survival.

Under this revised scenario (thank you Xerox) the printing industry could experience a belated but quick game of catch-up, such that only a few large vendors — probably just three or four — will be left dominating the declining office/consumer printing era and be poised for growth in the rising business of industrial digital inkjet printing. And those smaller vendors would unfortunately find themselves on the path toward extinction.

 April 2018:  “Be Careful What You Wish For”

Some old-timey sayings fall by the wayside, but others never seem to lose their luster. A case in point is that old standard, “Be careful what you wish for.” It’s occurred to me recently that this axiom is particularly apropos to what we see going on today as MFP vendors gently nudge (or blatantly harangue) their dealers to “get with the program” and make some life-altering changes in the fundamentals of their businesses.

It’s eminently logical for vendors to want dealers to broaden their focus beyond print. And there are few surprises on the list of the most common areas of business that MFP vendors choose to promote, whether it’s IT and managed network services; ancillary IT offerings like cloud storage and IP telephony; document management software; workflow and business process related consulting; or deeply vertical solutions.

But what’s surprising is there’s been so little public attention to the no-win situation MFP vendors face as they pursue this approach with dealers.

First, there’s the rather obvious and reasonable expectation that dealers will heed their vendors’ warnings, as well as what they’re already seeing and hearing on their own. As a result, many dealers will materially shift their efforts and investments to non-print areas in their businesses.

Second, dealers will feel little allegiance to the limited and often ineffectual offerings MFP vendors haphazardly try to promote as the best way to achieve diversification. At the risk of mixing my metaphors, once the beyond-the-MFP diversification genie is out of the bottle, there’s no good reason for dealers to limit their non-print business options to just those few specific offerings sanctioned and sold by their MFP vendors.

Moreover, these twin effects feed off each other, thereby compounding the overall risk to vendors. Essentially, the more that dealers invest in the non-MFP parts of their businesses, and the more they obtain growth and rewards from diversification, the more they’ll accelerate their investment in opportunities further afield from printing. Likewise, the more expert and confident dealers become in those other domains, the more likely they’ll stray even further from what their suppliers are offering them beyond print.

It also doesn’t help that MFP vendors today are pretty blatantly using their investments in IT services, ECM software, and business process automation services largely as a “hook” to sell more MFPs and printers. Hardcopy vendors like to talk about their non-print offerings, but they still measure success mostly in boxes and pages.

In fairness, it’s not as if MFP vendors have a lot of other choices. On one hand, companies like Xerox and Lexmark spent lots of financial and organizational capital in their attempts at significant but supposedly adjacent diversification. But they discovered they weren’t good at running non-print businesses, and they still had little to offer dealers who were looking beyond print.

On the other hand, it’s not like MFP vendors can simply stay the course and not make any real effort to encourage or help their dealers expand beyond traditional office and production printing. Savvy dealers know they have no choice but to diversify, with or without the aid of their print suppliers. So it’s a classics case of “Damned if you do and damned if you don’t.”

As difficult as this dynamic would be under the best circumstances, two other changes in recent years are making the entire process of channel evolution even more daunting for hardcopy vendors.

For one thing, the MFP channel pendulum is swinging back from direct to indirect sales. Some of this is because of major initiatives at Ricoh, Xerox, HP and Lexmark to aggressively recruit or shift business to dealers. It also partly reflects a growing desire by vendors to enable IT resellers to offer MPS to SMB customers. And the rest reflects the simple fact that dealers have outperformed branches across the MFP industry.

On top of all this, there’s the massive increase in dealer acquisitions that’s accelerating each month. We’re clearly moving toward a final wave of dealer channel consolidation. A combination of acquisitions, customer absorption, and organic growth is putting unprecedented distance between dealer haves and have-nots.

Among other things, this is quickly changing the relative balance of power between vendors and dealers in the MFP industry. Today’s regional US dealers doing $100 million, $200 million, or even $300 million and more in revenue are in the catbird’s seat. Vendors quiver and kowtow to what these big guys want, say and do. Even the mere suggestion they might switch an MFP product line or expand in a new direction beyond traditional MFPs and printing can be calamitous for their incumbent hardcopy suppliers.

So what are MFP vendors left to do? I can really provide only two directives. Focus on truly diversifying acquisitions without regard to the fit with MFPs or dealers (like Canon and Konica Minolta have done in medical), and be honest top to bottom, internally, and with channel partners about what’s happening. That’s it. Wishing won’t help.

March 2018:  “Cat Got Your Tongue?”

More and more these days, the single biggest part of my job has shifted. It’s now less about interpreting and analyzing what vendors say they’re doing. Instead, I have to interpret the vacuous statements they proffer, and increasingly I must overcome the total absence of any communication whatsoever precisely when vendors should be saying something ... anything!

Yes, I’ve often railed against the declining quality of communication from MFP vendors when it comes to mundane announcements of products, solutions and programs. But the antics this month just about pushed me over the edge. Ricoh was the final straw, but its actions — or the complete lack thereof — sadly are not unique.

So in March, Ricoh in Japan ignominiously blamed its US operation for just about everything bad that’s happened to it this entire fiscal year. That includes the biggest write-down in its history, and the largest operating and net losses it’s ever recorded in more than eight decades of existence. It was all because of IKON, and mindSHIFT, and the inability of the US to focus on profitability, and the failure of the US organization to adapt to a changing market. Meanwhile, there hasn’t been one word from Ricoh in the US. Not an “Oops” or a “Wait.” Not “Let us explain” or “Here’s what we plan to do.” Nope. Bupkis!

Who does that? And why? In fairness to the US folks at Ricoh, it could be the company’s investor relations team or legal counsel in Tokyo simply won’t allow the US to speak. But that merely shifts where to lay the blame. And it begs this key question:  Who’s been minding the store in Japan? It certainly doesn’t justify the lack of a reasonable explanation or any communication in the US. It doesn’t help that Ricoh has never been at a loss for words when blathering on about its inscrutable “Workstyle Innovation Technology.” I’d gladly forego one posting on that topic for real answers to these very real issues.

As for other culprits, look no further than Fujifilm. The company looking to take control of Xerox and its iconic brand and legacy has basically ceded all of the public commentary to Xerox, even though its own credibility and capabilities are critical issues in the debate over the proposed transaction. And even when Fujifilm does say something, it looks like Xerox wrote the script. I can’t think of any other instance in which a public company doing the buying has left it to the public company being bought to explain the deal to investors and the world. How is one to believe Fujifilm can handle the massive challenges inherent in the deal if it won’t take the lead to justify this contentious transaction?

This deal has also put Xerox in the unenviable position of having to speak repeatedly but belatedly about how it really has no other options for growth — or perhaps even survival — and how it’s utterly dependant on Fuji Xerox for nearly everything it sells. That’s an awkward about-face from the company’s past bravado. Indeed, if Xerox had been more matter-of-fact and forthcoming about the fundamental nature of its hardcopy business, it likely would have been better for the company in the long run.

Nor is this phenomenon limited to major vendors. Look at the case of little old OKI. A year ago, the powers that be in Japan fundamentally altered (i.e., curtailed) OKI’s printer/MFP business, particularly in the office market. There’s nothing wrong with that, but one might have thought it was newsworthy ... or at least deserving of comment or communication by OKI sales companies in the US and elsewhere. But one would have been sadly disappointed. And don’t get me started about the utter confusion in Panasonic’s printer business.

The same problems can also afflict software companies in our industry. More than a year ago, Nuance had to acknowledge that an appreciable dip in sales in its Imaging division was self-inflicted, the unforeseen impact of some vague kind of sales reorganization. But Nuance’s Imaging sales had already been stagnant for a few years, and neither that situation, the nature of the sales reorg, nor what the company was doing in response to the problem has ever been discussed, certainly not in any proactive sense. In fact, Nuance has said barely a word to press or analysts about the nature or direction of its imaging business in two years.

At a more general level, the hardcopy industry as a whole has only very recently (and also very reluctantly) begun to acknowledge openly that the problems it faces from slowing demand for products and pages is not just a “someday” matter. It’s already here. And it’s bigger and badder than vendors are presently ready to let on. But so far not a single MFP vendor is discussing in a complete, clear, credible or quantitative manner where it goes next. A few are doing an “OK” job, particularly HP and Canon, and to a lesser degree Konica Minolta as well. But there’s a lot of room for — and a desperate need for — better communication all around.

The bottom line is that I can’t think of a single instance anywhere at anytime in which a company that’s in the midst of a turbulent environment, or one that’s weathering a big self-induced mess, has ever been well served by zipping its corporate lip. So speak up!

Febuary 2018:  “No Collusion!”

 “No collusion!” The phrase has become part of the political vernacular, although it remains to be seen if anything comes of it all. Meanwhile, in the hardcopy world, we’ve also got an oddly unanticipated outcome that begs the question whether the players were secretly and illicitly in cahoots to assure the result they all wanted.

What I’m talking about is the complete failure of compact, economical A4 MFPs to supplant significant swaths of the market for oversized, overpriced A3 MFPs in offices. It ain’t gonna happen. Not now. Not tomorrow. Not ever. But did this outcome result from dreaded collusion? Nope, it’s not. That’s because Collusion is just one of the “Three C’s” that can explain how an unexpectedly irrational outcome can occur. The other two are pure Coincidence and simple Common Interest.

Collusion entails intentional, often secretive efforts among coconspirators to achieve a desired outcome. Coincidence is the complete opposite. Stuff just happens randomly in parallel to produce a particular result, even if it’s unexpected, unlikely or flawed. Common Interest is an in-between explanation. It’s when shared preferences operate independently to nonetheless produce a commonly desired outcome.

With the failure of A4 devices to supplant A3 devices in the office MFP market, there’s no need for an investigative committee or a special counsel. Hardcopy vendors didn’t get together in a smoke-filled room and agree on a common strategy. But this also wasn’t just some random throw of the dice. Rather, it has resulted from the overwhelming shared financial interests of hardcopy vendors, as well as independent dealers.

It also certainly helps when there ceases to be any credible threat from capable and disruptive outsiders intent on spoiling the fun. So “everyone” is getting what they wanted. Oh yeah, except for those pesky customers. Those stupid rubes continue to pay through the nose for A3 hardware that delivers far more than they need.

I’m actually hard-pressed to think of a similar circumstance from another market in IT or elsewhere. Generally speaking, we’re accustomed to seeing “free” markets respond to unmet demand or underserved customers with new players, new products, or new platforms. No small cars from GM and Ford? We got Toyota and Honda. Music albums are too pricey? We got iTunes. Taxis are expensive and inconvenient? We got Uber.

The fact that collusion wasn’t needed to forestall a meaningful A3-to-A4 transition doesn’t make the end result any less suboptimal for individual customers or for the economy as a whole. Just think of all the more productive things customers could do with the money they’re wasting on A3 devices when comparably equipped A4 models could easily suffice. How about investing in IT security? Or developing new products? Or perhaps giving raises to employees? It’s what academics refer to as “economic inefficiency.”

While A3 copiers and MFPs have been the office norm for decades, that wasn’t always the case. Mimeo and Ditto machines were mostly letter or legal size. And the seminal Xerox 914 launched in 1959 wasn’t an A3 machine. Frankly, I’m at a loss as to why the industry long ago settled on the idea that A3 paper handling was a sine qua non of design up and down the product line.

Was it the idea a customer would only buy one or a few of these things, so each one had to be able to handle everything? Was it a carryover from the world of printing presses? Or was it a way copier vendors could emphasize how they were different from what came before? Regardless, it was a really bad deal for customers. And it stuck. Even in the copier boom years, no one championed the idea that customers could buy twice as many machines that cost half as much, although it’s something HP figured out when it launched the first LaserJet printer in 1984.

Instead, the ongoing prevalence of A3 devices in the office MFP market is a case study in how the power of sellers’ shared business models and marketing have won out over common sense and customers’ own financial self-interest. From the advent of complex leasing arrangements in the 1960s, to a singular focus on cost-per-page in the copier-versus-printer wars of the 1990s and early 2000s, to the click-focused MPS transition over the past decade, the dominant business norms in office imaging have all served to mask the massive A3 hardware price premium.

Of course, it didn’t help that the top printer vendors were so excessively naive, simplistic, ill-prepared and mistake-prone in their efforts to push A4 alternatives. After years of overpromising, underdelivering, and ignoring channel and business model issues, HP, Lexmark, Samsung and OKI to varying degrees gave up or proved ineffectual. And not a single A3 MFP vendor has ever more than halfheartedly put forth an occasional competent A4 platform without almost immediately disowning it and assuring failure.

So unless some nervy incumbent vendor goes for broke in the industry’s future waning days, we’re all gonna ride those A3 MFPs into the sunset. But perhaps it’s time to tone down the smarmy “We’re all about the customer” rhetoric?

January 2018:  “Let the Games Begin!”

Something tells me this time things are different ... real different. I’m talking about the announcement that Fujifilm is sorta-kinda buying Xerox. I expect this deal — even if it gets modified and perhaps even if it falls through — will prove to be the long-awaited catalyst that triggers a final round of hardcopy industry consolidation.

Printing has had its share of boy-who-cried-wolf moments when it comes to predicting the time is nigh for industry consolidation. Previous M&A announcements never ended up triggering a rash of other deals. Not Konica buying Minolta back in 2003. Not Ricoh purchasing IKON in 2008. Not Canon acquiring Océ in 2009. And not the twin 2016 announcements that a Chinese consortium would buy Lexmark and that HP would acquire Samsung’s printing business.

So what’s different this time? Five things. First there’s the size of the deal. About $8.6 billion will change hands (a big part of that several times) in order to create the “New Fuji Xerox.” That’s small potatoes in the gluttonous world of corporate M&A these days, but it’s much more money than in any previous print-related transaction.

Second, there’s the timing of the deal. In some ways, it’s counterintuitive. After a frighteningly miserable 2016, 2017 turned out to be an OK-ish year for the majority of the industry, with improvements in both sales and profits. And it was an almost good year for a few vendors. But clearly printer companies now see this as just a temporary lull; it’s the eye of a hurricane. Things will only get worse, so it’s time to hunker down. And vendors see safety in bigger numbers.

Third, there’s the context of the deal. For two decades, there’s been a subtle but significant and continual shift in the locus of power in the office printing industry from channel players to vendors. But that’s changed abruptly in the past year or two. While everyone was obsessed with which vendors might buy each other, the real M&A action (and money) quietly shifted to the dealer side. We’re fast heading toward a much “lumpier” landscape with a lot fewer, larger and more powerful dealers who together will determine which hardcopy companies win and lose. There won’t be room for all of today’s suppliers.

Fourth, it’s Xerox. The brand and company ain’t what they used to be, but Xerox is inextricably linked with office imaging. And when Xerox does something — anything — it tends to get more attention from both inside and outside the industry. And even in the face of considerable challenges, the New Fuji Xerox is likely to be a more formidable competitor than the old Xerox.

And fifth. There’s a palpable sense of disequilibrium paired with a scent of blood in the water.

So who’s the next contestant on “Let’s Make a Deal?” I don’t know, but I do believe the industry is coalescing into four distinct groups of companies. It’s the dynamics within and between these groups that will determine the next dealmakers.

First, there are the Mega Vendors. That’s HP, the New Fuji Xerox, Canon, Ricoh and Konica Minolta. Their sheer scale ($10-$20 billion in printing revenue), channel footprint, and breadth of offerings mean they’re here for the duration. They’ll be able to expand into adjacent “document” services. And more importantly, they’re moving into industrial inkjet printing. These companies are probably too big and too print-centric to be acquired, although Ricoh might prove to be a wild card. More likely, these vendors will themselves become serial acquirers, but their prey will be mostly smaller industrial print technology add-ons.

Then there are the Twin Tweens. That’s Epson and Brother. They’re moderate in size, and each performs pretty well in its own domain. They’re trying to move upstream and into new channels to grab a bigger piece of the office market. Each has a toehold in industrial printing. While both are somewhat diversified, printing is still their largest business. And although M&A has not been part of their DNA, Epson and Brother may well confront a new eat-or-be-eaten dynamic.

Next is the Fish-or-Cut-Bait Crowd. That’s Kyocera, Toshiba TEC, Sharp, OKI and also Lexmark. Each is part of a larger diversified company, although much less so in the case of Lexmark. Their hardcopy revenues range from under $1 billion to over $3 billion. Kyocera, Toshiba TEC and Sharp are decently stable with a good range of office devices, but they’re not much on the desktop or in industrial printing. OKI is smaller and perpetually struggling. And Lexmark is in its own world these days. Sharp (with its sugar daddy Foxconn) has spoken of making a big buy that will move it up the printing ranks, but OKI is likely to wither away. So does that leave Toshiba TEC and Kyocera in a Mexican standoff?

Finally, there’s the Industrial Crew. You recognize names like EFI, RISO and Memjet, but there are lots of lesser-known players, such as Xeikon and Screen, and a panoply of niche vendors in everything from textiles, to labels, to boxes, to signage. They’re smaller companies who hope that industrial digital printing grows fast enough and soon enough — before their funds are depleted or their investors grow too weary from the wait.

Yup, it’s gonna be the race of a lifetime.

December 2017:  “Our Own Fake News”

At any given moment these days, my inbox seems to be flooded with results from various surveys and polls conducted by or on behalf of MFP vendors and imaging solution providers. Along with fact-free blog posts, vacuous tweets, and self-congratulatory Facebook missives, producing data on “what real people really think” has apparently become obligatory in the cool new world of B2B marketing. But just because this trend is hardly unique to the hardcopy industry, doesn’t mean we shouldn’t hold our own accountable for jumping on the “fake news” train.

Here’s a sampling of items that have crossed my desk in recent months. Canon in December proclaimed that a survey it sponsored found “60% of enterprises will implement digital transformation strategies by 2020.” HP in September released results from a consumer photography survey that found “Germans like to photograph a lot.” Ricoh, also in September, revealed results from a survey of European workers that found “81% believe new technologies such as automation and AI are changing how we work.” In November, a Brother survey found two-thirds of SMB companies feel they need to do a better job “increasing the efficiency of business processes,” and about half said “cutting corners on office equipment sometimes backfires.” And YSoft in August determined that 52% of younger US workers thought their companies had “too many paper-based processes.”

Can you say, “Duh ?” I admit I’m cherry-picking these findings, but such “insights” are typical of what vendors rush to tell the world. Sadly, these divinations are right up there with “people like mom and apple pie,” and “most folks prefer lower taxes.” Will these genius revelations never cease?

It’s not that these efforts are necessarily intended to mislead or disappoint, but far too many of these surveys and polls end up doing one or both of those things because they suffer from two serious and intertwined flaws.

First and quite strangely, there’s often no compelling reason why a particular hardcopy vendor or solutions company is bothering to sponsor or conduct such an information-gathering activity. All too often, the topic is some variation of workplace/workforce/workstyle meets technology/solution/service to produce innovation/transformation/evolution. Yet the questions asked are so vague — and the likely answers so obviously predictable — that one wonders why a company would go to the trouble and expense.

Other times, it’s like the vendor is hoping to position itself as a source of “basic research” regarding the IT landscape. Or it expects to discover some psycho-sociological “truth” that academic researchers have missed. But that thin veneer of pseudo-selflessness all too often yields “findings” that are of little or no value and have minimal applicability to the vendor’s present customers or its future business. Moreover, I’ve yet to see a single one of these polls that explicitly — or even implicitly — tries to answer that most fundamental of all questions:  “So what?”

Second, even if the underlying goal or premise of the polling activity has merit, very often the methods employed by the vendor or on its behalf are somewhere between questionable and laughable. It can be everything from a weak survey design, to badly worded questions, to poor sampling methodology, to minuscule sample size. For example, one of the snippets I referenced earlier came out of a mere 100 responses to an online SurveyMonkey questionnaire. Really?

Put these problems together, and you get our industry’s own version of what I call “fake news.” Vendors produce surveys that by design are unlikely to reveal any meaningful findings or actionable information. And they compound this by employing methods and tools that are incapable of assuring the findings are reliable or even real. It’s sort of a new and unwelcome spin on an old saying. “Those who can, do; and those who can’t, sponsor surveys.”

That’s why in my role as an industry analyst and newsletter editor, I pay little attention to these increasingly common PR pronouncements. And I have to wonder if anyone else pays them heed. Aside from the vendors who want to create a vague aura that they’re on the leading edge of momentous change, one has to wonder why the companies bother with these activities at all.

And then there’s the matter of opportunity cost, which to me is the most frustrating aspect of these misbegotten polls and surveys. Instead of spending time and money trying to be seen as disinterested market observers, vendors should be collecting and sharing data on what their customers, sales prospects and channel partners are doing “down in the trenches,” so to speak.

I’m still waiting for the first MFP vendor who produces a credible report on why customers chose their products over those of the competition. Or what about a poll on how low color page costs will really need to go before companies are comfortable shifting en masse to color devices and output? Or how about a survey on the kind of suppliers companies feel comfortable turning to for ECM, or managed IT services, or consulting services? These are the kind of results I’m interested in seeing. How about you?