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R.J. Stasieczko

Will Konica, Follow Ricoh's 2017 Strategy? Are Dealers Preparing for Massive Consolidation?

Will Konica, Follow Ricoh's 2017 Strategy? Are Dealers Preparing for Massive Consolidation?

As the Document Imaging Channel's end-users continue to avoid printing, the industry's OEMs plan the path forward. Nothing like an evolutionary event to bring the need for bold leadership. OEMs are normally 5-7 years ahead in their business strategies. We have all heard the saying, "You can't turn an ocean liner on a dime." Unfortunately, most of the OEM's aspirations determined 5 years ago are now completely out of alignment with today's new realities.

Back in 2012-2015, the OEMs were building their models for the year 2020. I think about all the meetings where the glories of production and industrial print's future were laid out. How many meetings regarding the shift into IT services or other diversifications were attended? How many hours were spent coming up with new gimmicks to splatter on A3 devices? The OEMs are quickly discovering many good intentions are now questionable. 

So, the question now is, what goes and what stays?

The industry's dealers represent many manufacturers in this article; I wanted to discuss Konica because of its massive direct footprint and share my thoughts on how Konica may take a page from Ricoh's book. Or, will Xerox look to Konica, I will also discuss some things dealers should consider as they prepare for coming probabilities.

Here's the question many Konica dealers must be asking. Will Konica sell its direct operations as we saw Ricoh do in 2017? I am in the camp that believes that it is a solid possibility.

If Konica remains tomorrow as yesterday, they will struggle under the cost to deliver in their current model profitably. As Ricoh already determined, being a manufacturer and selling directly to the SMB customers was too expensive. So, now as the entire industry understands, the volumes are not coming back and will decrease going forward much faster than pre-virus thinking so, what will the Industry's actors do?

Konica has spent the last decade plus buying dealers and diversifying into IT services through their acquisitions in that space with All Covered and others. Konica even went as far as buying the ERP FORZA; a SAP Business One ERP designed for the Document Imaging Channel. However, the question will be, can those diversifications function with enough profitability on their own without the life-support of the core print deliverable?

The other question is, if these diversifications can't survive on their own, or if Konica does sell to say, Xerox, as I suggested in an "End Of The Day With Ray!" Episode. What would Xerox eliminate to reign in cost? Regardless of who might be a buyer of Konica print and their IT Services business All Covered, most would agree to sell an ERP to dealers would more than likely be on the shortlist to go. A question is, should those few dealers on the FORZA platform prepare for new ownership?

As all the manufacturers are looking towards the future, there will be painful decisions. Many will be addressing ways to align revenues and profits, and as the OEMs make necessary adjustments, their dealers must prepare for what could be coming.  

As I continue suggesting, the coming consolidation will be about shedding costs and redefining distribution to align with market realities.

The why Xerox and Konica coming together could be an awesome opportunity for both entities is about consolidation. Xerox and Konica in both Europe and the Americas have so much redundant footprint that the cost savings would be enormous as they consolidated that footprint. There obviously would also be a great opportunity to lower human capital costs.

Xerox needs a manufacturer, and Konica gives them that. Xerox has proven themselves to be bold; they have a leadership team that has the ability to make the needed tough decisions regarding cost alignment, as we all witnessed in 2019 with their restructuring of Global Imaging. The coming consolidation will not be easy and will not be about past alliances it will be about creating relevant alliances.

In the next couple of years, the industry will witness many challenges and changes. The manufacturers and the dealers who represent them must prepare and modify as needed to ensure they continue in profitable relevance. The days of robbing Peter to pay Paul because diversifications are not profitable are ending quickly.

In 2017 Ricoh made some tough decisions, and in 2020 all the OEMs will face the toughest decisions of the last 4 decades. So, as the Manufactures plan for 2025, some are planning their exit, and some are planning their consolidation strategy. Those planning more of the same or believe they will push forward their plans from 2012 or 2015 post-pandemic should instead sellout over a disastrous falling-out.

The future for the OEMs was being outlined before this pandemic. The decisions the OEMs made pre-virus may prove bad or good. However, moving forward will take boldness and the ability to understand without prejudice the impacts this evolutionary event had on the end-users they and their dealers serve.

Something all leaders must face is this. It's easy to buy someone; the hard part aligns profitably with what you bought, which takes bold leadership. The document imaging channel and its OEMs have been investing in many redundancies; it's time to align those investments to maximize profits, and that will again take bold leadership and painful decisions.

Many in the industry were critical of Xerox as it consolidated in 2019. As the industry advances to the future, its success will be determined by how successful all the channel's actors can realign cost and prepare for the impacts of a major consolidation coming.

As manufactures either sell out or realign their go to market approaches. The dealers who represent them will all be evaluated, and through that evaluation, some dealers will not make the cut; also, the larger dealers will gain greater influence with manufacturers, thereby pressuring them to eliminate smaller dealers in their marketplaces in efforts to align supply and demand.

Dealers must prepare for what's coming. Here are a few of my suggestions:

  1. Build relationships with wholesale distributors, regardless of a dealer size; understanding what organizations such as Tech Data or CDW can bring to your capabilities is important. It is also important to understand the alternatives for parts and supplies.
  2. Build e-commerce platforms and hire both employees and consultants who understand pull-economy processes, and look to possibly merge with aligning vertices.
  3. Evaluating your entire MIF (Machines In Field), those dealers who have the facts regarding their end-user personas' and understand all the details backed by data regarding the profitability of all deliverable categories. Will be in a much better position to either fire a manufacturer or leverage this detailed knowledge to obtain a new manufacturer. For, example instead of looking at A3 placements being replaced by another A3. Look at how many A3s could actually be replaced with A4, and that information may very well excite an A4 manufacturer to help you replace them. There are many examples of what could result if dealers intimately understood their data and were open-minded enough to inject that knowledge into a different mind-set. 
  4. Dealers must understand what outcomes their customers are achieving and stop focusing on outdated A3 strategies, as 5 year leases, and premature buy-outs. This will take an A4 business model, and that model will surface as dealers' study all the data of their A3 MIFs.
  5. It is time to look in different places, and those places will be discovered if dealers start their search at their end-users. Keeping in mind searching for what you want to find is easy. However, searching for the unknown takes the ability to put aside all prejudices of what you think you knew.

There are obviously many things the dealers in the industry must do to prepare for what's coming. My hope for this article is to spark thought on all dealers' processes regardless of the manufacturers' they represent. Dealers must imagine what could be in preparation for what everyone knows is coming.

Massive consolidation and channel realignments.

Currently, all the manufacturers have plans, and my scenarios with Konica or other scenarios I have painted in the past are merely what I see as probable. My friends, I strongly recommend you also take the time to prepare and imagine because we all know that today imagined possibilities become probable and quicker to reality than any time in history.

I understand the loyalty dealers have to manufacturers; however, all dealer's first loyalty must be to their business model designed for their customers. Remembering all the manufacturers you represent will always put their business success ahead of any outdated emotional ties, as all businesses must.

This new era of our industry will put many pressures on past relationships and loyalties, and as with all evolutionary events, the coming changes will be challenging. However, these challenges will also be extremely opportunistic for those looking for opportunities. Those who look to keep the past alive will find themselves surprised when the past is no longer there to comfort them.

"Status quo is the killer of all that will be invented."

Ray Stasieczko

CEO/Founder TEASRA,The Innovation Channel and Host of The End of The Day With Ray!

The Customer's Answer Can Fool One Into Complacency

I recently read where someone asked a few customers' questions to prove that delivering products and services through outdated systems was still relevant. 

But what we don't know is how they asked the question. Were they explaining how they fit into the realities of a marketplace and can now help their customers? Or, did they phrase the question based on their own digital ineptness to save their outdatedness? 

Most in fear of a change to their relevance will present their outdatedness as valuable. The customers they seek approval from will tell them what makes them feel good. The reason customers' do this is they can easily replace them, and one day they will. But until then, the delusional seller will remain happy with a delusional view of their customer relationships. However, soon their buyers will trade in that relationship for an innovator's better experience.

Those continuing in denial of the digitalization transforming the selling and buying intersection is beyond comprehension.

Sellers who rely on the push economy process to deliver their products and services are completely devastated when they realize their customers are more comfortable doing things through the pull-economy processes; processes residing in the intersection between the digital and physical worlds.

Here's how I define these two very different processes.

The Push: Economic Processes are those processes designed to bring your products and services to the customers you seek. This is a show up in person, and this process, for the most part, lives in the physical world.

The Pull: Economic Processes are those processes designed to allow the customers to seek to bring your products or services to them through their control, a process, for the most part, lives in a digital landscape.

What happens when your customers are searching for your replacement, and they don't find you there? The simple answer is that they no longer are your customer. I wrote an article on this subject back in 2017; here's the link for more details.

Like other product and service providers, The Document Imaging Channel faces great pressures to its core deliverable of print equipment, its supplies, and services. The industry's customers have benefited from a commoditized marketplace for well over a decade as its customers held vendor auctions through nearly all buying cycles.

There has to be a reckoning with reality regarding all aspects of customer engagement. Regardless of core products and services, those resellers or dealers must have a strategy to accommodate both buyers' understanding that forcing push-economy processes on buyers who prefer to operate with a pull-economy process will result in a lost customer.

Here's the problem, those who attempt to deliver both these customers through the push-economy processes will find themselves out of alignment in delivery cost with competitors who successfully built systems designed for pull-economy processes.

It is nearly impossible for some resellers to imagine their customers value desired outcomes over products, services, delivery systems, or the friendly smiles of those servicing or selling them. In reality, many of the most innovative organizations today reinvented the means by which their customers receive those desired outcomes.

For example, a signed document is the desired outcome; a digital platform allowing for the signature replaces the need to print off, sign, and then scan back to the digital world. Obviously, the ability or means to do this digitally is a much better experience than the outdated way. So, one can imagine those who lack the competence to present digitally will believe their customers are happier signing paper.

Another example is those who refuse to engage their customers through video communication, even as a pandemic confines the globe instead of embracing what is becoming more common every day.

Some insist on running around opening doors in the physical world instead of learning and perfecting closing deals in the digital world. Again you can imagine how those outdated door bangers will exclaim how their customers prefer on-site meetings over digital communication.

My Caution to Outdatedness

"Your buyers did not know it was up to them to keep you outdated."

So, as buyers can acquire products and services through a better means more suitable for their modern buying habits, they will switch to their preferred buying method as long as their desired outcome is achieved. History proves they always do.

Product and service providers need to remember that as their customers' shift from the push-economy to the pull-economy. This shift will start with those customers who have commodity mindsets and are at a lower scale in their needs of both the products and services.

This is critical for the document imaging channel to understand. They must accept that a vast majority of their end-users are reducing printing needs, and their desired outcome, which a printer/MFP once furnished them exclusively, now can be achieved without the printer/MFP, and any who still require a device will replace the oversold A3s with the less expensive A4.

As more and more customers search for alternatives to outdated business processes. Resellers must decide to align themselves to meet these customers or let these customers leave them. In some cases, letting them leave may be appropriate as some dealers will redefine their deliverables to align with the persona of a more profitable customer.

For nearly five years, I have expressed concern that the document imaging channel's dealers treated all customers in the same manner. That strategy of sameness worked when the industry was growing. However, as the industry retracts and the industry diversifies, that strategy will be deadly.

The imaging channel dealers must be conscious that their customers already have options, and this pandemic has brought great awareness to the industry's end-users. The document imaging channel's end-users will shift to organizations that already exist and align better with those seeking options through the pull-economy.

So, don't ask your customers how valuable you are with your outdated processes. Instead, paint a picture that outlines you delivering the future. Don't ask customers if they will agree to keep your status quo. If you do, as I already said, you will get a passive answer design to support your thinking.

As I listen to some of the nonsense from some determined to stay status quo, it reminds me of many other industries where complacency fought against reality and lost.

It's time to stop chasing squirrels. Would it not make more sense to clearly redefine the delivery, the management, and service processes of your core deliverable and position your business to meet customers in both the digital and physical worlds? Today's resellers must be able to function in what I call "The intersection between the digital and physical worlds."

That functionality takes many forms from the inception of customer engagement, managing the engagement, through the engagement end. Dealers, resellers, service providers, and product manufacturers are all positioning themselves to function digitally effectively. All actors of all industries must increase their digital acme aligning with the realities of today's buyers.

Stop fighting the desires of your customers' future and open your mind to how things will work, even those things which are completely against all that is sacred to yesterday. Tomorrow is about improving your customer's experience, not about keeping you comfortable. 

"Status quo is the killer of all that will be invented."

Ray Stasieczko

CEO/Founder TEASRA,The Innovation Channel and Host of The End of The Day With Ray!

Thinking About The Second Quarter As Third Quarter Will Be Published Soon

Thinking About The Second Quarter As Third Quarter Will Be Published Soon

"Blind Optimism Takes Realities Out of Focus"

Well, the document Imaging Channel just finished another quarter, and soon the numbers will hit the street. One does not need a degree in finance to realize the numbers again won't be pleasant. The question is, will the manufacturers discuss the realities of the numbers? And will those dealers who bet on those manufactures for their deliverable (meaning their livelihood) look harder at the numbers?

We can all remember in the second quarter of 2020. To sum it up, it sucked. However, for the most part, the industry expected a disaster; after all, the globe is in a pandemic. In the third quarter, we should not expect much better. However, I hope we see more analysis from the industry on the realities facing the legacy BTA Style dealer.

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As an example, I want to share a visual I have seen numerous times. This visual clearly shows where Sharp was the only manufacture in the Document Imaging Channel, which had positive numbers in the second quarter of 2020.

On the surface of this chart some, Sharp dealers are cheering! However, what are they cheering? The document Imaging Channel dealers need to keep in mind that all the manufacturers on the chart above have numerous options to distribute products to end-users. The growth in one distribution area probably came at the loss to another distribution area.

All manufacturers saw huge bumps in their A4 distribution and saw bumps to business services, such as IT services or equipment such as display or compute.

Every dealer knows that it's the pressure on the A3 deliverable, which is of greatest concern creating the need for diversification One must also take into account the starting point of all numbers.

The questions for Sharp and all the other manufactures are simple. What was the percentage increase in products distributed outside the BTA or legacy dealer channel?

The question I ask my dealer friends is this. What is your strategy to accommodate a competitive landscape as to ensure that as those outside the legacy dealer channel continue taking end-users from you and as they gain momentum with your key manufactures, will you, in fact, be positioned to compete? Or will you continue losing market share to alternative distribution? 

Another couple of questions to ask, as you look at this chart and the new one coming out soon, highlighting the quarter just ended is this.

What are the manufactures cutting as they align cost to battle the losses in revenues? As we see with our friends at Xerox, some manufacturers started cutting excessive costs in the third quarter of 2019 pre-virus, and of course, the massive cost restructure of Ricoh back in 2017 as it shed the excess cost of direct operations.

The realities of needed cost cuts have been apparent for at least a half-decade. However, most of the industry's actors ignored this reality. During this time, we witnessed the mega dealers building up market share by buying each other. I have always questioned that approach without an absolute determination to cut overhead and exceeded 30% in a diversified deliverable as quickly as possible.

The dealers in the Document Imaging Channel must pay attention to what they are losing in revenues based on others replacing them. This need in awareness should prioritize what they are losing based on the deliverable as it was pre-virus.

Everyone knows that the A3 business model will take substantial hits, especially as government customers freeze budgets and businesses realign technologies to accommodate a remote work force and a quicker path to digitization. Those two things make a great argument for A4 over A3, and as all the dealers understand, A4 can easily be delivered in lieu of them.

It's nice that our friends at Sharp had a positive growth number, although the dealers should focus on where all the numbers come from, especially as the entire industry must plan for what will inevitably be a massive consolidation of manufacturers and convergence of reseller channels.

As the final quarter of this horrific year unfolds, all dealers need to remember that the manufacturers they sell and service products have options. The marketplace for print equipment, its supplies, and its services is not exclusive to what's known as the BTA dealer network.

It will be critical that dealers follow their end-users' movements and understand how the manufacturers they support can bypass them if needed. As dealers work to align themselves with remaining successful, it will be important to focus on what they lose, why they are losing it, and, most importantly, whom they lost to.

"One of the greatest threats to a company's willingness to innovate is its perceived stability."

Sometimes it's easy for the Document Imaging Channel to miss the warnings signs which threaten its core competency the A3 deliverable. As they are exposed to growth outside of that core without a clear definition of that growth's numbers and mistakenly find false comfort in a perceived security.

"Status quo is the killer of all that will be invented."

Ray Stasieczko

CEO/Founder TEASRA,The Innovation Channel and Host of The End of The Day With Ray!

Conformity Nourishes Obsolescence

"The worst thing about current circumstances is the way there ending surprises the complacent."

Regardless of one's business or industry, the challenges are immense during this time of COVID 19. The Document Imaging Channel faces its greatest challenge since 1959 when the Xerox 914 made its first plan paper copy revolutionizing the document copying industry.

Now the question for the industry is this. Why will the industry once again be revolutionized?

Those searching for why things will be different will Create Relevance, and those focused on how things can remain the same will, by default Remain Status Quo.

The document imaging channel still has not agreed to participate with an obsession to revolutionize its deliverable based on why they should.  

"Innovation is a painful process and will exhaust most into complacency." 

I think about the many failed attempts of dealers and manufacturers' direct operations in transitioning into Managed IT Services or even embracing the realities of the monumental shift to A4 as examples. The leaders driving these transitions have not truly bought into the Why they need the transition. Or, are betting with total delusion that the core deliverable of print and its services will return to pre-virus levels.

If these leaders truly faced the realities in why they need to transform, they would become obsessed with their transformation. Through that obsession, these leaders would eliminate all that has held them back regardless of the pain in ripping off complancency's bandage.

"Conformity nourishes obsolescence."

Everyone knows that all businesses are based on the customers it serves, and yet in declining industries, there seems to be a denial mechanism blocking common sense. Everyone in the industry knows its customers have been decreasing in the needs of its core deliverable for at least a decade. However, still, the industry has not modified to that reality.

Many have elected to continue buying more declining market share without an obsession to increase customer spend through diversification. Those who did this and continue doing it will face severe stress through this pandemic as it continues to push print customers to new digital platforms.

The time has to be now for dealers and those manufacturers with direct operations to become obsessed with transforming their market strategies based on the, Why they should. Continuing in overselling A3 and refusing to add diversification will cripple all aspiration of continued relevance. The Document Imaging Channel has to defeat the status quo and must look past wants comfortably.

It starts by asking different questions.  

It is probably safe to say that when the industry's analyst asks questions of the industry's customers, they are not seeking an answer built of imagination; they feed a question where the answer they get describes the past continuing on in the future, over being eliminated by the future.  

Being Future Proof means massive readjustments towards reinvention. The reinvention of an industry starts with the reasons why then the how. Nothing new will come when everything old is more important than exploring what's new. Or, when old-mindsets fear what they do not understand and refuse to explore the unknown.

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As we all witness the many challenges for not only business but all aspects of life. It is important to open one's mind to all possibilities. Remembering that possibilities are not just about improvement possibilities may also be about disasters.

The document imaging channel's future is where the leases on all the past glories more than likely were not renewed. The future should not be analyzed by looking through mirrors or memories. It seems so many analysts look at the past and present and project what they see in the future. Visions of the future require imagination and a willingness to explore what else is possible outside current circumstances. 

"It is more important to look into the future in search of how things changed without the past relevance regardless of how painful those changes are."  

No one has a crystal ball, but everyone has an imagination, and everyone has the ability to open their minds to the realities around them. As the pandemic continues to challenge everything, leaders must continue to challenge themselves and honestly with logic examine their business's future relevance.

"Beware of the visions of those unimaginative for they use their memories in creating them."

As a caution when you see the reports of some analyst describing a future where current circumstances remain. It is important to understand the questions on the surveys and the imagination abilities of the analyst. Unfortunately, most analysts are focused on bringing the past to the future. In contrast, nearly all visionaries focus on bringing the future to the present.

I penned this the day Sears and Kmart merged "A Company becomes obsolete when they focus on bringing the past to the future instead of bringing the future to the present."

The industry's end-users are in charge of its future. We all watched blockbuster make bad decisions. They refused to accept the value of Netflix's subscription model, and they refused to explore or, worse, ignored the realities to the momentum of Netflix's better experience.

You may have great relationships; however, your customers are searching for better experiences. Don't misjudge the value of the experience, for better experiences continue replacing many great relationships. 

The document Imaging Channel must look to their end-users. It is there they will discover why they must modify; this pandemic is the catalyst to introduce the channel's customers to alternatives. Those alternatives will be based on better experiences, and those better experiences will answer Why and hopefully the answer will spark the obsession needed to transform. 

In closing: You may find an article written three years ago titled "Before How there's Why" of additional value. see the link below.

"Status quo is the killer of all that will be invented."

Ray Stasieczko 

CEO/Founder TEASRA,The Innovation Channel and Host of The End of The Day With Ray!