Digital Printing Business Forecast SGIA January07 .pdf
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M A N A G E M E N T
Digital Printing Business Forecast:
Market Movement 2.0
Can you feel the swirling winds of
change? 2007 is here. 1999 was eight
years ago, and much has changed since
then. Digital technology controls the
growth of our industry at almost every
level. Virtually everything in our industry
requires digital technology.
Globalization is marching into our
business environment with extreme
speed and effectiveness. It comes in many
shapes and flavors. But only now is the
impact starting to present itself in the
market. How do you fit into this market
movement? Will you change with the times
or be a fond memory?
Remember the Pets.Com sock puppet?
We have been living with constant Internet
access for more than 10 years now. As with
most significant shifts in communications
and technology, it has taken some time
to recognize the Internet’s potential and
toss away those cute, not-quite-ready-forprimetime companies it ushered to market.
Now the Internet is rapidly aggregating
markets, and digital printing is by no means
an exception to that rule. The Internet has
in all likelihood affected the specialty
graphics industry more than anything
else in the past decade. Everything from
simplifying art transfers to sharing Tshirt expertise in online forums increases
globalization’s momentum. But perhaps
the biggest impact has been in linking
buyers and sellers of hardware, software
and consumables in a low-cost way.
Consider this scenario: The supplier
is China. The country supplies printers
directly to consumers, with a price that is 60
percent less than US suppliers. People think
they are adhering to all the international
laws of intellectual property but no one has
checked. It works fine so far…
Sir Isaac Newton’s Third Law of
Motion states “for every action there is
an equal and opposite reaction.” What a
great law. You have to admire it. This is
a law that can and should be applied to
markets as well. So how does this apply to
the generic scenario above?
Price pressure caused by imports of
questionable reliability and legality will
continue on consumables, and the business
models that support them. Domestic
suppliers will have decisions to make if they
have not already positioned themselves to
adapt to the situation.
Delivering value to the customer will
be more important than ever before in
an environment in which most serious
buyers are well-read on their options.
Innovators rightfully will defend their
intellectual property. Suppliers will have
V i s i t S G I A a t w w w. s g i a . o r g
industry more than
anything else in
the past decade.
By Chris Bernat, Principal, Vapor Apparel/Source Substrates
The Internet has in
all likelihood affected the
SGIA Journal ■ First Quarter 2007
1/19/07 2:22:15 PM
PETG • VINYL
Curbell has been supplying plastic
sheet, rod, tube, films, adhesives,
sealants, tooling materials, and
fabricated parts for over 60 years.
FILMS AND THIN
FULL-LINE OF PLASTICS,
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Proud supplier of Bayer Makrofol® polycarbonate films
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CURBELL FILMS GROUP
©2007 Curbell Plastics, Inc. All other trademarks and
service marks are the property of their respective owners.
to work harder and deliver more of what
the customer wants. Of course, what the
customer wants will change as well.
But these reactions are somewhat
predictable, and have happened in the past.
What will be different is globalization is in
place as suppliers and manufacturers react
to these price pressures and threats to their
Co-opetition: It’s Here, So Don’t
Globalization fosters competition, but
it also encourages “co-opetition.” Coopetition is loosely defi ned as being in a
mutually agreeable business relationship
with an organization that competes with
you on one or several other fronts.
For example, you may represent a
manufacturer’s line of consumables in one
market and fi nd the company competes
with you directly in a non-related vertical
industry. Or perhaps, your largest customer
decides to offer his own product, which
reduces his purchases and pulls down a
couple other large accounts.
Your media supplier may start offering
an overflow print-for-pay service to help
smaller customers better serve their walkin customers. That service may marginalize
the equipment investment you have made
that serves the same purpose, and causes
you to loose customers to efficiency.
Organizations try to protect themselves
with alternate revenue streams. That is a
smart idea. Organizations must build
multiple revenue streams to ensure
longevity in the global market in which
we all live — like it or not. If you are
old school and have difficulty with this
concept, then that is understandable. It is
a very big change.
Are you worried about alienating
your core customers? Logical reasons for
shifting your business model must exist if
customers are going to remain loyal.
Some of these business model shifts will
be caused by manufacturers looking to get
closer to the customer and focus on their
most effective representatives in the market.
Strategic organizations will look to limit the
competitive elements by creating a separate
entity to support the demand. Others may
focus on being quiet about their competitive
relationships with customers. Both have the
potential to blow up.
Vertical Market Development Requires
Another manner in which globalization
will change business models in our
industry may be less obvious but logical.
Executives faced with significant threats
SGIA Journal ■ First Quarter 2007
to their revenue streams are human
beings. They look to their surroundings
for answers. Some will think “outside the
box” because it worked the fi rst time they
tried it. That will cause unique expertise
to be developed. Strategic companies will
add to their core-competencies to ensure
success for the new revenue stream. The
search for new revenue streams is a big
idea these days and the topic of many top
selling titles on business strategy.
“Blue Ocean Strategy: How to Create
Uncontested Market Space and Make
Competition Irrelevant” is a new book
by W. Chin Kim and Mauborgne. The
book’s blue ocean metaphor elegantly
su m marizes the authors’ vision of
expanding competitor-free markets that
innovative companies can navigate. Unlike
“red oceans” — which are well explored
and crowded with competitors — “blue
oceans” represent “untapped market
space” and the “opportunity for highly
The only reason more big companies
don’t set sail for them, the authors suggest,
is that “the dominant focus of strategy
work over the past 25 years has been on
competition-based red ocean strategies”
(i.e., fi nding new ways to cut costs and
grow revenue by taking away market share
from the competition).
Using dozens of examples — from
Southwest Airlines and the Cirque du
Soleil to Curves and Starbucks — they
present the tools and frameworks they’ve
developed specifically for the task of
analyzing blue oceans.
T hey u rge companies to “value
innovation,” which focuses on utility, price
and cost positions, to “create and capture
new demand” and “focus on the big
picture, not the numbers.” And while their
heavyweight analytical tools may be of real
use only to serious strategy planners, the
overall vision will inspire entrepreneurs of
all stripes. Most of the ideas are presented
in a direct, jargon-free manner.
There are plenty examples of what
this will look like. Perhaps your coatings
manufacturer will start a strategic
partnership with an aluminum plant and
large print house to offer an innovative,
new product. Maybe a print-for-pay
textile house will start its own line of
custom furnishings with a furniture
manufacturer down the road. It really
does not matter what scenario we describe
here. The bottom line is companies will
draw on a combination of relationships,
market dynamics and skill sets to protect
V i s i t S G I A a t w w w. s g i a . o r g
1/19/07 2:22:21 PM
Finding Your Opportunity
Value often is created by generating
demand for new ideas or new concepts.
M a s s c u s to m i z at io n i s o n e s u c h
concept that is still in its infancy. Mass
customization has shown itself in several
ways: Custom-ordered cars from Cadillac
and Scion, custom jeans from Levis and
custom sneakers from Nike.
These are all high-margin products
that allow the companies to differentiate
themselves and create new areas of revenue
that leverage their core expertise. Whether
it is customizing signage or developing a
customized-apparel production system,
the opportunity is still there for the
taking. Companies such as Zazzle.Com,
CustomInk and Café Press are great
examples of mass customization in action
from our industry.
Customization is not only a way to
differentiate end products. It also can lead
to enhancements in distribution models.
We are witnessing new types of digital
distributors entering the market. They often
are focused on specific vertical markets,
such as national parks or university book
stores. They recognize the demand for
digitally printed objects, and deliver these
digital print solutions, strengthening their
position with these retail customers.
Perhaps your opportunity lies in
discovering an emerging technology or
business application that will allow you
to benefit economically as you present it to
the marketplace. Consider the companies
that have emerged almost overnight
in our industry as serious players.
Gandinnovations, for example, formed
in April 2000, and quickly developed into
a major player by focusing on converting
large-format traditional printing to digital
ErgoSof t US — incorporated in
December 2001— also impacted the
market quickly since winning the DPI
Product of the Year awards at SGIA ’04,
Digital Expo and SGIA ’06, as well as
multiple DIMA Shoot-Out awards in 2005.
The company took the unconventional
path of targeting digital photography and
fine-art printmaking. The market has
obviously taken notice.
You r opp or t u n it y i n t h i s n e w
environment depends on what you do
in the marketplace. However, several
large trends continue to develop, and
those trends can be an integral part of
developing new secure forms of revenue
on your own search for blue oceans. Now
go fi nd your ocean!
.FFU UIF USBOTGFS JOEVTUSZ T OFXFTU BMMZ
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1/19/07 2:22:24 PM