Entrepreneurs Welcome: Opportunities in the New Printing Industry Dr. Joe Webb WhatTheyThink Economics & Research Center Print 09, Chicago, September 14, 2009

Agenda Quick overview of the economy “ Entrepreneurs Welcome” 9:40 break Q&A until 10am 10:15 manroland booth #1129 for complimentary copies of “Renewing the Printing Industry”

Quick overview of the economy

“ Entrepreneurs Welcome”

9:40 break

Q&A until 10am

10:15 manroland booth #1129 for complimentary copies of “Renewing the Printing Industry”

Long before recession, GDP was sub-par (Y-Y data) ‏

Oncoming problem: expansion of money with no goods/services to absorb it

Stagflation is here CPI since December 2008 is 4.2% ISM Manufacturing inflation report very discouraging GDP might be slightly positive in Q3, but not worth noting Employment worsening Workforce is shrinking, hours stagnant Unemployed + underemployed + discouraged = 16.8% Employment is now at December 2003 levels Employers reluctant to hire when regulatory environment is cloudy and uncertain Productivity is rising when GDP is not Creates more slack in economy, so no hiring

CPI since December 2008 is 4.2%

ISM Manufacturing inflation report very discouraging

GDP might be slightly positive in Q3, but not worth noting

Employment worsening

Workforce is shrinking, hours stagnant

Unemployed + underemployed + discouraged = 16.8%

Employment is now at December 2003 levels

Employers reluctant to hire when regulatory environment is cloudy and uncertain

Productivity is rising when GDP is not

Creates more slack in economy, so no hiring

But wait… there’s more! Trade skirmishes China: tires; new tariff on US poultry? Canada: stimulus money country of source requirements Mexico: truck drivers; new tariffs on 40 US products, mainly agriculture Change in role of dollar China diversifies UN considers issues: worldwide currency?

Trade skirmishes

China: tires; new tariff on US poultry?

Canada: stimulus money country of source requirements

Mexico: truck drivers; new tariffs on 40 US products, mainly agriculture

Change in role of dollar

China diversifies

UN considers issues: worldwide currency?

Latest recovery indicators

9 quarters of negative real “growth”

Forecasts: 2 models, WTT opinion 2009 = $86.5, 2015 = $58.0

More Entrepreneurship, Please

What’s changed in 2+ years <3 years ago... no iPhone no Twitter Facebook was obscure web site In mid-2009 30+ million iPhones 50 million+ 7/2009 Twitter users who accessed site 250+ million Facebook users Facebook Mobile 65+ million users 8/2009

<3 years ago...

no iPhone

no Twitter

Facebook was obscure web site

In mid-2009

30+ million iPhones

50 million+ 7/2009 Twitter users who accessed site

250+ million Facebook users

Facebook Mobile 65+ million users 8/2009

Entrepreneurs Welcome: Yeah, right Why would anyone want to invest in a declining industry? No one will lend to us No niches with high growth rates Replacement technologies are rampant Environmental preferences and regulations limit upside

Why would anyone want to invest in a declining industry?

No one will lend to us

No niches with high growth rates

Replacement technologies are rampant

Environmental preferences and regulations limit upside

What is entrepreneurship? Many definitions Activity of organizing, managing, or assuming risks of a business or enterprise (Webster’s) The practice of starting new organizations…in response to new opportunities (Wikipedia) A process that creates something new, different; changes or transmutes values (Drucker) Innovative acts that create dynamic disequilibrium (based on Schumpeter)

Many definitions

Activity of organizing, managing, or assuming risks of a business or enterprise (Webster’s)

The practice of starting new organizations…in response to new opportunities (Wikipedia)

A process that creates something new, different; changes or transmutes values (Drucker)

Innovative acts that create dynamic disequilibrium (based on Schumpeter)

Does it matter? Is entrepreneurship… Everyone? An exclusive few? Permanent, transient or an event? What is “innovation”? An essence of newness Different application of an “old” idea

Is entrepreneurship…

Everyone?

An exclusive few?

Permanent, transient or an event?

What is “innovation”?

An essence of newness

Different application of an “old” idea

When things don’t make sense Differences in beliefs and realities Economic functions of an industry Assumptions about it Values and expectations of customers Rhythm and logic of processes It always helps to be maladjusted

Differences in beliefs and realities

Economic functions of an industry

Assumptions about it

Values and expectations of customers

Rhythm and logic of processes

It always helps to be maladjusted

Are printers entrepreneurs? Very few are, same as everyone else Are printers just channels / expressions of technological innovations made by others? Limitations Capital locked in equipment appropriate for a different business period: lags market shifts Profit generation is lacking Necessity is the mother of more lease payments “ All printers are the same” more justified than ever Focus on production processes as means of escape

Very few are, same as everyone else

Are printers just channels / expressions of technological innovations made by others?

Limitations

Capital locked in equipment appropriate for a different business period: lags market shifts

Profit generation is lacking

Necessity is the mother of more lease payments

“ All printers are the same” more justified than ever

Focus on production processes as means of escape

What is the focus? The medium or the businesses? Is “demand for print” relevant? Diverse and numerous media environment Is there a “demand for communications” Why are print businesses formed? A pre-existing need for printed goods that changed in favorable ways when demographics changed Tradition thrives until alternatives arrive There is a lack of new print business formation at this time

Is “demand for print” relevant?

Diverse and numerous media environment

Is there a “demand for communications”

Why are print businesses formed?

A pre-existing need for printed goods that changed in favorable ways when demographics changed

Tradition thrives until alternatives arrive

There is a lack of new print business formation at this time

Entrepreneurs Welcome: No kidding! The new focus is on the printing business Equipment has always been an expression of strategy, competence, expectation and desire Major shift is in process Grasping at straws? Marketing services, ancillary services Perpetuates existing processes in most companies The great shake-out Weak demand, recession What’s next? Maybe we should focus on the clients

The new focus is on the printing business

Equipment has always been an expression of strategy, competence, expectation and desire

Major shift is in process

Grasping at straws?

Marketing services, ancillary services

Perpetuates existing processes in most companies

The great shake-out

Weak demand, recession

What’s next?

Maybe we should focus on the clients

Primary concept Entrepreneurial strategy increases chances of success when it starts with the users Enhance profits or provide efficient costs Objectives and progress criteria Client’s target audience preferences and needs

Entrepreneurial strategy increases chances of success when it starts with the users

Enhance profits or provide efficient costs

Objectives and progress criteria

Client’s target audience preferences and needs

Entrepreneurs Welcome: That’s me! No one way to succeed… … except to defy industry traditions and accepted measures of mediocrity Non-advertising media growing The “rules” are still being written Media interactions still being learned Measurement obsessed No one really knows what ROI is until they see it Change formats and messages as measurements unfold

No one way to succeed…

… except to defy industry traditions and accepted measures of mediocrity

Non-advertising media growing

The “rules” are still being written

Media interactions still being learned

Measurement obsessed

No one really knows what ROI is until they see it

Change formats and messages as measurements unfold

Media Changes Create Entrepreneurial Opportunity The difference between old and NOW

Permanence Old A physical format Stored, cared for, and known Now Always available Simultaneous deployment Multiple formats

Old

A physical format

Stored, cared for, and known

Now

Always available

Simultaneous deployment

Multiple formats

Portability Old You can take it with you Now Always connected Content optimized (on the fly?) for different formats of viewing devices

Old

You can take it with you

Now

Always connected

Content optimized (on the fly?) for different formats of viewing devices

ROI Old Function of design, content, and budget Now Deployment related Social and other media have low cost barriers “ Lower bar” than traditional media Content creation is cheap in relation to advertising

Old

Function of design, content, and budget

Now

Deployment related

Social and other media have low cost barriers

“ Lower bar” than traditional media

Content creation is cheap in relation to advertising

Cross or integrated media Old Serial creation and deployment Print production created imaging baseline Now Integrated and parallel production Integrated and parallel deployment Integrated and parallel measurement

Old

Serial creation and deployment

Print production created imaging baseline

Now

Integrated and parallel production

Integrated and parallel deployment

Integrated and parallel measurement

Reference point Old Print as static reference Reliable, authoritative Now Gateway to other media interaction Authority is based on repetition, access and “branding”

Old

Print as static reference

Reliable, authoritative

Now

Gateway to other media interaction

Authority is based on repetition, access and “branding”

Media selection Old The medium is the message Communicator in full control of medium selection and economics Now Information user has dynamic choice Saturation with relentless consistency is the message Obscurity is the enemy Obscurity the risk of single media

Old

The medium is the message

Communicator in full control of medium selection and economics

Now

Information user has dynamic choice

Saturation with relentless consistency is the message

Obscurity is the enemy

Obscurity the risk of single media

Personalization Old Variables were selected by the communicator Based on historical data Now A choice made by the recipient Historical data + real time actions of recipient

Old

Variables were selected by the communicator

Based on historical data

Now

A choice made by the recipient

Historical data + real time actions of recipient

What do printers see? Demanding users with tighter budgets Prices and costs out of alignment Green ambiguity Confusing communications “ They’re just not buying print like they used to” Twittering behind their backs Is it the inane messages of teens

Demanding users with tighter budgets

Prices and costs out of alignment

Green ambiguity

Confusing communications

“ They’re just not buying print like they used to”

Twittering behind their backs

Is it the inane messages of teens

Harsh realities Print prices not keeping up with inflation, but costs are Recession and budget cuts justify new behaviors of clients Equipment investments critical for recalibration of industry economic structure Installed base does not match market needs Unwinding through bankruptcies and closures? Flexibility is limited when management backs itself into a corner (via debt?)

Print prices not keeping up with inflation, but costs are

Recession and budget cuts justify new behaviors of clients

Equipment investments critical for recalibration of industry economic structure

Installed base does not match market needs

Unwinding through bankruptcies and closures?

Flexibility is limited when management backs itself into a corner (via debt?)

Entrepreneurs Welcome: Sign Me Up! Entrepreneurs create new business; Others just get old business Risk is a choice; indecisiveness is a risk Businesses that can be planned with precision are usually stagnant industries There is always a tension between strategy and daily decisions in a changing marketplace

Entrepreneurs create new business; Others just get old business

Risk is a choice; indecisiveness is a risk

Businesses that can be planned with precision are usually stagnant industries

There is always a tension between strategy and daily decisions in a changing marketplace

Building blocks of the new printing business Corporate employment will be austere Outsourcing opportunities: Credibility? Staffing? Services? Small and mid-size business lack communication capabilities New media is an entry point, a lever for new print Multiple media is essential communications strategy Even for the most mundane items Network new skill resources, not employees

Corporate employment will be austere

Outsourcing opportunities:

Credibility? Staffing? Services?

Small and mid-size business lack communication capabilities

New media is an entry point, a lever for new print

Multiple media is essential communications strategy

Even for the most mundane items

Network new skill resources, not employees

The correct role of “ancillary services” Services that if added may one day stand on their own with high value-added Not just “billable tasks” Strategic, not opportunistic Retainer-based content development, management, deployment, and measurement services Why task-based “ancillary services” are tempting Prices keeping up with inflation Non-print growing +1%/yr while print –2-3%/yr

Services that if added may one day stand on their own with high value-added

Not just “billable tasks”

Strategic, not opportunistic

Retainer-based content development, management, deployment, and measurement services

Why task-based “ancillary services” are tempting

Prices keeping up with inflation

Non-print growing +1%/yr while print –2-3%/yr

Media choice can be boon for print businesses

Can’t get the big e-mail payback unless you keep lists clean

How to do it: simplified case E-mail blast from well-designed data base Has mailing addresses and e-mail addresses Collect bounces next day and mail post card “ We recently tried to contact you, but your e-mail address did not work… you missed our latest sale” Mention new product in past category purchase, etc. pURL or QR to go to record update page Incentive to update Constantly recruit additional targets

E-mail blast from well-designed data base

Has mailing addresses and e-mail addresses

Collect bounces next day and mail post card

“ We recently tried to contact you, but your e-mail address did not work… you missed our latest sale”

Mention new product in past category purchase, etc.

pURL or QR to go to record update page

Incentive to update

Constantly recruit additional targets

Stay on top of new media Smartbrief.com Many free e-newsletters for social media, interactive media, advertising businesses Also e-newsletters about small business, and many other industries, topics Ad:tech shows New York 11/4-6/2009 San Francisco 4/20-22/2010

Smartbrief.com

Many free e-newsletters for social media, interactive media, advertising businesses

Also e-newsletters about small business, and many other industries, topics

Ad:tech shows

New York 11/4-6/2009

San Francisco 4/20-22/2010

How we grow again Worry about print businesses, not print media Print’s costs must continue to fall Print’s value will be judged in relation to other media make the other media successful, and print becomes part of new media New media become a jumping-off point for new print consumers Retainer services are the best of the “ancillary” class

Worry about print businesses, not print media

Print’s costs must continue to fall

Print’s value will be judged in relation to other media

make the other media successful, and print becomes part of new media

New media become a jumping-off point for new print consumers

Retainer services are the best of the “ancillary” class

The rules for new media, and the new printing businesses are not yet written Entrepreneurs write them in their own style

QUESTIONS! Dr. Joe Webb WhatTheyThink Economics & Research Center