Is Konica Minolta Ready? What Big Changes Are Coming?

by ray stasieczko October 01, 2023

Well, September is over, and so goes another quarter. Konica Minolta has ended its 2nd quarter, and once the numbers are tallied, will Konica still be losing money? I am guessing YES!  

To recap, at the end of Konica Minolta's current year, the first qtr. Konica had an operating profit loss of around 30 Million Dollars. Over the last three fiscal years, Konica has lost nearly One Billion Dollars! 

At the end of Konica Minolta's FY22, ending in March 23, Konica breached some of its loan convents as they lost money for over two consecutive years. It looks pretty likely that Konica Minolta's creditors are getting extremely concerned about Konica Minolta's inability to navigate the company profitably.

I expect a significant change in Konica Minolta governance, A change long overdue. For the first time in Konica Minolta history, its board of directors has more outsiders than insiders. The board will have to make many changes, which will most definitely upset the status quo!

Konica Minolta leadership here in the US within their print business unit will quickly blame the other business units as the cause of Konica Minolta's Financial Crisis! I say, "Not so Fast"

In the print sector business, one business unit is called Digital Workplace, and the other is called Professional Print. These business units have continuously struggled to produce reasonable operating profit. Why?

Within the Digital Workplace, Konica Minolta accounts for the revenues and profits from its MFP print equipment, supplies and services. This sector is also where the revenues and earnings from its managed IT services or other non-print related services delivered to the SMB space are also accounted for. 

One of my complaints to all the industry's actors is to stop hiding the poor revenue and profit numbers based on the poor management of non-print related activities inside the numbers of the print activity. 

Nothing will improve without accountability and the awareness of that accountability. Hiding is not accountability; it's instead a cowardness to accountability. It is hard to fix what is not accurately measured.

Konica Minolta here in the United States has spent 100's of millions of dollars buying up IT-related business over the last 12 years. I argue today that all those investments have entirely failed in relation to the aspirations of Konica Minolta's past and current undisciplined over-optimistic leadership. 

Konica Minolta, as many in the industry, has yet to figure out that it's a discipline, not uncontrolled optimism, that ultimately delivers profitable outcomes. Konica Minolta seems to operate in a delusional, over-optimistic manner. 

I have challenged Konica Minolta many times to share the details of the All-Covered platform. Konica Minolta refuses to articulate the realities of All-Covered and all the entities Konica Minolta bought under the All-Covered umbrella. This unwillingness to share the details seems to highlight Konica Minolta being embarrassed over the lack of success in implementing a profitable ROI on the 100's of millions spent on their hopes and dreams.

It seems Konica Minolta acquired a dysfunctional mess in 2012 when it purchased All Covered. It has been 12 years and many other acquisitions without any movement in profitability. Konica's operating profit within its digital workplace is dismal at best. 

This poor performance has to be attributed to the mismanagement of non-print-related deliverables. After all, we should assume that Konica Minolta can deliver print equipment, its supplies, and services profitably! It's their core deliverable!

IT services delivered correctly should have been a home run for Konica Minolta. In the last three years, we have seen a massive IT services movement as end-users quickly migrate to the cloud, and securing their digital infrastructures becoming big priorities. 

After twelve years of owning All Covered, Konica Minolta should have been positioned perfectly to capitalize on IT service-related products and services as print equipment is challenged based on end-users awareness regarding the new realities of even needing to print. But obviously, something remains dysfunctional in the Konica Minolta IT and related services deliverable. 

Here's my thinking: Konica Minolta purchased a company in All Covered under the stress of debt with leadership incapable of building a profitable, organically grown business. As All Covered was growing only through acquisitions. 

The three years before Konica Minolta acquired them in 2012, All Covered had purchased 16 companies. Konica Minolta since purchasing All Covered, a collection of non-realized dreams, has added more debt and distractions as Konica Minolta acquired 24 more companies which they put under the All Covered umbrella.

One of those companies was the failed FORZA ERP. Which I am sure Konica Minolta paid little to nothing as apparently Grey Rock Capital the private equity behind MWAi and FORZA dumped them as a failed investment.

It was the purchase of MWAi - FORZA by Konica Minolta that drove my thinking that most of the acquisitions Konica Minolta put under the All Covered umbrella were likely all failed or highly distressed entities, entities Konica Minolta hoped they could save.

I think buying poorly run companies and implementing a strategy based on unrealistic optimism over disciplined leadership is a recipe for disaster. 

The industry cannot buy dysfunctional IT servicing organizations and think by some miracle they can turn them around and create success in a whole new deliverable outside their core. It seems Konica Minolta is a perfect example of attempting and failing at just that.

Some maybe asking, why do I discuss, Konica Minolta and Visual Edge IT?

My greatest motivation in discussing Konica Minolta and the Mega Roll-up Visual Edge IT is to warn the industry's actors, dealers, and OEMs that delivering non-core business services takes much more than over-optimistic hopes and dreams. It takes leadership with an absolute discipline to all the realities of the specific deliverable. 

In my opinion, neither Konica Minolta nor Visual Edge IT have developed the discipline or the abilities to drive a successful integration of new services into the core services profitable. I base this on what the leaders of these organizations say when they articulate their aspirations.      

Konica Minolta and Visual Edge IT seem to have an inherited mindset that they can make profitable what has been functionally not working profitably. If they continue denying their inabilities this mindset based on over-optimism without any reality will destroy both Konica Minolta and Visual Edge IT. 

I believe if Konica Minolta and Visual Edge IT were honest, they would regret the decision to accumulate debt based on fantasy.

So, what is the prognosis for Konica Minolta? My friends, It seems the only viable outcome is for Konica Minolta to first face reality and second clean up the mess based on that reality. Here's a probable start to the clean-up strategy 

One - Dump, All Covered, and every entity under the All-Covered umbrella. Also, dump all non-print related business inside the Digital Workplace and Professional Print business units worldwide.

Two - Dump all direct operations worldwide. Konica must eliminate this cost.

Three: Form or join a strategic manufacturing consortium as we witness Toshiba Tec and Ricoh implementing. Konica Minolta should consider becoming the third OEM in that relationship.

The above three things will be extremely painful to the status quo; however, I do not believe Konica Minolta can continue as they have. The reasonable time allotment for Konica Minolta to continue in on-the-job training to inject alternative solutions into the Digital Workplace and Professional Print business units has expired. 

Konica Minolta may face bankrupting its Medical business unit. However, that could potentially cause creditors to force all of Konica Minolta into bankruptcy. It does seem as the 200 million put will add too much debt to an already extremely troubled business unit.

The Konica Minolta Industry business unit is a shining star for them. Maybe an alliance with another organization in the industrial lens space may make sense. Maybe that alliance can be funded through the elimination of print related assets such as direct operations and all the All Covered assets.  

Konica Minolta spent too many years chasing a fantasy, and they can no longer continue failing in profitability. Over the next few years, all the print industry OEMs will have to decide precisely how they will participate or end their participation in the print industry an industry, which definitely needs much consolidation. 

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

Ray Stasieczko Host of The End Of The Day With Ray!

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