The Imaging Channel's Changing Business Model Must be Profit Over Revenue.

The Imaging Channel's Changing Business Model Must be Profit Over Revenue.

by ray stasieczko May 31, 2020

"Regardless of industry, those who have participated in an obsessional quest for revenue regardless of disciplines towards profits will eventually find themselves without adequate liquidity."

Unfortunately, it does seem as some are still desperately chasing revenue over the importance of profit. There has never in the history of the Imaging Channel been a more critical time than now to control cost by aligning all the industry's business process to the realities of the marketplace.

Nearly all print equipment manufacturers have presented their recent quarterly financials, and it is safe to say that no manufacturer is excited about the outcome. However, the worst is yet to come the last quarter presented ended in March. As most understand the months of April, and May will fair far worse. As for June, we will see. However, those with common sense can draw a pretty good description of the April-June quarter for the print equipment and services industry.

Throughout the last few months, we have seen nearly all manufactures making adjustments to human capital cost, and there will be more adjustments made through June. The industry known as the Document Imaging Channel will face many challenges, and aligning all costs is paramount to remaining although changed as ongoing entity. Both the manufactures and the dealerships who represent them must now focus on profitability.

This profitability focus will cause many changes to the industry. As I have repeatably said, "The manufactures and those dealers who represent them must develop strategies to capitalize on prints decline."

Those who attempt to continue overselling and over-spec'ing to maintain outdated business processes will find themselves defeated. That defeat from a broken business model comes as a market's end-users become more aware of what is broken. This pandemic is elevating that awareness to both the industry's end-users and those innovators who intend to disrupt the industry's actors.

Like all technology resellers, the Document Imagining Channel must pay attention to the lessons from this ongoing pandemic. With regards to print and copy equipment end-users are getting along without the equipment, end-users are questioning their print equipment and its services expenses. This questioning is causing end-users to evaluate their print applications and their needs themselves. End will quickly fallout of trust in those providers who will attempt to sell them based on pre-virus applications.

Both Dealers and print equipment Manufactures must face the post virus reality and shift their business models to customer-centric approaches. Manufacturers who sell and service directly to end-users in the old BTA model must diversify just like the dealerships who represent them, as we have seen with Konica and its All Covered Group.

Those Printer/MFP manufactures who were more focused on A3 print equipment will face many storms ahead without migrating to A4 platforms. The reality of the migration to A4 equipment will become mainstream. This shift to A4 will provide numerous innovative processes to the print equipment and services deliverable. These innovative A4 processes will cause a major disruption as it improves the print equipment and its services deliverable to a vast majority of that BTA business model's end-users. People will still need and buy some A3 equipment, but not enough to support an industry who has depended on A3 equipment to support its business model's processes.

The A4 Revolution I began in 2018 is not just about a product type. It's about the processes of how the product is delivered and serviced through innovative ways, which will highlight the old ways dysfunctions. Innovators will look for ways to improve the experience of a product's end-users then set out on a path to educate those end-users in the better way, the better experience.

In a recent End Of The Day With Ray! Episode I predicted that the manufacturers would all begin promoting A4 equipment, align with other manufacturers and relabel brands if necessary to implement an A4 program. Manufactures must pivot and consolidate. Supply vs. Demand must be aligned, and no outdated marketing will win against an innovator's remarkability.

The days of any manufacturer being obsessed with winning or continue in the contest of being the largest A3 provider are done. It will be curious to see if our HP friends will continue in their pre-virus discussion of disrupting the world's A3 manufacturers by replacing them with HP A3 products: products they acquired in their acquisition of Samsung's printer division in 2017.  

Of course, we will also see consolidation through more acquisitions. We will all have to remember that in the year after new mergers, it won't be organic growth in the acquirers' revenue increases. It is not hard to imagine headlines in 2021 or 2022, declaring an acquiring manufacturer's massive growth in revenue as a form of propaganda attempting to highlight growth in a declining use industry.

As print equipment continues to evolve in abilities that align closer to the marketplace's end-users, the industry will face new competitive challenges. The old business model of over-spec'ing and outdated financing models will become the Achilles Heal to any legacy organizations that believe the tenure of pre-virus circumstances will continue.

Those dealers who participated in the growth through acquisition strategy themselves now realize that buying declining bases without diversification is a recipe for disaster, and the good intentions to diversify over time become disastrous when unforeseen events cause you to run out of time. Hopefully, this crisis has taught an industry that buying growth in a declining use market without enough diversification to offset the revenue and declines of the core deliverable is a bet against logic.

Print will play a role in the business process for foreseeable years; however, those who misinterpret its function or value add in delivering both print and its services will lose to those who understand how to deliver profitably based on the realities of a quickly changing marketplace. Dealers must focus on cost to deliver based on the needed changes to the deliverable, and dealers must also acknowledge that end-users will begin replacing A3- MFPs with A4-MFPs and its services in ways which were once unimaginable to that BTA business model.

The cure against the sickness caused by chasing revenue over collecting profit is simply a new mindset and the ability to create what could be based on what should be.

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

If not already Let's connect here on Linkedin and I welcome everyone to subscribe to my YouTube Channel https://www.youtube.com/channel/UCULKZDBCR1ozWXmu4Tob66A?view_as=subscriber

Ray Stasieczko

CEO/Founder TEASRA,The Innovation Channel and Host of The End of The Day With Ray! https://www.endofthedaywithray.com/




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