An Emerging Renaissance In Office Equipment Markets

By Allan Erickson
This article originally appeared in the July 2002 issue of Office Technology

Conventional wisdom says the office products/business technology industry has changed forever to the detriment of insiders and customers alike. In recent years many have decried the negative impact on gross profit blamed on the emergence of mega dealers and the accompanying decline in customer service.

Others assert business has never been better. They say that even with economic globalization, the recent recession, radical changes in technology and fierce competition, it is still possible to simultaneously generate profits and provide excellent customer service.

One side of the debate is certain; copiers, printers and digital multifunctional devices have become commodities easily acquired through mega-dealers, wholesalers or online at rock-bottom prices. Consequently, margins have collapsed and traditional opportunities for outside salespeople and dealers have practically evaporated.

The other side contends this is a lot of nonsense. They claim that business is booming, that customers still require the human touch and, therefore, demand a live salesperson to address their business requirements. After years of enduring sub-par support, many customers are not as focused on price as they are on value. These conditions, it is said, present opportunity for technology-literate and astute salespeople and dealers.

The overall truth is, while the mega-dealers struggle to catch a stride, many other manufacturers are prospering and developing their own network of branch and dealer operations. The independents, while fewer in number than in years past, are on the rise. A renaissance appears in the making.

Although Xerox, Danka and IKON are struggling, IKON and Danka stock values have improved significantly. Ricoh is reporting record profits. Canon has eclipsed everyone in many categories. Global Imaging Systems’ stock continues to out perform the mega-dealers and Xerox. The tremendous success of Global has encouraged others to follow the Global model by refocusing on local decision making, decentralized inventory and heightened customer service, while slowly blending in comprehensive document management solutions. Imagine Technology Group and Imagistics are noteworthy examples of this continuing trend. Many dealers who years ago sold their businesses to a mega-dealer are now back in business for themselves, running their own locally owned and operated office products enterprises quite successfully.

Independent dealers and consortiums of dealerships appear to be defining best practices in the industry today by combining what has worked in the past (in terms of local "feel" and old-fashioned customer service), an embrace of new technology and a willingness to diversify into solutions offerings in measured steps.

What Do Industry Insiders Believe?
To confirm or confront conventional wisdom on both sides of the fence, I conducted an informal poll of industry executives from both the corporate and small business worlds. I asked senior salespeople and managers for their views. I believe they can best provide insight into the mind of today’s customer.

Here is the question I posed: In your opinion, what changes in the office products industry during the last several years have prompted the biggest challenges to management, and how should management respond?

Here is a sampling of the responses:

"Biggest challenge: staying abreast of the huge increase in new technology (both hardware and software) and determining which technology should be adopted, which technology effectively links with other technologies and how to create an environment for success where all technologies work seamlessly to meet company needs. Management should respond by identifying and adopting technologies that bring value to all users and link suppliers. Invest in those technologies that really improve the overall workflow process and clearly provide a ROI (quantified) benefit. Develop a clear implementation plan and train everyone involved in the process."

-- Joe Manos, vice president of sales,
www.printable.com;
formerly vice president of sales, IKON

"This is the best time ever to be in this business. When times are bad, it’s the best time to differentiate your company. Managing change comes down to two key factors: empower your employees and always be "passionate about customer productivity," our new company motto. We sell a value proposition that translates to customer retention. We are replacing printers every day, saving customers money and making them more productive, and we’re serving the customer while holding our margins stable on equipment, service and the bottom line.

"The key to customer service is making sure your employees who have the responsibility to support the customer also have the authority to make decisions and act. We empower our people to do the right thing, and if they screw up, that’s okay to a point, as long as they improve. We look at every transaction every day and we have strong guidelines in place to make sure we do business with integrity and to ensure that our financial, operational and productivity benchmarks are defined, understood and adhered to. We probably have the lowest employee turnover because we’re tough, but fair, and we pay well. Overall, you must be able to trust your people to do the right thing."

-- Tom Johnson, CEO, Global Imaging Systems

"The biggest challenge in our industry is the shift from selling hardware to selling complex, customized solutions and creating support programs that meet the growing needs of our clients. People in our industry must get their arms around the notion of a document strategy vs. placing equipment.

"Here are some of the trends driving our industry today: Those who use information technology to collect, analyze and communicate knowledge waste between 15 and 24 percent of their time engaged in non-productive document publishing activities; 15 to 20 percent of printed documents are thrown away or outdated. A company spends an average of $8,200 per person per year on file management activities (source: The Gartner Group and CAP Ventures).

"In the next few years more than 75 percent of enterprises that establish a document management plan will use a steering committee. Planning and development will account for at least 65 percent of the startup costs for a typical document management system. Enterprises that do not bring content under control will experience a 30 to 40 percent increase in wasted work time among average, document-related workers (source: The Gartner Group).

"What can today’s managers do to prepare their teams to help their customers? Understand the trends affecting our industry and provide training and support for a solutions oriented approach to clients. This is a long-term investment, essential for survival going forward."

-- Lisa D. Magnuson, director of strategic account development, IKON
author of "The 48-Hour Rule" (www.the48hourrule.com)

The introduction and success of copier networking has opened the door to enormous opportunity and a new source of "clicks" for office products companies. What was once a steady, but slow, growth trend for copier placements has been given a huge boost and renewed optimism.

"The issue I saw as a manager, and currently experience as a representative, is the increasing demand for technical computing/network knowledge not previously required for "traditional" copier reps. This knowledge is critical for success in prospecting, needs assessment and customer product training in today’s market. Unfortunately, for many companies there isn’t sufficient support for these reps. They are spending valuable chunks of "Golden Selling Hours" fulfilling obligations to their current customers instead of finding new business to fill their prospect funnel.

"Many larger office product companies have one to four "systems analysts" to carry the workload of 10 to 50 sales representatives. When you consider pre-sales activities (network compatibility confirmation, product demonstrations, software issues) and post-sales activities (product installation, calibration, troubleshooting and repair), for more than 75 percent of all office machines sold today, there remains a lack of expertise and support staff to accomplish the work completely on time."

-- Erin Farley, major account specialist, Canon USA
formerly a manager with a Xerox agency

"The migration from analog products to digital was dramatic and faster than many people anticipated. Bringing the sales force up to speed on how to communicate and sell into a digital environment has been a challenge. A secondary challenge has been trying to sell to the IT departments the concept of printing from a copier vs. just putting in a HP printer."

-- Kim Coles, director of sales and marketing,
CPO Ltd., Santa Clara, Calif.

"The biggest change has been the transition from analog to digital technology. The challenge is not just in educating the sales force but also in dealing with the shift of volume from traditional copiers to printers. Management should respond by providing more training to open sales opportunities into different parts of an organization, e.g., the IT world. Also, staff needs more education on how to deal with the real cost of ownership of printers vs. copiers. This will help penetrate the major accounts using multiple HP products. We bring to market the extra value of service support. Management should respond by highlighting this value added dimension of our overall service to the customer."

-- Tom Gernhardt, vice president of service,
Taylor Made Digital Systems, Livermore, California

"The biggest challenge to our industry has been the introduction of the connected, digital device and all the permutations that have developed from that digital technology. This new technology has forced us to modify our thinking on all levels.

"The basic skill-set required for the technician has grown significantly. Before, a basic understanding of electronics coupled with good mechanical skills and an outgoing personality were enough to qualify the candidate. Now we need all those attributes plus an understanding of digital theory, computer operations, software applications and basic networking knowledge. The costs of obtaining personnel with these skill-sets or bringing our current employees to the required levels has increased operating costs considerably.

"Customer satisfaction has become more difficult to maintain as the complexity of the equipment and the customers' applications have increased, almost exponentially. Our people must satisfy the customer on multiple levels today, where a few years ago if the copy was dark and came out of the machine consistently, they were happy.

"Marketing this new technology is in itself a challenge. Before the salesperson stressed the device, the copier or fax, for example. They were selling a thing! Now, to be really successful in the office products industry, we must sell process and application, both intangibles. Couple this with the fact that we are no longer selling to purchasing people, but rather to IT people, and a new strategy of marketing is required. Most companies in the industry are struggling to make this cultural transition.

"How should management respond? The only way we can hope to cope with this change is to change our mindset to reflect the new reality of our world. We need to review each of our processes with a critical eye to see if they still make any sense. Traditions die hard, but we can ill afford to cling to the old ways for their own sake. This mental retooling needs to begin at the top and be believed and preached throughout the organization. It is a new day for the office products industry, and we managers need to recognize that and make the most of the opportunity the day affords."

-- Terry Michael, general service manager,
Pacific Office Automation, Portland, Ore.

There are two major changes that have occurred. One is the lack of qualified salespeople. Talent is being taken by other industries. The second is that competition has caused significant drops in product pricing. Management can respond by working to keep proven sales talent by finding a way to appeal to their motivations, e.g., recognition, reward and increased compensation. The only way we can appeal to their motivations is by understanding through fact-based evaluation. To counteract significant price reductions, we must make sure our people are trained well at selling value. Additionally, we must move away from the box-selling mentality and transition to solution selling without hesitation.

-- Frank Evans III, manager/client operations,
Xerox Business Services

"The commodity market is saturated: intense competition, narrow margins, declining ethics and economy. Assess the specific challenges plaguing the organization, find niches that are underserved, focus on margin and profitability, eradicate those that can’t seem to stay honest, focus on customers and provide above-average service to those with whom the organization can excel."

-- Linnea Westlake, office systems industry
independent consultant, San Francisco

"Digital equipment! More specifically, the network capability of machines. The units have become very, very feature rich. Almost all users only use a small percentage of a modern machine’s capabilities. Training or a willingness to be trained on the part of the operator would enable the user to make management’s decisions look good if they would more fully use the machine’s more sophisticated features. The answer for management is simple: more education or familiarity with the capabilities and a plan to embrace the changes that are necessary for implementation of new methods."

-- Louis Horvath, major accounts/high volume
sales executive, Danka, Sacramento, Calif.

Here are the top changes (circumstances) noted by the polled management group, and the recommended management responses:

• Changing technology: Research, configure, adopt, apply -- ongoing effort; test internally and externally; solutions must be workable, customer-focused and provide ROI to everyone.

• Commodity nature of some products: Market to underserved niches, be more competitive; highlight need for salespeople and their presence in the marketplace; value-added and solutions selling.

• Intense competition: Heighten customer service and integrity to differentiate; innovate with products and solutions; improve technical competence; provide better training and compensation for sales force; cut costs where appropriate.

• Losing great salespeople: Improve internal culture; discover what salespeople want/need and provide where feasible; be in the people development business; look at compensation enhancements.

• Document management trends: Improving solution approaches to customer needs instead of the old hardware sales focus; influencing internal steering committees responsible for improving company’s document management system.

• Pressure to respond in the knowledge age: Provide better coaching of clients to help them see areas to improve productivity and cut costs; improve pre-sales and post-installation technical support.

• Internal processes: Must improve efficiencies: deliverables, etc. al; sales acumen improvements in the face of technical challenges; everything we do should be focused on what is best for the customer without giving away margins.

Here is an encapsulation of the most frequent responses from salespeople:

• More education and support for salespeople and their customers so they can more fully utilize the capabilities of new technology. Better staff support and expertise to engage connectivity sales throughout the sales cycle.

• Less frequent change in terms of compensation, territory assignments and business plan adjustments.

• Improved coordination and cooperation with sales in other areas such as facilities management, imaging, outsourcing, IT and digital print on demand.

• We spend too much time putting out fires and not enough time in the center of our job description: increasing market share.

• If we could just get the support we need to make deliveries on time and bill clients properly, things would improve 100 percent. Order processing is a nightmare.

• A more serious commitment by management to become current with new technology and ways of selling effectively to the range of authorities now involved in a purchase decision.

Mega banks, giant telecoms, vast accountancy, energy and consulting firms are sharing certain learning experiences with many organizations in our industry. American buyers resent and punish companies that are perceived as trying to own it all by riding on the backs of employees and customers. Americans often seem to experience cognitive dissonance in view of big guns and top dogs: "We love to see people and organizations get to the top, but if they become megalomaniacs, we shoot them out of the sky." The message is: "It’s okay to make it big, just don’t rub our noses in it — stay humble, stay local."

From what I’ve learned through time and this recent effort to take the pulse of industry insiders, the office products industry is on the threshold of a renaissance. This renaissance will be spurred on by the companies that:

• Focus on the middle market.

• Emphasize customer service by working to make customers more efficient and productive.

• Educate the client about real costs, waste, potential savings, better ways to manage document production, distribution, filing and retrieval.

• Promote systemic employee empowerment to improve internally and externally.

• Improve sales training and support.

• Blend the best practices of the past (which made this industry fun).

• Embrace new technologies and mature solution offerings.

• Apply new sales methodologies appropriate to high-tech environments.

• Contain costs without hurting customers or employees.

• Run lean and be sales proactive.

In view of this emerging renaissance, the doom and gloomers appear to be seriously out of step.

© 2002 Allan Erickson. All rights reserved.