Innovation and How it is Shaping the Printing Industry

Report
Prof. Göran Roos
Manufacturing Thinker in Residence, Adelaide, South Australia, Australia
Professor in Strategic Design in the Faculty of Design at Swinburne University of Technology,
Melbourne, Victoria, Australia
Senior Advisor, Asia Pacific, Aalto Executive Education Academy, Aalto University, Singapore
Honorary Professor, Warwick Business School, Warwick University, UK
Visiting Professor in Business Performance and Intangible Asset Management, Centre for
Business Performance, Cranfield School of Management, Cranfield University, UK
Visiting Professor, Innovation Management and Business Model Innovation Finnish National
Research Institute [VTT], Finland
Chairman of the Board, VTT International, Finland
Intellectual Capital Services Ltd., UK
Business
Model
Innovation
Technology
Based
Innovation
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Design
Based
Innovation
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Technology
Based
Innovation
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Technologies that enable or
deliver on the desired
changes in the business
model or design objectives
Design Based
Innovation
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Design
Business Model
Innovation
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The way we set up our
business to appropriate as
much as possible of the
value that we create
Owner of L.A. Times files for bankruptcy
December 09, 2008|James Rainey and Michael A. Hiltzik | Rainey and Hiltzik are Times staff writers.
In perhaps the starkest sign yet of trouble in the news business, media giant Tribune Co. -- owner of the Los
Angeles Times, KTLA-TV Channel 5 and other newspapers and TV stations -- filed Monday for
bankruptcy protection from creditors.
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Pearson "proud" over 2009 preliminary results
01.03.10 | Catherine Neilan
Pearson's chief executive has said everyone in the company "can be proud" of the preliminary
results for 2009, in which sales and profits grew "in a tough climate".
Penguin had a record year, growing sales above the £1bn mark for the first time - up 11% to
£1.002bn - however, profit slumped 10% to £84m, owing to one-off costs of £9m in relation to
the company's restructure midway through the year.
The Pearson group saw headline growth in sales of 17%, to £5.624bn, with growth at a
constant exchange rate up 4%, and adjusted operating profit also up 4%, to £858m. Operating
cash flow increased by 15% to £913m.
Pearson Education experienced "strong growth", thanks to "sustained investment and our
leadership position in learning services and technologies". The North American division grew
23% to £2.47bn, while adjusted operating profits were up by a third to £403m, with the
international arm, which includes the UK, growing sales 20% to £1.035bn. Profits increased
by 4% to £141m.
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2.5% of volume
45% of Profit Pool
In less then 3 years
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Source: Roos, G. and J. Roos “Mulighetenes Bransje - valg og handling for fremtiden”, Grafiske Bedrifter, Landsforeningen, Oslo, 1993.
Google has around $24 billion in annual sales volume—equal to about 30% of the
entire US printing industry. Google’s revenue is around $1.2 million per employee—
seven times the US printing industry’s revenue per employee.
Children still grow up reading—or being read—books – an increasing amount of
which are being read from a Kindle or an Ipad, but they are also growing up with
television, computers, iPhones ND Ipads. They grow up knowing full well what print
is—they just choose newer media, especially as they get older.
The same amount of advertising dollars spread over 10 times as many channels
The technical and economic life of your equipment is longer than its business life
Circulation of Daily Newspapers in the US
65,000
60,000
55,000
50,000
45,000
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40,000
1940
1950
1960
1970
1980
1990
2000
2010
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Source: ERC analysis of U.S. Commerce Department Quarterly Financial Report
Revenue of the industry is forecast to grow on average annualised real rate of 1.4% in the five years through 2015-16,
reaching $9.43 billion.
There will be pressure on industry profit margins, partially offset by efficiency and productivity gains.
There will be little growth in industry employment.
Competition from media substitutes will affect the rates of growth in magazine circulation levels and magazine pages.
This competition, which is expected to intensify, will adversely affect printed publication circulation and advertising.
Growth in internet advertising and online shopping will affect demand from some ‘brick and mortar’ retailers for
printed materials, such as printed catalogues and point-of-sale material.
Australian book printers face stiff competition from imports, including for downstream products. A strong Australian
currency may potentially hinder local book printers in the next five years. Local book publishers and printers will be
affected by growth in the online sales of books, with sales on overseas websites promoted by a lack GST payable on
online purchases from these sites of less than $1,000. In addition, the e-book market will grow. New e-readers are
coming to the market, offering an ever-improving reading experience and access to cheap e-books. In January 2010,
Apple released a tablet computer called iPad, which has an e-reader capability.
Electronic transactions, the electronic distribution of documents and data and the online distribution and hosting of
media content all represent significant risks to most industry segments.
The internet could offer opportunities in some printing segments.
During the next five years, there will be growth in ancillary services. These include digital printing, graphic design,
fulfilment management, warehousing, mailing services, desktop publishing, telemarketing, electronic file
management, e-books, database management, digital print libraries, multimedia services, website production and
digital rights management.
Digital printing is a small but rapidly growing component of the commercial printing industry.
Developments in substitute technologies (photocopying equipment, office computer equipment and the internet) will
have a dampening effect on demand for traditional commercial and job printing activities, such as pre-printed invoices
and order forms.
Commercial printing operators that are not exposed to sectors competing with digital media should fare better. These
include package, label and security printing.
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Source: Ibisworld, Stop the presses: The industry stagnates as competition from media substitutes intensifies, February 2011
Industry activity levels remained largely subdued during the March 2011 quarter
Key economic indicators such as orders, production, sales and net profits fell on a
net balance basis.
With reduced activity employment and overtime levels also fell.
Selling prices fell for the 41 consecutive quarter.
Capital expenditure improved on a net balance basis.
The respondents reported difficulty in accessing finance and labour
Moderating trend in material and wage costs. The former no doubt benefiting from
the stronger Australian dollar.
An examination of the trends indicates that whilst the reported downturn was
largely due to seasonal factors, there were also some non-season influences at play.
The forecast for the June 2011 quarter remains favourable with increases expected
for orders, production, sales and net profits.
Modest net balance increase in investment in plant and machinery are also being
forecast – PrintEx effect.
With selling prices forecast to decline again, the improvements in profitability are
likely to come from a combination of cost cutting, as employment is forecast to
decline, and technology cultivated improvements in productivity.
Again the expected improvements are mainly being driven by seasonal influences
rather than structural factors.
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Source: Tchamkertenian, H., 2011, “Printing Industry Trends Report”, Printing Industries Association of Australia
© Copyright Göran Roos 2011
Source: Tchamkertenian, H., 2011, “Printing Industry Trends Report”, Printing Industries Association of Australia
Revenue grows slower than economy
Falling company numbers, albeit slowly;
Large firms dominate although the concentration level is low
Little technology & process change
Declining per capita consumption of good
Stable & clearly segmented products & brands
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Having marketing expertise
Aggressive marketing is important given the high level of competition.
Access to niche markets
Firms which specialise in narrow product lines using advances production techniques, and which adopt a
more concise approach to marketing, improve the likelihood of establishing a market niche.
Production of goods currently favoured by the market
Firms should focus on markets of high demand and profitability.
Access to highly skilled workforce
Given the serious shortage of skilled tradespeople in the printing industry, firms that can ensure an
adequate supply of labour have a distinct market advantage.
Attractive product presentation
Increased design orientation and the ability to use colour more effectively is important for operators in
the industry.
Access to the latest available and most efficient technology and techniques
New technology developments yield time efficiency, reductions in labour costs and improvements in
product quality, and firms maximising their utilisation of ‘state-of-the-art’ technologies enhance their
competitiveness.
Prompt delivery to market
Prompt delivery through reliable and efficient transfers of digital data is important.
Optimum capacity utilisation
Firms should maintain optimum capacity utilisation. The size of print runs can affect capacity utilisation.
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Source: Webb & Romano, Disrupting the Future, 2010
All the changes [technology, demand, etc] provide a fertile ground for
growing new business models
These new businesses will be a mixture of products, services and solutions
but be highly linked to the networked world and the internet of things.
This will require new competences, and the ability to innovate
Let me give you an example of a new print market
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Definition of printed functionality and its link to printed media, digital media and hybrid media
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Source: VTT
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Source:
Source:
VTTVTT
The estimated growth in Finnish publication, printing and printed functionality
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Source: VTT
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Source: VTT
© Copyright Göran Roos 2011
Source: VTT
Understand what goes on – in the broadest possible sense
Outline a clear innovation strategy – that increases both the
value that you create and the share of the value that you
appropriate
Execute
Change your resource base [competence, relationships,
equipment, facilities, location, processes, systems, brands, etc]
and how you deploy it to fit the new business model.
© Copyright Göran Roos 2011
Fernström, L. and G. Roos “Differences in Value Creating Logics and Their Managerial
Consequences - The Case of Authors, Publishers and Printers”, International Journal of
the Book, Volume 1, 2004, pp. 493-506.
© Copyright Göran Roos 2011

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