1 Innovation and how it is shaping tomorrow’s printing industryProf. 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
2 Innovation is more than you thinkBusiness Model Innovation Design Based Innovation Technology Based Innovation © Copyright Göran Roos 2011v
3 And they serve different purpose© Copyright Göran Roos 2011
4 The 1st component Technologies that enable or deliver on the desired changes in the business model or design objectives © Copyright Göran Roos 2011
5 The 2nd component © Copyright Göran Roos 2011
6 The 3rd and most critical componentThe way we set up our business to appropriate as much as possible of the value that we create © Copyright Göran Roos 2011
7 The consequences of deploying technology and modifying the business model and getting it wrong is bankruptcy © Copyright Göran Roos 2011
8 The consequences of getting it right is dramatically increased profitability© Copyright Göran Roos 2011
9 Doing it all correctly have huge returns2.5% of volume 45% of Profit Pool In less then 3 years © Copyright Göran Roos 2011
10 The printing industry is the first major industry that went digital – generating new business ecosystem opportunities whilst forcing the old ecosystem into decline This started around 1990 – 20 years ago!!!!!! © Copyright Göran Roos 2011 Source: Roos, G. and J. Roos “Mulighetenes Bransje - valg og handling for fremtiden”, Grafiske Bedrifter, Landsforeningen, Oslo, 1993.
11 Some facts 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 © Copyright Göran Roos 2011
12 US Printing Industry Shipments and Profits, 1995–2009© Copyright Göran Roos 2011 Source: ERC analysis of U.S. Commerce Department Quarterly Financial Report
13 The Australian Printing IndustryRevenue of the industry is forecast to grow on average annualised real rate of 1.4% in the five years through , 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. © Copyright Göran Roos 2011 Source: Ibisworld, Stop the presses: The industry stagnates as competition from media substitutes intensifies, February 2011
14 The Australian Printing Industry – Latest UpdateIndustry 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. © Copyright Göran Roos 2011 Source: Tchamkertenian, H., 2011, “Printing Industry Trends Report”, Printing Industries Association of Australia
15 © Copyright Göran Roos 2011 Source: Tchamkertenian, H., 2011, “Printing Industry Trends Report”, Printing Industries Association of Australia
16 The Traditional Printing Industry is DecliningRevenue 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 © Copyright Göran Roos 2011
17 Key Success Factors for the Traditional Australian Printing Industry according to IBISWorldHaving 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. © Copyright Göran Roos 2011
18 Key to success is to provide what the customer wants or can be made to want© Copyright Göran Roos 2011 Source: Webb & Romano, Disrupting the Future, 2010
19 All the bad news hid some good newsAll 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 © Copyright Göran Roos 2011
20 There are many opportunities on the horizonThere are many opportunities on the horizon. Example: Printed Functionality Definition of printed functionality and its link to printed media, digital media and hybrid media © Copyright Göran Roos 2011 Source: VTT
21 © Copyright Göran Roos 2011 Source: VTT Source: VTT
22 New businesses start smallThe estimated growth in Finnish publication, printing and printed functionality © Copyright Göran Roos 2011 Source: VTT
23 The roles of the players in the manufacturing chain© Copyright Göran Roos 2011 Source: VTT
24 An integrated flexo press line for producing RFID labels© Copyright Göran Roos 2011 Source: VTT
25 Recommendation 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
26 Good Readings 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 © Copyright Göran Roos 2011