Sean Skelly11.14.16
You’ve made the decision to “get hitched” and your new partner will be a digital label printing press; maybe you’re a first-timer and it’s your initial purchase, or maybe you’ve been around the block and it’s your tenth. In either case, as with any major capital investment or acquisition, this will be a long-term relationship, for better or for worse.
Digital printing in the world of labels is at a paradoxical stage of market acceptance. More than half of all label presses shipped this year will be digital, so in that sense, the market for this category of advanced technology seems reasonably mature. On the other hand, fewer than 10% of all printed labels are actually produced digitally, so by that measure, these are the early days of adoption.
One thing that can be said with certainty is that label converters have a host of product choices when initiating or expanding their digital family. Converters can choose among purchasing “Something Old, Something New, Something Borrowed or Something Blue,” and be successful with any of those choices. This article uses this “marriage framework” to explore the pros and cons of each of these options.
Something Old
“Old” in the context of digital label presses does not mean antiquated or obsolete, but is rather indicative of a product that has been on the market for some period of time with an established performance record. These systems can either be older-generation digital presses that have never previously made it out of a vendor’s inventory or second-hand presses bought from fellow converters.
Pros
Supportive, knowledgeable family of users: Technology for equipment in this category is typically well understood and there exists a solid customer support infrastructure, both from the original equipment manufacturer, as well as from peer companies who have mastered the product’s nuances and idiosyncrasies.
Predictable performance: Bugs and workarounds are well documented and understood, as is the true capability of the machine: which substrates work best, what speeds provide the optimal image quality, what colors can be achieved, which jobs can and can’t be produced and so on. Additionally, proven best practices for equipment maintenance along with ready access to spare parts allow users to have confidence in using the press.
Cost effective: This choice can be great as a cost effective entry into digital printing. The pricing for previous years’ models or used equipment is often quite reasonable and can be a “safe” way to get off the fence and finally make the plunge into digital printing for the first time. For converters who have already started their digital printing journey, this can be a very economical tactic to add digital capacity, especially if purchasing from the existing vendor.
Cons
Undifferentiated: Of course, the biggest drawback with this approach is that a converter is just taking a “me-too” strategy for entering digital printing. A “vintage” press, even from a market-leading vendor, will not leapfrog competitors but will just bring you to parity with them, at best. More likely, you will be playing catch-up.
Unenthusiastic tech support: If the underlying system components (e.g., printheads, lamps, etc.) of your press are too old, it may not be well supported as vendors lose interest and move key support resources to next-generation platforms. Spare parts, ink types, trained field engineers and even operating system support may be harder to come by for digital presses that are more than just a few years old.
Buyer beware: Buying a certified used press from a manufacturer or distributor is quite different than buying one on the open market from a fellow converter. Pre-owned digital presses from a vendor often come with some level of warranty and support level, whereas buying from a converter on the open market is typically an “as-is” purchase. This can still be a great way to go digital at an extremely attractive price, but it’s important to understand why the converter is selling it.
Limited availability: Many vendors have just launched their first digital press within the past two years, so not every product is available as used or discounted as excess inventory. “Old” digital printing equipment will only be available from the earliest equipment pioneers.
Something New
“New” covers a broad range of offerings, including breakthrough, never-seen-before products, as well as evolutionary modifications that augment existing presses with new features, components or integration.
Pros
First mover advantage: Advanced digital printing technology can truly transform a business and differentiate it from myriad other “early” or non-adopters. This can lead to a sustained business advantage over your competition in which demanding clients view you as a preferred, high-tech supplier that is responsive to their most complex job types.
Free publicity: A new digital press acquisition often gets you designated as an industry thought leader, which then leads to free publicity for your business. You will be in high demand as a forward-thinking executive who is actively defining the future of printing, and will find yourself highlighted in case studies, videos and on expert panels discussing market trends.
Contagious excellence: Investments in cutting-edge digital printing technology often lead to improvements throughout the factory, even in areas that seem unrelated. In-depth job-by-job analyses to determine suitability for digital production end up also uncovering opportunities to streamline other production tasks.
Cons
Bleeding edge: The anticipation of installing new equipment can sometimes obscure your view of reality and blind you to potential risks. The most obvious downside to implementing new technology is that it may place you squarely on the bleeding edge of adoption as opposed to the leading edge, depending on how “new” the press is. Is it truly a major departure from a previous generation press (e.g., a new, unproven printhead) or is it just a facelift (e.g., a new print mode)?
Trial and (many) errors: Adopters of new print technology have often unknowingly signed up to be a guinea pig or a de facto beta site, even though a product is fully commercially available. In the early stages of new technology implementation, equipment vendors and converters may have conflicting goals and expectations. “Routine” production runs may end up being a series of experiments until the idiosyncrasies of the new press are mastered. Conversely, many converters have uncompromising, high hopes as they test digital press marketing “promises” in the real world of label production.
Change is hard: The introduction of new digital presses often impacts more than just a firm’s printing processes and changes functions within the business you hadn’t anticipated (e.g., sales, order taking). New technology that fundamentally transforms workflow and the types of jobs you do may threaten personnel who are comfortable with the status quo (either flexo or first gen digital). Friction may subsequently arise between a visionary owner who promotes digital printing and the production management team who ends up dealing with the day–to-day implementation details.
Something Borrowed
“Borrowing” a piece of multimillion dollar capital equipment is not like going to Rent-A-Center! For purposes of this article, borrowed implies digitally producing and delivering labels without owning digital equipment. It comes in two flavors: equipment rental and outsourcing. A converter can market and sell digital capabilities but fulfill them behind the scenes with assets they either don’t own or have in their plant.
Pros
Cash conservation: Leasing a digital press allows converters to take full advantage of a strategic technology while delaying the expensive, complicated purchasing process and decision, thus mitigating their capital cost exposure. A select few digital press manufacturers offer rent–to–own programs or straight lease deals.
Virtual digital capabilities: Another “non–ownership” approach is based on outsourcing short-run jobs to friendly, local print shops that have digital capabilities. This can offer you tremendous agility so you can make a production decision on a job-by-job basis. If a high-end craft beer label needs to be produced, then engage the partner/supplier with the corresponding digital assets. One side benefit of this approach is that you get to compare the image quality and performance capabilities of multiple digital presses by “looking over the shoulder” of your partners, thus preparing for future conversion of virtual digital capabilities to real, in-house digital capabilities.
Say yes to more jobs: Sales organizations always want to say “yes” to orders, and converters are no different. If a series of short-run jobs are being bid on, you want to find every possible way to say yes, even if all you have is flexo equipment with no way to cost effectively fulfill the orders. The solution: take the order and work out the fulfillment details behind the scenes by partnering with your digitally-equipped partner converters.
Cons
Fear of commitment: If you actually install a press in your facility, train your people and adapt your workflow, then “borrowing” doesn’t really seem very different from the “Something New” option, other than the financing and payment mechanisms. In reality, with a leasing model, there may be a psychological feeling that you are not as fully committed to digital’s success but are just flirting with the technology, and can escape from the financial commitment at the first sign of implementation trouble.
Reduced profitability: A major business trade-off with the outsourcing model is greatly reduced margins on those jobs as you are now sharing profits with other players in your fulfillment network. So, while this approach makes sense for some period of time, you end up leaving a lot of money on the table if you never move beyond the “dating” stage.
Loss of control: “Friendly partners” who are part of a fulfillment network could decide that they no longer want to do toll manufacturing for someone else but would rather pursue their own digital opportunities directly. This could put your virtual capabilities at risk and result in unhappy customers whose jobs are delayed.
Something “Blue”
At first blush, this category may be a bit misleading as equipment vendors with blue logos or branding might think this is all about them – they would be wrong. This choice is when a converter doesn’t have the digital assets to address a highly specific business need; one particular example might be labels that require reproducing specific brand colors. More generally, “something blue” is a proxy for any demanding or unique print requirement that cannot readily be satisfied with current equipment.
Pros
Diversification: Many converting businesses heavily concentrate their sales in only one or two vertical markets, leaving them overexposed to market downturns. One way to diversify their businesses is to aggressively go after new print applications in lateral markets, and then to invest in the assets to fulfill those job-specific print requirements.
So, for example, to complement a core automotive label business, a firm could acquire an ultra-high resolution press that can print 2-point text for pharmaceutical applications. Even with the right entry-level digital equipment, this approach may be a very effective way to both grow the bottom line and branch out to new markets.
Augment flexo: Often, converters see themselves as “long-run” shops with no need for any of that short-run, digital “stuff.” But, label jobs sometimes require printed features that are beyond the scope of an analog press, such as including variable data or QR codes. Fortunately, add–on digital print stations can greatly enhance analog systems without requiring total immersion in full-color digital printing.
Cons
Entrenched competition: Profitable markets usually draw the attention of many competent players who will be formidable competitors, some of whom may be well-established in this particular space. So, for example, if you buy a press with the idea that you can now lucratively produce wine labels, but then lose that business to an experienced competitor, you may have invested in a pricey asset that will be underutilized and in search of new work.
Suboptimal resource use: The purchase of any digital press will require the use of many company resources to properly conduct such a project.
Non-strategic: The danger of such an opportunistic buying model is that it may not be done in the context of an overall digital strategy and will therefore be too speculative and unsustainable. Digital presses purchased with only a single application in mind defeat the purpose of buying general purpose printing machines. And chasing markets without a more thoughtful, well-resourced go-to-market plan will ultimately fail. Instead of patiently penetrating the market and growing the business in a sustainable fashion, this action will look like a random management decision - something that just “came out of the blue!”
Next Steps
At various times throughout the course of your digital journey, you may end up picking one, two or a combination of the choices outlined above. The path a business follows will depend upon many factors, including risk tolerance, corporate culture, current digital printing assets (if any), the overall economy, company financial position and the urgency of competitive pressures.
If you don’t already have a digital printing roadmap, this framework can be used to create one. If you do have one, evaluate it against this model to make sure you haven’t overlooked any market opportunities or strategic options. Although taking this systematic approach can’t guarantee that you and your digital press partners will “live happily ever after,” it will improve the odds of future business success.
Sean Skelly provides thought leadership to the label industry on technology adoption and implementation best practices. Contact Sean at skelly@yahoo.com.
Digital printing in the world of labels is at a paradoxical stage of market acceptance. More than half of all label presses shipped this year will be digital, so in that sense, the market for this category of advanced technology seems reasonably mature. On the other hand, fewer than 10% of all printed labels are actually produced digitally, so by that measure, these are the early days of adoption.
One thing that can be said with certainty is that label converters have a host of product choices when initiating or expanding their digital family. Converters can choose among purchasing “Something Old, Something New, Something Borrowed or Something Blue,” and be successful with any of those choices. This article uses this “marriage framework” to explore the pros and cons of each of these options.
Something Old
“Old” in the context of digital label presses does not mean antiquated or obsolete, but is rather indicative of a product that has been on the market for some period of time with an established performance record. These systems can either be older-generation digital presses that have never previously made it out of a vendor’s inventory or second-hand presses bought from fellow converters.
Pros
Supportive, knowledgeable family of users: Technology for equipment in this category is typically well understood and there exists a solid customer support infrastructure, both from the original equipment manufacturer, as well as from peer companies who have mastered the product’s nuances and idiosyncrasies.
Predictable performance: Bugs and workarounds are well documented and understood, as is the true capability of the machine: which substrates work best, what speeds provide the optimal image quality, what colors can be achieved, which jobs can and can’t be produced and so on. Additionally, proven best practices for equipment maintenance along with ready access to spare parts allow users to have confidence in using the press.
Cost effective: This choice can be great as a cost effective entry into digital printing. The pricing for previous years’ models or used equipment is often quite reasonable and can be a “safe” way to get off the fence and finally make the plunge into digital printing for the first time. For converters who have already started their digital printing journey, this can be a very economical tactic to add digital capacity, especially if purchasing from the existing vendor.
Cons
Undifferentiated: Of course, the biggest drawback with this approach is that a converter is just taking a “me-too” strategy for entering digital printing. A “vintage” press, even from a market-leading vendor, will not leapfrog competitors but will just bring you to parity with them, at best. More likely, you will be playing catch-up.
Unenthusiastic tech support: If the underlying system components (e.g., printheads, lamps, etc.) of your press are too old, it may not be well supported as vendors lose interest and move key support resources to next-generation platforms. Spare parts, ink types, trained field engineers and even operating system support may be harder to come by for digital presses that are more than just a few years old.
Buyer beware: Buying a certified used press from a manufacturer or distributor is quite different than buying one on the open market from a fellow converter. Pre-owned digital presses from a vendor often come with some level of warranty and support level, whereas buying from a converter on the open market is typically an “as-is” purchase. This can still be a great way to go digital at an extremely attractive price, but it’s important to understand why the converter is selling it.
Limited availability: Many vendors have just launched their first digital press within the past two years, so not every product is available as used or discounted as excess inventory. “Old” digital printing equipment will only be available from the earliest equipment pioneers.
Something New
“New” covers a broad range of offerings, including breakthrough, never-seen-before products, as well as evolutionary modifications that augment existing presses with new features, components or integration.
Pros
First mover advantage: Advanced digital printing technology can truly transform a business and differentiate it from myriad other “early” or non-adopters. This can lead to a sustained business advantage over your competition in which demanding clients view you as a preferred, high-tech supplier that is responsive to their most complex job types.
Free publicity: A new digital press acquisition often gets you designated as an industry thought leader, which then leads to free publicity for your business. You will be in high demand as a forward-thinking executive who is actively defining the future of printing, and will find yourself highlighted in case studies, videos and on expert panels discussing market trends.
Contagious excellence: Investments in cutting-edge digital printing technology often lead to improvements throughout the factory, even in areas that seem unrelated. In-depth job-by-job analyses to determine suitability for digital production end up also uncovering opportunities to streamline other production tasks.
Cons
Bleeding edge: The anticipation of installing new equipment can sometimes obscure your view of reality and blind you to potential risks. The most obvious downside to implementing new technology is that it may place you squarely on the bleeding edge of adoption as opposed to the leading edge, depending on how “new” the press is. Is it truly a major departure from a previous generation press (e.g., a new, unproven printhead) or is it just a facelift (e.g., a new print mode)?
Trial and (many) errors: Adopters of new print technology have often unknowingly signed up to be a guinea pig or a de facto beta site, even though a product is fully commercially available. In the early stages of new technology implementation, equipment vendors and converters may have conflicting goals and expectations. “Routine” production runs may end up being a series of experiments until the idiosyncrasies of the new press are mastered. Conversely, many converters have uncompromising, high hopes as they test digital press marketing “promises” in the real world of label production.
Change is hard: The introduction of new digital presses often impacts more than just a firm’s printing processes and changes functions within the business you hadn’t anticipated (e.g., sales, order taking). New technology that fundamentally transforms workflow and the types of jobs you do may threaten personnel who are comfortable with the status quo (either flexo or first gen digital). Friction may subsequently arise between a visionary owner who promotes digital printing and the production management team who ends up dealing with the day–to-day implementation details.
Something Borrowed
“Borrowing” a piece of multimillion dollar capital equipment is not like going to Rent-A-Center! For purposes of this article, borrowed implies digitally producing and delivering labels without owning digital equipment. It comes in two flavors: equipment rental and outsourcing. A converter can market and sell digital capabilities but fulfill them behind the scenes with assets they either don’t own or have in their plant.
Pros
Cash conservation: Leasing a digital press allows converters to take full advantage of a strategic technology while delaying the expensive, complicated purchasing process and decision, thus mitigating their capital cost exposure. A select few digital press manufacturers offer rent–to–own programs or straight lease deals.
Virtual digital capabilities: Another “non–ownership” approach is based on outsourcing short-run jobs to friendly, local print shops that have digital capabilities. This can offer you tremendous agility so you can make a production decision on a job-by-job basis. If a high-end craft beer label needs to be produced, then engage the partner/supplier with the corresponding digital assets. One side benefit of this approach is that you get to compare the image quality and performance capabilities of multiple digital presses by “looking over the shoulder” of your partners, thus preparing for future conversion of virtual digital capabilities to real, in-house digital capabilities.
Say yes to more jobs: Sales organizations always want to say “yes” to orders, and converters are no different. If a series of short-run jobs are being bid on, you want to find every possible way to say yes, even if all you have is flexo equipment with no way to cost effectively fulfill the orders. The solution: take the order and work out the fulfillment details behind the scenes by partnering with your digitally-equipped partner converters.
Cons
Fear of commitment: If you actually install a press in your facility, train your people and adapt your workflow, then “borrowing” doesn’t really seem very different from the “Something New” option, other than the financing and payment mechanisms. In reality, with a leasing model, there may be a psychological feeling that you are not as fully committed to digital’s success but are just flirting with the technology, and can escape from the financial commitment at the first sign of implementation trouble.
Reduced profitability: A major business trade-off with the outsourcing model is greatly reduced margins on those jobs as you are now sharing profits with other players in your fulfillment network. So, while this approach makes sense for some period of time, you end up leaving a lot of money on the table if you never move beyond the “dating” stage.
Loss of control: “Friendly partners” who are part of a fulfillment network could decide that they no longer want to do toll manufacturing for someone else but would rather pursue their own digital opportunities directly. This could put your virtual capabilities at risk and result in unhappy customers whose jobs are delayed.
Something “Blue”
At first blush, this category may be a bit misleading as equipment vendors with blue logos or branding might think this is all about them – they would be wrong. This choice is when a converter doesn’t have the digital assets to address a highly specific business need; one particular example might be labels that require reproducing specific brand colors. More generally, “something blue” is a proxy for any demanding or unique print requirement that cannot readily be satisfied with current equipment.
Pros
Diversification: Many converting businesses heavily concentrate their sales in only one or two vertical markets, leaving them overexposed to market downturns. One way to diversify their businesses is to aggressively go after new print applications in lateral markets, and then to invest in the assets to fulfill those job-specific print requirements.
So, for example, to complement a core automotive label business, a firm could acquire an ultra-high resolution press that can print 2-point text for pharmaceutical applications. Even with the right entry-level digital equipment, this approach may be a very effective way to both grow the bottom line and branch out to new markets.
Augment flexo: Often, converters see themselves as “long-run” shops with no need for any of that short-run, digital “stuff.” But, label jobs sometimes require printed features that are beyond the scope of an analog press, such as including variable data or QR codes. Fortunately, add–on digital print stations can greatly enhance analog systems without requiring total immersion in full-color digital printing.
Cons
Entrenched competition: Profitable markets usually draw the attention of many competent players who will be formidable competitors, some of whom may be well-established in this particular space. So, for example, if you buy a press with the idea that you can now lucratively produce wine labels, but then lose that business to an experienced competitor, you may have invested in a pricey asset that will be underutilized and in search of new work.
Suboptimal resource use: The purchase of any digital press will require the use of many company resources to properly conduct such a project.
Non-strategic: The danger of such an opportunistic buying model is that it may not be done in the context of an overall digital strategy and will therefore be too speculative and unsustainable. Digital presses purchased with only a single application in mind defeat the purpose of buying general purpose printing machines. And chasing markets without a more thoughtful, well-resourced go-to-market plan will ultimately fail. Instead of patiently penetrating the market and growing the business in a sustainable fashion, this action will look like a random management decision - something that just “came out of the blue!”
Next Steps
At various times throughout the course of your digital journey, you may end up picking one, two or a combination of the choices outlined above. The path a business follows will depend upon many factors, including risk tolerance, corporate culture, current digital printing assets (if any), the overall economy, company financial position and the urgency of competitive pressures.
If you don’t already have a digital printing roadmap, this framework can be used to create one. If you do have one, evaluate it against this model to make sure you haven’t overlooked any market opportunities or strategic options. Although taking this systematic approach can’t guarantee that you and your digital press partners will “live happily ever after,” it will improve the odds of future business success.
Sean Skelly provides thought leadership to the label industry on technology adoption and implementation best practices. Contact Sean at skelly@yahoo.com.