Electronic Commerce and the Printing Industry
Ray H. Killam, CFSP, CFC
This month, I read through the usual dozen or so magazines that I follow, including general business
magazines such as Fortune, Industry Week, and Business Week, plus trade magazines such as FORM, Print
On Demand, Papertronix, Inform, Strategy & Business, American Printer, and Infocus (the newsletter of
the Business Forms Management Association). Each of these publications feature articles on business-tobusiness e-commerce. Throughout American industry, e-commerce is the hot topic, with virtually all
companies seeking to develop a strategy. The printing industry is no exception.
This paper discusses the specific challenges encountered by traditional “brick and mortar” businesses as
they attempt to move into these uncharted waters. I then focus on the printing industry, which is an industry
that faces no less than a complete reinvention of the way businesses (and individuals, for that matter) buy
print. Faced with a serious onslaught by new “.com” companies, traditional industry companies have been
slow to respond, yet have considerable opportunity for competitive advantage by staying focused on
customers and working hard to meet their current and future needs.
Electronic Commerce, A Managerial Perspective, (Turban, et al), sets the academic framework for business
to business e-Commerce. The authors establish the supply chain management view as the central
underlying factor driving B2B. Businesses in this model are using e-commerce to drive cost out of the
procurement process, reduce time to market through just-in-time (JIT) availability of products, and to
facilitate the efficient exchange if information between employees, suppliers, business partners and
customers.
Turban cites several successful business ventures that use e-commerce aggressively to accomplish these
tasks. The book also contends that e-commerce will transform the way business is conducted throughout
the world. While I completely agree with this rather aggressive contention, there will be many management
challenges along the way that will enable some businesses to succeed while others will fail.
For an excellent discussion on the organizational structure of the new “E Organization”, Neilson, et al, as
published in Strategy & Business, a Booz, Allen & Hamilton publication, makes informative reading. Their
“E-Organization Dimensions”, as outlined in the following chart, point out the range of organizational
changes that will need to occur as businesses make the transformation to successful e-businesses.
1990s
E.Org
Organization
-Hierarchical
-Centerless, networked
Structure
-Command & Control
-Flexible structure that is easily
modified
Leadership
-Selected “stars” step above
-Everyone is a leader
-Leaders set the agenda
-Leaders create environment for
Leaders force change
success
-Leaders create capacity for change
People &
-Long-term rewards
-“Own your own career” mentality
Culture
-Vertical decision-making
-Delegated authority
-Individuals and small teams are
-Collaboration expected & rewarded
rewarded
Coherence
-Hard-wired into processes
-Embedded vision in individuals
-Individualistic
-Impact projected externally
Knowledge
Alliances
-Focused on internal processes
-Focused on customers
-Individualistic
-Institutional
-Compliment current gaps
-Create new value and outsource
-Ally with distant partners
uncompetitive services
-Ally with competitors, customers
and suppliers
Governance
-Internally focused
-Internal and external focus
-Top-down
-Distributed
Source: Booz-Allen & Hamilton
Shikhar Ghosh, in his article “Making Business Sense of the Internet”, contends that the Internet presents
four distinct types of opportunities:
-
Companies can establish direct links to their customers (which includes other businesses)
-
Technology lets companies bypass others in the value chain
-
It enables companies to develop and deliver new products and services to new customers
-
A company can use the Internet to become the dominant player in the electronic channel of a
specific industry
The above contentions are important for traditional “brick and mortar” companies to understand as they
develop their going forward strategies for e-commerce. Yet, these issues also cause much of the reluctance
and delays in implementing such a strategy. To understand this issue, it is helpful to consider the opposite
to each of these opportunities:
-Direct links to customers can cause serious disruption to established supply chain relationships,
causing short term loss of profits and revenues
-Technology can be used by competitors to bypass your company and reach out directly to your
customers or drive down margins by more effective competitive bidding. Adoption of technology can be
expensive or viewed as “too complicated” by traditional managers
-Companies that do not traditionally drive new products and services to new markets may find that
others are entering their “space” in ways not previously considered
Companies that do not recognize that an electronic channel exists within their industry or are
reluctant to drive the internal changes required by such a channel could lose out to a start-up “e-tailer” that
has no such reluctance to abandon the traditional mindsets.
Perhaps the biggest fear that exists in traditional brick and mortar companies is the fear of the unknown.
“There’s almost no such thing as an established business model in e-commerce” (Wilder). Things are
moving so fast that, unless you jumped in several years ago, it must seem as if there is no way to catch up.
Trade press and conventional business press articles are using terminology and case examples that
intimidate managers use to historical business strategies and understandable technology. For example, the
stock market valuations afforded to many “e” businesses have no historical precedence. The fear of being
“Amazoned” permeates more than one boardroom.
In about 1995, Fortune magazine published an article that stated that American businesses had invested
more than one trillion dollars over the previous thirty years in computer hardware, software and
communications, yet had experienced a mere 1% improvement per year in white collar productivity. Senior
managers were getting surly, expecting more for the amount of money invested. This led to a distaste for
even more investment, particularly for some of the older managers. Y2K issues and concerns fueled this
distaste for continued investment. As a result, some managers have been reluctant to view e-commerce as
more than another "“fad” that will also pass over time. They couldn’t be more wrong.
Most analysts attribute the current booming economy, accompanied by little inflation, to major gains in
productivity achieved through this technology investment, with the Internet at the core of the action.
Investment in the mid-to-late 1990s reached a frenzied pace, particularly in infrastructure building and ecommerce development. Most of the investment has been made in B2B.
Fear of supply chain disruption as caused many companies to go slow with e-commerce investment.
Recently, Home Depot, a major retailer based in Atlanta, sent a letter to their suppliers suggesting that
suppliers that sold “direct” through the Internet would experience significant loss of business with Home
Depot. General Motors and other automobile manufacturers risk upsetting their powerful dealer network if
they sell direct through the Internet. Intermediaries in many businesses face loss of market share as their
suppliers and manufacturers sell direct.
Many businesses risk a loss of opportunity because they do not understand what e-commerce is and how it
works. Their web sites (and most companies do now have web sites) are little more than on-line brochures
that promote their products and do little else. They do not employ good web design techniques, do not
understand that the web is a pull technology, not a push technology, and make it difficult for visitors to
their site to place orders or communicate with the company. Heavy use of graphics, excessive text, lack of
hyperlinks, and poor indexing and navigation slow response times and frustrate users.
Another barrier to traditional businesses moving into successful e-commerce is lack of focus. Managers see
the web as an opportunity, but fail to properly fund the investment or assign the proper priority. “One of the
most common mistakes that companies make is simply adding E-business to a long list of responsibilities
that someone already has” (Wilder, in a quote attributed to Laurie Windham, founder and CEO of
consulting firm Cognitiative, Inc.). In other words, e-commerce development is added to the
responsibilities of the CIO, or VP Marketing and is not viewed as a new discipline incorporating new skills
and drawing from both IT and Marketing. This lack of focus delays investment, allocation of capital and
human resources, and tends to get buried in the overall strategy.
This view is again identified by Tapscott, et al, in their article “Rise of the Business Web”. They state “The
real key to competing in the new economy is in business model innovation”. These “B-Webs” challenge
traditional approaches to management, to business strategy, and to the roles of businesses in general. Their
view seems to be pervasive throughout the literature. It is a new economy and we need fresh management
innovation to compete successfully. This indicates that the most common impediment to e-commerce is the
reluctance of management to innovate and move forward.
There are additional forces that make it difficult for “brick and mortar” businesses to compete in ecommerce. Heavy past investment in infrastructure such as buildings, distribution channels, direct sales
organizations, business processes, legacy computer systems, and training weigh heavily on maintaining the
status quo and maximizing return of this investment. E-commerce is still relatively small in terms of total
transactions processed, and it is easy to look at this and delay the additional investments required to move
to e-commerce. Viewed in the historical sense, this makes sense. However, this does not stop the “new
economy” companies, flush with all the venture capital they require, from inventing new ways to own any
identified “space” on the Web, generally at the expense of those companies that are trying to maintain order
in their existing market spaces. Many examples abound, with names of companies that didn’t exist a mere
five years ago now garnering huge market capitalization, then using this new currency to buy additional
businesses, including the old “brick and mortar” businesses. One has only to look to the recent acquisition
of Time-Warner by AOL Corp.
The printing industry in the US is a prime example of the clash between the old and the new. One of the
oldest industries in existence, it is currently the second largest employer of all industries (second only to the
fast food industry in the US). It consists of tens of thousands of firms, ranging from very large to very
small. Firms can be full service, or highly specialized. Barriers to entry are relatively small, and the
industry (at least in most segments) is quite mature and quite profitable. However, most segments of the
industry are slowing down, and technology is beginning to have a sizable negative impact on overall
growth rates, both from reduced demand for printed products and changing printing technologies.
The remainder of this paper focuses on the printing industry and how traditional “brick and mortar”
printing companies can take advantage of e-commerce, and the threats and barriers they face in this effort.
Printing has many facets, ranging from the simple specification jobs to multi-component, complex
specification projects. Many of these projects require that artwork, or “digital assets” be separately
maintained and then associated with the proper component at time of production, thus assuring that the
correct version or edition is printed. Many departments, individuals, and third party providers can
collaborate on a complex print job, such as an annual report, training manual, legal file, and others. The
Internet provides an ideal solution for collaborative communications. Companies that can harness this
incredible power can achieve significant competitive advantage.
Print technology is relatively unchanged since the days of Johann Gutenburg, the inventor of the printing
press. Many practitioners still view printing as more art than science. It is primarily a craft. As such,
printing has resisted change over the years. However, this concept is now changing rapidly. Digital printing
has grown rapidly over the past twenty years and the advent of digital artwork files, coupled with the
Internet for rapid deployment and distribution, is beginning to change the overall landscape. Thus, the
industry is poised for a rapid transformation that is still not largely understood.
Evidence of this impending change is rife. Digital pre-press, computer-to-plate technology, improving
digital color presses, standardization of specifications, and rising demand for just in time manufacturing are
beginning to drive this change.
Nowhere is this pending change more evident than in the proliferating establishments offering print
procurement, print requisitioning, and print development via the Internet. Companies such as Collabria
(www.colabria.com), Impresse (www.impresse.com), Noosh (www.noosh.com), Printmarket.com
(www.printmarket.com), iPrint (www.iprint.com), ImageX.com (www.imagex.com), and a host of others
are bring e-commerce to the printing industry in ways not understood or embraced by the traditional “brick
& mortar” printers. All of the above companies are new, have raised substantial amounts of venture capital
(“Print On demand” magazine, January, 2000), are planning to go public soon, and are disrupting existing
channels of distribution within various aspects of the printing industry.
Many printers face the classic barriers to e-commerce, including large sales forces, strong distributor
networks, entrenched management practices, multiple factories with large presses, and a belief that it is
impossible to communicate design and production requirements for complex print jobs via the Internet.
Some even believe that customers do not want to interact over the Internet. Consequently, few established
companies have developed e-commerce solutions that involve end user customers in print development.
In the past two years, some established firms have introduced e-commerce solutions for standard
requisitioning of products from inventory (after they have been produced and stored), and for certain
simple specification products such as imprinted business cards, stationery, and envelopes. However, none
of these programs attempt to reach end use customers in the collaborative development of complex
specifications. Yet, it is through this collaboration, and its ability to get the printer closer to customers, that
true competitive advantage will be achieved.
In some segments of the printing industry, specifically the business forms segment, suppliers have long
wrapped services costs into product costs and have differentiated themselves on services provided. As the
products matured, true differentiation on products has become very difficult. Now, the e-commerce
“raiders” have introduced systems (based on the Internet) that allow end use customers to aggressively bid
each job, effectively “unbundling” services from the product and driving down pure product costs to the
point the product is becoming a commodity.
I am convinced that, as is the case in many industries, e-commerce technology, philosophy, and innovation
will change the way print is procured, produced and distributed. Print as a medium of information exchange
is not endangered, as print revenues continue to grow (several industry sources confirm this assertion,
including IBFI, PIA, Xplor International). What is also apparent from the industry trade journals referred to
above is that few “brick and mortar” printing companies are leading this charge to e-commerce. In “ECommerce Rising” (Print On Demand, January, 2000), the author identified fifteen companies that are
involved in various aspects of print-related e-commerce. Only two are traditional “brick and mortar”
printing companies. All the rest are “.com” startups!
Opportunities for some are perceived as threats by others. The ability to achieve competitive advantage
within the printing industry will ultimately be determined by attitudes of management and their willingness
to “cannibalize” existing channels, products, and institutions and embrace the new age economy at
“Internet speed”. As is the case in many B2C industries today, the “click and mortar” companies have the
early advantage and momentum. The old, established companies clearly must play “catch up”, or fall by the
wayside.
Bibliography:
American Printer magazine, various articles, February, 2000
Form magazine, various articles, November, 1999
“The Forms & Document Industry-The Next 10 Years”, research report of the IBFI, Summer, 1999
Fortune magazine, various articles
Ghosh, Shikar, “Making Sense of the Internet”, Harvard Business Review, March-April, 1998
InFocus, newsletter of the Business Forms Management Association, November/December, 1999
Inform magazine, Association For Information and Image Management, January/February, 2000
Papertronics magazine, IBFI, November/December, 1999
Print On Demand magazine, January/February, 2000
Strategy & Business, Booz-Allen, & Hamilton, First Quarter, 2000
Tapscott, Don; Ticoll, David; and Lowy, Alex; “Rise of the Business Web”, Business 2.0, November, 1999
Turban, Efrain; Lee, Jae; King, David; and Chung, H. Michael; Electronic Commerce: A Managerial
Perspective, Prentice Hall, 2000
Wilder, Clinton, “E-Business: What’s The Model?”, InformationWeek.com, July, 1999