Ink, Toner, and innovation

Digital printing is growing very rapidly, and it’s getting a ton of buzz in the print community even though despite huge growth the overall business is still quite small. Most people I talk to believe that digital print will overtake everything eventually, the question is how long it will take.

Our president, Karl Fritchen, raised an interesting point the other day. Apparently, the digital press folks have chosen the office copier business model when it comes to toner. That is, the press manufacturer supplies the toner and the customer has to buy it from them. This is way different than ink, which is sold by entirely separate companies. Naturally the printing company doesn’t want to be stuck with a single source, so they are resisting this business model. They want the offset/gravure/flexo model where consumables are sold by many companies, and they retain more control. Off hand, I don’t blame them.

But is innovation the real product of the future?

More and more, it seems that innovation is the real product of the future. It isn’t good enough to make a great product, you have to keep improving it. Open source software is a great example of this. The software is free, but it still produces revenue streams for people who implement it for customers, maintain it, etc. Offhand you might think that really the customer is paying maintenance, but really they are enabling the continuous innovation of the product. Even proprietary software usually involves a maintenance fee to ensure upgrades, and really, isn’t that fee paying for the development of the upgrades?

For those who don’t innovate, someone will duplicate the functionality of their product, either illegally as an exact copy or legally as in ways that don’t violate IP laws, and offer it for a lower price. They can only retain their share through attempts at rights management (see Sony) or by innovating fast enough to maintain their superior value.

And remember, software companies have pretty low incremental cost for each copy shipped – the cost of goods sold. Think about hard goods and their costs of goods sold.

The “big iron” style printing presses don’t evolve that rapidly. The technologies change, but not at the pace of higher tech products. So the model of investing in a new design, and then selling copies has worked. Enough copies of a design can be sold to pay for the development. But, are digital presses closer to software? I’m no expert on digital presses, but I do know that there is a tremendous amount of technical wizardry that sits between my pdf file and a printed piece of paper, most of it existing as software in one form or another.

But how do you pay for that innovation?

I remember an R&E Council meeting a long time ago – 1999 maybe – where Harry Quadracci ranted a bit at the manufacturers. He was upset because we’d given printing nothing really innovative or new. Not enough money was being spent on R&D, and because of that printers had no new equipment worth buying. I think he was right.

So, if software companies can’t really afford to keep developing new products without ongoing maintenance revenue, and they have very low costs of goods sold, how are the folks who make equipment doing it? Especially when more and more of that equipment has complicated computerized control systems that run on software? If you take the consumables revenue from these companies, which almost certainly is where a lot of their income comes from, how will they fund development?

The nice folks at Xerox have invited me to attend an event they’re hosting at OnDemand. It’s a roundtable/focus group about what will be important to commercial printers and their customers when it comes to the transition to digital. About a dozen folks from the industry will be there from various backgrounds. I’m really looking forward to it, and discussing issues like this.

3 thoughts on “Ink, Toner, and innovation

  1. Well this is one of the nice old folds at Xerox Corporation who is thrilled that you will be attending this event at the Print on Demand Show this April in Boston. I have the auspicious position of moderating this group. The wonderful thing is that this talk track has tremendous legs in subjectivity and stature. The difficulty is not being able to cover everything in the short period of time we have allotted.

    I myself am considered a die hard commercial printer in additional to a digital evangelist… In some circles that is an oxymoron. Bottom line is… Welcome aboard… This as with many will be one for the Blogosphere of digital print…

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  2. The rant you referred to was partially unjustified. The idea that expensive R&D is needed to be done is flawed. The problem in the printing industry is that there has been and still is a lack of investment in critical thinking about the process. Critical thinking does not cost a lot of money but it does require abilities, interest and motivation.

    The industry is ignorant and it does not even know how ignorant it actually is about its own processes. This is what results in the lack of innovation. One can not innovate when one does not actually know what is needed at a fundamental and specific level.

    The industry is basically a collection of users of technology. This applies to both the printers and technology suppliers. They use rote methods to work with technology. This can at times result in very fine results but it is done quite inefficiently. This is not an environment where new innovation is likely to happen.

    In the past it did not matter due to higher economic growth and little competition from other technologies. Now times have changed. Innovation is even more needed but the industry’s ability to critically think its way out of this situation does not exist.

    Digital printing might seem to be a solution. It certainly has been developed by critical thinking innovators. I am sure the engineers and scientists at Xerox and HP, have no idea about how little the engineers and scientists in the tradition printing industry know about the printing process. They might be shocked.

    The fact is, whether it is believed or not, that a lot can be done to innovate the traditional printing process. It could be done at relatively low cost. The problem is that no one wants to do anything. In ten years, I did not find one company or even one person in the industry who was really wanting to do something innovative to solve problems in the process.

    This is a sad situation but very pervasive and that is why I gave up on the printing industry.

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