For Konica Minolta Business Solutions, 2016 is likely to go down as a milestone year. At its dealer meeting in August, the company made a big commitment to the production print market with the launch of its Accurio brand. Konica Minolta also announced it had taken a stake in MGI, a French manufacturer of decorative printing equipment.
The company continued to grow its 3D printer business, based on its partnership with 3D Systems, reportedly scoring a couple of six-figure sales. And it expanded globally the bizhub Marketplace, an app store where customers can download software to extend the capabilities of its Konica Minolta MFPs.
Kevin Kern, senior vice president, Business Intelligence Services and Product Planning
ENX magazine had an opportunity to speak with one of the Konica Minolta executives at the center of these initiatives: Kevin Kern, senior vice president, Business Intelligence Services and Product Planning.
Tell us about your career with Konica Minolta.
Kern: I’ve been here 22 years, starting right out of school. I came on initially as director of product planning. I’ve had a wide variety of roles, from marketing to product planning, including areas as diverse as supply chain and corporate education. Now, I’m back to my roots in this role, where I have what’s called business intelligence services and product planning.
It’s hardware planning, software planning and services planning. The ECM business rolls up to us, managed print rolls up to us, global major accounts, facilities management team, the franchise print team, and things like that. The big area for us now is graphic and industrial print. We have a whole new team really driving that business segment.
What were some of the biggest highlights for you and Konica Minolta of the past year?
Kern: The dealer meeting in Aspen was a highlight. Every dealer meeting we do is an enormous amount of work for the entire company. It takes up everybody’s life, but also it went really well, and it was a really cool place and a really cool message. It would be really hard to top that one.
We’ve gotten our ECM business growing rapidly through both acquisitions and organically in the past year, and we’re pulling through our dealers in that area. We’re hiring additional engineering resources to help support the dealers as they build their business.
We just launched the global bizhub MarketPlace. We took our original idea and expanded it into 35 countries. Many vendors will say, “We’re going to launch 1,000 new products next summer.” That is not what drives customers. What the customer cares about is what problems you can solve for them and whether you can meet their application requirements. The cool thing about bizhub MarketPlace is it’s a platform from which you download new apps and capabilities during the lifecycle of the install of the product.
If you lease a product for 36 or 60 months, you’re not limited during that time if something new comes out that your current product can’t address. It’s not all about hardware anymore. It’s about providing, upgrading and giving the customer what they want during the lifecycle of the engagement.
Then we launched the graphic communication and industrial print product lines. We’re off to a good start with our [AccurioJet] KM1 product in commercial printers. We’re working on our first dealerdeveloped KM1 sale as we speak, which is really exciting. Our graphic industrial print roll-to-roll business is starting to take off. We’ve got several dealers engaged in deals on the labeling side. We’re off to a fast start in the past couple months with the MGI products and our relationship with them.
What were some of the things that surprised or challenged you in the last year?
Kern: Every day is a surprise. Nothing really was a super surprise. Some of the competitive acquisitions probably should have happened, but the acquiring partners were not what we expected. That doesn’t really challenge us directly. It just changed the competitive landscape.
The print market in the office is not growing that much in terms of page volume, so that’s a challenge. The volume is shifting from locally attached single function and multifunction [devices], to [connected] A4, A3, MFP. While there’s a tough competitive pricing market out there, our A3 color is up substantially year over year in both dealer and direct channels. Interestingly enough, our A3 mono is flat to slightly up. That was a surprise we didn’t expect.
From our standpoint, it’s a positive surprise, not a negative surprise. The economy is going pretty well. The exchange rate is quite frankly the biggest challenge for us all over the map, and everybody in the business is challenged by that right now.
Konica Minolta is seeing some success now in production and with 3D printers as a 3D Systems partner. How important is it for Konica Minolta to leverage its resources to enter these new areas?
Kern: Oh, very important. We’re realizing that to continue growth we need adjacent marketplaces. We got into IT services early because it’s a good adjacency. Now it’s a couple-hundredmilliondollar business for us. We pushed our dealers early, and some have gotten their own and are moving in that direction. The ones that can’t quite get there yet are using us in some cases to white box IT services.
The second area is ECM. We see it as a very logical adjacency that’s really working well for us. We are working with our dealers to develop business in the ECM space because we’re following the document wherever it is. The services model is more aligned with IT services if you have that.
I’m a big believer in 3D print, as is our company. 3D print went through a gold rush era, where people didn’t understand the actual application, so they hyped it up to be something it’s not going to be for a while. However, in automotive, aerospace, manufacturing, healthcare and universities, we see big markets. It’s just going to take time to develop. Like ECM and IT services, it’s an application sale. You’ve got to have the specialists to go in and identify the opportunities.
We are investing in the specialists to do that. We have specialists in ECM to help support the dealers, we have specialists in IT services to help the dealers, we have specialists in graphic communication and industrial print, and we’re adding specialists in the superwideformat type of printing, as well as 3D printing. It’s a big investment for a dealer before the business is there. We’re investing in corporate resources and in our team here to help ease them in to those areas.
What’s your methodology for assessing and entering adjacency markets?
Kern: You have to look at where you want to be as a company, what your skill sets are and how you go to market. Our strategy has always been to look at adjacent areas that relate to what we’re doing. IT services is a very similar model in terms of service. ECM follows the document. Industrial print follows a similar marketplace, and we’ll get into labeling, and packaging and things like that.
What we like about 3D print is that 80 percent of what we do there leverages the core infrastructure we already have or a dealer would already have. The 20 percent of valueadded expertise we have to develop. We invest again for both direct and dealer channels.
We choose markets where we think there’s an opportunity to either aggregate or consolidate some of the little holes in the marketplace. In IT services, it was the average size of the vendor, and the mid- to lowermid segment was a couple million bucks a year. We did leverage and scale to a more national opportunity, and build the big cloud data centers. Same with 3D printers, it’s really an extension of industrial print. We think it’s going to be a manufacturing process type product.
The third part is we have other technologies that may plug in. For example, Konica Minolta acquired Radiant Vision Systems a few years ago. It has technology that can do surface anomaly detection: 3D printing with our healthcare division works with Radiant. We get these little synergies within the company and we can deliver more valueadded product to both our dealers and direct operations can sell.
What makes Konica Minolta successful with the dealer channel?
Kern: Number one, it comes from the top. I think every dealer knows that our CEO Rick Taylor insists upon a level playing field for our dealers. They have confidence we will treat them fairly.
Number two, we have a lot of respect for what they do. Some companies resent the fact that dealers make money. We don’t. We want our dealers to be very successful, because if they’re successful, we’re successful. We’re not putting our personal capital or our house on the line when we run the business. But they are. Everybody has that understanding.
Number three, we invest heavily in dealer channel people who can help them support their business growth.
The fourth thing is any one of them can call any one of us, night or day, and we’re ready to talk. It’s not like a vertically stacked sales organization where you have to go through 27 levels to get to Rick Taylor, or myself, or Sam Errigo or Don Duvall.
Finally, we believe very much in customer intimacy. You can ask anybody in our dealer community; we love to be in the middle of it with our dealers.
What do you see as the biggest opportunities and challenges for the dealer channel going forward in 2017?
Kern: Industrial print will be a wideopen territory. Whether it’s labeling, roll-to-roll, sheetfed or largeformat, there’s a 2 percent to 7 percent digital penetration rate. Which means the ability to flip it to alternate technology like inkjet is pretty large, because most people in industrial print know they need to go digital.
People are constantly going to be changing their package designs or direct mail using valueadded print like the MGI Evo products…or the Meteor Unlimited Color for MGI.
All of these new opportunities change the conversation with the customer and build a parallel business that leverages your service strengths, but delivers the more high-value aftermarket to the dealer, and very high-value stuff to the printer. We think that’s a big opportunity.
The challenges are longer sales cycles and more complex financing transactions. You’re selling a $1.5 million press, your average lending company’s not going to pick that up. You’ve got to do that. You’ve got to have the right specialists onhand.
The challenges are getting to know the customer and having the right expertise for presale, postsale support to develop the application or the volume on those products.
ECM and IT services are still big opportunities. A lot of dealers are getting into it, but again, that’s an investment scenario, and where we help, we can.
We still think there’s plenty of life in office. It’s challenging from a pricing standpoint right now, but that’s what happens—you’ve got a lot of competitors and the market’s not growing fast enough. Our observation is that the predicted falloff in page volume is not really there.
Do you have any big predictions for the coming year in the industry as a whole?
Kern: I am optimistic about the new year. I think we will see growth opportunities in the industrial print and graphic communications market segments—which have a very low digital penetration rate—and increasing growth in print mediums like direct mail as a means to cut through the clutter of digital saturation. It is interesting to have gone to a very large mall near our office to see Amazon, the company who put bookstores out of business, building a brand new bookstore.
I think 3D printing will return to a rational growth rate. There will be increased opportunity in labeling and packaging as well as ECM and other services. Increased focus on infrastructure spending should positively impact the AEC wide-format business. Frankly, we are pretty optimistic about the core office MFP market as MFPs are becoming a part of the workflow environment beyond only print. And, of course, we see continued growth in Solutions, ECM and IT services.
There’s tremendous opportunity for dealers now if they’re willing to spend time, understand themselves and make investments. We’re still very big on the dealer model, and very big on the opportunity for dealers. Dealers have a big advantage, being more local than direct organizations and being more closely connected to the community. This is still a human touch business. That connection the dealers have with the customers, just like we do with our dealers, is one of the most valuable assets we have.
