Technology in and of itself is not an elixir to successful business. If it doesn’t address how end-users interface with technology and the manner in which they expect it to facilitate their processes, then technology becomes that shiny object that carries a hefty price tag but doesn’t translate in a practical manner.
That’s what makes the Konica Minolta value proposition so intriguing. Sure, the manufacturer boasts the sexy—if sometimes esoteric—Workplace Hub and a platform in the Workplace of the Future that envisions how tomorrow’s office will evolve, while leaving room for additional technology bolt-ons as the Internet of Things and artificial intelligence continue to shape work.
However, this manufacturer is a moving force not willing to just let the “if you build it, they will come” adage guide its principles. The OEM is pushing ahead with its One Rate bundled subscription model; anticipating the changing needs of businesses as they closely mirror buyer consumption in mainstream society. Konica Minolta recently hammered out an agreement to offer the full suite of Google Cloud solutions, and also rocked PRINTING United with a pair of high-volume, toner-based production presses.
In short, Konica Minolta hasn’t hitched its wagon to one star, but a universe of offerings designed to bring success to its dealer and channel direct partners. We sat down with Sam Errigo, executive vice president, sales and business development, for an overview on how the company is blending products and technology to enable dealers to meet the evolving needs of the client.
The year 2019 represented a difficult campaign for many OEMs that reported sales declines in hardware and supplies. How would you characterize the year from Konica Minolta’s perspective, and what were the factors that shaped it?
Errigo: Through the first three quarters, Konica Minolta Business Solutions U.S.A. Inc. has experienced positive growth in our transformational areas, such as managed IT services, ECM and industrial print. The market continues to compress as competitors with fewer capabilities focus more on price versus adding customer value. We continue to make solid progress in overall margin improvement due to our bundling strategy that includes the One Rate simplified model for our customers. Our focus for the remainder of fiscal year 2019 and into fiscal year 2020 is market share growth and the acceleration of our managed services offering.
Konica Minolta held its own in 2019, with a slight decline in unit placements due to the slowdown and factors related to the tariff. That prompted many customers to take pause in fiscal year 2019. But we rebounded very well and had a strong Q2 and an even better Q3. We’re bullish on Q4—our fiscal year ends in March—and if we continue our pace, we’ll end up with a pretty solid performance in the United States. We are obsessed with monthly-recurring revenue (MRR) and bundling as this delivers a consolidated offer with high value to the customer. With One Rate and offering multifunction products—plus security enablement and support—we can address a multitude of devices customers are looking to consolidate. Therefore, customers are willing to make a change from their current supplier to a new supplier based on value.
I’m less concerned about a product than I am about the thought leadership aspect and what really strong and strategic partnerships can do for the future.
– Sam Errigo, Konica Minolta
There is turmoil in our industry OEMs at all levels and this is causing customer, sales and support disruption. Look at our management team. I’ve been here 10-plus years. People like Rick (Taylor), Kevin (Kern) and Kay (Du Fernandez) provide a very stable team of experienced executives who are passionate about this business. Our desire is to help our dealers and our direct channel win, because we need both channels to foster growth. We’re doing just that, and we’re adding capabilities.
The October Dealer Summit gave Konica Minolta the opportunity to update dealers on the advancements made within its All Covered IT services division. Can you provide an overview of some of the Summit’s main takeaways?
Errigo: The October Dealer Summit carried strong messaging related to IT services and readiness for the accelerated digital transformation. We have consistently encouraged our dealers to either partner with Konica Minolta or invest in their own managed services business. Many dealers are on board, and we are seeing more one-on-one meetings with our dealer partners related to this expansion business. I am more encouraged than ever, and expect that fiscal year 2020 will bode well for the dealer channel as they invest in more managed service offerings.
At the Summit, there was a strong message regarding IT: at this point, you’re either in or you’re out. The managed service arena is moving so quickly that if you haven’t started—while I wouldn’t say it’s too late to do something—the train is moving at a pretty quick pace now. Acquisitions are still happening at a brisk pace, and dealers are making a conscious decision to say, “Do I have the financial capabilities and talent to move where the customer wants to go?” If not, then they’re better off partnering with either Konica Minolta to accelerate, or selling their business and working with investment companies that have money to invest to help accelerate that transformation. As a company, Konica Minolta is spending millions and millions of dollars just to keep pace. (All Covered President) Todd Croteau has visited many dealers for one-on-one sessions to personally guide and provide insight on where and how to get started.
In January, Konica Minolta announced its alliance with Google Cloud, which will enable the company and dealer partners to offer the full suite of Google Cloud solutions. Can you talk about the possibilities this partnership offers?
Errigo: The Konica Minolta and Google Cloud announcement continues to reinforce our position in the market as a technology leader and enabler. The most exciting part of this announcement is the future of this partnership and how strategic partnerships can shape the landscape of our industry. Partnering with thought leaders who bring new perspective and insight will allow us to think differently and develop technology from the customer viewpoint. The possibilities are endless, and our imagination is the only limiting factor for the future.
I’m less concerned about a product than I am about the thought leadership aspect and what really strong and strategic partnerships can do for the future. We’re leveraging large companies and resources to help accelerate where we can go, how we can detect different business problems, and how to help customers take full advantage of this technology. There are a lot of strong technology companies, but if you had to pick the one that is willing to make the investment of time, and really strategize about what and how you will use technology in the future, you can’t go wrong with Google. I think they’re going to be a great partner.
Last summer, Konica Minolta rolled out a 17-city tour in support of the Workplace Hub, aimed at SMBs and enterprise clients. Can you provide a progress report on the Hub and your plans for proliferating the technology in the U.S. marketplace?
Errigo: The rollout of the Workplace Hub and the Edge server have been successful as we continue to learn more about how customers will conduct business in the future. The product is evolving based on new customer requirements and desired platforms. Partnerships with key technology companies such as Google and Microsoft continue to flourish and assist in the next phase of product development. This product and platform will continue to mature at an accelerated pace, and should not be viewed as a traditional MPF product. The platform will transform at a rapid pace due to the acceleration of software requirements, security enablement and application development such as AI.
If there’s one big message we wish to convey, it is business transformation and how they’re looking at their business to implement change.
– Sam Errigo, Konica Minolta
It’s a great tie-in when you look at where Google is going with their AI capabilities. That’s one of the major reasons we like this partnership. They’re going to help us accelerate and really view technology for the use of solving business problems versus technology for the sake of technology. Everyone talks about AI, but we’ve defined practical applications that allow customers to accelerate their business transformation, take costs out of their business and provide better value to their customers. Workplace Hub is that platform that will continue to evolve and help those customers take full advantage of those technology platforms.
How would you characterize the progress of the Workplace of the Future platform, and what has been the feedback you’ve received from the dealer community?
Errigo: Workplace of the Future is gaining traction with customers as they seek to do more with fewer but more capable suppliers. That is probably one of the major themes that I hear on a consistent basis. The dealer community is adapting and finding niche opportunities such as physical security, conference room management, managed voice and managed services. The key, as I have stated many times, is not the product, but how you create a seamless customer experience. The dealer community will need to bolster their support capabilities in the areas of security and compliance, remote support and monitoring, help desk and technical support. The end game for Workplace of the Future is to deliver a fully integrated and seamless customer experience.
As I’m out with customers, they love the concept of tying everything together. The first question they ask after you show them products is, “How will you support me?” They don’t want to call five different people to support their infrastructure. This is where we’re helping the dealer community through our All Covered services. We’re tying this together and providing a turnkey package for our dealers in which they can leverage our infrastructure to support their customers. If you’re not ready today, don’t say no. Pick up the phone, call Konica Minolta and let us put together the package so we can help.
At PRINTING United, Konica Minolta unveiled five new products, including the AccurioPress C12000/14000 high-volume, toner-based production press. Can you talk about the potential this offers dealers to expand their reach from a hardware perspective?
Errigo: We were jam-packed in our booth; there was a lot of excitement about the product. That’s great to have that level of interest at a trade show, but it’s really about what happens after the show.
However, the C12000 and C14000 are going to be game changers. We have already hosted several large commercial printers in our new Customer Engagement Center in Ramsey, New Jersey, and all I can say is they have been blown away! These new products will allow us to expand and capture share in the upper segment of production print. Fiscal year 2020 should be positive in this category for us. The dealer community that is in production print will have a massive opportunity. This is going to be about taking market share, because this is a new category for us. A lot of the dealers may not have customers in these segments, so this is all net-new growth.
As the Xerox and HP saga continues to play out, can you offer your views on how the market may continue to evolve from a manufacturing perspective? Will supply and demand ultimately pressure OEMs to merge?
Errigo: The HP and Xerox saga will continue and, over time, will play out. I won’t comment on if they will or won’t merge, but rather the impact it has on customers. The “saga” is creating opportunity for dealers and our direct channel. When you become internally focused, lose sight of your customers and invoke massive change in your support infrastructure, customer retention is at risk. While they’re trying to figure out who will buy whom, the customer is suffering. Change creates customer doubt. For our dealers who have Xerox and HP in their base, they should aggressively attack that base and use products like the 12000 and 14000, especially in that high-end segment, to go in and invoke change. I’m seeing this for larger customers. The number of engagements that we are entertaining right now with Xerox customers who are dissatisfied is unbelievable.
I do think the continued consolidation of manufacturers will take place over time. The smaller providers will continue to decline, as they are not investing in areas that are relevant to customers in the long term. This business model will continue to drive margins down and ultimately provide no or little value to customers, as they can only provide a low price versus true customer value.
How do you see Konica Minolta evolving technology- and strategy-wise over the next few years?
Errigo: I believe our strategy is the right one for how customers will want to conduct business in the future. When you think about how information is consumed today, much of it is done through subscription. People choose Spotify for music and Netflix for media to consume what they want, when they want it and in the manner they prefer. I believe that, over time, dealer customers will want a model that is more technology-as-a-service. They’ll want a package built that enables print, technology that runs their infrastructure, level-one phone desk support and maybe even phone systems. They’ll want as much as possible bundled into a contract. They don’t want to buy it, they want to pay for it by subscription. Konica Minolta is aggressively working on the subscription-based model to realize the customer direction. We need the flexibility for our customers, to be able to move components in and out as customer requirements change. If you believe their requirements will change at a faster pace in the future, then telling them to buy something and use it for five years just doesn’t make sense. Our technology and where we’re going will definitely be geared more towards monthly recurring revenue and subscription-based services.
Do you have any plans to add to your direct channel?
Errigo: Not necessarily locations. We continue to add headcount as we’re growing our managed IT sector of the business. That’s a big growth area for us next year, and today we have roughly 1,200 people in All Covered dedicated to managed IT. That number will continue to grow. Both our core teams and All Covered will continue to grow at a pretty rapid pace.
Clearly, the channel has witnessed its share of changes in recent years. In your opinion, what does the future hold for the office dealership industry?
Errigo: The dealer channel still has tremendous value. Many of our dealers have built outstanding businesses that are core to the local community and align with them. There’s still value in the services that they provide. We have to continue to push our dealers toward investing for the future. You cannot just live on multifunction products and the revenue stream associated with them. That change is here and it’s moving at a quick pace. If there’s one big message we wish to convey, it is business transformation and how they’re looking at their business to implement change. It’s all about what they’re doing from an infrastructure standpoint to support the future requirements of their customers, and possibly looking at strategic partnerships that help round out their business. It’s taking advantage of companies like Konica Minolta that have this already built.
What are your goals for 2020 and what will you look to accomplish?
Errigo: As a company, we’re focused on revenue growth for FY20 in both channels. We have to make sure that our dealer channel—which represents roughly half of our business—continues to grow. We’re all in with our dealers. Continuing to push and help them make this business transformation is paramount for our success to date and for the future. One of the biggest things we can do for our dealer channel is help them branch out, whether it’s managed IT services, IP or any type of managed print services. They have to continue to provide more value to their customers, and if they can do it in the technology space and couple it with MFPs, that will yield continued progress for FY20.
