It’s been said that when times are tough, that’s when one learns who their true friends are and, conversely, which ones are only fair-weather pals. When the pandemic and its related business disruptions visited Konica Minolta Business Solutions in a most-unkind fashion, it didn’t take long for President and CEO Sam Errigo to discover who was really in his corner. As it turns out, the answer was every Konica Minolta dealer.
Obviously, the supply chain shortages probably had many dealers cursing under their breath, but none abandoned the manufacturer. Errigo didn’t try to soft-pedal the situation; he was blunt when times called for it, and many dealer execs appreciated the candor, if not the news. When the supply chain clouds broke up earlier this year, it sounded the all-clear alarm to resume normal business as much as possible. But Errigo knows there’s much work to be done, and he won’t soon forget that his dealer partners resisted the urge to go elsewhere.
Now, as Errigo and Co. embark on 2024, it’s pedal to the metal with the Rev’d Up dealer program, the ongoing quest to proliferate digital transformation, and a steely grip on the belief that the road to growth on the back side of COVID will entail taking market share. Errigo believes Konica Minolta has the tools to make that a reality, and he’s excited about bringing those loyal dealer partners along for the ride.
ENX Magazine sat down with Errigo to explore the depth of relationships between dealer and OEM, the new approach to more effective in-person engagements and the company’s 150th anniversary, along with his thoughts on the next 150 years.
Walk us through the highlights of Konica Minolta’s most recent fiscal year performance. How did the company perform in relation to the goals and expectations you set?
Errigo: From a company-wide standpoint, we achieved our revenue target and a performed slightly over operating profit as a global entity. In the U.S. market, we’re actually doing very well, especially coming off the COVID years and back to a level of business normalization. We were slightly ahead of our profit plan due to overachievement of unit sales we expected to sell, so I’m pleased. We did a lot of planning during the pandemic period to get our SG&A costs aligned to our revenue and operating profit objectives that paid dividends this year. Our direct channel outperformed top-line revenue and operating profit during our first half. The dealer channel was slightly below our revenue growth objective for the first half but on plan for profit. Most of the dealer channel shortfall was driven in the P&S category as dealer purchases skyrocketed and toner availability increased late last year. As we head into our Q3, the leveling of our P&S business is expected to rebound and return to a more predictable revenue stream. Overall, our first-half performance was as planned, but there’s still work to be done in driving greater profitability and growing that top-line revenue.
What stands out as some of the watershed moments for Konica Minolta over the past 12 months? What resonated the most with you?
Errigo: My answer may shock some. As I look at 2023, it’s really about the resilience of our employees and our dealers. During the COVID period, the true test of a partnership was pressed. We had supply chain issues and toner issues, and it took a lot of resilience and fortitude from our sales organization and our employees to support our dealers. Another big “ah-hah” moment was the trust and the strength of our partnerships with the dealers. When things get bad with a manufacturer, it’s easy for dealers to throw their hands up and make a change. Our dealer partners didn’t do that. And that’s because of the relationships and the trust we’ve built with them over many years. We didn’t try to hide from anything. We were open and honest, which is part of our core values, and I would echo that for our dealers. They were frank about their concerns, but we faced them together.
With supply chain issues in the rearview mirror, can you take stock of what was lost and what was gained during the toughest times?
Errigo: What was lost was revenue and profit. Dealers had to make choices because of supply issues, and we lost out on opportunities and the chance to strengthen those relationships. 2023 was a year of regaining our rightful spot within those dealerships’ hearts and minds. As a manufacturer, we’re going to claw and fight to win that business back and ensure we’re thought of as the premier provider for the imaging channel.
It’s an ongoing journey. You have to work at this every day and not take anything for granted. We have to be visible. We need to lean in with our dealers to better understand their businesses and help them grow. When it comes to developing deep, meaningful relationships, we’re probably the best in the industry. I’ve been here going on 15 years, and the relationships I have are now friendships. When I travel, I an tell you if I go see Paul Hanna at Blue Technologies, I stay at his house. I have dinner with his family. That’s not a business partnership, it’s something that goes way beyond. That’s why dealers continue to do business with us. We get a sense of trust and they’re going to stick with us. In times like these, you learn who your friends are. But I did learn that we have a lot of friends. We have a lot of people who genuinely trust Konica Minolta. They like our organization and what we stand for.
What were some of the highlights for you during the 2023 Dealer Summit? How was the event received, and what was the primary message you sought to convey?
Errigo: This was actually my favorite Dealer Summit. We talked very strategically and openly with our dealers about their businesses, not about Konica Minolta. It was a conversation around what was specifically going on in the industry and how we could face these challenges together. There was a lot of open dialogue with dealers sharing things about their businesses that they ordinarily wouldn’t discuss. There was a much smaller, more intimate group that opened up and talked about the challenges they face, and they wanted to better gauge some of the leading trends we see in the marketplace. We covered the changing dynamics around how customers are buying, what we need to do collectively in order to change our go-to-market strategy and where we should or shouldn’t be investing. It was probably one of the more enlightening presentations, so we’re sticking with this format. Whenever we do the huge productions, my time is very limited and my conversations with dealers were generally brief. But now, I can spend two quality days with dealers and talk about their specific businesses, the challenges they face, diversification strategies and how they’re positioned in the marketplace for growth. In turn, I share insight into what we’re seeing and make sure we’re sharing information across the board.
What were some of the major topics discussed with dealers that may be reflected in your strategy for next year?
Errigo: Market share growth and competing against other dealers in their marketplace was one of the key discussion points. It’s making sure they have a strong vehicle in Konica Minolta to compete, take market share and grow service revenue. The same concerns revolve around the decline in unit volume. They have to grow that service revenue, and the only way to do that is to sell more units. Another critical area is human capital, finding service technicians, drivers and installers to keep pace with growth. Post-pandemic, based on the tenure of service technicians, we’ve experienced a lot of retirements. We encountered it, and the same holds true with all our dealers. Finding that next generation of people who want to work specifically on the customer service side of the business has been challenging. Retention is critical, and dealers—just like Konica Minolta—are spending more money to retain service technicians. The break-fix category of employees, and really the market for all people who are mechanically inclined, is challenged. There’s compression in that marketplace. But we’re seeing it everywhere. The automotive industry has struggled with finding mechanics. Recently, I was told I’d have to come back the following week just to get my car an oil change because the shop didn’t have enough mechanics on duty. Shops like these are down to one or two people when they used to have 10. Where everyone went, I don’t know. Maybe they retired. We need to reinvent and expand the job description to include DX support, IT services, along with the traditional roles that are necessary to run our collective businesses. This will help attract new talent as the market will remain highly competitive in the foreseeable future.
Your service organization is the lifeline of your business. It takes care of your customers day in and day out. And you have to have high-quality people to ensure that consistent quality of service. This is a topic of conversation that needs to be addressed, and it will continue to grow in importance.
How has the Rev’d Up dealer performance program been shaping up? Has it proven to be an effective platform to drive digital transformation?
Errigo: It’s doing exactly what we’d hoped it would do—it’s rewarding dealers in key areas of growth that are most important to our long-term success. Like any program, we continue to modify and change the categories and incentives within the Rev’d Up program. It’s simplified the process for our dealers and aligned with our strategies around the things we believe are important for growth for both us and the dealer network. I’m pleased with the program and how it’s facilitating change within the dealer channel.
Talk a little about the rationale concerning the acquisition of Force Security Solutions. What did you like about Force, and how will it mesh with your own physical security portfolio?
Errigo: The acquisition of Force was a strategic play to drive expansion in the market. Our VSS business revolves around consulting services, security recommendations, hardware configurations, access control, and cloud and infrastructure to support the entire architecture. There’s a host of components that go along with the security package, not just the camera. Force has deep domain expertise, specifically in the government market. They have certifications for the federal government, and they also added resources we desperately needed. They’re also one of the largest distributors for MOBOTIX cameras. They are well-versed in all aspects of the VSS business model and provided us with experienced technical resources to expand our overall capabilities. Force also developed some specific proprietary IP that we acquired and are very interested in. It’s helping us move a little bit quicker to a cloud-enabled platform. Plus, you can’t overestimate the impact of adding human capital. In today’s environment, going out and trying to find 20 or 30 quality people at once is really difficult. This is where acquisitions make good sense. It will help us to accelerate our revenue growth and profit while acquiring talent.
Konica Minolta commemorated its 150th anniversary in 2023. Amid the significant challenges you’ve faced in the past three years, what does this milestone mean to you?
Errigo: If you go back in history, there are few companies that have survived for that duration, enduring two world wars, two pandemics, the Great Depression and the stock market crash. And it’s not just surviving multiple events, it’s knowing when to invest and when to divest, like we did in exiting the camera business. We’ve gone through a lot of changes as an organization, but it also speaks to the survivability of a company and making good, long-term strategic decisions so the company can last for the next 150 years. When I think about being here for just 15 years, it really puts into perspective the role I play as part of that success. I tend to look at the next 150 years and think about what we can do here in the U.S. to position this company for success. That’s the kind of legacy any leader wants to leave behind, to make sure you leave your company in a better position than your predecessor.
There’s a major focus on doing the right things for our employees. We spend a lot of time on our DE&I initiatives to change culture. Inclusion and diversity are healthy for any large corporation. You want to bring in different talent that helps you grow internally and externally. All our employees, on a global basis, bleed KM blue. I think that says a lot about our company, our core values and what we stand for as an entity. We truly want to win. And when you have that culture, it helps foster that growth and the energy required for long-term survival.
What will be the keys to Konica Minolta garnering a greater market share moving forward?
Errigo: Our focus right now is centered on market share growth. As a manufacturer, unit sales are absolutely critical and helping our dealers grow their business is paramount. We’re constantly looking at our programs to work toward that goal. We implemented some changes to Rev’d Up in December that will enhance the overall program for our dealers. We’ve talked about this with our dealer advisory board, making sure that the decisions we make in the U.S. will actually drive better performance for both Konica Minolta and our dealer community. While we’re doing that, we’re also helping with the Rev’d Up program as our vehicle around managed IT services, VSS and our solutions category. It’s all core to what we need to do in order to grow more market share within the dealer channel.
Talk about the goals you have as you prepare for 2024, and what are the measuring sticks for success?
Errigo: Our fiscal year doesn’t end until March, but we’re already in the planning stage. We’re looking for continued growth year over year. Market share, both in the dealer and direct channels, is vitally important. We have to increase our service revenue. We all know that, post-pandemic, volume is down per unit and has stabilized to the new normal, thus it is predictable as we head into FY 24. For us as a global provider, we have to continue to grow our volume, and the only way to do that is to take market share.
On the managed IT services side of the business, it’s really all about hyper-growth. With MIT, IIM and our VSS categories, we can’t shoot for one or two percent growth. We need 15, 20, 30 percent growth in those categories to help offset some of the decline in top-line revenue for MFPs. We know unit placements are going down, so we have to take market share. We’re still seeing a lot of price compression and the market remains highly competitive, so selling more units requires a more strategic approach with customers that includes DX capabilities to drive overall business efficiencies.
There’s no silver bullet or magic to what we’re working on. It’s continuing to engage with our dealers, our direct channel and assisting them every day to win. The market is dynamic and change is inevitable due to the landscape of our industry and the diverse customer requirements across all segments of the industry. We remain excited about our future and the direction of Konica Minolta to lead the change necessary to accelerate our overall business.
