Since his departure from Sharp Imaging and Information Co. of America in 2011, Ed McLaughlin has remained very active in the industry, including starting Valderus, a new company specializing in information technology and services. He recently spoke at the Photizo’s Transform 2013 symposium held in Scottsdale, AZ this past May, and I got the chance to sit down with him to discuss the state of the industry, the importance of partnership, and his (not so killer) golf game.What have you been doing since you left the presidency of Sharp?
McLaughlin: Well, I have not improved my golf game that’s for sure. I have done some work with Intel, and I am still an advisor to Innovolt, whose technology I think has huge potential way beyond the document business. But most of my time has been preparing for Valderus.
What can you tell us about your new venture, Valderus?
McLaughlin: As you know I have been uncharacteristically quiet about that. The company is just an infant at this point, but the better part of a year has been putting the idea together. The idea germinated when I was working with a dealer who is really more involved with MPS than copiers, although they represent both. I discovered a technology that very honestly knocked me off my feet. The amount of account knowledge collection, machine performance data, and back room efficiency was something I didn’t expect to see for quite a few years. They have literally leaped over the entire industry. We discussed what to do with it and decided that creating an organization that utilized this game changing system would be more advantageous than selling it to everyone. Much of the last year has been looking for the right financial backing and structure to put together something that has not yet been attempted in the industry. I think we have done it and are in conversations with a number of dealers in various states of negotiations. Stay tuned.
What are your thoughts on the current state of MPS and its impact on the OEM and Dealer Channel?
McLaughlin: This won’t make a lot of friends. It’s a disaster. The truth is that the industry has not really embraced MPS, and many dealers just give it lip service, or at best look at it as an account retention program, and for some it exists on their web site only. I’m not blaming the dealers, or for that matter the OEMs. I believe the potential, although very real, has been oversimplified. Years after the first discussions about the management of print the industry is still defining it. Most dealers that are serious are only doing 10% of their business in MPS. It should be at least twice that. They just do not have the tools to manage all those moving parts profitably. It’s a problem. I’d be remiss not to mention it’s a problem that Valderus solves.
The worst part of the disenchantment with MPS is that many are turning to IT services as the answer. Unless you have all the right pieces it will be very hard to make that work. In the right segments it answers a huge need, but it requires even more account knowledge than MPS, and a level of partnering that most dealers will find close to impossible.
In your opinion, what is the biggest challenge facing OEMs these days?
McLaughlin: The “Box” mentality. Every company is challenged with how to handle this problem. I can honestly say I understand the complexity of being driven by a factory, but the fact is that with the product life cycle we are in now, we are at a point where “services” are more valuable than products. The priorities of nearly all the OEMs are still driven by the factory’s demand to grow and be efficient. It’s understandable but it is not aligned with their rhetoric or the requirements of the end users. Most manufacturers are also struggling with the issue of dual distribution. They are getting in the way of their dealers’ profitability and therefore their growth. I know each of these executives and can honestly attest that it is not their intent, but the reality still exists. The problem is difficult to adjust because of the first problem I mentioned. The perception in the factory is they need more boxes, and perceptions dictate priorities. Those priorities are rewarded and that dictates the actions. It is hindering going after the real opportunity, account development.
What are the biggest challenges facing Dealers?
McLaughlin: Transitioning their business. For the past few years, that’s all dealers have been hearing from everyone. OEMs, consultants, analysts, and anyone with a pulpit are saying that they have to prepare for evolving office trends, the definition of which seems more fluid than definitive. Yet at the same time they are facing the reality that growth and profit is getting harder to manage and machines are becoming more and more homogenous. Differentiating is more important and harder to do. Frankly the fast answers and “Chicken Little” advice getting tossed about will not work. The answer lies in account development and for that there needs to be a better approach. There are industries out there that utilize an approach for service called “predictive,” but most of the OEMs in our industry claim it is not possible because of our complexity, but it’s not true. We are lacking the technology to properly manage and automate our business.
We need transition, but we need to be careful not to leap into business models that are not compatible with the process and knowledge that is our strength, and stay close to our core knowledge base as we evolve. If we want to know where we need to go we need to be closer to our customers. They are the ones who will guide us. Not by telling us what to do, but by our seeing what they can’t do.
What, in your opinion, are the best growth opportunities for OEMs?
McLaughlin: It varies by OEM. In the short term there is a trend that is moving production color from off site to in house. For over a decade work has been moving closer to the point of need. The biggest opportunity for capitalizing on this is the high volume in house color. Nearly all manufacturers have an answer and the profit and growth opportunity is excellent. It also does not require changing core business practices. Another area is to have their direct operations become more committed to MPS. Today it is more in voice and image than practice, and they try to combine machine placements with MPS. Focus on the account not the products. By focusing on accounts and problems, it elongates the sales cycle but in the end there are more products placed and better density leading to greater profits. Another area is to recommit themselves to their indirect channel. In my opinion the direct channel should be there to help OEMs be better providers, by learning the reality their dealers live.
What, in your opinion, is the best growth opportunity for Dealers?
McLaughlin: MPS, done right. The reason I love the opportunity of MPS is that it is close to the core knowledge of the dealer community. They can focus on accounts and not just products. The approach needs to be different than in the past, but it offers fast and exceptional growth without necessarily expanding the accounts. I am normally not a fan of specializing, but it can be a good way to launch a new program. Avoid the sharing commission stuff though—it is counter productive. We need to keep in mind that if a dealer has 100% of the market share for MFPs they only have 20% of the pages. Service based MPS is the vehicle to secure more page share, and it helps acquire more account knowledge. Another opportunity is the same as it is for the OEMs, HV color. This is for the same reasons. There is one thing I would like to caution. Avoid “two up 11×17” on single click. This is suicide. It’s worth losing accounts to avoid it. Simply stated there is no way to make money doing it. I feel better promising a loss. We have all learned these cannot be made up with volume.
You recently spoke about the importance of forming partnerships to provide comprehensive solutions. Can you elaborate on that?
McLaughlin: Of course! It is not possible to have all the knowledge necessary to expand relationships in accounts. When we are providing services we need to reach out to as many organizations as possible that can expand our knowledge. It is common in the area of IT services to have dozens of active relationships. IBM, AT&T, and others are the standard bearers of mission critical services, and they partner with companies that could sometimes be considered competitors. It is not a simple thing to do, and it is not a standard practice in the document business. I believe the more we go down the services path the better we will get at it. The practice today is to find a favorite developer and work with them to provide answers for our accounts. We may be more comfortable working with them, but we may be selling our customers short. Expanding our horizons is critical to success in the services business. The depths of our partnerships are badges of credibility to accounts looking for help.
Last but not least, what do you like to do when you’re not working?
McLaughlin: I don’t know why you laughed when you asked that. It is true I love the business—it is always changing and I am always learning. I do however have some other interests. I enjoy an occasional game of golf, but frankly I’m awful. I really don’t get a chance to play often. I love it anyway. I am an avid reader of biographies and history. I’m especially fond of the revolutionary period, but have read a lot on WWII. George Patton and Winston Churchill are my favorites from that period. An odd couple for sure, but I like them for very different reasons. I also have read on the Roman era that transitioned from Republic to Empire. When I was with 3M there was a commonly used phrase, “Old Is Forever New.” The more I read history, the more I know it’s true.
