The Emerging Business Model In The Printing Industry

As the printing industry evolves in today's ultra-competitive business environment, the printing companies still standing are, by and large, pretty well-run organizations.  Some have focused on a product niche such as short-run invitations or personalized childrens books.  Others have utilized Web technology to reduce transaction costs and build scale.  The vast majority, however, have managed to survive and prosper through some sort of diversification.

In this blog, we take a quick pulse on how this industry diversification is reshaping what it means to be a "printer" in the 21st century.  We surveyed publicly available information on what appear to be the world's five largest printing firms (sadly, only one of which is based in the U.S., and it is only #3), which are:

1. Toppan Printing (Japan)
2. Dai Nippon Printing (Japan)
3. Donnelley (R.R.) & Sons Co. (US)
4. Quebecor (Canada)
5. Rexam PLC (Germany),

to see what business models are emerging.  We found generally more forward-looking business planning at some (e.g., Toppan and Donnelley) than others, but all are doing more than putting ink on paper.

From the chart above, you can see what is called Concentric Diversification (in black).  These are really product extensions, which use the same or similar technology and sell to the same market.  Packaging, for example, is quite similar to traditional commercial printing.  Similarly, "creative" or graphic design is closely related to the pre-press work every printer requires to prepare files to print.  Mailing and fulfillment are also not big leaps, as printers have always had to distribute product.  All five of the companies we analyzed -- and most other commercial printers that we know -- have gotten through at least this level of concentric diversification.

Many of these large firms have ventured beyond concentric diversification, into horizontal and vertical integration (in gray).  Horizontal Integration occurs when products are produced with quite different technologies than the core business, but which are sold to the same market or channel. This strategy proves to be advantageous in a competitive market scenario, wherein the company has a loyal customer base.  Example: a hot dog vendor expanding to sell hamburgers.

Example of horizontal integration among the Top 5 include products like real-time point of purchase displays, e-paper, security tags, and semi-conductors, all of which have something to do with printing; and services like database, target marketing, video production, call centers, community social media hubs. 

Vertical Integration occurs when a company invests in it's own product supply chain to increase or guaranty market share or insure quality of production inputs.  Example 1: car company buys tire manufacturing business (backward vertical integration, as it is closer to the raw material).  Example 2 car company buys dealerships (forward vertical integration, as it is closest to the customer).  The only clear example of vertical integration we saw is one company's investment in a paper mill.

Many of these big printers have diversified even further away from their cores, into what's called Conglomerate Diversification (in white), where there is little or no connection to the core technology or market.  This is very similar to an investor holding a mix of stocks and bonds and precious metals to smooth out cyclical ups and downs.  At the still recognizably-related level, one company has invested in a writer's consortium.   Another claims to offer workforce solutions, an extension of outsourced fulfillment services.  In fact, Donnelley markets itself as a business process outsourcer like IBM or Accenture, and has even acquired OfficeTiger and Astron, allowing them to "create processes and distribution for mission-critical information for the world’s largest companies."

Many of the Top 5, particularly the Japanese printers, are actually part of large highly-diversified conglomerates, in which printing is just one line of business, not necessarily the "core".  We have not even bothered to chart these businesses, because they do not really indicate a new or emerging business model in the industry.

So, what does this all mean?  What will these Top 5 printers and other printers be doing in twenty years or fifty years?  Unfortunately, we do not have all of the answers, but we feel like Donnelley and Toppan are companies to watch.  The vision seems to extend well beyond becoming a multi-channel communications company -- they seem to be thinking about a tightly integrated but diverse set of products and services pushing in every direction.  The main connective tissue between the set of offerings will probably remain the customer -- a common market or channel.  It will be an interesting ride!