Technology and the Disruptors Path to Reshaping the Office Products Industry

Technology and the Disruptors Path to Reshaping the Office Products Industry

Business transformation and disruption are over-used terms we have become accustomed to hearing about daily. It is common for innovators to claim they are the next big thing as they compare their concepts to widely recognized disruptions such as the paid-ride (i.e. Uber) and entertainment (i.e. Netflix) industries that have already been transformed.

It's also quite common for innovators to believe they have created the latest technology for disrupting an industry when the reality is, that they have done nothing of the sort. While they may have developed a value proposition that provides for incremental improvement, it's far less common for real barriers within the existing value proposition to be removed and for true disruption to then take place.

Disruptors are attracted to large, mature industries because, typically, the players inside those industries cannot see or understand the threat of disruption until it's too late. Usually, it takes an outsider capable of taking a completely different perspective on an industry and its existing value proposition to come up with an alternative and successfully introduce it to the market.

We believe the office equipment, products, and supplies industry is ripe for disruption.

  • The most commonly used platforms independent resellers are operating on are built to support the way business has been done in the past and not for the way we believe customers would be receptive to doing business in the future.
  • These platforms do little to help independent resellers survive the onslaught from Amazon and other online competitors.
  • While some of these platforms may be evolving, we don't see significant evidence for an evolution toward technology designed to remove barriers built into the current value propositions.
  • They are also incomplete solutions in that they do little to help relatively unsophisticated owners improve their online presence or convert raw data into actionable business intelligence.

With 70%+ of buyers' searching online for answers to their questions before engaging with a salesperson, it has never been more important for the independent resellers' website to become a destination for addressing the potential buyers' research.

Amazon can be viewed as a disruptor as it transformed the shopping experience and are directly responsible for the downfall of many high street retailers who failed to respond to the competitive threat. But, think for a moment about what Amazon has done and question whether it represents anything more than a series of incremental improvements to a transactional process that has existed for centuries.

For sure, barriers have been removed. Just like with entertainment, it used to be we'd have to visit the local Blockbuster to rent a movie for the weekend until Netflix transformed the service and delivered the movie when we wanted it directly into our homes. This eliminated the time it took for us to get to and from the store and removed the supply constraint that frequently existed on popular movies. Amazon has done the same thing, deploying technology to present the widest choice of products possible, the most competitive prices, and the fastest delivery. It has become unnecessary to physically go to the store, even if some of us still prefer to do so.

Regardless of how valuable a product, service, or company has been in the past, loyalty counts for little when it's compared to the convenience or the benefits of other simplifications in the process that are introduced by a competitor.

Technology has already disrupted the way people work but Amazon or no Amazon, the transactional process to provide customers with the products and services they need to operate their businesses has not changed. In not changing, it fails to adequately account for the ground shift in how workers operate, where they operate from, and how businesses must adapt.

Underlying changes in work practice are technologies in the form of software and the internet. The software has permitted documents to be "born" digitally (eliminating the need for printed output). At the same time, the internet provides 24/7 access to digital filing cabinets and facilitates remote sharing and collaboration in terms of content creation and approvals. These two technology factors combine to remove the shackles previously tying workers to corporate offices.

The consequence is a rapid dispersal of the workforce and the elimination of dead time commuting to and from the corporate office. Workers have become vastly more efficient than they were in the past.

Combine these factors with the changing profile of the labor pool as Millennials continue to form a larger share of the overall workforce. Millennials typically have a different outlook on their career paths to those that baby boomers did in the past and will choose to work more on their terms than those of an employer. If they can't work flexible hours from their home, from Starbucks, or some other convenient location, they will simply choose a different employer. Eventually, the employer who fails to accommodate the lifestyle preferences of a Millennial will have no workers.

Now combine this trend with the typical set of office requirements. Instead of utilizing the employer's capital assets and services, such as furniture, copier machines, office space, bandwidth, etc., someone else's assets, whether the employees or a third party like Starbucks, are utilized instead. This has profound implications for the future requirements of a business. They will purchase less furniture, lease less space, and buy fewer technology products, business equipment, office products, and supplies.

Some of these products and services will still be required but more and more of them will be needed in remote locations rather than the corporate office. This complicates responsibility and accountability for expense control and is an entirely different ball game for the traditional structure established by corporate purchasing departments to cope with and successfully manage. Indeed, this becomes one of the many friction points that explain the employer's resistance to allowing workers to work remotely.

When workers used to come into the office, and when just about everything was printed and copied, there was a strong argument for establishing central print and copy stations designed for low-cost, high-output requirements. These circumstances supported the business case for expensive copier machines and spawned the managed print, service, and repair business model along with multi-year contracts and cost-per-page billing models. But, as we've explained, reduced print volumes and dispersed workers mean this value proposition is no longer appropriate for many businesses. Furthermore, despite the shift in customer requirements, the channel that sells copiers has not changed because doing so would have a profound impact on their business model. So, the channel continues to sell the value proposition established decades ago, based on brand-centric solutions from dealers operating within territorial boundaries closely controlled by their original equipment manufacturing (OEM) partners.

While you can configure and purchase a brand-new Tesla online, just try doing the same for a copier machine!

Consequently, many businesses continue to purchase or lease high-capacity copier machines and organize their office around the central print location. However, consumers are increasingly voting with their wallets and diverting their spending to Amazon. While this trend may be gaining traction more quickly in transaction-dependent channels (such as office products and supplies) where comparison shopping (price) is simple to do, it would be naive to think it won't continue into the office equipment channel, regardless of the bundling of services and multi-year contracts that make comparison shopping more difficult. Contracts and bundled services may delay the threat Amazon poses to this channel, but they will not eliminate it.

Eventually, all those dealers threatened by Amazon (100%) think they must copy Amazon to compete successfully with them or, worse still, join their marketplace and ultimately hand over all their customers. Neither of these is a viable strategy. Remember, Amazon incurred 15 years of losses building its value proposition, and, today, it doesn't even make its profits from shopping; it makes them from Amazon Web Services (Cloud Hosting) and Amazon Prime (memberships and digital content). Unless technology is utilized to remove other barriers currently existing in the typical independent resellers' value proposition, Amazon will win the war, and many local businesses will be eliminated.

Think back to the earlier call-out in this article about the inverse relationship between customer loyalty and the availability of a value proposition that eliminates existing barriers. Think for a moment about how the equipment channel has resisted change in terms of taking the lead to reduce the total cost of ownership related to printing devices and the ongoing costs of printing and think carefully about this in an environment of ever-reducing print volumes. The page-wide-array business inkjet printers from MemJet and Hewlett Packard have been available for years, but their market penetration in the equipment channel is limited. Despite their vastly lower cost of ownership and suitability for business print environments, their market penetration is low because the revenue per device is perhaps only 25% of that generated from an over-priced, under-utilized, legacy copier device.

How many dealers will embrace a value proposition that generates a quarter of the revenue the current one does? Of course, not many so; instead, they focus on rolling existing customers into new equipment lease agreements and evergreen service agreements to try and protect themselves from external threats. However, this legacy value proposition is vulnerable to a new proposition that eliminates customer friction points such as complex, multi-year agreements, excess print capacity, and equipment requiring regular service and repair.

The legacy value proposition is even more vulnerable to a new proposition that also focuses on solving other problems businesses face, particularly in terms of controlling a spend that's taking place in locations outside the central office, and that is notoriously more difficult to maintain control over.

A value proposition that;

  • Leverages existing technology in monitoring print volumes, cartridge reorder points and authorized vendors for resupply. In other words, taking away the "bad" but keeping the "good" while also solving other problems that Amazon is not (at least yet) dealing with.
  • That goes beyond helping a business manage its spending on traditional office equipment and supplies to provide a scalable solution that helps manage the myriad of other issues surfacing when embracing and managing a remote workforce. These may include onboarding and off-boarding new and departing employees, their company-issued assets, and their company-related activities.
  • Allows customers to intelligently determine what their true requirements are and only to purchase what they need. Because each customer is unique, this means dealers must facilitate flexible bundling of products and services configured in such a way that the customer only purchases what is needed and pays for what it consumes and that they can accomplish this without having to get the CFO to sign on the dotted line after their law firm has advised him or her it's okay to do so.
  • Allows the resellers to present their customers with a compelling case for providing a broader range of products and services that are necessary for them to survive in a shrinking market.
  • Provides seamless access to reordering portals using mobile apps designed to facilitate a dispersed spend, significant amounts of which will be initiated by remote workers, while allowing the corporate purchasing to have full control over that spend.

Not every independent reseller can survive in a shrinking, changing market. However, the question becomes whether the only survivor will be Amazon, or will it be Amazon alongside a group of healthy, independent resellers. Resellers who have leveraged technology to match the logistics performance of Amazon while also providing a range of products and services that include a strong element of value, including local service, accessibility, and know-how, while simultaneously resolving a host of other emerging issues Amazon is unable to.

However, even with all this said, there must still be a trigger to start the disruption cycle, and someone must be prepared to pull the trigger. Think about the point we've made about the equipment reseller who is compromised by its top line and can't pull the trigger because it results in a potentially catastrophic reduction in revenue. Then think about the office products sales resources not equipped to break into a channel trained to listen to service-oriented sales pitches. While the office products channel may love to pull the trigger, they're not currently equipped to do so.

This means that an additional burden is placed on the technology solution before it becomes the trigger for disruption. The solution must be sufficiently intuitive and compelling that it will be embraced by resellers in the office products channel (who are more inclined to pull the trigger) and rapidly adopted by their customers in this transaction-oriented business model. Only then will it be adopted by customers in the service-oriented equipment channel assuming, that is, it meets the criteria for not requiring a sales pitch from a service-selling specialist.

Ultimately, once the process has started, the equipment dealers will have no option but to also adopt the value proposition or they will simply go out of business.

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