Why Xerox, HP and Canon Should Stop Innovating

What I would do if I was the CEO of Xerox, Canon or HP...

I don’t have a hate on for any OEM manufacturer. I am, however, critical of how some reacted to the decline in office print over the past decade. Since most channel partners depend on the health of the OEMs for their own well-being, there is trouble ahead for those that pick a partner with the wrong strategy.

Nothing any manufacturer or reseller does today will change the long term decline in this industry. A faster printer at half the cost will not increase office printing—it might take marginal market share. More than likely it would take revenue away from the vendor themself as it replaces the previous product serving that market segment. A better process of document management will not increase printing… revenue is going to decline.

Office printing is not the only industry to suffer long term decline. So let's learn from them instead of clinging to a mantra like “office printing will never go away” (for the record, I don’t think it will go away anytime soon, but it doesn’t have to go away, to upend a business—Toys"R"Us, Sears and Borders taught us that).

Don’t confuse revenue decline with a decline in profits. The first is inevitable, the second is a result of poor execution and a refusal to diagnose and then adapt to the market reality.

These companies got “Amazon’d”. (definition: verb. To have your business driven into Chapter 11 by seriously misjudging your customers’ willingness to switch purchasing habits). More importantly though, they prioritized revenue over profit, which is what I believe many OEMs are doing.

Understanding that revenue is going to decline, print manufacturers must focus on profitability. Product innovation at this point in the product lifecycle will not affect sales. Every year some print vendors release dozens of new models—with considerable overlap across the portfolio.

There is a better way. What if vendors:

  1. Collapsed their product offering to a few key SKUs. This reduces overlap and cannibalization. Pick some winners, double down on those and drive out the costs. A few years ago GM scrapped entire business units like Saturn and Hummer. Their revenue changed little but their profitability skyrocketed.
  2. Reduce R and D and product management costs. As unit sales decrease, each unit needs to account for the internal costs: you still need to design it, test it, write a manual, market it, manage a production run, etc. Doing nothing will mean your costs increase. Assuming you aggressively pare down these areas, and some unit sales increase, then costs will decrease.
  3. Strategically cut marketing spending. Will the annual dealer conference trip to a far off destination make any difference for sales?
  4. Reduce senior management headcount. Old people are expensive.
  5. Stop paying for engineers to make marginal improvements to technology products that are over 30 years old!
  6. Stop “revving” the product line every 18-24 months.

Overall OEM headcount must decrease. We have not seen enough cuts yet, so many OEMs seem to be playing a massive game of chicken with each other.

OEMs see cuts as a sign of weakness. They should be seen as a signal that the OEM is reading the market properly.

Amazon-ing is real. OEMs should be rightsizing their businesses, but so should resellers! Do you continue to support massive outbound sales teams, and service departments? Do you think your customers prefer a high-touch sales and service model? Are you focused on revenue instead of profit?