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Conversation Kevin Joyce, VP Worldwide Sales and Marketing, Kodak

July 15, 2009

On 23 May 2009, we met Kevin Joyce and Bhalchandra Nikumb of Kodak at the Oberoi Hotel. Kevin Joyce was on his first visit to India in his extensive tour of Asia. Joyce shared his views on the eastern and western markets and the global industry scenario.

Naresh Khanna in conversation with Kevin Joyce and Bhalachandra Nikumb. L-R: Naresh Khanna and Fayez Ali (IPP); Balachandra Nikumb and Kevin Joyce (Kodak)

In the east Joyce sees an unexpectedly rapid pace of digitization. ChinaPrint09 showed the pace at which the gap in digitization was closing between the east and the west. In China and more so in India the optimism, enthusiasm, growth and entrepreneurial spirit is amazing. It definitely helps that these economies are growing in comparison to the decline in western economies. While in the west printers do not invest without one hundred percent clarity on where the revenue will come from, this is not the case in the east where printers are more willing to take calculated risks with their investments.

In the west advertising spend is moving to the Internet and the print business is not going to be the same. The reduction in the western economies is not going to come back. The recovery will not achieve the same rates as earlier and some of it is gone for good. The reduction in paper and print should be seen and overlaid with the overall advertising media mix in the United States. Of the one trillion dollars spent in advertising and marketing last year on print, television and the Internet, seventeen per cent went to the Internet. The earlier forecast for the next five years was a conservative 19 per cent and an optimistic 29 per cent. Now it looks like five years from now 29 per cent will be a reality.
Should this be perceived as a threat or an opportunity — it is a threat if the industry thinks of itself as just a manufacturer of print and they will experience a painful transformation. Alternately, if printers get more involved in the overall marketing campaign and realise that print supports the digital printing part of the advertising media mix, then only will they have an exciting transformation. Kodak is coming up with helpful workflow solutions to make printers understand that printing is an important part of the overall marketing campaign.

On inquiry of his tour mission Kevin Joyce responded — This tour was to get a ground level perspective of the adoption of digital technologies by major applications such as forms, transactional, books, newspapers, magazines, catalogs and direct mail. Each one of these has an assumed adoption curve of digitization. This helps in taking decisions for investment in research and development. Book production is seeing the fastest change in technology. Five years from now eighty per cent of all books will be printed digitally. Right now the economic feasibility of digital book printing is two hundred and fifty pieces in India and five hundred to seven hundred fifty pieces in certain other markets. In five years this will progress towards ten thousand then it will have eighty five per cent of the market. The list of applications seeing adoption of digitization is seeing a collapse in the timeframes for adoption. Direct mail which is not big in India is very important for the integrated media mix and will go digital very quickly. Thus books and direct mail are the investment opportunities.

Asked to comment on one of the views at the pre-drupa Dayton conference that digital transpromo was ten years away — Kevin Joyce said that he did not agree with this view. Transpromo is all about data if you have good data, transpromo will work. In China all the big printers were talking about transpromo and two big printers were doing transpromo for two very big banks. Everyone loves to talk about transpromo but it is very difficult to implement. It requires a lot of business development at the consumer end. It is very tough to get a new application of technology adopted by a vendor. Until it is sold and applied by their customers the technology will not see any acceleration. Digital transpromo has been hurt by the recession, printers in North America who were earlier talking about colour transpromo are now hesitant as banks in America don’t want to be seen as luxurious. This has given black and white transpromo an inadvertent extension. However some very big banks and credit agencies are doing colour transpromo for their high-end customers, as they see it as a vehicle for better returns from their customers. Slowly this will start trickling down the segmentation pyramid.

On transpromo in India, Joyce says that data is a major issue and that without data we cannot talk about transpromo. The issue for printing businesses worldwide is that they almost exclusively have a production-productivity cost-cutting mentality. They do not have a revenue generating mentality. The need is to focus on both reducing cost and revenue generation simultaneously. Cost reduction stymies creativity — if customers are shown the return on investment there is no reason they will not invest. There is a collective mentality in this industry that has lasted for forty years and that has to change. Printers respond to the stated needs of their customers and not their un-stated needs, which need to be suggested to the customers. The future will see mergers and acquisitions between printers and advertising and marketing agencies.

Kevin Joyce asked us about print service providers progressing towards becoming marketing service providers and the database issues — integration of multimedia, relational databases and analytics. We agreed that India could export its expertise in these areas to areas which had better data to help convert that data into information useful to the printing industry and their customers. What has not happened is personalisation, they have had the algorithms but lacked in the printing technology to do mass customisation. Now digital transpromo will help them do that. In the future we can see an offset printer who understands print and a data provider who understands data merge and given a digital press the opportunities could be endless.
Joyce then added that, printers doing transactional business are very sophisticated and have very good data. The challenges and opportunities in India and China are to not make the same mistakes that were made by the Western Europeans and North Americans. As is often seen in the digitization of an industry, printers only think of using a digital press as they use analog presses. Kodak underestimated or it is possible did not even know the number of new skill sets needed with a new digital press to leverage the digitization level— the databases and the selling. The fundamental ability of a printer’s salesperson to sell a digital press is limited. They need to develop the business development thinking of the end-user and not only solution providers. It is a 3-dimensional model with the suppliers to the printers — the printers themselves — and the printer’s customers each occupying an important dimension.

Talking about the future level planning of Kodak, whether a different level of consumption was expected and if India and China could be expected to take up the slack for the western economies. Kevin Joyce said that — the reduction in consumption was here to stay. The next generation of Americans is more aware of environmental sustainability and are not consuming like their predecessors. The country which will really feel the impact of the drop in consumption is China. China’s economy was heavily based on American consumption and it was unlikely that their domestic consumption would ever come up to that level.

Kodak’s future plans and reliance on the United States as a major consumer — Six years ago Kodak’s revenue breakup was — 80 per cent consumer and 20 per cent commercial, 70 per cent analog and 30 per cent digital. Of this 70 per cent was in North America and 30 per cent in the rest of the world. Today it is – 30 per cent consumer and 70 per cent commercial, 20 per cent analog and 80 per cent digital. Now it is 40 per cent in North America and 60 per cent in the rest of the world.

There has been a dramatic shift in the world balance and although there is still quite a way to go, Kodak however does not see growth from North America. China and India will emerge as important as North America and Western Europe. Kodak has seen strong success in high-end digital transactional business. Now there is a need to work on solutions for entry-level digital printing businesses. Kodak will be installing the first Stream presses in the first quarter of 2010, the goal is to be sold out for 2010 by the end of 2009. Targeted segments include transactional, direct mail and books. There has been some success in the newspaper segment for the VL line of presses and not just the Stream presses. Kodak now has three generations of presses with the VT, VL and Stream. The VL Drop on Demand is doing very well in Europe for transactional. A popular perception is that Stream will overlap with the VL series but this is not the case as it has applications in newspapers, books and upscale catalog printing.

Concluding the meeting Kevin Joyce said there was general optimism for India. The current environment will force us to become more creative and will make us healthier. Some competitors will be undercutting India on price.

As reported by Fayez Ali