Changes ahead
Recent changes at Heidelberger Druckmaschinen AG, the world’s largest press maker, indicate our industry may be starting to envision the future of lithography. The new leader of Heidelberg, Dr. Gerold Linzbach, who will take over as CEO this September, does not have a press-maker background. He has an understanding of the printing industry based on time spent with Hoescht AG, but his big-business experience is founded in the world of chemicals and later textile fibers.

After 13 years of leadership from Bernhard Schreier, the move to hire a CEO from outside of the business suggests a new way of thinking at the top levels of Heidelberg. The company had tried it before when Hartmut Mehdorn was named leader in 1995. He attempted to diversify Heidelberg’s famous press brand and was ultimately replaced by Schreier in 1999. This move was met with a sigh of relief from most Heidelberg employees because Schreier had risen through the ranks – for the preceding 24 years before his CEO appointment – as a true Heidelberger press builder.

However, it is clearly not the 1990s anymore. Unfortunately for Schreier and everyone else in the machine-building sector, world markets tumbled, the Euro took flight and the business power of a mature World Wide Web took hold. Key structures of the modern economy changed drastically over the past decade and big machinery, while still vital to large manufacturing industries, lost credit because of the transformations in how business and people connect. Despite huge loses from the dot-bomb era, financial markets are again favouring the relatively low capital investment needs of online business 2.0.

Heidelberg, as the world’s largest litho press builder by size and sales, is watched by many in the printing industry as a sort of Dow Jones index – particularly in a drupa year. Like most printing machinery builders, the company is going through its own painful downsizing. It will be very interesting to watch how Dr. Linzbach transforms the company, if he believes traditional printing can rebound and break through all of the white noise.

Linzbach’s priority certainly revolves around figuring out how to redeploy many of the company’s still vast resources – providing a fresh look at digital-printing opportunities, unburdened by the memory of millions wasted on Heidelberg’s collaboration with Kodak – in light of the dying love for big iron and significant structural change brought on by a shrinking industry.

Pigeonhole printers
I believe the vast majority of operations in the printing industry can be pigeonholed into three distinct groups: commodity printers, creative-marketing printers, and packaging printers.

Commodity producers invest to be the most-efficient, and often cheapest, option of putting ink on paper. This includes the most traditional litho printer on the planet as well as some of the most modern who drive all of their business through the Web. Commodity printers offer one thing, price, and they combat white noise only with lower costs. There is still plenty of cost-sensitive printing out there and this group gets the majority at the expense of slower and less proactive companies.

The creative marketing printers leverage their abilities – even with some of the most traditional processes – through innovative ideas of better seller-to-purchaser campaigns. These printers are clearly in the best position in the commercial space to breakthrough the online white noise, primarily because of their ability to intertwine with the creators of mass marketing.

The packaging printer, regardless of which sector they operate in, are also in an enviable position in their ability to break through the white noise. In fact, brand owners rely on this group to do just that. It is a mindset that has been fostered in packaging printers for decades and, as most pundits see, will continue to be so for years to come. The only true threat facing the traditional packaging printer is the wide-eyed glaze of commercial printers who have access to a bevy of new technologies to enter the sector, particularly for short-run work. Legacy packaging printers, however, hold key advantages in the substantial investment needs and also in areas like security and legislation needed, for example, within the pharmaceutical space.

While each of these groups generate very different margins for their work, I believe all three still have the ability to break through the online white noise. And I also believe all three will continue to buy printing presses as world markets stabilize. Of course, the ease at which printers invest is forming a noticeable gap depending on where the company is located. The right technology in the United States or Western Europe is likely to be totally different from what is needed in countries like China or India.

Indeed, some secondary printing markets are reaping the rewards of low-cost production by taking work away from more developed printing economies. This is largely because print is not taken for granted as much in these emerging economies, even as their online white noise ramps up at enormous rates. For most printers in North America it is hard to imagine an economy without a mature printing industry, where the perception of print is much stronger.

Unfortunately, as North American ad agencies regain positive thoughts about the impact of print, this may also be fueled by the fact that it does not cost nearly much as it did even just a few years ago. And so printers who hope to break through and make better margins are searching out new technologies. However, they must be cautious in believing new printing processes are the ultimate way to reach this goal. I do not believe the process itself is ready to have material impact on the white noise, because, today, production-strength digital engines cost well over $1 million and run at under 3,500 impressions per hour.

If the white noise of the Internet is what ails the marketing sector today, a smaller printing industry is the only remedy. Unfortunately, these means there is still a lot of procedures and recuperation needed before the industry can start its climb back, but there are people who still believe in a healthy outcome.