2013 Konica Minolta Dealer Meeting: Numbers Don’t Lie (Part 1 of 3)

Dec 3, 2013 11:22:28 AM

By Carl Schell

Throughout his opening remarks at “Shape the Future,” President and COO of Konica Minolta Business Solutions U.S.A. (KMBS) Rick Taylor peppered in a few jokes, along with some self-deprecating humor. The news he and other executives shared over the next several hours in the Venetian Theater, though, was no joke.

Strategy. Passion. Leadership. These were the pillars upon which the event was built, regardless of the topic at hand, and they served to support the biggest theme: transformation. Looking back to 2008, when Taylor was hired and began bringing his team on board, it’s obvious that the company’s journey over the past five years has been marked not only by positive change but also impressive results, particularly in the areas of dealer relations, the continued “flipping” of the hardware-based business model to one that’s solutions and services-centric, and the overall score on the board.

Konica Minolta, Inc. President and CEO Masatoshi Matsuzaki said, “2013 marks the first 10 years of the merger between Konica and Minolta. Since then, the world market has very much stabilized. For a corporation, this makes it all the more important to have a unified approach and a unified vision: ‘Turn Ideas into Images.’”

This sense of solidarity could easily be felt in the theater, the product expo, and even the buffet lines during meals, while the results rang louder than the sounds coming from the casino just down the corridor.

Dealer Channel Health

As part of its focus on quality over quantity, KMBS has reduced its BTA partners from 459 in 2008 to 355 in 2012, to its present level of 334 in roughly 300 metropolitan markets. While some might argue that this decrease went too far, it’s our belief that the previous oversaturation clearly wasn’t working anymore and, in all likelihood, made it difficult to maintain intimacy with its dealers and keep them trained. So, beginning with the appointment of Taylor, the company sought to eliminate conflict between its BTA partners and direct operations (the “Rules of Engagement” were introduced to bring fairness to the playing field), as well as to streamline distribution, in order for it to earn the trust, loyalty and dedication of it dealers. Based on KMBS’ recent growth, no doubt it has achieved that and, interestingly enough, proven that less can be more, at least in this case.

In fact, at the 2012 dealer meeting, KMBS Dealer Sales Division Executive Vice President Alan Nielson reported, “In 2008, our dealer support rating among Tier 1 competitors was the worst, but last year we were voted the best.”

Founder and President of Blue Technologies Paul Hanna, who only weeks before the Venetian event presented a leadership award to Taylor, echoed this by saying, “Back in 2008, dealer relationships were at an absolute low, and the business was faltering. Today, the situation has completely changed, and an environment of true partnerships has been created.”

Everybody we spoke with at the show attributed this transformation to one person: Rick Taylor. “The company needed direction, and that’s exactly what he’s provided—you can tell that the moves being made are the right ones,” said President of Copier Fax Business Technologies Al Scibetta.

Among the announcements Taylor made that were met with applause: KMBS doesn’t think it has to have direct sales branches in every market; dealer sales are now outpacing those from directs (see table below); that a full review of contracts would take place to bring even more fairness to the dealer community “to take any doubt out of the relationship”; and that BTA partners would have free access to the Harvard Online Business Curriculum and the Bluepoint Leadership Development program, thus helping foster an environment of growth by giving people tools so they can reach their full potential.

“Based upon the current state of our business, we’ve laid a great foundation for our future on this planet,” Taylor commented. “We had a tremendous fiscal year 2012 ending in March, and a great first six months of FY 13. Dealer business has been so much a part of our success, certainly in the last five years, that I can’t thank you enough for the effort and everything that you’ve done.”

Sales Breakdown for Konica Minolta Dealers vs. Directs

	FY 2009	FY 2011	2013 (April–October)
Dealers	45%	48%	52%
Directs	55%	52%	48%

The New Deal Grows…

As was the case at the 2012 meeting, where EnvisionIT was formally unveiled for education, healthcare and legal, the verticalized solutions strategy was the chief topic at this event. “Our vertical market approach speaks to the unique needs of each industry … [and] we’re well on our way to transforming our business from a hardware-oriented business to a solutions and services business model,” said Taylor, who also mentioned that, with annual revenue in the healthcare vertical of approximately $65 million, it makes sense to expand its portfolio in this market but in others, too.

Of course, understanding these “unique needs” equates to figuring out customers’ pain points and trying to correct them through improved workflows and automation. Matsuzaki spoke about this during his 20-minute presentation, saying, “We are very close to our customers, giving us a very clear picture of demand as it evolves, and whatever we should do, the results should be a net benefit to the world.”

Along with finance, government and manufacturing, Konica Minolta added production print to its EnvisionIT menu this year. This area provides a direct link between hardware and software because it’s a very specific market with very specific needs—needs that are clearly tied to the equipment. “The long-term trend is that runs are becoming shorter as customization increases—this creates pressure,” Taylor explained. “All of this is eroding the market of offset printing, especially since digital production print requires much more of an up-front investment. [But with] superior capabilities such as inline finishing and variable data printing, growth in digital print will drive demand for workflow automation and electronic job submission as organizations seek to minimize human intervention.”

One thing that was readily apparent to us was that Konica Minolta doesn’t just want to be a digital printing company or, even more, a technology company—it also wants to be an information management organization. This all-encompassing philosophy, which helps augment its Tier 1 status, comprises hardware, software, and, most recently, IT services, evidenced by its acquisition of All Covered. About that Taylor noted, “We want to grow organically by developing new products, but we also have a goal of being an active acquirer of companies … so we can become a national provider of IT services and solutions to complement our hardware.”

Taylor also discussed the company’s new managed market services initiative (EngageIT XMedia, a cloud-based platform), and announced a partnership with Hyland to help KMBS increase its penetration in the enterprise content management space.

Plenty of other interesting points were brought up, including…

● Solutions-wise, accessibility, connectivity, mobility and security were highlighted, but it was perfectly clear that, again, tying these into unique workflows is what Konica Minolta finds most critical to its customers and its growth.
● Matsuzaki said that cloud computing and SaaS (software as a service) will continue to grow, according to Gartner—and that the company will be active in these areas.
● Konica Minolta will open three business innovation centers, one of which will be in Silicon Valley, allowing it to be close to venture capital and healthcare firms in order to find opportunities in their infancy. “We’re looking deep into the future, 10, 15 years out,” Taylor said, but discussed no other specifics.

Delivering Results
It’s been over three years since Konica Minolta secured the No. 3 market share position, and after hearing the sales tallies at this meeting, KMBS and its parent company should be exceedingly thrilled—to the tune of a 6.8-percent growth in only five years, in a relatively flat market to boot. Moreover, had Taylor brought up the goal of a 20 percent market share back in 2008, when the company had a 10.2 percent share, dealers would no doubt have been skeptical. But now, seeing as Konica Minolta is making that figure a strong possibility rather than a pipe dream, it seems that nobody is dubious and everybody wants to work together to make it a reality.

Konica Minolta Market Share Growth

2008	2009	2010	2011	2012	2013
10.2%	13.6%	15.0%	15.5%	16.6%	17.0%

Drilling down into the finer details further shows the company’s momentum since the Taylor hiring. For instance, Konica Minolta has consistently grown unit sales by 8 percent annually while the rest of the industry has declined. And one of Nielson’s objectives—something we’ve heard at all previous meetings and again here—has been to increase major account business, which the dealers have certainly done (14 percent compound annual growth rate in this area over five years). Finally, while it can be assumed that some—perhaps a lot—of the revenue growth in the areas of solutions and IT services is derived from a series of acquisitions, particularly with the latter, it’s still a huge shot in the arm and certainly provides the company with a stronger and wider foundation upon which to build its future success.

Konica Minolta YOY Growth Rates (FY 2012)

Hardware*	Solutions	IT Services	TOTAL
8%	44%	59%	6%

* Sold 9% more units than previous year.

Dealer YOY Growth Rates (April–October 2013)

	Mono Office	Color Office	Mono Production	Color Production	Wide Format
Unit Placements	48%	53%	52%	37%	73%
Unit Sales	8%	22%	18%	5%	11%

The Net-Net

It was a very good show for Konica Minolta, one that gave dealers more to think about—and implementable tools—on the quest to 20 percent market share. Yes, much of the messaging about mobility, security, solutions and service wasn’t far removed from what we’ve heard at other events hosted by traditional A3 manufacturers. That said, it’s been especially nice to watch the vertical market strategy develop from vague thoughts and ideas during the early days of Taylor’s tenure, to the rollout of EnvisionIT at the 2012 meeting, to this year’s additions for the financial, governmental and manufacturing industries. To conclude, as Taylor declared, “What’s changed is how people consume media, and some industries have never adapted to this new customer reality.” It’s plain to see that Konica Minolta has adapted, and will continue to do so.

Stay tuned for Parts 2 and 3 of this event coverage, where we’ll dive more deeply into the news about hardware and solutions.