Something old was new again at the Konica Minolta 2019 Dealer Conference, as the company emphasized how and why dealers need to update their business to deal with digital transformation – which has been a recurring theme at the event in recent years
NEWPORT BEACH CA – Traditional dealers in the imaging business around copiers and printing need to evolve their businesses, or those businesses will wither as the convergence with the IT industry continues to impact margins on core lines. That was the message this year at the Konica Minolta 2019 Dealer Conference here – as it has been in previous events. It has been a recurring theme for years, as Konica Minolta tries to walk a fine balancing act between encouraging dealers to evolve in an era of digital transformation, without resorting to ‘march or die’ scare tactics.
“It’s kind of the same story, but it keeps getting better, with some new characters and a few plot twists, and the sci-fi of a few years ago is reality now, Rick Taylor, the CEO of Konica Minolta Business Solutions U.S.A, told the dealer audience in the event keynote. “For those willing to take action, the future is limitless.”
Taylor emphasized that the driving force in this story is the changes in how people work.
“Companies of every size and every type will undergo massive transformation driven by technology,” he emphasized. “Some will resist change and some will embrace it. Customers don’t have the ability to do this on their own. They need your help. If you embrace our expanded business capabilities, you can drive that. This is something that we have been talking about for eight or nine years, but it has now reached an inflection point, where you have to change or face an uncertain future.”
Todd Croteau, the President of All Covered IT Services from Konica Minolta, the company which was acquired back in 2011 to greatly expand Konica Minolta’s managed IT services offerings, and which has been expanded since with multiple acquisitions, laid out the metrics for the dealers in the keynote, with numbers that other executives agreed with during the event.
“Roughly one third of the dealers here are actively involved in growing managed services,” Croteau told the audience. “roughly one third are tinkering with it, and one third are just watching.” Expanding the business model to add some degree of managed services to customers is one of the key parts of that business transformation.
Reluctance of dealers to change isn’t about wanting to embrace new ideas, but is about expanding beyond the core businesses that built up the dealers’ companies.
“All of our dealers are deeply focused on growing the core businesses,” said Laura Blackmer, Senior Vice President, Channel Sales, at Konica Minolta Business Solutions U.S.A. “It may not even be a third of our dealers today who aren’t expanding beyond the core. The number of these dealers is getting smaller. They are getting bought, with the dealers who have been adding newer things like managed voice options or help desk getting larger.”
Taylor discussed Konica Minolta’s dilemma later in the event – that while they don’t want to tell dealers that they will go out of business if they don’t adjust their business model, some of them inevitably will.
“We thought specifically about not trying to scare them about this,” he said. “But the bottom third isn’t all getting bought. So what do they do? Add higher value print services? Wide format? Decorative format? Even if they just want to continue to sell office products, they have to get their costs down.”
“Doing nothing is not an option, because the outcome may not be advantageous for their business,” said Sam Errigo, Executive Vice President, Sales and Business Development at Konica Minolta Business Solutions U.S.A. “We didn’t want say ‘doing nothing means you will go out of business,’ and it may not be death for them, but it is still likely to mean a loss in valuation when it is time to sell.”
“We were able to buy all these companies in the All Covered business because they weren’t making any money,” Taylor added. “You need scale. Even the top third need help from us. Complacency is a villain. The pace of change is picking up. What worked in the past may not work going forward.”
Taylor stressed to the dealers that Konica Minolta’s direct sales force – which accounts for about 60 per cent of their sales – has already made this transition, because the company didn’t give them a choice.
“We have had a tremendous increase in profits in our direct channel because we forced our direct channel to do the things we ask of you today,” he said in the keynote. We know they are good for business. We hired people with different skills. We changed our compensation plans. We invested in growing managed services. Ten years ago, we thought wrapping services around our core business was a good strategy, which led to our acquisition of All Covered. Today we are positive that this will make a big impact on your customers and business, particularly because as dealers you can leverage a cost structure that can’t be duplicated in direct.”
“We’ve learned a lot through trial and error with the direct channel,” Errigo said. “The dealers do not have to mirror exactly what we did on the direct side, but they do have to develop things like a long term strategy. Ultimately, the driving force here is not Konica Minolta. It is the customer. If we know the customer is moving in a certain direction, what a specific dealer does will determine whether the customer does things with that dealer or someone else. The customer will enforce that transformation in the industry.”
“We need to convince you to invest this way,” Taylor emphasized to the dealers. “We will be here to help you every step of the way.”
Tools for this include a relatively new managed services enablement program.
“It is designed to assist motivated dealers to grow a managed services business,” Blackmer said. “It takes time and investment, so it is critical that both dealers and Konica Minolta have shared accountability.”
Blackmer also said that Konica Minolta is adding new consultants specifically around digital workplace solutions to work with partners, making an additional investment in this area. This will also include providing a dealer with a resource paid for by Konica Minolta to help them get a business of the ground, providing the dealer agrees to commit to get the business to a specific point at a specific time.
“We will give them a person for six months till revenue comes in so they don’t have to support that,” she said. “We have done it reactively before. Now we are doing it proactively.”
“I am really sold on the resilience of the dealer channel,” Taylor concluded in the keynote. “This is especially so when things get more complicated. Then it becomes a home run for people who can deliver services.”