Konica Minolta also provided an update on the state of the Canadian services business, where IT Weapons was acquired three years ago to serve as a bridgehead into the Canadian market.NEWPORT BEACH CA – Konica Minolta presented its dealers at the Konica Minolta 2019 Dealer Conference here with a forceful message that their dealer channel has to transition their businesses from legacy copiers and printers to newer technologies and business processes, or face inevitable decline in margins – and professional extinction. At the same time, they also pledged their commitment to that legacy business, and offered dealer partners a broad choice of options to augment their legacy business with things that could be natural adjacencies to specific business models.
Rick Taylor, the CEO of Konica Minolta Business Solutions U.S.A., stressed in his keynote Konica Minolta’s commitment to the core business – something he acknowledged later he has to do repeatedly, since he talked almost exclusively about software and services at this event a couple of years ago. That, he acknowledged, was likely a mistake, because it created a false impression he now repeatedly has to dispel.
“Without our core product there is nothing,” he emphasized to the dealers. “We might as well be in trucking.”
“Our approach to our core business is that we believe there’s still a lot of office MFP potential, which is why we are replacing our whole lineup over the next year,” said Kevin Kern, Senior Vice President, Business Intelligence Services and Product Planning, at Konica Minolta Business Solutions U.S.A. “We are introducing a new series with brand new engines in both A3 and A4, designed to address critical issues of efficiency security, environmental consciousness as well as provide a simplified workflow.”
The company’s numbers in the legacy business were generally good, although the numbers in the newer areas – working off a smaller install base – showed higher rates of increase. Overall revenue was up 4 per cent. Profits in the U.S. alone were up 16 per cent, with margins growing. Dealer solutions revenue – basically a software play – was up 10 per cent, while production print was up 36 per cent. Unit sales in the dealer channel were up 52 per cent, although gross margin was down, as competitive pressure led to reduced margins for dealers.
“There is a lot of price pressure in the business right now, with a couple of companies really struggling for survival,” said Sam Errigo, Executive Vice President, Sales and Business Development at Konica Minolta Business Solutions U.S.A. “The industry is really dividing into the haves and the have-nots. Those companies that have invested more in the business and in differentiated products can get more margin. If they haven’t, all they have is price, and we are seeing that in the marketplace.”
The need for partners to invest more in managed services – either through Konica Minolta’s All Covered services, or the ones available through partnerships with strategically aligned software vendors featured in the event’s Technology Expo – was also stressed, along with the fact that this does not require a wholesale revamp of a dealer’s business model.
“Managed services isn’t an all or nothing proposition,” said Laura Blackmer, Senior Vice President, Channel Sales, at Konica Minolta Business Solutions U.S.A. “Some dealers have added one solution, while some have developed huge IT businesses.”
All Covered was emphasized as an excellent way to acquire service offerings that would be expensive for a dealer to build out.
Paul Hanna, President of Ohio-based dealer Blue Technologies, which has been in business since 1995, spoke during the keynote how his company had learned from hard experience that using these kind of services can make more sense.
‘In 2012, we saw All Covered, and we knew we had to be in this business,” he said. “But we got shellacked doing it ourselves. In 2013, we bought an IT company for $15 million. But we found there were big learning curves out there. I’ve paid the dumb tax. We’ve been able to augment our business using All Covered. We don’t have, most of us in here [the dealer keynote audience], the ability to put that much in resources. It makes us look bright to get a competitive advantage. We have to be in that space, but it costs a lot of money. All Covered provides a viable option.”
In late 2015, Konica Minolta acquired Greater Toronto-area based solutions provider IT Weapons to basically act as All Covered in Canada. The plan was to expand the business through organic growth at first, and ultimately through the acquisition of more Canadian MSPs under the IT Weapons banner.
“We have seen the organic growth in Canada,” Errigo said. “Acquisitions in Canada have been slower. We have been looking for the right companies to acquire in Canada, but we have had to be much more selective. IT Weapons was unusual in that they were doing well. Most of the companies we could acquire are break-even or losing money, because they don’t have the scale that IT Weapons did. We want to acquire ones of similar size and scale. Buying one in Vancouver that does a $3 million business doesn’t move the needle for us. That has been the challenge for us, finding bigger ones with the right mix of services and recurring revenue.”
Konica Minolta also recently inaugurated a new strategic initiatives with the appointment in November of Mark Simons, as Senior Vice President, Strategic Alliances in November. This is a net-new position, which is often a sign of a new strategic focus, and Konica Minolta did not disappoint here.
“Strategic partners is something we are really trying to work on,” Taylor told the dealers. “A world which wants to get anytime anywhere access and connectivity, to be completely secured, lends itself to partnerships. Companies want to partner with us and reach the SMB customer. But what they lack is what you have, the infrastructure of customers’ needs on a daily basis.” That has already been the case in existing products. HPE provides the hardware for the Konica Minolta Workplace Hub precisely because this relationship enables that enterprise vendor to sell into the SMB space where Konica Minolta is much stronger.
“With Mark Simons coming in, we can start hooking more things into this,” Taylor said. When Simons, who had been President and CEO at Toshiba America Information Systems since 2008, became available, Konica Minolta saw him as the ideal person to fill this role.
“A lot of the work around strategic partnerships fell to Rick and myself, and we both have other jobs,” Errigo indicated. “Mark was the perfect candidate to help us branch out. His role is to think about the next great technologies, help us bridge the gap between where we are today and where we want to go, and make connections into other areas of the business. It brings clarity to where we go as an organization.”
These relationships will also further develop the workplace of the future, which for Konica Minolta has moved in the last two years from concept to reality
“Every customer is different, but large enterprises have a lot of complexity and there is a drive for them to transition and look more like SMBs,” Errigo said. “They want more simplicity – not more stuff. Anything we can do to help them take cost out of aggregation, to simplify resources, or offer aggregate billing is highly attractive. That plays in multiple areas, like our conference room products [in partnership with Crestron] or our VoiP platform. Today, we are actively servicing robots. No one knows that we do it.”
Being able to sort out this kind of confusion is attractive to customers, Taylor stressed.
“If you can deal with these issues around things like security and management, everybody will want to talk to you,” he said. “If some dumb sales rep talks to the customer about what they have, and what kind of contract you are on, they ought to be horsewhipped. But for the people who will be in business in the long term, this will be right in their wheelhouse.”
Niche products like Forza, an SAP Business One-based ERP product designed for the imaging channel that Konica Minolta acquired last year with MWA intelligence, is an example of the kind of differentiated product the company is highlighting
“Forza is a really compelling product for dealers who just want a different offering, but don’t even have to be connected to us,” Taylor said. “it’s a home run.” Indeed, one of these dealers, Mary Ellen Franz, Managing Partner at Phoenix-based Imagine Technology Group, which partners with Toshiba and Sharp rather than Konica Minolta, spoke in the keynote that they were a Forza customer. They have implemented a Forza barcoding system, and can now do an entire inventory within two hours that would once have taken days.
New types of products that have come to market, like ALICE, an automated receptionist, aren’t likely to be big money-makers out of the gate, but they open new doors, and the key is to be patient with them.
“With new technology like ALICE, sometimes companies are ready to pull the plug after the first year because it didn’t sell enough, and three years later, something similar goes gangbusters,” Errigo said. “We need to be in it for the long haul. It’s the same thing with what we are doing in conference rooms. You can’t pull the plug short-term, or you will make the same mistake with the next product.”
“These are pretty simple integrations and are very productized,” Taylor noted. “They are not a giant money maker for us, but they open up different conversations. That’s good for the dealer community, where it helps to start slow and simple, Alice is the start of automating initial entry.”
These kinds of products can be enhanced going forward. Konica Minolta is closely partnered with Mobotix AG, a German company that does intelligent IP video solutions, whose facial recognition technology was on display at the Expo, as the Mobotix technology is now being made available to the dealer channel. That technology is not yet in Alice. But it will be at some point.
“It’s always about getting it right going to market, and there are some longer-term issues around facial recognition we had to work out, which is why this is just coming to dealers now,” Errigo said. “But why would we not put facial recognition inside of Alice? We are working all these pieces through.”
Ultimately, Errigo emphasized that all the new technology still has to be integrated within a coherent business strategy.
“I don’t care about product,” he said. “Product will change. Look at the discrete pillars. Look at your sales readiness, at your back end. If you don’t look at all these in a holistic way, it won’t work. You haven’t thought through the strategy.”