Heidelberg’s Disappointing Results – A Look of Things to Come?

Ed Crowley, Sr. Partner – Photizo Group

After making an impressive statement with their massive presence at Drupa, Heidelberg proceeded to announce a less impressive set of financial results.  On July 10th the firm indicated that quarterly results will be 640 to 660 million Euro’s, down from 742 million Euro’s last year.  Simultaneously the firm announced a series of cost savings measures (including cutting Research and Development) which they anticipate will save close to 100 million Euros during the next two years. 

So what is happening?  Why does a company that has some of the best technology on the market today and a significant market presence still struggle to grow?

My view is that the Heidelberg is stuck selling to the wrong market.  Their ‘press centric’ paradigm results in only selling into their existing customer base.  For Heidelberg this means selling ‘digital’ technology to supplement or replace web presses in commercial printing applications.  While this strategy performed well when the commercial printing press market was thriving and vibrant, this market is now going through significant compression.  As a result, Heidelberg is trying to grow by selling into a shrinking market.

Heidelberg has great technology.  They also have a great brand name, one which is essentially the ‘Cadillac’ of the digital printing industry.  But none of this matters if they continue to sell into the wrong market.  So what would be the right market?  The right market would be the HVTO market.  Heidelberg’s technology would be very competitive in HVTO applications.  These are the applications which are thriving and growing, and most importantly, driving equipment purchases. 

The challenge for Heidelberg is marketing.  They must move away from their sales and marketing ‘comfort zone’ and reach out into new, high growth markets.  But can they do it, and can they do it fast enough?  I do have some suggestions. 

First, set up a sales and marketing team which is composed of individuals knowledgeable in the HVTO market.  Give the team enough of a budget to provide them with a reasonable chance of success (diverting just a portion of the $100 million Euro’s in savings would more than pay for an adequate marketing program).   Be sure to bring in ‘fresh blood’, or at least identify the creative thinkers in the organization.  Those who can think outside of the box and don’t have the words “that isn’t the way we do things” in their vocabulary!  Also, it is critical that the team reports directly to the top executives, not through the ‘normal channels’.   Organizations are extremely adapt at gradually ‘forcing’ groups back into their traditional behavior.  And this is counterproductive to trying to break out of the box.

The Photizo Group is a Consulting and Research firm which focuses in the hardcopy space.  The firm has recently introduced the Output Market Investor Report, the most comprehensive analysis of the industry available today.  For more information, contact the Photizo Group at eacrowley@photizogroup.com.