For the last several years, we have witnessed a continued decline in the number of pages being produced by the vast majority of print technologies in the market. While there are some exceptions — most notably those being produced on digital inkjet presses — the market reality is that overall printed pages are declining.
This raises a number of questions. Will paper really disappear from the world of business? Is there an emerging technology or visible innovation that could materially impact paper consumption? Can office technology manufacturers outrun the current market trend by selling more print engines? And maybe of greatest concern, can the industry survive a rapid and sudden decline in paper utilization?
During my time in the office technology industry, these questions have been front and center in all of my business planning exercises. An unfavorable outcome for any of the first three questions was likely to mean that the answer to the last was a resounding “no.” Fortunately, over the last 25 years, although paper consumption in the office has declined, it has done so at a relatively steady pace.
For those in the industry, the questions related to paper consumption cut to the heart of the long-term viability of the industry itself and therefore should be a part of the strategic planning and innovation processes conducted by all players. Is there anything on the horizon that would accelerate the current trends, and if so, how do office technology companies survive?
As has been indicated by numerous industry analysts, there doesn’t seem to be a cliff on the horizon, but a continued steady decline. Of course, nobody thinks that printing is going to disappear; however, even a steady decline will continue to squeeze industry players, making the achievement of business results ever more challenging. Forget growth — under a continuation of the current scenario, assuming there is no major consolidation at the manufacturer level in the market, achieving the prior year’s revenue and not losing money will be considered excellent performance.
Today’s business landscape is rapidly moving towards digital transformation. Many businesses are taking steps to automate previously manual business processes, and in doing so remove much of the paper that has historically dominated these processes. Like a kind of black hole event horizon, as companies become more digital, the impact on paper will be more profound, with further digitization accelerating paper’s decline. Although by itself this transition is not likely to be an immediate kill shot for the industry, like black holes, this market force may be inescapable, ultimately leading to an industry landscape unrecognizable as compared to today.
Two accelerators related to paper consumption are artificial intelligence and machine learning. What impact might these technologies have on paper utilization? There are already some hints that can help us answer this question. The use of AI and machine learning are helping businesses to more effectively capture and classify information, and as these technologies are used to a greater extent, their ability to perform this function improves over time. As AI and machine learning become even more pervasive there is little question that these technologies will be used to serve up relevant information to business users — the majority being served electronically. As a result, where paper was once the primary method for users to receive and analyze information, AI and machine learning can present information on screen in real time. Will users ultimately print this information for easy viewing? In some cases, yes. However, advancements in display technology may minimize this need.
Content management — or document management, as it was called historically — has been around for quite some time, and to date it has not dramatically impacted the use of paper. This may be a reflection of the fact that viewing information is still easiest in paper form as compared to doing so on screen. However, in combination with AI and machine learning, the process of culling relevant information from content stores will become easier, and viewing and sharing such information on screen is likely to become more efficient.
Can display technology reach a level of effectiveness where it can replace paper? Recent history would indicate that it can’t. However, display technology is advancing in a number of ways, and doing so rapidly. With continued improvements in display resolution, form factors, materials and applications, we are beginning to see display technologies that provide many of the valuable attributes of paper. Although the advances in display technology are certainly making reading content on screen easier and more comfortable for users, replacing paper’s tactile feel and portability will likely remain elusive for display technologies given their current materials, size and power requirements. In addition, the most current research would also indicate that despite its continued improvement, display technology still lags paper when reader comprehension is tested — especially understanding abstract concepts; characteristics that are true even for millennials and younger generations.
On an individual basis, any one of these trends is not likely to create an environment where paper use falls off the cliff. However, when combined we must at least hold out, and plan for, the possibility that this could be the case.
In the unlikely event that these and other trends combine to create a black hole event and the industry finds itself in a position where paper utilization experiences a sudden and dramatic decline, can it survive? While some players certainly would, it’s highly likely that such a scenario would cripple many existing players and force an industry consolidation that has been expected for some time and is likely long overdue. During my time in the industry the biggest concern about the economics of the business was not the steady and continued decline in average selling prices and margins — issues that created challenges but could be managed. It was the unseen market disruption caused by a dramatic and immediate decline in paper use or the emergence of some innovation that rapidly changed industry fundamentals that was a key concern, as this is not something any industry player could easily manage.
As with any industry, the key to overcoming such disruptive forces is a healthy diversification of one’s business and a consistent focus on new business innovation — it’s better to be the disrupter than the disrupted. By taking both of these approaches, any business in our industry can manage the continued decline of paper and survive a sudden change in industry fundamentals.
How are today’s industry players preparing for paper’s decline? The good news is that over the last 10 years we have seen many of the industry’s major players take steps in an effort to diversify their businesses. Most have done so via acquisition, generally integrating software companies into their portfolios in the hope that they would find success integrating such capabilities with their traditional hardware offerings and business model. The same can be said for those players that have looked to build such capabilities organically. At the dealer level, we have seen a rapid integration of managed network services capabilities layered atop traditional solutions and hardware and software portfolios. And the results? For dealers we can safely say that their efforts have been largely successful, with the new services proving to be a nice fit for the typical SMB customers they serve. When looking at major industry players, virtually none of the acquisitions could be categorized as a success. For other “organic” players we can safely say the jury is still out, although the results aren’t stellar. Is this merely poor execution or are there larger issues at play?
There is little question that integrating acquired companies or amalgamating organically built entities is tough business. This is particularly true in environments where the focus and culture continue to be one of chasing unit sales, market share and pages as tends to be the case at most manufacturers. There is a formula for making such initiatives work. Unfortunately, we haven’t seen it yet, and given the many failures we have witnessed it is unlikely that industry players will continue to go down this path.
So, what’s next? Where do today’s industry players go to innovate and capture growth? The downward spiral of paper, and the continued acceleration for industry players trapped more deeply in the funnel will necessitate a major shift in thinking and action. Let’s hope the industry is far enough from the event horizon to make escape a reality.