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MANAGING TECHNOLOGY: PLAN AHEAD

Apr 1, 1999 12:00 AM


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Consider ancient Sisyphus. He was ordered to push a huge rock up the side of a mountain. But just before he reached the top, the rock would roll all the way back to the bottom, forcing poor Sisyphus to start over again and again. That was surely among the most miserable fates in classical mythology.

Today, many printers must feel like Sisyphus as they face the task of dealing with new technology. They spend a few years pushing that technological rock up the mountain, purchasing new pieces of equipment or systems along the way. Then, just when the highest peak is in sight, and the equipment almost paid off, innovations or perceived competitive pressures force printers into starting all over at the bottom one more time. As a result, they frequently find themselves caught between a rock and a "high" place.

With a carefully constructed technology plan, however, printers may find themselves not only on the top of the mountain, but coasting down the other side. Greater profits, happier customers and more satisfied employees can be yours with just a little forethought.

Today, few firms have an independent technology plan. More likely, technology issues are incorporated into a strategic or capital investment plan. Wherever it resides, it's important to realize that strategy--whether for your overall firm or the equipment you plan to buy--is a dynamic, living process. A good technology plan needs to be an ongoing part of your firm's activities.

The other important issue to consider is that your technology planning needs to be linked with every facet of your operations: finance, sales and marketing, human resources, etc. Each of these areas plays a critical role in the successful acquisition and implementation of new technology, whether it goes into the prepress area, pressroom or bindery.

When developing a plan for incorporating technology--on an ongoing basis--within your printing company, you must start looking at the issues from 30,000 feet up. Start by setting up an ongoing process for monitoring the external environment in which your firm exists. That includes three things--the world around you, your specific customers and markets, and both existing and emerging technology.

Let's consider these three issues. There is no doubt that the world is changing, and nowhere are the changes more radical than in the way people communicate. Fifteen years ago, business communications involved print, the telephone or face-to-face meetings. Today, many more avenues of communication exist, and they can be layered upon one another--cell phones, beepers, the Internet, email, voice-mail, faxes, etc. Part of the printers' job is to keep abreast of communication technology--it's the very essence of the world around us.

Your clients also are affected by these changes. In addition to understanding their need for faster turnaround, more color and lower cost, successful strategies will also consider how they communicate with their clients, with their colleagues and with their suppliers. Printers can provide a much valued service by solving communication problems.

Monitoring your technology helps provide solutions to clients. First, your company needs to have a solid idea of the technology currently available, and that includes a working knowledge of various technologies related to the graphic arts industry. Then you can select a few key areas to focus on. The remainder of your technology planning process should help determine which of the technologies will fit the needs of your customers, your internal operations and your pocketbook.

To acquire the knowledge you will need to make basic decisions, establish a team that monitors news magazines and trade publications, talks with dealers and suppliers, meets with customers and attends your customers' trade shows and conferences. Make it the team's mission to collect relevant information and share their knowledge on a regular basis.

What types of information need to be monitored? According to consultant Dennis Mason (Western Springs, IL), printers should "look beyond conventional areas." For example, he suggests that printers should now be actively monitoring the CIP3 initiative and the "smart factory"--a digitally networked production system. "Ultimately," says Mason, "the image information we're all used to working with today will include many types of data, such as how many copies, how the project will be bound, instructions for cutting information and so on."

The consultant also suggests jotting down what you think will happen in the next five years, creating an environment that offers flexibility. "You must have the willingness to embrace new technology," Mason asserts, "but not the idea that you have to run out and buy every new piece of equipment that comes along."

This may necessitate printing companies to hire a chief information officer or a chief technology officer, "who can help monitor trends and guide decision-making. Today, this position is just as important as a vice president of manufacturing or a vp of sales and marketing," notes Mason.

After collecting and evaluating information, the next step in the plan should revolve around establishing standards for making acquisition decisions. These "standards" vary from company to company, but each operation must establish the process in which equipment and system buying decisions are made. Part of the process is understanding exactly why you're obtaining each new piece of technology.

There are basically three reasons to acquire technology:

*To replace existing equipment that's worn out;

*To expand your plant's productivity, capacity or service (new technological developments usually fall into this category);

*To respond to external pressures (industry standards or practices, for example).

Your plans must take these three issues into account. Therefore, you need to routinely examine what is old and needs replacing. You also must consider where you want your company to be in the future and how technology can help you get there. Finally, consider where the industry as a whole is headed.

Your technology plan also needs to answer other questions, including your primary motivations for acquiring new equipment. Will it be to satisfy your customers? If so, what are you going to do when a customer asks for something that will place the firm in a precarious financial position? At what point does it make sense to outsource services rather than purchase new equipment? A technology plan will provide guidance in these areas and help focus the process of making important decisions.

Most companies use a multi-tiered combination based on customer needs, return on investment and productivity/capacity enhancements. Steve Hayes, president of Omaha Printing (Omaha, NE), says that his firm "always asks threee questions: Can we increase the productivity of the current staff? Can we increase our technological support of clients without adding additional staff? And, in prepress, what upgrades do we need?"

"We look at the technical side counterbalanced by the return on investment," asserts John Berthelsen, president of Suttle Press (Waunakee, WI). "It's easy to get caught up in new developments, but at some point we have to know that the addition will save labor, improve our product and offer us a reasonable payback. Our plan gives us a general structure that helps answer these questions."

If there is one fatal mistake that is made when purchasing equipment, it's simply buying the iron without thinking of how you are going to sell the additional capacity. Before deciding to buy any piece of equipment, you need to ensure that market demand exists. You not only have to think you can sell the added capacity, you must actually carry through on the sales effort.

For example, if purchasing a new sheet-fed press with all the bells and whistles will increase your productivity 80 percent, you must construct a sales and marketing plan that will increase your capacity 80 percent in order to achieve the best payback. Increasing 75 percent may not make it cost-effective to purchase that new press. Even a five percent difference can have a huge impact on the bottom line.

How do you develop a sales and marketing plan to accomplish your goals? Develop a realistic assessment of current market conditions, your customers needs and wants, and target new accounts that may be candidates for your added capacity. The goal is to sell new things to new accounts or new things to existing accounts.

"Our profit goals are linked to our sales and production goals," points out Sam Kimbriel, president of L K Printing (Arvada, CO). "Looking at technological trends is a key to success that can't be ignored. One of the ways we look at technology is whether it can help us meet our sales and marketing goals, as well as profit goals. We consider whether technology can help us meet our top line while keeping our bottom line strong."

Another overlooked component of planning is training. How are you going to provide for the ongoing development of your employees? How will you keep their skill base improving? As part of your technology plan, you will need to provide for continual education of your staff. Outline exactly what will be included in each equipment or system purchase.

Plan how employees will be trained on new equipment. Who will do the training? How long will it take to master the technology? How will progress be measured and monitored? What type of ongoing training will be required?

Finally, when incorporating new equipment into your plant, allow sufficient time for "practice" with the technology, then launch it with a select group of customers before rolling out the service to everyone. You want to be sure all the kinks are out and everyone is comfortable with the new ways of doing things.

Last, but not least, are financing issues. One of the important aspects of financial planning is risk assessment. In acquiring new equipment, you are making a confident statement about your future, so you'll want to enable a process that minimizes, rather than maximizes, risks.

Do some exercises with your considered purchases. Calculate sample jobs as if you already had the technology. Determine your budgeted hourly cost rates. Incorporate feasability studies into your plan. Keep records on the productivity of various presses or software and analyze them.

Once you've established operating costs, do proforma statements based on the best, average and worst business cyles you've experienced. Don't forget to include training costs, learning curves, lost productivity during the learning process, then add sales and marketing costs, including new salespeople needed to support the equipment and system additions.

"Your plan should include an assessment and projection of what it would take to ease the cash flow of acquiring the equipment," says Joseph A. Becker, CPA, founder and president of Becker and Co., financial specialists for the printing industry. "You'll also need to determine how long it will take you to get to the point where that happens, and when the equipment will start turning a profit."

On expensive pieces of capital equipment, "you'll want to assess running speeds, makeready time, the theoretical and real capacity--everything you're going to need to make it work," says Becker. "You really need to assess how you're going to keep the cash flow going until the orders come in. Then, see if this total picture is comfortable for you."

With all your strategic goals and decision-making criteria in hand, the last two steps involve timing. For each piece of your plan, develop a critical path for when you'll implement each phase, from the broadest decision about specific technologies, to individual sales, marketing, training and installation schedules.

The second piece of timing involves ongoing review of your plan. As mentioned, strategy is a dynamic, living entity. To keep it so, you and your teams should meet regularly to review and assess each phase of your plan. You'll want to review developing technologies, progress against your stated goals, as well as customer developments and the current market status.

It takes some doing, but when you have a technology plan that addresses key issues, you'll sleep better at night, knowing you have a logical system for sorting your way through today's array of newer, faster, better systems. Once you have a grip on the basic process of planning, you'll be well equipped to meet the challenges of the new millenium.