Sunday, April 5, 2009

Kodak, Xerox: Value Chain is disappearing. User networks are growing.

The reason that focusing on channels is a loser is the same reason Standard Oil turned into lots of different oil companies, ATT was broken up, CitiCorps' model of one stop shopping doesn't work and GM seems to going bankrupt. It's also the reason that Obama won the election and the grown ups are back in the game.

Once asymmetric information disappears, the idea of controlling the conversation or the offering disappears.

Consider this (thanks to RZ for the point)

I was scanning the Kodak Conference call and came upon something that caught my interest. The Q4 Conference call transcript is at Seeking Alpha
As far as the document imaging businesses, earlier this month we are now in the acquisition of Bowe Bell + Howell Scanner Division. This acquisition is complementary to our product line in a business that we know well because we are the current field service provider for these products. Once the acquisition is complete, we will be able to provide a broader set of products and services to our channel partners and any use customers worldwide as well as create revenue and cost energies through leveraging our distribution channels and driving back office consolidation.
That might have made sense in a value chain commercial model. The Brand has the "total solution." They can supply the production equipment, the copiers, the workgroup printers and the scanners.

But the rules of a facilitated user network are that consumers - both end users and commercial printers - have the power to choose the right tool for the right job at the right time at the right price, with little regard for the "brand." If you make the best tool, you win. If you don't, channels are not going to protect you.

To invest time and money in "filling out the portfolio" is not time well spent. The days of buying a "portfolio" of products are quickly coming to an end. The new reality is about gathering the best solutions for the customer.

Consider that when Xerox did a big MPS contract in the UK it was box agnostic. Consider that independent MPS is growing in the "channels". They craft the best solution for them and their customers from a range of boxes and offerings.

The way to win is to be the very best at something. Then to keep improving it to keep competitors from eating your lunch. The competition is not the other brands. The competition is emerging combinations on the ground. The recent experience with e-paper for Xerox and Screen technology for Kodak is not impressive.

The competitive advantage is a constantly improving offering, the speed of implementation and easy integration with the in place production ecology. For example, it seems a no brainer that Kodak and Oce should work together with a combined set of offerings for newspapers. Xerox should work together with any box manufacturers to solve the K-12 education problem.

And everyone should work together with Google and other strong players - IBM? HP? - in the Cloud to implement Ground > Cloud >Print and printernet publishing.

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