Hayzlett Clarifies Kodak’s Print eCommerce Network Strategy

By Cary Sherburne, Senior WTT Editor

March 19, 2007 -- Kodak’s announcement last week of the launch of a new online design and printing solution for the small office/home office market met with a lot of blogging and other commentary on PrintCEOblog, the PrintPlanet forums and more, as well as a clarification from Kodak about who would actually be doing the printing submitted through this network and what Kodak’s strategy was in launching this service.  WhatTheyThink spoke with Jeff Hayzlett and his team at Kodak to get more detail on this and other Kodak announcements and programs, including the departure of industry veteran COO Jeff Jacobson.

WTT:  It seems as though the Kodak Creative Network is somewhat of a joint Graphic Communications Group (GCG)/Consumer effort.  We were curious if that was the case and if the press release was coordinated between the two organizations.  It created quite a bit of negative stir because of the way it was interpreted by the market.

JH:  Kodak has had online printing offerings driving volume to our customers for years. This particular service is offered by our Digital Imaging Service, the same organization that runs the online printing services offered through Kodak EasyShare Gallery, among others.  These offerings, including the Kodak Creative Network, utilize networks of printers that are using Kodak products. In the case of EasyShare, the Kodak Creative Network and our MarketMover Network, these printers happen to be running NexPress equipment.  While the Kodak Creative Network itself is new, the concept is not new at all for Kodak.

WTT:  How do these networks fit into the overall Kodak strategy?

JH:  Perhaps the easiest way to explain it is to share the GCG vision and mission with you. Our vision is to elevate print and other visual communications for creativity and commerce, and our mission is to drive growth for our customers and for Kodak.  With the EasyShare Gallery, we have been involved with photo books, calendars, photos, cards and all of the ancillary products to the tune of millions of dollars of print since we purchased those assets from Ofoto.  The actual production work is being done by our customers, and we plan to continue to grow these types of offerings.  We have always said that we are doing everything we can to drive more business to our customers and support the investments they have made in Kodak technology, and Kodak Creative Network is one more model we are testing.  MarketMover Network is another program that is designed to do the same thing in B2B.  Our customers have been asking for this, and we hear from customers all the time about how much they appreciate these programs. 

WTT:  Organizationally, where does the Digital Imaging Service report?

JH:  It now reports into the newly formed Chief Operating Office.

WTT:  How many Kodak customers have signed up to participate in the Kodak Creative Network so far?

JH:  We don’t disclose that information.  Just keep in mind that we are running a test with this program, and we made it public to gauge market reaction and up the ante a little bit. We will need more printers to be able to back up the network, if that gives you any indication.  We will continue to look for people who want to be the catcher’s mitt for this type of work in both the Kodak Creative and MarketMover Networks.

WTT:  In a recent PrintCEOblog post, a number of questions were asked about how the billing works, who sets the pricing and whether this type of initiative is likely to draw antitrust attention from the government?  Can you address some of those questions?

JH:  In essence, Kodak negotiates a fair and equitable wholesale pricing agreement with the participants and makes some level of guarantees relative to the anticipated volume and the types of products that they will have the opportunity to produce.  The buyers pay with a credit card, and the appropriate revenues are redirected to the participating printer. There are many digital commerce networks of various types managed via the Internet that do a similar thing.

WTT:  In terms of the pricing, one blogger reported that he just spent $66.70 for 500 4/0 business cards with a trade printer, yet Kodak is selling 100 4/0 business cards for $2.00 through the Kodak Creative Network.  Kodak must be subsidizing these orders.  Please explain how that works

JH:  Let’s be clear: that is a promotional offer and we are still testing the offering. We want to gauge the response of online customers for these services.  You will see different offers that will change throughout the day.  That is the inherent nature of an online commerce network like this.  You can assume that on a promotional offer, we are losing money to test out a concept.  It is no different from my old days as a printer, when I used to run a $9.99 special on Tuesdays for one-color business cards. My objective was to use the promotion to draw in customers and gain additional business from them. You can’t apply a single instance as a rule for our business. And our shareholders would not appreciate it if our strategy was to lose money on an ongoing basis.

WTT:  People were also wondering what happens in a multivendor environment where digital printing equipment from other vendors is also in use. 

JH:  Of course we know that some printers have presses from multiple vendors, but we are asking them to produce this material using Kodak technology, and people participating in these commerce networks adhere to those policies.  Also, there is a highly automated infrastructure that is implemented here that routes these jobs to the NexPress press and eliminates any front-end work on the part of the printer. That makes it efficient and affordable and will also stimulate work going to Kodak products in a mixed environment.

WTT:  With the MarketMover network, you initially launched only to Kodak NexPress owners.  Is that also the case here, or is the Kodak Creative Network open to all Kodak customers?

JH:  You have to crawl first, then walk and run.  Digital workflows tie into digital production devices more easily than non digital production devices.  You typically see the web to print, some of which is variable and some static, going to digital technologies.  We are seeing some other applications, like letterhead, envelopes, catalogs and other work, going to conventional print.  It depends on the network and the products.

WTT:  With the MarketMover network, it appears that there is an opportunity for the printer to develop ongoing relationships with buyers, since these will generally be higher value jobs.  That does not appear to be the case for the Kodak Creative Network.  What is the value that a NexPress owner sees in getting this somewhat one-off, low-value, commodity work?

JH:  We are creating a Kodak community with these networks, and people get together on a regular basis around the shows and our Graphics Users Association to share best practices.  EasyShare printers also get together to share best practices. And getting to know each other helps them stimulate other kinds of growth.  You can’t just look at one piece of the program and apply it across the model.  You need to look at the whole picture. Especially in the SOHO market the Kodak Creative Network is designed to address, people aren’t necessarily looking for relationships anyway.  They just want to get something printed. They want the convenience factor. And they probably aren’t printing that frequently. For the printers, if we can provide an automated workflow system, they can do this work profitably. This particular network won’t apply to everyone, but we do believe there will be good uptake.

WTT:  So how is the printer chosen to do a specific job?

JH:  Again, we are still in test mode, but we have set up a business-rule-driven process based on volumes where a printer will understand what types and volumes of work he is likely to receive by being part of the network.  Jobs are automatically parsed to specific printers based on those business rules. We do the same thing with EasyShare Gallery. There are a lot of NexPress press owners on that network, and they are happy with the volumes they are getting. You have to have rules as to who gets what when.  We are not looking at every order individually.

WTT:  Speaking of the MarketMover network, can you update us on that?

JH:  We are focused on continuing to expand the pool of participants, both buyers and sellers, and it continues to grow.  We have grown it much faster than expected and now have a national footprint of print service providers.  We have recently expanded the network to include Kodak Digimaster black & white system customers.  And we are beginning to do some proactive marketing to educate the buy side about the existence of the network and how it can benefit them.  Aside from national expansion, we will begin to move it international as well.  We are already getting a fair amount of international activity, even though we haven’t formally launched internationally.

WTT:  Can you comment on the recent organizational changes at Kodak?  Exactly what role is the Chief Operating Office going to play?

JH:  This was primarily a rationalization of our businesses around print, with the divestiture of Healthcare.  Every day, there are 315 million photos taken that are stored digitally and never printed; that is 115 billion per year. We are looking for ways to make print a bigger part of how people use those images.  This was the next logical step for Kodak in our digital transformation.  The Chief Operating Office will have direct responsibility for operating the digital business. It will accelerate our decision-making process—and as we all know, speed is of the essence in today’s world. As we said about our vision statement, we want to promote print – to be produced by our customers.

WTT:  As an industry, we are sorry to see Jeff Jacobson leave.  Any idea what he plans to do next?

JH:  Jeff Jacobson is one of the most respected people in the industry, and certainly one of the most talented.  Jeff was very open about the fact that he wants to run a major company, and I believe we will see him as the CEO of a company very soon. I just hope he stays in the industry.

WTT:  With Carl Gustin retiring, will Kodak be sourcing a new CMO or how do they plan to handle marketing at a corporate level?

JH:  It has been part of the plan to operate marketing in the business units, redistributing the responsibility into the businesses and functional areas.  Carl will retire July 1st.  What was not part of the public announcement is that Antonio Perez has created two councils, Branding and Advertising; and Public Relations and Communications.  I have been tapped as chairman of both of those councils.  There was only one before, Branding, which was chaired by Carl Gustin.  For this role, I now report to Antonio Perez.  For the business side of marketing, I report to the Chief Operating Office on behalf of GCG. Two other professionals will co-chair each council with me and serve as the secretaries of each.

WTT:  Who makes up these councils? 

JH:  The executive management team, including Antonio, our CFO, our two COOs, the leader of our Film business, key functional leaders and others appointed by Mr. Perez.  I am very excited about this new organizational structure and my expanded role inside of it.

Cary can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.

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Prior to launching her consulting practice, Ms. Cary Sherburne was the Vice President of Marketing Communications and Outsourcing Solutions at IKON Office Solutions. In that capacity, she developed and implemented a branding campaign to build brand awareness for IKON in the marketplace as well as enhance employee pride in the organization, and was responsible for all internal and external communications, including trade shows and events, corporate newsletters, and industry and press relations. In the outsourcing role, she set strategic objectives and priorities for IKON's product and services portfolio in its Outsourcing businesses, including development of programs and sales support materials for that environment.

Sherburne was a Director at CAP Ventures, an internationally known firm specializing in market research and strategic consulting for the digital document and print on demand industry, before joining IKON, where she launched and managed the company's Document Outsourcing Consulting Service.

Her tenure in the printing and publishing industry has also included sales and marketing positions at Xerox Corporation, Indigo America and Bitstream. She is a frequent speaker at industry events and a recognized author.

Cary can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.

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