Heidelberg's Jim Dunn Reports on State of the Business, drupa Expectations

Stable Workflow Leads the List of Priorities for Printers

By Cary Sherburne

October 19, 2007 -- Following what most are categorizing as one of the most positive Graph Expo's in recent years, WhatTheyThink spoke with Heidelberg's USA President, Jim Dunn, to get his take on the show, key success factors for the industry, and what we can expect to see from Heidelberg in the run-up to drupa 2008.

WTT: How is business going for Heidelberg these days?

JD: Business is extremely good. We have a very busy summer, and summers can sometimes be spotty. But we have been tracking the business above target levels every single month since the beginning of the year, and that's positive. There is a little bit of stress now because business is so good, for most part, around the world, that we are elbowing our order positions at the factories to make sure we can meet customer delivery requirements. That is the challenge of the day and is a good problem to have, but one you would rather not have to deal with.

WTT: Are there areas of the business that are more active than others?

JD: There is very broad interest across the product line, everything from workflow to CTP, although I would have to say that we have had more really deep and lengthy discussions with customers here of late on workflow. In the past, it would be somewhat unusual for a customer to come down for a demo that lasts two days. But more and more are doing just that. They bring four or five people and spend two days working through the workflow, really diving into it. In the past, we might have had a couple of those events every two weeks, and now we are seeing a couple per week.

WTT: To what do you attribute that?

JD: As workflows become more and more integrated, the complexity of the decision becomes more apparent. It is not just prepress burning a plate. Now we have to think about JDF workflow, how data is getting back to the MIS, whether to integrate color management to make sure the standards in prepress and the pressroom are linked. It is an entire end-to-end workflow. That means it is not the prepress manager coming alone for these workflow sessions. It often includes someone from the pressroom, and if the company is advanced, someone from finishing. As often as not, the finance guy also shows up, wondering how he is going to be getting all this data back to his MIS system, and what it will do for his ability to measure actual performance against estimates, etc. They are also bringing IT people, either more database focused or from the financial side or prepress.

WTT: Since we live in a multivendor world, how much discussion is had about the ability for your solutions to integrate with existing systems?

JD: That is an every-day discussion. The whole idea that there would be only one solution from one vendor is very rare. A lot of that is because companies are stuck with whatever legacy solutions they have, good or bad, and to redo a complete workflow top to bottom in one go would be bold. It could be successful, but it is not usual.

Coming from an accounting background, I know that getting people off of legacy MIS systems is a challenge. MIS systems touch every part of the business and changing them can create major turmoil. But we have had several shops that have been able to go Greenfield with MIS. One customer builds a new plant about every six years. He just shuts down the old plant. He says that his biggest problem is the baggage. He gets out from under it that way. It is unbelievable how it affects his revenue. Every time he does it, he dramatically increases revenue and decreases the number of non-revenue-generating people. His operation is totally paperless; he even sends out invoices via email. He did it once and was enormously successful, and now he can afford to do it over and over. That's a bold person.

WTT: Most of the visitors coming to spend two days must be people who are pretty far along in the sales cycle. Can you comment on close rate after these visits?

JD: Actually, some are literally in the very beginning of the sales cycle. They come to us saying they know they are way behind, and they want to understand what can be done. That would probably be a one-day visit. We do a whole walk-through for them, literally launching a job through Prinect and Prinance and walking the whole job through electronically. We print it, finish it, and then look at the completed job docket to see the information that was generated. They go away, maybe even for a couple of months. Then they come back with a handle on what they think they can bite off. That second time might be the two-day event. We have a 50% close rate in prepress.

WTT: What happens to the other 50%?

JD: You can never be absolutely sure. But of the other 50%, we believe that half are not taking action and the other half go to other solutions.

WTT: How was Graph Expo for Heidelberg?

JD: Graph Expo was good. I am always surprised—and I have mentioned this to you before—as to how many unexpected orders we get at the show. These are people who are on the sidelines a bit. They make the circuit through the halls and then sit down and say, "Hey, I want one of those." It is also interesting how things ebb and flow. Last year, Graph Expo was the year of the folders. I can't explain it; it is like fashion—lapels go wide, lapels go narrow, and who knows why? Last year we were stunned by the number of folders we sold at the show. This year was the year of the cutters. It may be that postpress is more of a spontaneous decision than the pressroom or prepress. Again, decisions may have already been made, but the customer wants to make one last round on show floor, making sure they haven't missed anything, and then make a decision.

WTT: Any other comments about Graph Expo?

JD: One other area where we saw very positive business results was in the half-size presses. That was really big from a show sales standpoint. A number of new products in that format are coming on the market, so there has been a little bit of wait-and-see. Customers wanted to see what else was available and then make their decision. We had a huge order intake on 29" presses at the show.

WTT: What kind of comments, if any, did you get about the new HEI Tech branding Heidelberg launched at the show?

JD: We didn't get any negative comments. Some people didn't really even notice. The lion's share liked it. But one thing a lot of people said about our both was, "Wow, it is really quiet in here, very relaxed." We worked hard to achieve that. We had two aims. First, with the HEI Tech launch, we wanted to leverage our history, our fundamentals and our future in technology. With all of the red, it was designed to build energy. Secondly, with the overall design of the booth, and in particular the lighting, we were trying to create a specific ambiance. The only thing that was lit in the booth was machines; there was no light other than that. We were able to get a diffusion of the lighting so it felt cool and relaxed when you were standing away from the machines. It seems to have worked quite well. In principal, that is what the look and feel of drupa will be next year.

WTT: I heard from a lot of exhibitor executives at the show that the quality of attendees was way up this year. What are your thoughts?

JD: Graph Expo last year was strong, and this year was as strong, if not stronger. The traffic in our booth was manageable from the standpoint of the number of customers there, and they were spending a lot of time in the booth. We actually had slightly reduced the available seating capacity for presentations. We typically see two types of visitors to our booth—those looking for general information who are more likely to sit through the theater presentation, and those who are seriously looking, who tend to be in deeper discussions. We were more into having adequate space for the deeper discussions than we were into the sizzly showmanship of the presentations—although those are still very important for awareness building.

WTT: Heidelberg recently announced the opening of a new assembly hall—Hall 11—at the Wiesloch-Walldorf site in Germany to manufacture the new VLF (very large format) line of presses, and I understand you will be showing one of these presses at drupa. Tell us a little about that.

JD: The VLF presses will be very exciting. Beta machines are now being delivered to customers. The hall measures 35,000 square meters (375,000 square feet)—equivalent to almost five soccer fields—and will be used to assemble this new generation of large-format presses, which we are calling the Speedmaster XL 145 and the Speedmaster XL 162. Heidelberg has invested about 45 million Euro in this manufacturing initiative, making it the largest input of funds into the Wiesloch-Walldorf site in the last ten years.

WTT: What else can we expect to see from Heidelberg at drupa?

JD: Certainly you will see the further extension of workflow, and that is an area where we will have continued development on the overall functionality and depth of Prinect. We will show a large CTP device to match up with the large press, an addition to the Suprasetter line. Anicolor will be extended from the standpoint of the product range that supports it. At this time, we still believe that it will be on the 20" platform alone, and we won't be taking it to a larger platform by drupa, but the number of available configurations will be extended—more units, more color, perfecting, etc.

WTT: You also talked about eCall at Graph Expo, indicating that it had the capability for making automatic outbound calls from the press, although you had not implemented that feature. Why?

JD: First of all, we have been working on eCall for some time, and it will begin shipping embedded in machines in January of next year. It will be an important standard feature of systemservice 36 going forward.

The barrier to having the machine make the call itself is privacy. If we were hotwired all the time, we can actually look at the press console as the operator sees it for that specific machine. Are customers comfortable enough with their manufacturer to allow them the option at any moment to literally be peeking under the curtain, looking at what the pressman is seeing? We are not ready to cross that bridge yet, although customers typically don't seem to have an objection.

When there is an anomaly found in press operation, eCall generates a file that shows up as an icon on the press console's touch screen. The operator touches that icon and it transfers the data to us. We immediately run the data through our systems, and we can place a call back to the customer, letting them know what we found. If we can fix the issue remotely, great; but at least we are looking at something that is about to happen, and not something that has already happened.

WTT: What should printers be focusing on as they think about the future of their businesses?

JD: Workflow is the core, and that has to be stable. There is so much opportunity to improve the business with well-considered workflow, which concurrently is generating thoughtful and relevant reporting. That is the only way people can look at their business to understand what is making—and costing—them money.

On the press side, we have discussions almost every day with customers as to whether to go conventional, hybrid or UV. Markets are moving very quickly in this area, so the number of presses we are shipping that are UV-prepared or UV-equipped is increasing. Interestingly, this trend is quite geographically different, even within the U.S. Some markets are heavily UV-oriented and others are just emerging.

On the finishing side, the real play is dramatic reduction in labor. We are seeing more instances of one folding machine replacing three folders, one stitcher replacing two. And the new generation of cutters eliminates lifting and stooping. These more automated machines reduce headcount, but more importantly, they also reduce injury.

WTT: You also mentioned at Graph Expo that you were launching a consulting business.

JD: Yes. That is the other big area. We have an initiative that Steen Jensen is heading up that is the consultative part of our business. This is not in the Accenture or McKinsey consulting arena. This is production analysis. One of the tools we use when we work with our customers on these consulting engagements is Machine Room Audit. It is operational auditing, where we can take the customer's data—sometimes as much as a year's worth of job dockets—and run it through simulation models to come up with more productive ways for them to operate their businesses. Some of the results are stunning. From a pilot with two part-time people, we now have three people full time in our business development consulting group and are backlogged with customer requests. We screen requests, because the whole quality of analysis is directly proportional to the quality of the data being loaded. A shop might believe they have excellent data, but when you load it, you find out what you really have. On the other hand, some shops have very good data, even though they might believe that they don't.

WTT: I assume a customer has to have some sort of MIS system to qualify.

JD: Even if they are paper-based, they can participate. One customer was so enamored with the possibilities, he had staff key in one year's worth of job dockets. It took hundreds of hours, but the result was powerful and worth the effort for him.

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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