Amos Michelson: Life After Creo
By Cary Sherburne
March 21, 2008 - WhatTheyThink recently had the opportunity to speak with Creo’s former CEO, Amos Michelson, to see what he is up to since the acquisition of the company by Kodak. Michelson shared some interesting Creo history as well as his perspective on the industry in general.
WTT: Amos, thanks for agreeing to speak with us. Can you tell us what you have been up to since the sale of Creo to Kodak?
AM: I retired from active management and became an investor, director and founder of companies, leaving myself enough time to ski a lot and put time into my family, which was difficult to do when I was working.
WTT: Are you still involved with the printing industry?
AM: No, actually, I am not. I am focusing on the medical and the clean energy industries, which are high growth and high margins industries.
WTT: Can you share some of the history of how Creo became involved in the printing industry?
AM: Creo was founded in late 1983 and was not involved in the printing industry until 1990. We were doing some work with DuPont on thermal imaging, and RR Donnelley learned about us from DuPont in the summer of 1992. At the time, RR Donnelley had been approaching all of the existing manufacturers of imagesetters with a proposed specification for a computer-to-plate (CTP) solution, but the specification Donnelley had in mind was unachievable by any of them at the time. After hearing about us from DuPont, Don Reeves and John Michaelis came to visit us. We looked at the spec and said we could do it. We were the only bidder. At the time, Creo was about a $3 million company. The first purchase order from RR Donnelley, which they cut in October of 1992, was $12.4 million.
WTT: That’s quite a story. How did the rest of the industry respond?
AM: Interestingly, when RR Donnelley came to us with the objective of moving all of their production to CTP within five years or so, many people in the industry did not believe it would happen, because the cost of a digital plate was about equivalent to the cost of the film plus the cost of the analog plate. However, what many didn’t understand, and RR Donnelley did understand, was that most of the savings would not be in the prepress area, but in the pressroom. When you have perfect registration and color from the get-go, the savings in the pressroom in set-up cost reduction and increase in press utilization can be significant. When we visited RR Donnelley plants, we came to understand that this process could deliver tremendous savings for the industry.
WTT: Since RR Donnelley was basically funding the development, what was the arrangement Creo had relative to selling CTP to others?
AM: The technology was Creo technology. RR Donnelley did not fund the development but just provided a large enough down payment to allow us to start the development full speed. In return, we gave RR Donnelley the first right to production. So basically, RR Donnelley could buy as much as they wanted, and once that need was satisfied and we had extra production capacity, we could sell to anyone else.
WTT: In light of the skepticism, how did you go about selling to other printers?
AM: We had the benefit of hiring an incredible sales person, David LeMaster. He is one of the most amazing sales people I have ever met in my life, and probably in existence in the printing industry. He sold presses before he came to Creo, and he knew all of the key players among the large printers. He took Creo into Quad, World Color at the time, Quebecor, Banta and all of the other large printers. Within a very short time, we had a manufacturing backlog of a year and a half. People were willing to wait when they realized the benefits.
WTT: When did you deliver the first machine to RR Donnelley, and when did you see the first competition in the marketplace?
AM: We delivered the first machine to RR Donnelley in April of 1994. The next machine that came into the market, which was still far away from our capabilities, was from Agfa, and that didn’t hit the market until 1998. Agfa’s first market entry was an internal drum configuration. It was very expensive to make and delivered poor performance. A few years later, Agfa dumped it and came to market with a thermal external drum machine, imitating our move from drupa 95. The first real competitor with an external thermal drum machine was Screen. By drupa 2000, almost all of our competition had introduced a similar concept. Scitex was our most aggressive competitor, and we bought them in January of 2000.
WTT: Was RR Donnelley the first, then, to be 100% CTP?
AM: Actually, no. The first large printing company to be 100% CTP was Quad Graphics. Quad is one of the most sophisticated printers in the world, and they have an incredible team. Tom Frankowski, an enormously capable human being, was in charge of imaging technology. When he came to speak with us, he immediately grasped the benefit, and they decided as a company to adopt CTP. At the end of the day, Quad was 100% CTP before Donnelley, even though Donnelley was the true pioneer that drove its development. In fact, Donnelley was a pioneer in many ways. The company had a technology center in Lisle, Illinois, where they tried to predict where the industry was going to move in the future. In those days, RR Donnelley was on the cutting edge. Another example was the work they did with Xeikon and Barco in high volume digital printing.
WTT: What happened with the rest of the industry?
AM: Everyone else took longer, but the large printers are the ones that had to compete with RR Donnelley. When they realized what was happening at RR Donnelley and Quad Graphics, they all started to adopt, although the adoption rate was different from segment to segment. Software manuals were the first to convert, then black & white books. These started out in a more digital format. The last to convert was magazines, for which almost all input was analog.
WTT: Was any of the development actually done by Donnelley?
AM: Donnelley financed the Creo development of a halftone scanner that could scan the color separations within a color accuracy of +/- 1%, producing a digital page without distortion. We paid them back by giving them again first right to production and royalties on the sale of halftone scanners to the other printers.
WTT: How did you go about analyzing the benefits of CTP?
AM: We wanted to understand the economics in both prepress and the press room. We asked RR Donnelley to aggregate the cost of analog plates in different factories and segments of their operation. They were shocked to discover that any two RR Donnelley plants could pay prices that were up to double of the other, even in the same segment of the industry. So for example, one plant paid $1.20 per square foot and another paid $0.60, buying from the exact same manufacturer. As a result of that analysis, they immediately engaged procurement and renegotiated contracts, as you can imagine. By the time they signed an agreement with us, they already saved more than the $12.4 M they were paying us. That worked against us to some degree, because the cost benefit of CTP in the prepress area was somewhat deteriorated before we delivered. However, the pressroom benefits remained intact.
WTT: Amos, this has been an interesting discussion, and we thank you for taking the time to share the story. Best of luck in your new “growth industry” ventures. Is there anything else you would like to add before we close?
AM: From a Creo perspective, I cannot stop thanking RR Donnelley. They basically made Creo a major player in the printing industry, most specifically Don Reeves and John Michaelis. They are the two pioneers that really drove the CTP revolution in this industry and they deserve the credit. The only credit we could take is that we were the only company willing to respond positively to RR Donnelley specs, we understood what it would take for a complete CTP solution to be successful, and for our ability to perform flawlessly under extremely tight schedules to a very difficult set of specifications. Thank you for taking the time to talk to me today.
Cary can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.
Cary Sherburne is available for speaking engagements and consulting projects. To get more information contact us here.
Please offer your feedback to Cary. She can be reached at cary@whattheythink.com.
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.
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