Technological change is one of the principal drivers of competition. It plays a major role in industry structural change, as well as in creating new industries. It is also a great equalizer, eroding the competitive advantage of even well entrenched firms and propelling others to the forefront. Many of today’s great firms grew out of technological changes that they were able to exploit. Of all the things that can change the rules of competition, technology is among the most prominent. (Ham, et al 43).
The publishing industry is one that has gone from publishing in the streets of New York and London into a multimillion-dollar industry. Today the industry has advanced from the use of the traditional modes of publishing to methods that include intricate processes that use scientific methods. These techniques could only have been made possible with significant improvements in science. These improvements have allowed competition to be confined to a small group of companies that dominate the market. As such this paper is going to look at some of the present major organizations in the market and take an in depth look at a company that is going to have an indelible effect on the printing industry from here forward. I will take an in depth look at Professor Clayton Christensen’s writing on Disruptive Technologies and make comparisons with a technology today that threatens the existing standards in the publishing industry, finally determining if this technology falls under the category of disruptive technology.
Jeff Marsh of Marsh Technologies Inc. of St Louis Missouri has developed the perfect binder that has the potential to revolutionize the publishing industry. This revolution would cause the price of producing paperback books to fall dramatically and thus forcing the market to drop prices of paperbacks. Jeff Marsh has integrated the use of computers and printers with engineering and pneumatics to create the Perfect Binder. The Perfect Binder is capable of producing a book from start to finish that is to say producing a book that is received in a digital form over the internet via disk and transforming it to a completely bound paperback text.
By examining how consumers evaluate technology and how this evaluation changes as performance improves, …offers new theoretical insight into the impact of the structure of the demand environment on competitive dynamics. (Adner, 667).
Professor Clayton Christensen Professor at the Harvard Business School introduced a new concept called Disruptive Technologies in 1997. This pioneering notion was first published in his book The Innovator’s Dilemma in 1997 and has impacted the way that CEO’s and scholars have approached competition and technology ever since the inception of the book. CEO’s as such are reassessing the ways in which technological threats, such as new technologies, are approached as they evaluate their strengths, weaknesses, opportunities and threats in their organizations. According to Professor Christensen, CEO’s today are taking a second look at businesses, which in the past they would not have looked at. He indicated on an interview he conducted with personnel from Integral Inc. an independent company that deals with consulting that helps create growth in turbulent markets. When he was interviewed he indicated as an example that if:
…the senior-most executives at Dell [had] an intuition that this little hand-held computing device [PDA] coming up the market is going to be important to them, but they haven’t been able to get the people in their organization to respond” or that “[f]or years, ‘Andy Grove has known that Intel should be addressing low-end chips. But that Intel hasn’t been able to put the logic together to persuade other people in the organization that this is an important threat. (Christensen, 1).
Today we know that the PDAs have been an over-whelming success and that low-end chips have dominated the chip market. Professor Christensen suggested that his book had now given CEO’s a framework to capture the problem of an emerging technology coming to disrupt their existing businesses. They could not understand then but knew that they felt uncomfortable with the possibility that they could soon be displaced. According to Christensen, everyone else now has this frame to work with, thus equalizing the playing field.
Christensen introduces two “new constructs” in his discussion of disruptive technology, which is a demand view of the emerging technology. He defines disruptive technologies as technologies that are inferior to that which is presently in existence and, introduces a performance level that is substantially different from mainstream technologies.
Preference overlap refers to the extent to which development activity that is valued in one segment [a section of the market] is also valued in another segment. [And] Preference symmetry [which] refers to the symmetry of this overlap, the relative size of the functional ‘shadows’ that segments cast on each other. (Adner, 669).
He goes on further to analyze his model using a computer simulation done in Pascal programming language with data inputted for the purpose of his analysis.
The inferiority of these technologies is mainly in the performance aspect and as such the technology only appeals to a niche market at first. When these technologies are developed later on to the point where it satisfies the mainstream customer and, not necessarily improving in its performance, it displaces the mainstream technology. Christensen uses an example with the 5.25-inch hard disk being replaced by the 3.25-inch hard disk during the period 1984-1990. He highlights three dynamics of disruptive technologies:
1) Incumbent technologies that are replaced by technologies those under perform.
Mainstream consumers shift their
purchasing habits to the inferior performing
3) Incumbent firms not reacting timely to disruptive technologies.
[According to Christensen further examination proves that technology transitions are not inherently due to: -]
1) The limits of the incumbent technology,
2) The superior performance of the new technology or
The incumbent not being able to adapt and
to master the new skill. (Adner 668-
He goes on to plot “performance-provided and performance-demanded trajectories for different technologies and market segments” showing that it is when these trajectories intersect you have the occurrence of disruption in technologies, suggesting that the dynamics of disruptive technologies mentioned above are the results of interaction of “performance over-supply” and “resource dependence”.
He suggests that firms prefer to improve on the existing technology as opposed to taking up a prospective disruptive technology because of the fact that they emphasize on superior performance. In addition, incumbent firms, injudiciously chooses to dismiss disruptive technologies because of their inherent inferior performance. Contrastingly, firms just entering the industry do so without the constraints of an existing customer base. Due to the fact that these firms enter with an inferior product they mainly appeal to the lower income end of the market only themselves receiving a low profit margin. This forces the new firms to only appeal to customers who value these new features of the technology. The mainstream consumer eventually decides to adopt the new technology because of a concept Christensen calls performance oversupply. He suggests here that once the “specific functional attributes” for a technology are met the customer tastes shifts to attributes that were previously considered to be either secondary or tertiary. Consequently, between the periods 1984-1990 the existing technology for hard disk was the 5.25-inch hard disk. Consumers were satisfied with the mainstream superior performing, more expensive technology because the functional attributes for the technology were not met by the 3.25 hard disk. Eventually when customers taste for performance became satiated they changed specific functional attributes and started going for attributes such as size and weight of purchase.
A Demand-Base View
Substantial questions about performance and price/performance disadvantages of these technologies that disrupt older and more established technologies remain unanswered. In addition, incomplete explanations as to how these customers who were once satisfied with superior performance suddenly are no longer interested in superior performance but are now satisfied with, and are settling for what they previously identified as inferior attributes. According to Christensen “while the prominence of the performance-provided-performance-demanded relationship” shows that the demand environment plays an important role, its factors are not studied enough. Subsequently, Professor Christensen embarks on a demand-based view in his discussion to resolve these issues. Here he introduces a model that examines how boundaries that divide market segments become less defined when you have improvements in technology. As such the environments that two competitors once compete in starts to differ and simultaneously, show how
…the extent to which demand heterogeneity is masked depends on consumers’ marginal utility from performance improvements, which dictates their willingness to pay for product enhancements, and on the relationship between the functional preferences of the different market segments. (Adner 669-670)
His model looks at how his two concepts preference overlap and preference symmetry interacts to create competition. He controls …the supply-side asymmetries and thus looks at the nature of three distinct regimes that arise under varying configurations of demand. (Adner 670). These three regimes are defined as follows:
1 Competitive isolation - during their evolutionary course technologies do
not have any
reciprocal effect on each other
Competitive convergence-there is a head
to head competition between technologies
in similar consumer groups and
3 Competitive disruption-where one technology displaces another technology
own home market.
Christensen then identifies that consumers have individual thresholds, utilities and diminishing returns. Although not entirely a new concept in economics, he defines his usage of two types of thresholds. The functional threshold is the level of performance irrespective of price that a consumer is not willing to accept. In other words, the customer will not buy a poor performance product. Nevertheless, as the product performance improves above this functional threshold the consumer starts to derive a functional benefit from the product and thus is willing to purchase the product. On the other hand, the net utility threshold incorporates the price into the consumer’s decision. Here he suggests that it is the highest price that the consumer is willing to pay. The salient point here is that the consumer functional threshold is met for the product and there is heterogeneity among consumers. Christensen suggests that customers have minimum thresholds for accepting performance however there is no maximum limit that a consumer will accept for functional performance. By extension there is a decreasing marginal utility for a product as it improves beyond the minimum threshold of the consumer. If a customer at the upper levels of a product’s functionality do not value performance greatly, that customer would move on to a more advanced product instead of staying at that “absolute level of functionality” for a less advanced product.
Market segments are defined as being composed of consumers who have functional preferences that are similar; segment numbers however may have dissimilar functional and net utility thresholds. He introduces a value trajectory here, which he suggests as “characterizing the consumers relative preferences for functional attributes.” A relationship between value trajectories is then plotted against Indifference Curves to graphically depict market segments
Functional Attribute Y
Fig. I. Indifference Curves and a Value Trajectory.
Fig. I illustrate Christensen’s theory that the value trajectory identifies the direction a particular market is preceding, while the various Indifference Curves justifies a market segment as they improve reaching higher levels of utility. By the consumers’ evaluating a products functional performance one can determine the value trajectory of the product performance overlap is thus where the segments functional preference intertwine. This is to say that the indifference curves represent different groups of customers’ levels of taste for a product and that some are ultimately higher than others. The different attributes represent the various reasons why customers choose product X and product Y.
Functional attribute Y
Fig II (a) Small symmetrical preference overlap
(b) Large asymmetrical preference overlap
In Fig.II two value trajectories are illustrated, one for personal computer PC’s and the other for Personal Digital Assistants PDA’s and notebook computers NC. Different Indifference Curves illustrate different levels of satisfaction. For the PC group, the PDA group and the NC group, it can be seen that the PC group derives a level of utility at 150 from product A. Simultaneously they also have a utility level of 15 from product B. The PDA group on the other hand receives a utility level of 25 for product A and 150 from product B. Figure II A shows a preference overlap that is further apart and, as such, the level of utility that both groups experience for products A and B are dispersed over a wider range. In Fig II B the value trajectories for the two products PC and NC are much closer and thus the levels of utility are dispersed closer. As such, the evaluations for the products A and C converge because their preference overlap are closer or increases. So the PC group’s level of utility is 150 for product A and 135 for product C, a stark difference from that in Fig II A. The NC’s groups too have a much higher utility level both for products A and C in 80 and 150 respectively. It can then be said that the preference overlap measures one market segment’s satisfaction with another. The products’ functionality shows the satisfaction of one group of customers who used a product with a product that they were previously not satisfied with. The point at which a firm can move from one segment into another segment of a market is dictated by the preference overlap. As such, firms are only able to predict their rival’s activities when they get results from the consumers purchasing habit. If consumers responded how a particular firm did not want them to then the firm’s product functional state, the amount of innovation carried out during the period, the price at which the product was sold and the offers that were presented by the firm, must all be looked at. This type of evaluation is a requirement for the success of a product innovation and, before a product is disrupted, these are some of the considerations that are usually presented to a firm that is threatened with a disruptive technology.
Christensen’s “simulation explores how the structure of demand influences the emergence and the extent of competition over consumer segments in the market.” He looks at pricing and functional development on the supply side and the amount of ground that a firm was able to advance into a market segment.
Fig III Preference relationships in the three competitive regimes
Fig III is a graphical representation of the relationships between preference symmetry and overlap and the areas they lead competitively. Here a fixed trajectory is held and therefore three distinctly competitive dynamics emerge in competitive isolation, competitive convergence and competitive disruption. “Competitive isolation is where there is a partition between market technologies. Groups here focus solely on their own segment, as there is minimal preference overlap.”(Adner 674). When preference overlap starts to increase segment preferences becomes symmetric evolving into competitive convergence. At this stage the firm directs their efforts towards their rivals’ markets expanding their business operations. As segment preferences become asymmetric, you have the firm maintaining a dominant presence in the competitors market and eventually leading to removing the competitor from the rival’s position as market leader. Christensen calls this competitive disruption. The firm that disrupts the incumbent firm now experiences dominance in the market until it becomes displaced. The cycle then is repeated.
Christensen’s graph attempts to illustrate his discussion using a two-dimensional concept with the use of only two functional attributes.
Functional Attribute Q
Functional Attribute Y YYY
Figig IV Three Dimensional Functional Attributes.
The question can be asked what if consumer taste was measured three-dimensionally? In Fig IV the Y-axis represent levels of functional attribute Y, the X-axis represents functional attribute X and the Q-axis represents the functional attribute Q. Each axis represents a new attribute of the consumer. What if the functional threshold for the consumer today was portability, storage capacity and amount of connectivity? His graphs did not capture such a scenario. The fact that he established the parameters for his argument does not rule out other possibilities. To consider consumers with three or more attributes that the previous technology satisfied were not represented in his theory. Professor Christensen’s Indifference Curves and Value Trajectory would take on a whole now outlook.
Present Printing on Demand (POD) Market
Johannes Gutenberg in the mid-fifteenth century introduced the concept of casting and printing from movable metal type to an unsuspecting world. He transformed literacy in the world forever. Gutenberg’s technology dominated for almost 5 centuries and it was not until the 1950’s that the computer made a drastic alteration to the methods of printing. The first Xerox printers were introduced but not before the inventions of lithography - Alois Senefelder and, photogravure and halftone in the 18th and 19th centuries respectively. (Nathaniel, 1).
Computers have transformed man’s lifestyle forever and have transformed the playing field by now making information affordable for individuals at the furthest corners of the earth. They now have access to information they would not have been able to access had it not been for computers, and simultaneously individuals wishing to publish information can now do so with much more ease.
Before the 1970’s, offset printing was only available for people who wanted to print books. The large publishing houses used offset printing, which uses traditional analog printing presses. There are a large number of publishing houses today still using offset printing. The trend however, is to go the route of modern techniques in digital printing. In traditional printing the length of print is much longer than that of digital printing. Traditional writers would contact their publishers and make their orders long periods in advance of the date that they wanted to publish their books. Digital printing today has eliminated that delay. According to the Graphic Arts Marketing Information Service (GAMIS), electronic print research survey taken in 2002, 49% of respondents indicated that the reason for selecting digital printing was turnaround time. A job printed on traditional equipments average turnaround time is twice the time than those jobs done on digital equipment. According to print buyers surveyed for the GAMIS study, jobs on traditional equipment takes eight days while those on digital equipment take between three to four days. This, according to the survey, is the number one reason why print buyers select digital printing. It must be noted here that there is still a reasonably large amount of traditional printing taking place today, however according to this study digital printing is quickly becoming the printing selection of choice. (Roth, 2-7)
The other main reason, according to the GAMIS study, for print buyers to select digital printing is the length of run. Thirty-nine percent of the respondents surveyed indicated that they would select digital printing over offset for run length of 5000 or less. There is a demand for faster delivery of short-run-jobs and as such the drive is towards digital printing. According to the survey, 54% of all the printing done in 1999 consisted of run length of 5000 or less. The projection is by 2020; the delivery of only 39% of all the printing jobs done will be done in 24 hours or less.
Cost is another factor on the survey; 38% of the print buyers indicated that cost was the main factor for their selecting digital printing. While printing paperback copies using offset printing brought down the price of books in the late 1899’s the early 1900’s, digital printing has the ability to reduced the prices of both hard and paper covered books even further. Although only 38% of print buyers survey indicated that they chose digital printing for price, this is a significant amount and is expected to increase significantly as digital printing is accepted more in the industry. Altogether, according to the GAMIS survey, run length, turnaround time and cost makes up the top three selections for digital printing, traditional printing equipment alone can do spot vanishing. Digital printers or digital presses could not at the time of the GAMIS survey do spot vanishing and therefore print buyers wanting to do spot vanishing had to revert to offset printing. There is no doubt that digital printing has changed the printing industry forever. While it may not affect us the way in which Gutenberg’s moveable print machine did, it has revolutionized the way printing is done.
What is Digital Printing?
Digital Printing is the use of digital technology to do printing. Today printing can be done in the home with the use of printers attached to the personal computer. The appropriate software can be used to do relatively good quality printing from the comfort of one’s home. At the industrial level, heavy-duty copiers and book making machines are used. At home one can combine the use of bookbinding presses and make a complete book at home. While the commercial presses are very expensive; suitable substitutes can be used to give the same effect at the bookbinding press at a much cheaper cost.
As compared with offset printing, digital printing is indeed a significant improvement. Offset printing had to be done at some location where there would have to be a minimum number of prints done to experience a profit. As a result, the profit margins in the industry were and still are relatively very small. Although today there are numerous publishers in the U.S. approximately 53,000 small publishers, 200-400 medium size publishers and about 7 large publishing houses, the small publishers are switching over easily to digital, as they now do their printing for much cheaper overhead costs. While initially, they have to put out large amounts of money to purchase equipment, they cover their initial high cost as they continue to do their printing and as cost of production decreases as the years go by.
Printing on demand has evolved directly out of digital printing. The fact that almost every home either has a computer or has access to a computer, gives legitimacy to the printing on demand industry. Companies can put their documentation on websites and persons access their IP addresses and download the information onto their systems at home or at school. No longer do individuals have to go to a company premises or await the postal service for deliverance of documentation on a product or a company. Printing on demand eliminates these cost factors that companies would normally factor into their prices for products. PDF files are used to download large books and other documentation placed on the Internet so that these large book files can either be read or printed off of the internet to a home or school system. Printing on demand has changed the outlook of the transfer of documents. When Charles Pesko, the managing director of CAP Ventures, says that print media is here for a long time to come, one has no other alternative but to believe him after looking at the trend.
Print medium evolve with the new technology and, it has developed into a new medium of its own. With almost every home having access to computers in most if not all of the developed countries and, in a large number of developing countries, a large portion of the population either have a computer or have access to computer then indeed one can surmise that information is reaching individuals today in places that at no time in earth’s history has it ever before. With offset printing alone, it would have been impossible to reach this many people. Digital printing together with the Internet has made it possible for the inhabitants of earth to improve intellectually and otherwise, in qualities that have not been seen throughout the earth’s history. The evidence of this can be seen in the amount of conferences held this year in the U.S. alone by either publishing companies or among companies that make publishing equipment. CAP Ventures have already conducted three conferences in the U.S. for 2002. The ninth annual On Demand digital Printing and Publishing Strategy Conference and Exposition also took place in New York this spring and it was considered to be the largest digital printing and publishing event in the world consisting of 85,000 square feet for more than 125 corporate exhibitors. The messages that the sponsors Direct Marketing Association (DMA) and Print On Demand Initiative (PODi) are sending out is that corporate America is ready to take up the challenges of digital printing. Leaders in the printing industry are taking the initiative and new players are entering into the industry continuing the trend of high volatility in the area. The printing industry at this time remains one of the most dynamic industries because of the concept of printing on demand.
Digital printing has been replacing analog printing since the early 1990’s. At first it took off at a snails pace; however, it has proceeded to the point that in 2000 there were a lot of major players in the industry. Existing technology companies such as Xerox, IBM, and Canon who were already leaders in the photocopying, photo and other parts of the already elaborate digital world entered into the digital printing industry with consummate ease. Across the Atlantic in Europe, Heidelberg was already creating digital copiers and presses so that by the 2001 Printing Expo in Chicago there were already quite a few companies involved in displaying their products.
By the 2002, On Demand Digital Printing and Publishing Strategy Conference and Exposition in New York, there were close to 200 corporate exhibitors. This increase was mainly due to a lot of other major players getting into the industry and, in addition, a number of big companies are combining their efforts with smaller companies who are specializing in niche areas. You have companies like Ikon, Office Solution, ImageX.com Inc., New Donu Inc. and Optimus Corporation providing either on-demand printing or some variant of digital on-demand printing to its customers. While companies such as Barco Graphics, Creo Scitex, Digital Art Exchange (DAX) and Systems Inc. are either dealing with servers, some server related service, example user authentication, or PDF files. Other smaller companies are dealing with other aspects of the printing industry Jaws Systems Ltd., Realtime Image Inc., Smart Works.com and Webprint have partnered up with other smaller companies to either extend their existing service base or worked together. In one case Smartworks.com has partnered up with Darka Business Systems PLC to design platforms for full commercial print management capability. Companies such as Webprint Inc, which was founded in February 2000, had opened its doors after a year of research and development and partnered up with Adobe Systems Inc. to develop a PDF-based e-commerce service for the printing market.
This kind of dynamics amongst the smaller and medium sized firms in the industry augured well for the industry in that it not only maintains upward and horizontal mobility of firms within the industry, which in itself is not an ingredient for success, but created that kind of environment which forged the enthusiasm and the spiritedness that upheld the industry. A company such as Xeikon had not partnered with any other company but continues to promote its own products such as the ultra violet (UV) coating unit for digital color printing even to today. Xeikon has also launched its DEP 320 DX, DCP320 D and DCP 500 D series of digital color presses. These are just some of the small and medium size companies that have confidence in on-demand digital printing and that are taking up the challenge of this growing industry. Xeikon has shown that companies can also survive without joining forces with other companies in the market but can also survive alone with continued persistence and ingenuity. There are, however, the larger companies in the industry. These companies are bringing with them the financial fortitude of their being already an existing business before and in addition, the wealth of experience.
Companies like IBM, Canon, Xerox, Heidelberg, Oce and others are investing mega millions and are teaming up with smaller companies with innovative ideas. Earlier on there was an anticipated boom expected for digitally produced on demand printing. In the mid 1990’s it was anticipated that there was going to be a boom in the publishing sector with the rapidly growing World Wide Web. At that time standard retailing was thought to be going under to Internet retailing. Traditional publishers, in an effort to not be left out of the anticipated windfall, invested large amounts of money into Internet publishing prospects. Random House together with a number of other publishing houses invested $15 million in Xlibris. Xlibris today remains one of the largest fee based POD organizations that exist doing on-demand publishing for those who want to publish books and not use the traditional publishing houses. Barnes and Noble bought up to 40 percent of an on demand printing competitor iUniverse. IUniverse too remains one of the largest on demand publishing organizations today.
The fact that the expected boom did not come to pass reduced Barnes and Noble share to only 20%. The publishing industry in itself has indeed been digitalized but as one writer said,” Once the book is created, the hard work of selling it begins.” This writer is referring to the work that has to be done to sell a digitally produced book. Authors are having a difficult time getting their digital produced books sold for numerous reasons. Here are some of the common problems experienced by authors who choose this route: -
1) Established publishers do not sell their books. Barnes and Noble only sold books that were produced by iUniverse. No other big name publishers sold them because the books are seen to be either cheaply produced books or vanity books-books produced by subsidy publishers.
2) Digitally produced books are not reviewed the same way that traditionally produced books are reviewed by the New York Times, Publisher Weekly, Booklist and Library Journal. These are “major publishing venues” which in this industry can and in fact do considerably boost the sales of authors who go through traditional publishing houses. Here is where a major part of the advertising for these authors are done and while a bad review could also see poor sales for an author a good review could ensure a best seller for books that need not be brilliantly done.
3) Traditional publishers provide proof reading and other such services to ensure a high quality for the book they are publishing under their name. This is not the case with digitally produced books. Companies like Xlibris and iUniverse do not provide these kinds of services. While they ensure against pornography and obscenity in some cases, editing for proper grammar, proper use of diction and other literary devices are absent causing the books to be seen as poorly produced, cheap books.
Companies such as IBM, Canon, Xerox, Oce and Heidelberg are proceeding at lightening pace in producing digital presses. Heidelberg, a German company, appears to be one of the leaders in the digital press industry and digital related pieces of equipment. Heidelberg, Digi Master 9100 and NexPress 2100, digital printing presses are being purchased by many companies both in the U. S. and abroad. In 2001, the 2000th unit of Heidelberg Digimaster 9110 was sold. Heidelberg also introduced the color digital press in the 2001 Print Expo in Chicago. Heidelberg Digimaster and NexPress continue to be sold throughout the U.S. and, while there is a Heidelberg USA they continues to be a strong hold in Europe. Oce and Canon are two other strong players in the medium large to large-scale company category. Canon U.S.A. is a subsidiary of Canon Inc., which is a top patent holder in the U.S and ranked #3 overall in their Computer Office Equipment Industry in 2001. (Jeffrey, 1-14) In 2002, however, Canon Inc is off of the top12 list of the Industry altogether. IBM and Xerox have been placed 1st and 6th respectively in the same Industry. Heidelberg, which has operations in four of five continents, has not been placed in the Industry both in the U.S. and Globally. Nevertheless, they have continued to be considered as one of the major players in the Industry in all the conferences dealing with on-demand digital printing and publishing help this year by this company’s peers. (www.fortune.com).
The facts that three of the top twelve companies in the Computer Office Equipment Industry are also in the on-demand digital printing and publishing or in some related service augurs well. As anticipation continues to grow, new equipment is continuing to be introduced by these companies. Canon Image Runner 1300 series of digital printers and copiers, Oce 3100 series, DPS 400s and DPS 700 series are more examples of newly introduced digital equipment. These range in price from a couple thousand dollars to as high as $808,000. The higher end the Heidelberg NexPress range in the vicinity of $350,000. One Xeikon brand consists of both monochrome and variable printing basic simplex or full duplex systems range between $230,000 to $685,000. The Xerox’s DocuPrint 700 CFO’s twin-engine configuration sells for $808,000. (Jeffrey, -14). These upper end machines are complete printing presses which print paper bounded book without or with minimal human intervention from start to finish. Some of these systems are combinations of smaller digital systems, printers, scanners, and so on while others are whole systems built for the purpose of printing and binding. Xerox’s DocuPrint uses two continuous feed digital printers while Oce has included servers in their system. In addition to the printer there is a Digi-stitcher, saddle stitching system, a standard Hinkeler UV4 Unwinder and CS4 wide Pinless cutter/stacker producing an on-demand book, booklet making and perfect binding system. This, however, is in the medium range classification and is one of the cheapest in the range at $175,000. In fact, the cheapest in this category is priced at $160, 000. All these quotes are 2001 quotes; however, the range of prices remains basically the same for 2002.
One perfect binding system found which appears to be the cheapest in the industry is the Perfect System from Marsh Technology Inc. (MTI) from Chesterfield Missouri. His system works with 3 printers serially attached together on one side of the machine. Two printers placed at the ends do the digital monochrome printing, while one in the center is for digital color printing. Two books can be printed at approximately every 3 minutes on this system. The Perfect System can be priced as low as $45,000
Fig V PerfectBook 080
according to the number of machines purchased and as high as $75,000. A perfect laminate and an ultra sonic binding machine have been invented at MTI that can be attached onto the system to improve the quality of the book according to the customer demands. These peripheries can be added additional fee. According to your choice in printers, you also have additional options available to you for improving your printing capacity. In all of the systems observed so far, Marsh Technology Inc. has provided the most affordable system. Even with the ultra-sonic binding and the laminating of the color cover for books, the Perfect Book 080 can be bought for approximately $100,000. The closest to this is the Xeikon’s CSP 320D sheet fed color press. This press, when it is ready, has a “rated speed of 1920 A 4 simplex sheets or 969 duplex sheets per hour”, and is priced at $160,000. No mention was made about laminates or gluing methods, as is the case with the Perfect Book 080 from MTI. Clearly there is a great divide between the high end and the lower end on demand digital systems, but it would be reasonable to conclude that they target separate segments of the market at this point. The industry has not yet reached its peak and, one can sit and observe what is happening in the Industry.
Mr. Charles A. Pesko the Managing Director of Cap Ventures Inc., the leading worldwide strategic consulting and marketing research firm for digital business communications and e-business revolution (www.businesswire.com), indicated that Printing On-Demand technology is just entering the maturity stage in its development.
Fig VI Printing Technology Life Cycle
In the February conference of 2002 he indicated diagrammatically in fig VI that while the B& W POD lifecycle is just entering the maturity stage, color POD is still way down the lifecycle in the early growth stages. This suggests that while there are 5 of the top 11 companies in the Computer Industry are involved in this Computer, Office Equipment Industry, which is the category where printing equipment falls, there are still a lot more companies in the wider Computer Industry that are still to enter this category. (www.fortune.com). Already there are a host of new companies, some of which will go on to be dominant names in the industry while others will undoubtedly, fall out. Of the top 12 companies in the Computer Office Equipment industry, all are already dealing with digital equipment.
Pesko, in his Printing Technology Lifecycle diagram, showed that offset printing is on its way out. While the reasons why analog printing is no longer the choice of consumers may be immaterial at this point, the fact is that it is being replaced by digital printing. Numerous reasons are still being brought forward as to why publishers such as Barnes and Noble and Random House appear to have reverted back to traditional press analog printing houses. There are signs that the period is just beginning where true challenges to these publishing houses are about to begin.(www.sfwa.org).
There is an apparent new birth for the printing and publishing industry, and according to Pesko, the Universal Printer is being developed which will be able to process black and white as well as spot color and process color printing on the same device at competitive prices. This will certainly deal a deathblow to offset printing. Presently, only in offset printing can spot coloring be done, and this is one of the main reasons why analog offset printing is still actively among us. If Pesko’s predictions are correct then we will see within the next 5 years such a printer at competitive prices. Simultaneously, the Computer Office Equipment Industry too would be positively affected initiating a new round of dynamism in this industry.
The American Association of Publishers in their 2001 Industry Statistic report showed that there was minimal drop in trade totals between the periods 2000 to 2001 from 6540.8 million to 636,69.9 million dollars with the sale of both hard cover and paperback books. This represented a –2.6 percentage change from 2000. However, this figure represents a 3.5% compound growth from the period 1992-2001. Mr. Pesko’s predicts an 18% compound annual growth rate between the periods 2000 to 2005 from $21 billion in 2000 to $48 billion in 2005 in the retail value of print on demand. He anticipates that the overall U.S. print market will grow from $115 billion to $140 billion simultaneously, which represents a 4% compound annual growth rate (www.capv.com).
While one might think that Pesko’s figures are somewhat escalated, there is a clear indication that the general outlook for the market in the future is positive. Studies done by the National Association for Printing Leadership where commercial printers were interviewed 50% of those interviewed said that they were going to purchase digital printers in the next two years. This suggests that the market for commercial digital printers is increasing and one can expect an improvement in sales.
Marsh Technology Inc. has brought a new dimension to printing on demand. While the Industry’s cheapest perfect book binding system is in the areas of $160.000, MTI has drastically reduced the cost of producing a perfectly bounded book. While medium to large companies could afford to purchase Xeikon’s CSP 320D, small companies can on their own purchase the Perfect System 080 or even better yet larger companies can now purchase three 080 as compared to one 320D, not to mention Heidelberg’s NexPress 2100 or Xerox’s DocuPrint. While Pesko’s is anticipating great deals in the future for Variable Printers Jeff Marsh has produced the affordable perfect binding system. It is not the variable system that Pesko anticipates, but it is a Perfect book binding system that combines color and monochrome.
While Barnes and Noble and Random House are not placed in the top 19 companies in the Printing and Publishing Industry, there is an opportunity here that can see a new dawn for digital on-demand printing. Companies that are pro digital printing can transform this industry effecting a surge in sales that can be equated with the resurgence experienced in Britain and the US back in the 1930’s. One can reasonably argue that with the Internet, especially in the younger generation, reading of both paperback and hardcover books has decreased. Evidence can be brought forward with the AAP Industry statistical report for the periods 1999 to 2001 where there was a marked decrease in Industry trade (http://www.publishers.com). More reading was done on the Internet during the period, and this in turn could affect book sales.
Whereas this is a plausible argument, reading books on laptops and on desktops is a long way from displacing books. Reading over the Internet has been mainly confined to shorter articles such as newspaper reports and excerpts from books that have been downloaded. Should distributive on-demand printing drive the price of paperback books down, as some have anticipated, one can visualize a return of the days of old when every bag had a novel, on trains, buses, planes, the office, the home, young and old, rich and poor all having access to books.
In the US, a major drop in the sale of books may not lead to an incremental increase in book sales, however this is possible in countries outside of the US. Numerous people would now have access to books and an incremental increase in sales would take place in countries where books are not as high on the priority list. Imagine a system such as MTI’s Perfect System 080 being in place in bookstores located in remote areas around the globe having access to the internet and a ready supply of paper and someone needing to purchase a text in English, Spanish, Dutch or whatever the language and having access to this machine! Here a book can be downloaded over the Internet paid for via money transfer programs such as Pay pal over the Internet and you can have your book at your book dealer site in minutes! The potential of a world market of roughly 6 billion people is magnanimous. The object here is giving each citizen of our world an opportunity to read at some point in their life, understanding that some would be prone to reading more books than others.
I would not attempt to predict the amount of literature that any one individual can read through a lifetime; nevertheless, an organization involved in selling books in a system such as this has to consider the world as the customer base. While this may seem farfetched, governments outside of the US are preparing themselves for a Global market where there are no trade barriers. The US today has continued to lead the way towards globalization. The speed at which this type of globalization can be achieved is anyone’s guess and together with a system such as distributive printing on-demand, this is achievable in the near future.
The question of copyright must be given attention as there is always the possibility of individuals with motives that are less than honorable having access to a systems such as this. Even with our system today, questions of copyright are rising and need to be dealt with. Our present copyright laws do not adequately cover material over the Internet and, in addition, there is no effective means of identifying copyright lawbreakers today. DARPA has recommended an interesting approach to deal with Internet terrorism and, if a system such as this were ever implemented, it would deal with numerous Internet crimes including copyright crimes. DARPA has recommended that an Internet user fingerprint be established for each individual that uses the Internet. This would act as the DNA for each user of Internet and a signature is going to left on each site the individual visits. This can lead to a profile for an individual being established about that individual’s Internet use. All the activities would then be able to be identified as such allowing law enforcement agencies to apprehend criminals (http://www.cs.duke.edu).
There are numerous implications involved with a system such as this. Questions such as who would implement it, who would monitor it, who would monitor those who are monitoring it are just some of the questions that would have to be answered. Then, there is the question of up keeping such a database of information. First, governments of each country would have to agree to first have such a database and then there are the ramifications dealing with sharing this information with other governments. Finally, some form of international body would have to be set up to monitor abuse by governments. The question of copyright is undoubtedly an area that needs to be addressed even for our systems as they are today. Laws governing copyright should be reviewed to ensure that, not only the creative ideas in our society are adequately rewarded but also, in addition, the requirements of every citizen are met as best as possible as we address issues in the music and the movie industry. These are ongoing goals but they are important enough to devote a considerable amount of time too especially in any distributed on-demand system.
The concept of a disruptive technology put forward by Professor Christensen is not exactly a new one. Dating back to Renaissance in Art 15th and 16th centuries and of learning in the17th century, the concept of replacing that which exists was actively at work. Professor Christensen’s submission however, is the first of its kind to actually present a rational, logical scientific explanation as to the reasons why such a phenomena took place in our society. It is my view that an explanation such as this one provided by Professor Christensen would not adequately apply in the 16th and 17th centuries when the society was effervescing in creativity and easily accepted new ideas and techniques. However, with Mr. Ford in the 1920’s and 30’s with his new invention of cars, a theory such as this can apply.
Firstly, he was in an era where there was nothing that compared with his invention of the motorcar. Horses were the method of transport at the time. Secondly, and maybe more importantly, his inventions were in a society that was about to embrace capitalism fully. Adam Smith’s economic theory had long been accepted, but it was the new concept of capitalism in my opinion, which was about to evolve in the US that makes Professor Christensen’s submission a reality for Mr. Ford.
Thirdly, Professor Christensen’s definition suggests that the technology that may be inferior in performance at first and then, with improvement, it would surpass the technology that was dominant at the time. This to me logically does not follow history’s example. While at first Mr. Ford’s cars did not go at 120 mph, they appeared to be performing in an inferior way however, with Mr. Von Neumann’s architecture computer machines replacing the file cabinet in the office or the Xerox printer replacing the traditional copying methods does not necessarily mean that the technology’s performance was inferior. In his example of the 3.25 disk replacing the 5.25 disk, the evidence does not suggest that the 3.25 disk storage capacity was less than that of the 5.25. In addition, the 3.25 were more expensive when comparing the price of storage per capacity ratio. When a new technology is in the testing stages, it would undoubtedly perform substandard until the errors are rectified. This cannot be classified as an inferior technology in the area of performance.
The question now comes up whether Professor Christensen’s submission should be discarded altogether? For the purpose of my discussion I wish to accept Professor Christensen’s submission to the point where he suggests that there is a possibility that the technology with inferior performance replaces established incumbent. His inference of inferior performance for the purpose of this paper would not be considered applicable however; the rest of his submission applies in a Capitalist society, which is the framework of this analysis.
Having established the framework for the discussion, I would now point you to the Printing and Publishing Industry. In this industry an existing method of printing has dominated, in the use of analog printing. A new method of printing with the digitizing of a lot of the previous functions especially in the field of transferring data, files, documents, and voice just to mention a few. The quality in some cases is arguably better and in others worse according to what the user is looking for. In the case of music it is whether the record, the analog sound, has a softer tone to the sound emanating from the record as compared to the cleaner sound of the CD. Or in the case of topology and calligraphy whether fonts created by the hand artist using his penmanship is richer than that of the artist who creates his font on a desktop
What, then, is the determining factor? In a capitalist society my first answer is price. I agree with Professor Christensen’s theory that price determines our choice up to that point where the consumer has reached the net utility thresholds. That is the highest price the consumer is willing to pay to be satisfied. The cause of satisfaction is insignificant at this point and it is here where the Publishing Industry is at cross roads. The 1930’s saw a rebirth of the paperback books and over the years the prices of books both paperbacks and hard cover books have increased considerably. The world of education is the epitome of pricing injudiciousness with regards to books. Professor Christensen’s theory in this regard adequately captures the consumers purchasing paradigm. As such it is my strong conviction that the Publishing and Printing industry is ready for digitization and is in fact ready to accept a disruptive technology. The question then is where, when, who and how?
While the US market is an integral part of this formula, there are approximately 6 billion people who make up the rest of the world and are prospective customers. Fortune magazine lists IBM, Hewlett Packard, Compaq Computers and Dell Computer as top Fortune 500 companies in the Computer Office Equipment Industry. In the Publishing and Printing Industry companies such as Gannett, McGraw-Hill, and other who lead the Industry would play an integral part in this transition. Which industry is going to take the initiative and to what extent would each affect disruptive technologies is anyone’s guess. Both Pesko’s projections and those of the NAPL seem to agree that there is going to be an increase in sale in the Computers Office Equipment Industry however, the figures presented by the AAP is showing that there was a decline in trade in the Publishing Industry between the period 2000 to 2001. No figures were available for 2002 at the time of this paper but it will be interesting to see these figures. Could it be that the price of books are too high?
Internationally companies that are in the field or are getting into the field of computers will definitely be targeting the publishing industry. While the Internet and computer are spreading to the furthest corners of the earth, new giants in the industry are emerging. There has so far been the absence of the Asians in the industry with printing and publishing equipment, which would, undoubtedly, commence a new round of battles amongst companies globally. A specific location thus is meaningless as the effects are going to be felt globally. To answer the question where then is to answer globally, as the effects of the disruptive technology are going to affect economies global, thus thrusting sales into dimensions not known before.
While the publishing industry continues to operate under the traditional premise, businesses both big and small are spearheading the use of digitally produced documentation. Computer equipment companies are addressing the needs of the business world and as such are increasing the production of digital equipment. It is clear that offset printing is on the decline in the office world. If we surmise that the Publishing Industry follows business world the answer is in the affirmative. Consumers are at that threshold and, with other sources to provide information mainly the Internet; a new variable has been added to the equation.
The six billion people who represent the world market will determine to a large extent how they get their information in the price they pay for books. Companies are already presenting alternatives to writers to produce cheaper books and, while there are writers who favor the status quo, new crops of writers are emerging. These writers are prepared to use the resources available to them to have their material published at the cheapest price possible thereby, facilitating disruption of offset printing and, embracing digitization. My answer to when therefore is now.
Jeff Marsh has pioneered a new era for companies that would produce printing presses at prices below the hundred thousand dollar mark. In the business community this is indeed immaculate as the smaller and medium size business can now afford to purchase such presses to carry out their business functions. In addition, authors who are just starting out can now afford to do test print runs to test the market and /or build clientele for their work. JMI has opened up a whole new level for a previously un-included group to participate in a rapidly growing industry in at a stage that augers well for the industry and for young writer simultaneously. While there is still a lot of room for improvement, the fact that there is a shift to digital publishing and printing suggests a move that can result in a cheaper price for books, both in the production and in the final cost of books.
The shift in prices of publishing equipment represents the final displacement of the existing offset printing. From this point, we will see a transition similar to that of the global movement from horses to motor driven cars in the 1920’s and 30’s. The price of cars today as compared to horses maybe an antithesis, but our method of transportation has greatly improved subsequent to Mr. Ford’s efforts and persistence in the 1920’S. The answer to the who question then, is to answer a person like Jeff Marsh, who is willing to put out the efforts initially and to persist passionately, taking the industry forward.
While in the 1920’s it might have been very difficult, the how today might not be as difficult but in no means can we say it is less intricate. Conscious efforts would have to be made to ensure success even though consumers have reached that net utility threshold. Well thought out marketing strategies are to be taken to ensure that a permanent market is created for digitally produced books. On the other hand, digitally produced books must meet the standards set by offset printing and binding. New methods of binding suggest that it would produce better quality-bound books, but at least the traditional standard should be met.
While there are no two same paths to success, it is clear for digitally produced paperback to succeed there must be a collective approach in the industry to produce digitally. In addition, producing digitally must mean producing at a cheaper price per copy. Pesko has envisaged the introduction of the variable printer doing printing jobs at affordable prices will in no doubt have a positive effect in the industry. An answer to the question of how is however, not as easy one. The how remains an integral variable in the equation. The answer here remains the most intricate because an inherent process cannot be clearly defined. The players here have to develop approaches that work best for them in their particular situation and deal with their situations individually. Simultaneously, each would have to arrive at the same result. Success. Consequently, in my view how remains to be answered by the individual players as they adopt various approaches that best suit them then, implementing these approaches effectively to work for them.
Throughout this paper I have looked at numerous variables that contribute to the question of whether there is a disruptive technology in the printing industry that is about to displace a well-established incumbent. The facts seem to suggest that indeed there is. Taking into consideration Professor Christensen’s theory together with the modification, it is clear that the Publishing industry has two such technologies. The existing technology is offset printing, which uses the analog printing technology. Digital printing presently has a niche in the medium-large to large businesses. Here however, there is a technology that is in contrast equivalent or somewhat superior in some instances than the incumbent.
There is no doubt that with people like Jeff Marsh the segment is moving out of the convergence stage and entering the disruptive stage. While no one can give an exact time as to when this disruptive technology would reach the disruptive stage in the publishing industry, Pesko and the NAPL are expecting phenomenal growth in the Computer Equipment Industry, the industry that supplies equipment for the Publishing Industry. It will be precarious to suggest that this will be the cause of the growth in the Publishing Industry but one cannot rule out the fact that it would not have a positive effect on the Publishing Industry. This effect can either initiate a positive growth, continue growth already started (which has already started according to Pesko and NAPL), or be an active ingredient in both instances as they work simultaneously to effect a positive change. Subsequently I wish to conclude, that there is no doubt in my, there are definite signs that a disruptive occurrence is about to take place in the publishing industry.
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