What True Digital Disruption Looks Like
September 30, 2015 Joe McKendrick, Contributor Forbes

What True Digital Disruption Looks Like

Everyone tells you that in this digital era your company should change, transform, “be disruptive”. gA invites you to explore what that really means and the journey you need to make:  

These days, unfortunately, “disruption” has become the most overused word in business, with many companies implying that the latest tweaks to their products are “disruptive.” Sorry, a new smartphone feature does not qualify as a disruption.

Clayton Christensen famously wrote that true disruption takes place when a company comes up with something that goes to unserved or under-served markets, and eventually works its way up from there, pushing formerly dominant players into shrinking high-margin enclaves. Think of Microsoft in its early days, bringing cheap computing to the masses, and eventually disrupting IBM and DEC’s multi-million-dollar mainframe markets.

The same law of disruption has been applied to the printing industry, with the help of digital technologies.

That’s the takeaway from a recent CXOTalk installment, in which Robert Keane, CEO of Cimpress (which most people know in the U.S. as Vistaprint) described how he helped to make mass customization a reality in the printing sector. As with many manufacturing operations, lower costs and economies of scale only come with mass production. But in recent years, increasing digitization has been creating opportunities for a counter-trend: mass customization.

Speaking with CXOTalk host Michael Krigsman, Keane explained how attempting to serve small businesses (“micro businesses”) with small jobs was a challenge for the printing industry, since  the per-unit costs could be astronomical. “If you want to get anything from a custom car to a custom suit to a custom sign to anything else which is individually designed and produced, the unit cost goes through the roof,” he said. “There is a huge amount of setup costs which are associated with customized products. So what you need to do is set up the physical production for the machine for each job in a conditional model.”

The $1.3-billion-a-year company, founded by Keane in January 1995, has sought to transform not only the printing but also apparel and photo merchandise industries through the employment of its shared mass-customization platform. This platform, developed in-house, is key to Cimpress/Vistaprint’s success, Keane explained. “We’re able to take that type of common platform and apply it to customized individually unique products. It is very much a platform play.” The company’s platform is built on software with a job scheduler at the core that automates “the flow of information that allows individual processes to exchange information with each other,” Keane explains. “The schedule activities initiate actions and control that throughout the manufacturing process.

The company’s technology aggregates, via the Internet, large volumes of individually small, customized orders for a broad spectrum of print, signage, apparel and similar products. The company’s business model is based on the belief that software and production technology can be harnessed to aggregate enormous numbers of small orders into a high-volume production flow and, in doing so, break the tradeoff customers traditionally have had to make between the benefits of mass production and the personal relevance of customized products. The company employs more than 400 software and manufacturing engineers and more than 5,300 team members across 16 countries. Over the past decade, the company has invested over $1.3 billion in technology, development and capital investments.

As orders are received, the company’s software automatically routes production jobs to the type and location of the production system that is most appropriate and cost efficient for the type of product ordered. The system requires as few as 13 seconds of pre-press, printing, cutting and boxing labor for a typical order of 250 business cards, versus an hour or more for traditional printers. The platform enables the company to print high quality customized orders using a fraction of the labor of typical traditional printers.

Sticking to the true spirit of disruption, as Keane described it, his company started out going after the low-end, unserved portion of the market — micro-businesses that were attempting to desktop-publish their own brochures and business cards. “We really saw the enormous opportunity that if we could serve customers who did the graphic design for us, rather than laws like in a traditional printer or graphic designer having to do it for them. We actually took away hundreds and hundreds of dollars in setup costs per order.”

The good news here is this is a living, breathing example of a large business that has built itself on a pure digital model. Keane’s Cimpress/Vistaprint may be the closest example we have these days of what it takes to become a digital business — a disruptive one at that.  “We use technology throughout our business in every aspect of the value chain to do that, and you break the trade-off between which traditionally was a requirement to either procure in very high volumes at a low unit cost, or to pay a very high unit cost if you wanted a small quantity.”

The bad news is that not everyone can successfully make this journey. Listen to the words of one who has, who isn’t sure established companies can actually make this leap: “When I started the company, we were born digitally,” Keane says. “Every single thing we did was based on the assumption that the technology could transform some aspect of our value chain. I’m sure there are good examples of companies that have done this, but I’m not aware of them.”

Nevertheless, Keane has advice for executives who want to pursue a disruptive strategy in established businesses. First and foremost, he suggests, is  to keep the new digital venture separate from the rest of the enterprise, and allow for a great deal of experimentation and failure. “If you are in a larger business, make sure protect the integrity of the digital business that you’re trying to create,” he states. “The very essence of entrepreneurial value creation is doing what people say can’t be done, and it fails many times.  We were on the verge of bankruptcy for five years, despite a regular infusion of venture capital money, and it’s not an easy thing to do.”

It’s not easy, but it’s a journey that businesses now need to make. Because a digitally disruptive upstart may be waiting just around the corner.

 

This article was written by Joe McKendrick from Forbes and was legally licensed through the NewsCred publisher network.

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