Lexmark to abandon inkjet for digital strategy: Three examples of total business transformation
Wednesday, August 29, 2012/
What does a printing company do when it doesn’t make printers anymore?
Lexmark has just announced that it will stop making Inkjet printers, and lay off about 1,700 people in the process. It’s no surprise to give up paper; given the rise of digital photo sharing and the number of people who are using tablets and smartphones.
The corporate move towards paperless offices doesn’t help, either.
“Today’s announcement represents difficult decisions, which are necessary to drive improved profitability and significant savings,” chairman and chief executive Paul Rooke said in a statement.
Instead, Rooke says the company will focus on its software and high quality image solutions. Although it will still be making printers, they’ll be focused on enterprise customers and those that have needs for a high amount of printing. The Inkjet printers mostly aimed at consumers will be gone.
While there are more competitors in this space making printers, such as Canon and HP, these companies are able to maintain inkjet printer manufacturing due to higher volumes. The equipment itself only carries a thin margin.
But despite the shift away from what was once the company’s main product line, investors are happy. Shares in Lexmark rose as much as 13% after the announcement.
Research firm IDC’s executive vice president of research, Crawford Del Prete, said in a statement the announcement is “an indication that Lexmark will drive higher price points for devices”.
But Lexmark isn’t the only company to have abandoned its initial purpose. With technology evolving so quickly, businesses that were once reliant on a certain product have to devolve and adapt to new market conditions, otherwise they risk being labelled irrelevant.
It can be done. Here are three other companies that have paved the way for Lexmark’s transformation.
IBM is among the oldest technology companies and has managed to change its product line again and again.
One of its most dramatic shifts was away from PCs. In 1981, the company announced its first PC. It was a landmark announcement, and IBM computers became commonplace in households during the 1980s and 1990s. The popularisation of the PC is often credited to IBM’s contributions.
But in 2005, the company sold its PC division to Lenovo. It’s easy to see why – it lost $US1 billion over the previous three-and-a-half years.
IBM has focused on diversifying its portfolio over the past two decades, offering more software services and other hardware acquisitions. It isn’t the first time IBM has managed to transform itself, but it’s yet another example of a company nimble enough to recognise necessary change.
Similar to Lexmark, Kodak was once the biggest name in film. Photography used to count for as much as 70% of the company’s business.
Now, of course, it has announced it will stop producing film. Earlier this year, it created a new division of the company to help it transform into a business more suited to a digital environment.
Of course, it hasn’t come easy, considering the business filed for Chapter 11 bankruptcy protection. And time will tell whether the company succeeds in its transformation efforts – but it’s an example of an iconic brand that is at least giving it a try.
It’s a cliché, but in 1997 when Steve Jobs came back to Apple, the company was focused on expensive, unnecessary hardware. Complete with an outdated logo. Consumers didn’t see it as a valuable brand and Microsoft was at the top of its game.
But after a few years of complete innovation, it managed to not only create popular computers, but become the biggest seller of portable music devices with the iPod. It also then became the biggest seller of digital music and, now, the most profitable mobile phone maker on the planet – 70% of the company’s revenue comes from portable devices using iOS.
Apple was days away from bankruptcy. Its post-1990s transformation is perhaps the best example the tech industry has.