Broadening Your Horizons

Recently my wife, Sue, and I returned from a two-day visit to a colleague’s company in the upper Midwest. We love to visit other shops in our industry; they’re a great example of the benefits of diversity. They’re thriving, and it’s a testament to wise, strategic decisions to evolve a 200-year-old company from one product and market into an unparalleled diversity of products and services. It reinforced Sue’s and my notion about why we have spent so much time, money, and effort diversifying our company for the past 20 years.

This visit also highlighted the benefits a PSP can derive from diversification. The first is a life insurance policy. Not for the owners, but for your business. Since we founded our company, not a single one of the half-dozen competitors we initially faced is still in existence. Over half that started later are gone as well. The market simply evolved and they failed to evolve with it. Investment in diversity is sound insurance your business will not die from insolvency because a market your product lined served slumped, evolved, or dissolved.

Challenges of commoditization
Your lifeline is profitability. And profitability is the result of increasing your client base and product offerings with an emphasis on developing products and services that support a reasonable to generous profit margin. This rarely happens with products that become commoditized. It’s essentially a market with too much supply for a limited demand. In this instance, every PSP is making essentially the same product and companies are forced to sell on price. This happens with products that lack significant differentiation.

Anyone who has been in our industry for over a decade understands what happened to the billboard market. Billboard printing became the “poster boy” or, to use a grand-format analogy, the “billboard” of commoditization. We’ve never printed billboards, but many of our friends in the industry did. In the mid ’90s, billboards were selling for $5 a square foot. What are they now?

Maybe hundreds of companies contributed to the commoditization of billboards; it was hard to resist if you had a five-meter solvent printer and billboards were the centerpiece of your business plan. A few companies ultimately benefited from the downward spiral and now own the market and survive based on volume. They have figured out how to efficiently and profitably manufacture this commodity. Good for them, but this is not how we want to make a living. What happens when the cost of digital billboards plummets like all electronic technology ultimately will? In the future, when you can buy a 40-inch LED flat screen monitor for a hundred bucks, what do you think is going to happen to the indoor printed sign market?

More is better
We’ve never wanted to be a one trick pony. Modern large- and grand-format print technology enables all of us with the ability to make a gazillion different products with these beasts in our print rooms. You can make garments; carpet; wallcoverings; countertops; ceiling tiles; glass, plastic, metal, and wood panel; window treatments; blacktop graphics, etc.

Having a wide range of products and markets is good business continuation insurance. Diversity saved our business. In the fall of 2001, we were reliant on one market, the local hotel casino industry. Our number one product in that market was fleet graphics (before that became commoditized). We had a client who gave us an exclusive to produce and install casino advertising on more than 100 airport shuttle buses that changed regularly. We also did the taxi wraps and digital graphics for the taxi tops for a big chunk of the more than 2000 local taxicabs. We made bank. Immediately after the World Trade Center towers fell, the Vegas Strip looked like a ghost town. Our fleet graphics business came to an abrupt halt, as in, from seven figures to zero, zip, nada. The giant hand of fate shut off the spigot. The exhibit business was our secondary market and you know what happened to trade shows after 9/11.

I am not equating what happened to us with that of the tens of thousands of people whose personal lives were tragically impacted by this event. However, the ripple effect felt out West was big enough to potentially put us out of business.

We have always said, “We would rather be lucky than good, but will take lucky and good if fate will bless us with both.” As luck would have it, one of the largest producers of digital dye-sub gaming table felts went out of business about this time. They were a direct competitor and had a significant share of the gaming supplier market. Yes, the casinos were like mausoleums, but they had purchase orders with the gaming suppliers that had to be filled. The suppliers who had issued purchase orders to the now defunct dye-sub PSP were SOL. Who did they look to for salvation? Us.

That was the luck. The good part was we had the foresight to be a pioneer in digital dye sublimation. We had been producing dye sub for four years by this time and had become a player in the gaming felt market. We had the capacity (loved the speed of those old e-stats). Over the next few months, our dye-sub turnover tripled and no one argued about price. Diversifying into dye sublimation saved our bacon when our number one and two markets went away overnight.

The lesson is that had we not diversified into dye-sub in ’97 and been able to take advantage of this opportunity, the loss of our casino sign and fleet graphics business and the slump in the exhibit business could have bankrupted us. Diversification was our insurance then as it is now. It ensured that our company could not be torpedoed by woes of a single market.

However, this experience opened our eyes that we were not diverse enough. This close call motivated us to take a long and hard look at all the ways we could diversify.

Others in the industry have looked longingly at our location: Las Vegas has all those big signs everywhere. Yes, there are lots of signs, but the casino market has become heavily commoditized. Step away from the casino industry and there are almost no corporate headquarters in Las Vegas or big advertising agencies. Also, there isn’t a single first-tier professional sports franchise. We are the premier destination for the exhibit industry, but most of the sales for exhibit graphics are made in Chicago, Atlanta, or New York City, not Vegas.

We needed to diversify our markets by both industry and geography. We also needed to diversify our products and services in order to appeal to wider markets. So we do latex, UV cured, dye sub, high-res eco-solvent, 3D printing, CNC tables, laser cutting, metal fab, a plethora of finishing methods, design, and installation.

Where possible, we’ve combined markets that use similar products. This helps assign customers to CSRs and project managers. For example, we lump architectural, interior decorating, environmental, and retail store graphics into a group. These markets buy our printed wallcoverings and accents, countertops and other surface laminates, interior and exterior tempered safety glass, doors, decorative pillows, a plethora of art mediums, upholstery fabric, etc. We recently produced upholstered fabric headboards for a fancy hotel.

The exhibit industry fits well with our events clients because of the heavy use of large dye sub panels, printed rigid boards, carpet, and self-adhesive vinyl, and complicated logistics and fulfillment.

Although we have no sales presence in other markets, we have been reasonably successful forming strategic alliances with companies that do. We use our diverse product offerings to partner with other companies as part of a distributive manufacturing process. For example, we have strategic alliances with a glass, acoustical products, and events companies. Together, we produce some really cool and profitable products with significant growth potential. They sell nationally, so our products are sold nationally. We are always looking for partners who have a sales presence in remote markets.

We can never finish this quest to evolve through continued diversification, to create a whole that is greater than the sum of its parts, to create products that customers demand and are willing to pay for. Fiber laser, hi-res color 3D printing and scanning, selective laser sintering, multi-axis subtractive manufacturing, still and video LED indoor signage (and billboards) with 3D viewing without glasses… what’s next?