Sam Errigo isn’t worried about the market dropping two or three points in the coming year. The newly-promoted chief operating officer of Konica Minolta Business Solutions knows that, at the manufacturer’s current position of 17% share, there’s ample opportunity for gain.
The first two quarters of fiscal year 2020 showed that Konica Minolta could take a punch, buoyed by its high-performing All Covered IT services division, content management, production print portfolio, a robust menu of forward-looking technologies and, of course, its core A3 and A4 device catalog, which it continues to grow. And as the business community continues to emerge from the pandemic, Konica Minolta is enabling its dealer partner and directs to employ a technology-as-a-service (TaaS) approach to packaging its value proposition and gain deeper roots with end-user environments by leveraging monthly recurring revenue opportunities.
Errigo doesn’t mince words: he knows the customer environment continues to change. He knows that targeted client conversations will win the day every time, and he believes Konica Minolta will leverage whatever opportunities the landscape may offer. And that starts with having the right technical resources to consult and guide clients in the post-pandemic environment. Errigo cuts through the hype and offers his take on what strategies dealers need to employ for success in 2021 and beyond.
Suffice to say, 2020 was a year like none other. From a performance standpoint, how did Konica Minolta fare?
Errigo: Thankfully, we’re just about out of 2020, as our fiscal year ends in March. Looking at the pandemic period, Q1 was a challenge, as it was for the rest of the industry. We watched customers, including some of our largest clients, completely shut down. That had a big impact on our entire industry. We did several things to adjust our go-to-market strategy and profitability during the early stage of the pandemic to balance sales, SG&A and customer support. From my standpoint, FY20 was not just about the pandemic—it was a wakeup call for our entire industry. It afforded us the opportunity to assess our business, stop doing unproductive things and invest dollars back into the sales engagement process and lead generation. We learned a lot internally and externally with our customers. Over the year, we have seen a marked improvement in quarter-over-quarter performance. We are watching volumes improve exponentially from where they were in Q1. The trends show that we will conclude our year with marked usage improvements as our customers return to work versus the low one year ago. The improvement trend is expected for the first half of 2021 as well, based on our analysis.
Tell us a little about Konica Minolta’s strategic approach during the pandemic from a product and service perspective and how it pivoted to meet the needs of its resellers—dealers and directs.
Errigo: As the pandemic took hold on the U.S. economy, the shift we saw in our Global Client Solutions center was dramatic. Normally, 80% of incoming calls are break/fix related to hardware. During Q1, the number flipped to 70/30—70% of calls were IT related, 30% were break/fix. We were able to transition without interruption and in a remote footprint, which was an even bigger challenge. In fact, our entire center worked remotely during the peak of the pandemic! The fact that we were able to shift quickly and not miss a beat with customers was a testament to the hard work and messaging we’ve been sharing on the importance of co-location of your core business and emerging businesses. It’s about having the right technical resources with high availability when needed to support your customers.
Also, as we look at the shift in business, the fact that we have a managed IT business has truly been a saving grace. As the spend for multifunction and print production products slowed, the increase in our IT, content management and Mobotix/thermal cameras business accelerated at a much faster pace than usual. Additionally, the return-to-work solution we developed gained momentum, which helped offset some of the decline in traditional business during the first two quarters of FY20. Many of the dealers positioned similarly to Konica Minolta experienced the same trends. Those that were ill prepared, with a sole focus on hardware only, saw the most dramatic decline in revenue and profitability. The need for incremental services, technology enablers and new recurring revenue streams is critical to our industry and aligns with customers’ expectations related to integrated work environments.
One of the product highlights for the company was last summer’s release of the color A3 bizhub C750i. How has it been embraced, and is it a tough sell in the pandemic environment?
Errigo: Overall, the i-Series is getting excellent reviews throughout the entire portfolio. Volumes are coming back, despite what some analysts might think. We have improved quarter over quarter in all of our products, including production, which is rebounding nicely. The C750i is a well-positioned, mid-range office product that can speak to high-volume needs. The reception has been very positive. Our unit sales for February and March are trending better over Q3 as we close out the year.
Earlier this year, Konica Minolta completed its next generation of the bizhub A4 series. Much has been said about the balance of A3 and A4 products in end-user environments—what is your view of this evolution?
Errigo: When we talk to customers, it’s not an A3 versus A4 discussion. Most customers don’t even know what that means, that it’s really just a paper size. There’s a lot of buzz around this in the industry. But quite honestly, this has been going on for the last 15 years. What we really should be talking about is the customer. The focus of the conversation is simple: “What BIG business challenges are you solving for your customers?” Our job is to put the right product in the right environment to satisfy the application. Konica Minolta’s multi-function (MFP) sales are stable, while printer sales surged to meet customer demand. The recent boom is the new market reacting to addressing remote/home use, which accounts for the printer sale increase. We’ve had long-time customers who traditionally didn’t buy printers due to an optimized MFP environment, and shockingly, they bought printers to support remote work applications. But the shift that everyone’s talking about has been happening over time. Our customers still buy MFP products and also need printer products because they have a requirement for certain paper sizes or applications. You have to look at not only the hardware component, but the software and technology enablers. They all tie together.
Is there a bit too much hype in the trade media about A3 versus A4?
Errigo: I’ve heard a lot of analysts say, “Multi-function devices are a way of the past and customers will only buy printers or A4 devices.” For the record, A4 is a paper size! If this was true, it would have happened 10 years ago. But customers still have applications and needs that require certain capabilities. There are reasons why they purchase these types of products for their work environment. As these environments change, products could change. But last month, we sold multifunction products because customers are returning to the office and still printing out of necessity. Usage may have gone down, but it’s not zero. That’s the misnomer when you watch some individuals speak about the topic. They’re painting a world of doom and gloom. Well, it’s not doom and gloom, because people will return to the office. They will still need to operate and they will need MFPs. Those who are best prepared to help satisfy the requirements of the customer will be able to take market share. With that share comes volume, services and the aftermarket. Worry less about the MFP versus the printer debate and focus more on the customer’s requirement, which will dictate the types of products and services the environment needs.
The speed at which change happened due to COVID has been rapid. We’ve embraced remote selling in a way that I couldn’t have imagined three or four years ago.
– Sam Errigo, Konica Minolta Business Solutions
I’m out with customers all the time and on the phone with some of the biggest corporations around the world. Is there a change? Obviously, but it doesn’t revolve around the device, but rather emerging applications, technology and support to better integrate a more diverse workforce. The customer expectations are greater; as a supplier, you have to go beyond the device. Ladies and gentlemen, A3 versus A4 is not the real conversation, and the people who want to talk about it are self-serving. Are they really out talking to customers, or are they trying to predict who is going to buy whom? I get it—it makes for a good story. In reality, customers are looking for help with security, and technology that enables them to access data and information quicker. They want automation that drives cost savings and fewer, more capable suppliers. That’s the true conversation.
Cloudtango recently named Konica Minolta’s All Covered the No. 1 MSP for the second straight year. What points of differentiation elevate All Covered above an august group of managed IT service providers?
Errigo: The one thing we’ve done systematically is add capabilities, and our portfolio gives us the depth and breadth of services to handle a variety of customers, from SMB to mid-market to enterprise. We have an enterprise-level solution set that’s affordable for SMB and mid-market customers. Smaller companies know it would cost exponentially more and require expertise to build this solution on their own, which is where All Covered comes to the foreground. We’re doing things in the area of managed voice, help desk, cloud, security services and desktop deployments. All of our professional services offerings integrate workflow and technology. We have built out our Global Client Services locations in a manner that can scale for any type of customer. It’s available 24/7, backed by more than 1,200 employees dedicated to just IT services.
Speaking of All Covered, can you talk about the role it played in helping land some significant deals in 2020?
Errigo: This goes back to our bundled approach. Customers engage with Konica Minolta because we look at their business from a holistic standpoint and put together a package to help better manage their information, technology and workflow. All those pieces come together in TaaS—technology-as-a-service. This bundles our IT services, content management, return-to-work solution and all of our imaging technology into one contract. All Covered is a big part of that, and linking it with our Global Client Services location allows us to work differently for our customers, which is instrumental in capturing the enterprise level contracts. We also make our Global Client Services available to our dealers. We’re positioned behind the dealer, but we’re providing a service for them. For those dealers that don’t have all the capabilities, they can lean on Konica Minolta to help put it together.
The loss of in-person events was keenly felt by many OEMs. What is Konica Minolta doing to replace that level of partner interaction and ensure its messaging is hitting the target?
Errigo: Like everyone else, we’re doing a lot of virtual events. We’re jumping on calls and having one-on-one conversations to check in on our dealers to see where we can help. We’ve hosted print production events in our customer engagement center for dealers and their customers. Learning tracks, webinars and training sessions are all available for dealer engagement. We’re doing the best we can under tough circumstances. We’ve done a couple really cool wine tastings with some of our dealers just to open communication about what’s going on in the industry. Hopefully, in the next 90 to 120 days, we’ll start to get back to those much-needed in-person meetings.
Given the trends heightened by the pandemic, what can dealers do to ensure they’re maximizing their opportunities for growth under less-than-optimal conditions?
Errigo: They need to put themselves in the customer’s shoes. At this point, trying to just sling hardware is not the correct approach. Developing a level of expertise around vertical markets is going to be critical to helping customers with significant challenges. Dealers need to wrap their heads around those problems end-users are trying to solve and become a part of the equation. I think there’s a huge opportunity right now in the SMB market to help customers with IT services, content management and security. For multifunction products, it’s all about bringing in the right product and consolidating environments, making it easier for the customer to conduct business. Dealers need to get these point solutions in order, provide strong direction to the sales organization and have structured programs to communicate that message effectively to the customers. This requires a new go-to-market strategy that utilizes data-driven customer insight to better understand what clients are looking for in the technology sector.
The speed at which change happened due to COVID has been rapid. We’ve embraced remote selling in a way that I couldn’t have imagined three or four years ago. Our campaign management and outbound marketing efforts are so much greater today. We’re organizing around verticals and making sure we have a highly structured program that speaks to those customers in a different manner. If I’m calling a health care customer, I’m speaking health care. Those conversations are no longer generic, and we can see that it is making a difference. I believe our dealers need to take some of these same approaches and think differently. It’s all about how you can help them, not what you can sell them.
What is Konica Minolta looking to accomplish in 2021?
Errigo: We continue to work with partners such as Google and Microsoft to help us think differently and look at our customer segments. Leveraging companies such as these broadens our horizons and gives us the opportunity to think differently about problem solving. The shift toward monthly recurring revenue streams is going to be a big push for us, and it’s critical to have a highly predictable business moving forward. New contracts with technology-as-a-service will be a big focus in 2021. There’s opportunity for market share growth, and I think there are huge opportunities in production, IT and our core product line. We have roughly 17% market share, so even if the market does drop two or three percentage points, there is still ample opportunity to capture share.
It will be vital to work closely with our dealer partners to ensure they’re taking full advantage of all the technology and services we offer and mimic what we’re doing for our direct channel with TaaS and adding significant value around the core products. That is something we have to strive for as an organization. I believe that our dealer channel has to work closer with Konica Minolta to enable their sales organizations to sell these types of products and services, because that’s what the customers are going to expect long-term. I believe 2021 is shaping up to be an exciting year. Print is not dead, as some of our competitors recently noted. It is changing, and those that invest in the future, diversify and serve their customers with more comprehensive offerings will prosper!