18 September 2017 Business

Farewell to instinct, welcome systematic decision making

Do not rush into buying the machine that caught your eye at any of the exhibitions taking race in the next few weeks. Instead take an objective step by step route to assessing what sort of investment is necessary and how to go about it. And learn from the experience of those that took part on the BPIF’s Investment Decision Making report.

The run of exhibitions in the next few weeks will be filled with tempting technology and persuasive sales people aiming to prove that the equipment, consumables or software on display is precisely what the visiting printer needs for his or her business.

The well protected printer will have donned the armour to deflect these arguments, but might also be missing out on something that might actually help. Somewhere between the goggle-eyed enthusiasm and the steel plated cynicism is a path to judge whether a purchase is right for a business at this time.

There is a whole set of literature about the techniques to decide whether to buy, when to buy and what to buy. But relatively few approach the subject with any real objectivity. Many will still rely on gut instinct even though a wrong decision may not just be an expensive mistake. It might be a fatal one.

To understand this and to provide solid advice on creating an objective route to taking investment decisions, the BPIF has first conducted research and put this together with independent advice and created a report that is a must-read for all printers. Working with Canon the full report will be available at the Print Show next month.

The companies participating represent a full cross section of the membership covering £732 million of turnover with 6,800 staff. The barriers to investing are the perennials of time and money joined by lack of the appropriate knowledge or skills and understanding of all the options that should be considered.

One of the printers involved sums up: “Making an investment decision in the current economic climate is very difficult and as a company you are very often on your own. We have found best process is to look at the equipment/service you are thinking of investing in and compare this with others that are available in the market place before proceeding. It is too costly to make mistakes so as much homework as possible needs to be done.”

This is the overriding message of the report. Gathering the first hand experiences of printers making an investment can sometimes feel a little one-sided, but the responses are genuine.

This means the early findings are not always comfortable reading for either those making the investment or those supplying equipment.

More needs to be done to make the sales and installation process more successful for both sides. One of the headlines is that there can be problems at all stages: sales, negotiation, pre-installation and post-installation, with the latter proving the most challenging.

This is where any disconnect between what a printer thinks he has bought and what the supplier thinks he has sold will be most apparent. The smarter supplier will have ensured that the buyer is clear, if for no other reason that the relationship should be ongoing, not a sell and walk away.

Printers state that they aim to have clear objectives when setting out on what for most is a two-year decision cycle. The day to day task of running the business can make it hard for many to keep abreast of technology, though trade magazines fulfil an important role along with exhibitions such as those coming in the next few weeks.

We would also make a plea for the Print Business website which is designed specifically for this role: the technology is described in detail and in the context of market developments and it is supported by hundreds of case studies about companies that have made similar investments and their experiences.

The average value of investment expenditure is £980,000 a year over a three-year period. For most this is not set in stone, but a guide line to enable the business to take advantage of opportunities should they arise. However, one in five do not set a budget.

The trigger for an investment may be a strategic business review, often a desire to increase efficiency, offer extra functionality or expand into different areas. Often such decision will follow something that a competitor has done. As many as 70% of printers track what their competitors are up to.

Not surprisingly, printers voice concerns about the pace of change and need to keep up. This leads to imperfect knowledge of the market and the technology on offer. This leads to uncertainty that there will be sufficient pay back and that there may be hidden costs. Independent reviews, case studies and advice will help say those in the survey. So too will a crystal ball.

This is because it can be difficult to verify the information that manufacturers provide or in case studies (no two printers are exactly the same). Even those that conduct the most thorough research and ask the most penetrating questions fear that they are missing some information when making the decision.

Partly this is because their own teams have been left behind by the pace of change are not suitably qualified to ask the right questions. This extends to making full use of the purchase once it has been delivered.

A way to cover this is to include performance criteria in the final contract, yet only 45% ensure that this happens. More than 80% will track and measure the performance of an investment after it has been installed. And a healthy number will also conduct scenario mapping.

The benefits of investment have not changed, albeit to gain the full benefits other factors have to be considered.

Where once a new press was almost a like for like replacement, offering some advances in technology to accelerate make ready and a faster running speed, now a new press, even if an offset press, is a fundamental shift in technology that demands training and wider cultural changes perhaps to maximise the potential.

The BPIF lists the benefits of innovation in this way: improved efficiencies, reduced time cycles, better product delivery, margin improvement, increased service and product value, culminating in increased profitability for the business. On the other the risks of poor decision making are magnified.

This can happen because of false assumptions, inaccurate assessments of the probabilities, reliance on expectations, poor measurement of results and lack of knowledge about the true state of the business currently.

An investment can fail for any or all these and it will not paper over the cracks.

The report examines the questions that a company should ask itself before setting out on a round of technology testing. These are all about the business and should take into account the cost of disruption from the installation of new equipment. This may vary according to the time of year.

But it is clear that investment is necessary: “Structural change across our sector is forcing greater strategic thinking. Risks associated with early adopters due to technology can be great being an issue for those looking at newest technology.This again is why decision making needs more robust processes surrounding it. We will all have experience of wrong decisions impacting a business greatly.”

Other factors are also highlighted in answers from participants. Many will involve customers in the decision making process, though not as many as did so at the start of the decade. This time around 74% say they involve customers; in 2011 the BPIF found that 89% had involved customers.

And printers point to the gap between what has been promised in terms of performance and what actually happens after an installation. There are requests for true ROI calculations based on actual cost of ownership, better training, better support and especially post investment evaluation support.

The report introduces the tools that business leaders have developed to add objectivity and understand the motives a business might have for investment and then the rules and processes that determine a best practice guide for printers.

It suggests the fullest engagement with staff and stakeholders is important. “At the end of the day most people’s futures are bound up more in the future of your business.

“Make sure you can verbalise your vision for the future and also understand how open you are to the great things that are happening across the sector. Setting about changing the feeling that you are besieged is a good starting point and use organisations like the BPIF with their access to data and information and others to inform and educate.

“It was encouraging that survey respondents gave a resounding yes to involvement of team members in the decision making process. Tasking individuals or groups with research or feedback on the implications of the investment is vital alongside creating cross functional teams with responsibilities to provide input on options and implications.”

And it says do not be afraid of disagreements as these can test the strength of decision and will bring out different strands of thinking.

Involvement of operators at an early stage will ensure that they feel greater ownership of a decision and will have a vested interest in making it work. The converse can also apply if operators feel that the equipment is imposed on them. There are numerous ways for an investment to fail to have the expected impact.

Follow up assessment can highlight training issues a few months down the line and should involve the supplier, particularly if the investment introduces a completely new way of thinking. Likewise the company needs to work out what might go wrong.

According to the survey, 69% do this sort of scenario mapping, and over an extended period. This should include the costs of support and maintenance after the warranty period expires.
Part of looking at the potential for something to go wrong includes an assessment of what might happen without an investment.

There are alternatives, says the report and they should be considered. “There are many other options and they should be compared and contrasted in relation to investment in achieving your overall strategy.

“Review outsourcing, joint ventures and collaborative agreements, merger or acquisition or indeed a trade sale. Is it a time to evaluate risk and reward in a more creative way? Make this an integral part of your business planning and strategy planning. Where do investment opportunities place us for the future?”

The greatest problems are perceived to relate to suppliers and the printers not sharing the same outlook. One company says it retains a slice of the payment until the machine is performing to expectations. Others are looking for regular training updates and support at regular intervals.

Communication of expectations on both sides needs to be clearer than perhaps it is in the heat of the installation. It seems that many printers feel that once an installation has been made, the supplier loses interest or the experience of what has been an expensive investment fails to live up to expectations.

“If you buy a top end piece of equipment, you do not expect it to break down,” says one.

But criticism is not universal. Another printer notes: “The majority of suppliers we have worked with seem to have excellent pre-install service, post install generally ok, some of the training can be top notch, others less so. If they can come up with a project plan, agree the critical path with us and then deliver against that we are happy.”

The decision making report is closely tied to the work that the BPIF does with Vision in Print in its focus of lean management techniques and the concept of OEE as well as Value Stream Mapping. “It is surprising how often organisations buy expensive new kit or undertake a major productivity drive without understanding that it will not increase over-all throughput. The first step is to confirm that the equipment to be evaluated is in fact the critical resource in the whole production process,” it says.

The Value Stream Mapping process will help identify bottlenecks in a production system and where an investment ought to make the most impact.

There is a section on establishing service level agreements to manage some of the ongoing relationships with suppliers. These should work to the benefit of the printer. It is easy to feel that a maintenance contract works too much to the benefit of the technology provider.

It can feel that making an investment is like a blind man stepping into a minefield where only the suppliers know where the mines are buried. It is a stressful process for any company, large or small.

However, investment must go on. As the report notes: “Companies that get investments right will inevitably capture the most profitable opportunities, clients and markets. Companies that don’t will be left to compete on less favourable terms and less attractive returns.”

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BPIF 2017 Summary Report

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