Is The Imaging Industry Under a “Positive Illusion”?
Investors tend to be overly optimistic and too confident when it comes to forecasting returns. Newlywed spouses routinely hope and believe that their relationships will thrive, but research shows these hopes are often overly optimistic. People are basically overly optimistic (okay – it’s a generalization and I certainly can name a few people whom I wouldn’t call optimistic!). We tend to overestimate the chances of something good happening to ourselves and underestimate the chances of negative events. So what does this have to do with our industry? Perhaps a more than we think.
A recent headline caught my attention: “More growth predictions for MFPs”. The article referred to a forecast by Market Analyst HTF Market Intelligence, which predicts growth of 3.35 percent for the MFP market through 2021. Given the impact of MPS in reducing fleet sizes (an average reduction of 60% in terms of units during the first contract based upon Photizo Group research), the saturation of markets in business worldwide, and the slow-down in BRIC economics or at least the BRC portion it is really hard to imagine someone predicting growth.
So what gives? Two things. First, many OEMs are desperate for good news showing the market will grow to support optimist market projections to support a favorite project, or to gain more funding for marketing spend. Secondly, there are the natural human biases that things are going to be more positive in the future than they really are. Bad stuff happens to other people (and companies) – right?
Photizo Group believes that, for a number of reasons the market is entering a critical phase. One which is going to drive further consolidation of the market and declining unit and page volumes. We are being a contrarian in this – our competitors IDC and InfoTrends are forecasting growth. However, we don’t really worry about being contrarian. In 2006 we began saying MPS would be a game changer. At the time, and for several years there after, major firms such as IDC and Gartner said the market was over-hyped, that it was a passing fad, that it wasn’t that big of a deal. We were contrarian then, and we were right.
Understanding the potential for market contraction is particularly important because it requires very different strategies than growth markets. It requires a focus on business model and cost restructuring (not just reduction – but radical restructuring). Down markets require investment in process and logistics optimization which will drive fundamental shifts down in operating costs.
Most of us at Photizo Group have spent our career in this industry so we would love to call for growing unit volumes, increasing pages, and increasing profits for the industry. But we can’t – this would be a disservice to our clients and even our own integrity. As a trusted advisor to our clients, we have to give the unvarnished truth – whether it is easy to accept or not. And our view of the truth for the future is that we expect unit and page volumes to decline. And this is going to drive a fundamental shift in the industry. Are you ready for the shift?
 Handbook of Contemporary Behavioral Economics, Routledge Taylor & Francis Group, © 2006, p. 713
 Justin A. Lavner, Benjamin R. Karney, and Thomas N. Bradbury, “Newlyweds’ Optimistic Forecast of their Marriage: For Better or Worse?”, Journal of Family Pscyology 2013, August (27)4: 531-540