2022 – The Year of the Chicken

It’s hard to believe that yet another year has passed us by.  As I age, my parents’ comments about time moving faster as one gets older are beginning to ring so true.  No doubt last year will go down as another one of the more challenging years in recent memory.  The fact that it has ended may be the best aspect of ringing in the new year.

While we did see the primary impact of COVID-19 finally begin to wane, this was quickly replaced with supply chain challenges, difficulties in determining the proper office/home balance, a new COVID variant, and rampant inflation.

Despite all of these issues, businesses in many industries continue to adapt, finding ways to ultimately overcome the obstacles that would normally lead to business contraction.  Taking the stock market as an example, corporate earnings continued to be strong and retail sales at the end of 2021 set new records.  All of this contributed to annualized returns of 28.7% and 20.7% for the S&P 500 and Nasdaq, respectively. However, history has demonstrated that like any industry, the overall market is cyclical.  As a result, the market run we have experienced over the last 10 years is likely to come to an end at some point.  Is 2022 the year?

The Lunar New Year, beginning February 1, marks the beginning of the year of the Tiger, the king of all beasts.  If this is a metaphor for business performance then it may just stand to reason that 2022 might not only deliver great results, but the challenges that have impacted business in the past several years may ultimately dissipate, leading to even better performance.

While it is quite likely that a number of industry sectors will in fact see economic performance akin to the power of the tiger, it is a bit more difficult to predict how the office technology industry will fare in 2022 when compared against companies in the technology, healthcare or pharma sectors. In fact, I would predict that with respect to the office technology industry, 2022 will go down as the year of the chicken.

Quite a contrast you say?  Well, let’s break this down a bit.

When we think of tigers, we conjure up images of strength, cunning, intelligence, and speed, all attributes that are hallmarks of successful businesses.  The chicken by contrast gets quite the bum rap.  When we think about chickens, we generally think weakness, lack of intelligence, and fear, none of which are ideal characteristics of high performing organizations. The one attribute where chickens have an advantage over tigers is their numbers.  Let’s face it, tigers, for all their strength, are on the verge of extinction while the lowly chicken seems to be doing just fine.  Maybe being a chicken is not so bad after all.

You’ll be pleased to know that I am not trying to make a direct comparison between office technology companies and chickens.  Frankly, office technology companies, both OEMs and dealers, have proven to have attributes more akin to tigers, particularly when considering the adaptiveness shown over the last several years.  However, when thinking about the industry as a whole and thinking about chickens, one has to wonder if 2022 will be the year that the chickens come home to roost — a phrase that became popularized in Robert Southey’s 1810 poem “The Curse of Kehama, where he famously wrote, “Curses are like young chicken: they always come home to roost.”  Since then, this phrase has been synonymous with actions in the past haunting those in the present or future.

This is the dilemma we find ourselves in when considering today’s office technology industry.  The past two to three years have created an environment of unprecedented challenges to industry revenue and profit.  While this has impacted the industry economics with respect to the sale and service associated with traditional hardware, it has been even more severely felt with respect to typical revenue/profit derived from print volume.  What has the industry done to address such issues?  Have we seen new business models?  Has the industry consolidated?  Have there been dramatic swings in market share?

My own analysis of the industry leads me to the conclusion that throughout the challenges experienced over the last several years, the industry and its participants look very much the same as they did prior to recent difficulties.  What does this say about the prospects for 2022?

If we look solely at financial results attained last year, most players reported excellent growth when compared to 2020.  Are we deluding ourselves into thinking that 2021 performance is indicative of anything (other than the fact that 2020 was a disaster)?  I hope not.

The fact of the matter is that 2022 will ultimately tell us a lot about the ultimate health of the industry.  Assuming we see a steady return to standard business operations, we will ultimately learn about the impacts of remote work, digital transformation, workflow automation, and the effect these and other market factors will have on industry health and the economics of all industry players.

As 2022 flies by it will be interesting to see whether the industry will roar like the mighty tiger or whether the chicken will ultimately come home to roost.