by Patricia Ames
The Imaging Channel sat down with Doug Albregts, president of Sharp Imaging and Information Company of America (SIICA) at the Executive Connection Summit in Scottsdale and learned that “laid back” can be quite irresistible. Join me in the SpeakEasy.
How long have you been in your current role at Sharp?
I started November 2011, so I’ve completed my third year.
So how’s it going?
The technology wasn’t new for me, but this industry was new for me. When you look at the industry in terms of running it from a manufacturer perspective, there are a lot of things we can clean up and do differently and be extremely profitable. One of the things we’ve done in the last two years is grow our operating income by triple percentage digits by just changing the mindsets around working capital and focusing on specific efforts to drive the business.
For me it’s been a heck of a ride. I’ve learned a lot. I enjoy it; I embrace it. I’ve made friendships that I’ve never had before. I’ll have lifelong friends among our dealers whether I am in the job or not. I have a great deal of respect for what they’ve been able to do. It’s a very complicated business.
Those are big changes you’ve made in a short amount of time.
Sharp committed to a direction — they did not want an industry person in this position, they wanted a business person with a technology background. They wanted someone to look at this as a technology business, not as “I’ve been a copier guy for 30 years, and I’m going to do it the same way.”
The decision to hire me was controversial. I came in with an open mind to a lot of negative press and a lot of negative feedback, honestly.
I am sure it gave you some gray hair!
Yes, it gave me some serious gray hair. And then shortly after I came into this job, Sharp had its financial crisis.
And people are still talking about that.
Yes, and rightfully so. I understand why they are talking about it. But the Business Solutions Division, which is the B2B division within Sharp we are part of, has always done exceptionally well. Looking back on it, Sharp made capital investments during that time that they probably wish they could have back. They invested heavily in LCD manufacturing right when the global economy collapsed in 2007/2008. The entire company suffered as a result and clients and prospects kept asking us in the last few years if we were going to continue to be in business.
It was a vulnerable time in general, though, not just in this industry. Business history is littered with the regrets of bad decisions made by every major company at some point. It just happened to be one of those “perfect storm” type of moments for Sharp and it really did look from the outside like it was going to collapse in 2012.
It looked like it was teetering! But I never lost the faith, because most companies, when they have a problem, it is because they CAN’T sell something. There’s usually a dropoff in demand.
Yes – a good example of what happens when consumers do not want a product anymore. That is an acute situation. Ours was because of the aforementioned poor investment decisions; it was never a problem around demand for our products or how the company was operated. It wasn’t an overseas issue, it wasn’t a tax issue, it wasn’t a technology issue. I see that as a positive for us because in the last two years, not only have we grown our operating income, we did it at the same time we were growing revenue and we also did it during a financial crisis.
That’s a crazy and interesting first couple of years for you. I am sure it was a rough ride, because you had to navigate all those big waves.
Absolutely. But along the way I’ve come to respect a lot of things that have been done exceptionally well in this industry. The goal is to leverage that, be careful not to change it, and then infuse some innovative thinking. At Sharp, we’ve changed our culture and a lot of other things internally — we’ve taken on the mantra of becoming the “irresistible partner” for the dealer channel. We have to be easy to do business with. There’s a lot of competition. It’s cliché to say “we have to be the best partner to do business with,” but the reality is it is the path of least resistance. For the dealer, you have to have great product, good performing equipment, good people, simplified programs and the ability to track the programs, and training on the normal topics as well as concepts like working capital. We did all those things along the way. We’re the only manufacturer that has such a large number of dedicated single-line dealers. We have over 130 committed, Sharp-only dealers at this point. In a community of over 430 dealers, in order to get that, you have to be an irresistible partner.
I continue to tell my team that it is extremely important for us to strive to get to “irresistible” because there’s always something that you can do better.
What do you see as some of the biggest challenges right now?
The industry is somewhat under siege. Our dealers have been able to succeed by flipping a copier and a service contract and margins have been very strong. Now we are at this point where that doesn’t always work anymore — it’s not enough. If you do not change your business model you are likely to end up going out of business.
The business model has to change because the number of dealers are dwindling and it’s not just that they are dwindling, it’s HOW they are dwindling. The strong are getting stronger and the meek are getting meeker. And the meek are getting bought or they are going out of business. There is a lot of consolidation in the industry.
I worry about the health of the business. The IT VARs lost their margins a long time ago, so I see a lot of those companies going into service and I see a lot of startups heading into service because the buzz is around managed network services. You have to diversify.
I do think, however, that the imaging channel will win the day because of the service component — this industry is predicated on service. Service is the Holy Grail for the channel and along with service comes the margins if it is managed correctly and they diversify.
So, maintaining control of that relationship by migrating to a technology services type of company is probably going to secure their place in the new business world?
Well, at least focusing on the network, and managing all of the devices and software that are attached to it, not just the copier. Sure, the copier has the highest service level requirement, but why stop there? That was good enough five to 10 years ago, but it is not good enough today. You have to provide more value and create that “stickiness.”
There are some innovative companies in this industry. Marco is one of those that has a very home-grown and spirited managed network service environment that they support. They go in and they manage the entire network for their customers and it renders a copier almost a secondary thought. In a high-margin business like ours that is exactly the way you want to keep it. You don’t want it to come up for bid; you don’t want it to get looked at. You want it to just keep renewing for five, six, 10 years and own that space. You make it very difficult for a customer to get into an account when you own more than just a copier.
Obviously for Marco it is kind of in their DNA at this point, but it wasn’t always that way for them. How can Sharp help your dealers “embed” some of this DNA, change their corporate culture to a point where they are able to effect change? There are some barriers — mentalities, technology gaps, there are generational gaps. How can you help with this transition?
That’s a great question. I think the problem that has plagued the industry is that there is no standardization. This makes everybody’s job that much more challenging. There is not one dealer that is doing something the same way. The end game might be the same, but the paths to get there are all different.
What that means for Sharp is that we need to not only have our large dealer meetings, but we also need to follow up with aggressive road shows, and go to where our dealers are. We can help by providing training, reinforcing the message and staying on course, with the whole goal of enabling them to do something different. I can’t force a change in their business. I can’t tell them what to do or how to do it. But I can help them think in a different way and I can keep reinforcing that message, clearing a path for change and enabling a paradigm shift. Case in point, when I came into this industry, one of the first things I said is that we were going to stop doing buy-ins, we were going to simplify our programs and we were going to give dealers the same price every day — we were not going to load them up with equipment. We decided to focus on working capital instead and many dealers came to me and said “you’re crazy, you can’t do that — you’re going to get fired.” I’m still here.
Thank you! We decided we could use our money in a substantially different way. We decided to invest in the local market and in helping dealers provide solutions to their clients. We outsourced all of our logistics to Tech Data recently. We want our dealers to get the product they need in two to three days from the time they order so they do not have to fill their warehouses up to the rafters with product.
We’ve had several dealers that have been in the $20-$30 million dollar range telling us they’ve improved their working capital by $2.5 million dollars due to our initiatives. So, I guess to answer your question, we look at it as “enablement.” How do we enable the dealer instead of dictating to the dealer? Some of our competitors try to dictate. We try to enable.
Sharp is a large company. It has a host of resources that can be utilized for your division in North America and this channel. How does that help you?
In Tenri, Japan, the Sharp historical museum is one of the most amazing places you can go because you can see all the products Sharp has developed, starting with the mechanical pen. Their strength in R&D and technology is incredible. The simple fact is, however, that it has become a prerequisite to have technologically advanced equipment. If you don’t have that, you’re not going to sell product. You’re not even in the game. We always get people asking “what’s the next thing – what’s the new piece of hardware going to be able to do?” I feel like we’ve kind of come full circle.
This situation reminds me a little of miniaturization. There is a point with the keyboard for a phone, for instance, where you just can’t make it any smaller and still have it be functional. That’s when you started seeing the pendulum swinging in the other direction again and a shift towards larger screens on mobile phones. You’ve reached some physical level hard stop. You do reach a point where the R&D focus goes somewhere more productive, like applications.
Correct – there’s just not that much more from a hardware perspective left to be done, so a lot of the R&D starts to get switched to solutions like our MICAS platform, a cloud-based service engine, and remote asset management and how to manage materials usage. One of the big buzzwords right now is “big data.” We have a large initiative around big data at Sharp and how to collect all that data around the machine and utilize it in a way that provides value to the customer. I just don’t think that elements like “speeds and feeds” are as relevant as they were five or six years ago.
Where is your biggest investment right now?
We are redoing our website. We’ve launched our cloud portal office. We’ve launched MICAS. We’ve redone our dealer portal so dealers can now get up-to-date information and monitor what they’ve bought and where they are tracking to their programs.
MICAS is very exciting – it’s a sophisticated front-end engine. It has the business intelligence built into it that can help a dealer manage everything from metering to predictive/preventative maintenance while automating the data and the activity. This affords our dealers increased response times and effectiveness. We’ve now merged our system with Salesforce.com. MICAS also integrates with various back-end engines, including FORZA, which has an SAP foundation. These innovations allow us to offer our dealers more integrated functionality.
A lot of our efforts have been around this whole notion of how we become an irresistible partner. How do we invest in things that matter, how do we create stickiness? We are trying to create value-add that enables the dealers to drive a positive value proposition to their end-customers, which in most of our cases are in the SMB space. The SMB space is the sweet spot for us.
The growth and innovation in the SMB space is attractive.
We are focusing our resources today and tomorrow into how we can preserve that “annuity” this channel has. We obsess over this. MICAS collects data from many different areas and it is very predictive. Currently, a lot of proposals are made by using relatively old data and averaging it to project the number of black-and-white and color copies a typical business might print on a monthly basis and coming up with a price accordingly. Bids are won or lost using data that may not even apply to the case at hand.
Now our dealers can use MICAS as a predictive tool that will assess the actual usage before the bid ever comes up for renewal. Those are the things that make us the partner that can help our dealers protect their annuity stream. It’s of vital importance to us to be that partner and we know if we can do those types of things we are giving them a reason to be with us and stay with us.
It’s going to be far more valuable to know what you are going to do next, not just know what you are doing right now. Finding a way to manage the data to deliver that type of information is absolutely what needs to happen.
Transfer of knowledge is more important than margins. We’re trying to do everything we can to collect as much data, to house as much data and make as much as possible of our business more predictive. It’s a huge transformation in our business.
If your team were to describe your leadership style, what do you think they would say?
I can tell you, because we talk about it every day. They’d say I’m focused on the big picture. I’m not a micro-manager. My team does a great job of mixing the visionary piece with solid execution. I’m a pretty laid-back guy. I’m from Wisconsin, so it was a tough adjustment to the East Coast. People talk really fast and I get lost sometimes. I think my team would say that we try to treat all of our employees with respect, we try to treat our customers with respect. We try to do everything we can to communicate effectively. I think they would say that I am honest and my door is open and I don’t carry pretensions. I’m just a simple Midwestern guy.
Patricia Ames has more than a decade of experience in publishing, and is currently president and editor-at-large of BPO Media, which publishes The Imaging Channel and Workflow magazines. Ames has lived and worked in the United States, Southeast Asia and Europe and enjoys being a part of a global industry and community. Follow her on Twitter at @OTGPublisher or contact her by email at patricia@BPOMedia.com.
This article originally appeared in the January 2015 issue of The Imaging Channel.