The guiding force at Epson America discusses A4, inkjet, and market disruption.
Following Epson’s dealer conference in early March, The Cannata Report interviewed Epson America’s President and CEO Keith Kratzberg. The conference and post-conference telephone conversation were our first opportunities to speak with Kratzberg. He joined Epson 24 years ago, starting in sales and marketing, and was appointed to his current position four years ago. This is an edited version of our conversation.
CR: What products was Epson selling when you joined the company 24 years ago?
Kratzberg: The first product that I was involved with was our SoHo line of color inkjet printers. And 24 years ago is when we launched the world’s first photo-quality inkjet printers where you could print photographic prints at home. We did that with a four-color ink set and 720 dpi at the beginning, and soon that became 1440 dpi, six-color inks, and archival inks.
CR: I imagine you’ve seen a lot of changes at Epson over the years?
Kratzberg: It’s been an exciting journey. Epson has brought new technology to market and we have been either one of the catalysts or one of the major movers of different technology shifts across the imaging field, whether it was in printing, projection, or scanning.
CR: Let’s talk about here and now. What are your goals for the coming year?
Kratzberg: We have been working on a strategic vision that we call Epson 25. We are focusing on four areas of innovation—inkjet innovation using our Micro Piezo technology; visual innovation using projection technology and heads up display technology; wearables innovation [leveraging Epson’s watchmaking legacy]; and robotic innovation. We are going to organically grow the business across those different areas. Seventy percent of the company is printing, and almost all of that uses our Piezo and PrecisionCore technologies. The most important area of growth is in business printing, including the copier segment.
CR: Did you learn anything from talking to dealers who were at your dealer meeting?
Kratzberg: I heard that they viewed our approach to the market as positive and unique. Epson has a consistently channel-centric approach across all our businesses. We have a broad base of technology products and different customer segments in different verticals. It is in our DNA that we can’t do this on our own. Our channel partners are core to our success. We’re very nimble in working with the channel. One of our strong suits is that we’re very responsive to the channel in terms of what works and where we need to make adjustments. The feedback I got was that message was coming through, and they saw it in our actions, and they appreciated it.
CR: You have an excellent team around you. I’ve known Mark Mathews and Joe Contreras for many years. How important is it to have that knowledge of the independent dealer channel at your disposal?
Kratzberg: It’s absolutely vital. We are a disruptor, no doubt about it. Our technology is very disruptive. We will bring innovations to the market not only in technology solutions and in our go-to-market, but also we have to do it in a way that is win-win for us, channel partners, and end-users. That intimate knowledge of understanding how this channel operates is key to our success.
CR: Let’s talk about A4. Do you foresee a time when A4 multifunction sales will surpass A3 sales?
Kratzberg: When I look at Epson’s business globally, we’re selling over 15 billion A4 multifunction desktops a year. In terms of the desktop market, that’s the biggest business we have. You’re probably talking about 30 ppm to 60 ppm A4 multifunction. I think there will be tremendous growth there.
CR: What do you think will be the drivers for that growth?
Kratzberg: We will definitely be part of the drive to that. One thing that is clear is that the U.S. market is unique in terms of the demand for A3. I’m also responsible for the Latin America market. And in Latin America, A4 is much stronger than it is in North America today.
CR: Do you think you could apply the knowledge you have of that market and the strength of A4 there to the U.S. market as A4 picks up steam here?
Kratzberg: I look at it a little bit differently. The bigger driver will be what people talked about at our dealer conference—and I’ve heard it at other dealer meetings—that over the last 20 years what the industry has been doing is centralizing print in the organization—taking out the smaller machines and centralizing print for cost savings and efficiency. With our technology, you don’t need to do that.
We already have dealers that are successfully moving things in the opposite direction because of either our desktop units or what we call our RIPS (Replaceable Ink Pack System) units with the high capacities—50,000 pages mono and similar in color on an A4 machine. Now, you have the ability to have a TCO [total cost of ownership] on the smaller machines that’s competitive to the big machines. It changes the model in terms of managing the cost, managing the maintenance, and in a lot of cases, you can meet the end-user customer’s needs better with that model where you can put the print closer to the person who’s printing. That will be the impetus for change. With more machines, there’s certainly not the need for so many of them to be A3. Some will be A3, but you certainly don’t need the majority to be A3 in the United States.
CR: As we move toward that reality, do you think we’ll see more future A4 MFPs incorporate A3-type features such as finishing?
Kratzberg: I do. Are you familiar with Epson’s product lines in the other categories? Where we’re No. 1, No. 2 in the market? Things like our SoHo inkjet printers, our business projectors, our home entertainment projectors, our point of sale printers? Have you ever looked at the breadth of those product lines? If you look at the way Epson goes to market, what we do is organically expand our product lines step-by-step to address user needs. What you end up with is that Epson generally has a broad product line for the categories in which it plays. I expect that will happen in this business as well.
CR: Going back to inkjet, it seems like you are using your technology as a differentiator?
Kratzberg: What I would say is unique about Epson’s inkjet position is the core technology. Our proprietary Micro Piezo technology, there’s really nothing else like it in the market—in terms of the performance, the precision. It is a lifetime component; it’s not a consumable. That is unique and different than the majority of what the competitors have with their thermal technology. Second is the scale of production we already have with that technology. Our PrecisionCore technology is designed for modular design of printing machines. We make machines that cost around $100 with one PrecisionCore chip, and we make industrial textile machines with hundreds of chips that sell for north of $500,000 into industrial markets—same basic technology. That’s a technology that’s used in the multifunctions. Our manufacturing scale today is in the tens of millions of print heads per year. It’s been that way for a decade. We are at a scale of Piezo production; there’s no one even close to us.
CR: Is there anything that you would like all independent dealers understand about Epson inkjet and how it can impact their business?
Kratzberg: The dealers are excellent businesspeople. The way they’ve managed their businesses has been perfectly logical to the core printing technology that they’ve been selling. The reality is the core printing technology hasn’t changed much for two decades. The technology has been stable, and the things that they’ve done in terms of service and managing MIF, financing, and providing additional services has been great.
Now, you have a situation where there is the opportunity for a shift in the core technology. It’s analogous to the shift we’re about to see from gasoline-powered cars to electric cars—less parts, less service, better performance, more environmentally friendly, a better experience. Getting printing closer to the end-user is enabled by this technology. The shift is about to happen.
You have the technology and now, dealers have to react to a different driver than they did when the technology was stable for two decades. My encouragement is what I have seen in many other businesses where Epson was a technology disruptor. I’ve seen great success and transformation in the photography market, the professional graphics market like pre-press where the company went through the technology shift to inkjet, and in the science market where Epson went through a shift to inkjet printing. I’m seeing it now in the textile market. Across all these different markets, there were different groups of dealers, and the ones that embraced the technology and decided to be leaders, not laggards, a lot of them were successful. I don’t see any reason why that can’t be the case for these BTA dealers.
CR: Do you have a final message for our dealer audience?
Kratzberg: Partnership involves two-way communication, and we want to hear from dealers. We have a good message for them, but we want to hear what their needs are and what’s working for them. What they should expect is for us to be extremely nimble and fast-moving to respond to their needs.
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