Above: Konica Minolta President & CEO Sam Errigo offers an honest assessment of Konica Minolta’s supply chain challenges during the General Session.
It’s been a while since I last attended a vendor dealer meeting in person. That’s because there haven’t been any since the pandemic started. For me, the Konica Minolta Business Solutions dealer meeting on April 25-26 was a nice first step in getting out and about.
This was a different Konica Minolta dealer meeting than past events, including its streamlined pre-pandemic events. For one, this was a hybrid event with nearly 70 dealers attending live and the rest remotely. Second, the business portion took place at Konica Minolta’s Customer Experience Center (CEC) in Ramsey, New Jersey. Attendees stayed at the W Hotel in Hoboken, about 45 minutes away, which was also the setting for the opening night reception.
Tuesday’s schedule was jam-packed, beginning around 9:30, breaking for lunch at noon, and then starting again at 1 with the breakout sessions before concluding at 4. As Laura Blackmer, president of Konica Minolta’s dealer channel, noted, it was three days of content condensed into one. It was a grueling day, including fighting the New Jersey rush-hour traffic from the hotel in Hoboken to Ramsey. All things considered; a single-day agenda is a recommended model for future dealer meetings.
Honesty is the Best Policy
It’s no secret that Konica Minolta has been seriously challenged by supply chain issues. This was the first topic on the agenda during the General Session with new President & CEO Sam Errigo candidly acknowledging the challenges the company is facing, and what Konica Minolta can and can’t magically make happen to solve the problem, while also noting that this is an issue that will likely continue for at least another six months. “The toner shortage, that’s on us, we have to take responsibility for that,” said Errigo. “We need to do a better job on toner fulfillment. We have toner and we need to make sure we’re getting it to our dealer customers. We are working diligently on a plan to do that.”
An important element of this plan is improving communication with dealers not only about toner but hardware. “Not only better communication but the best information at the right time so you can run your business,” emphasized Errigo. He reported that 75% of inventory in the first quarter will go to the KM dealer channel. “The direct channel is not happy right now,” he acknowledged. “The direct channel, I can control, and there are things I will do to take care of that, but you have a business and people and customers you need to take care of. I am personally obligated to make sure we succeed.”
Errigo noted that he was 95% confident about inbound inventory, emphasizing that the company was only planning and communicating about incoming product status one quarter at a time. “I have 23,000 units coming in between now and the end of June, less than I wanted, but I’ll take it for now.”
The company is also air shipping products to the U.S. as a way to navigate around issues at the ports. “We know you need monochrome, and we have to make sure we keep the supply chain moving,” said Errigo.
For some dealers, particularly single-line Konica Minolta dealers, this update may not have been exactly what they wanted to hear, leaving some I spoke with dissatisfied. However, give credit to Errigo and his team for telling it like it is rather than offering false hopes or not addressing the issue at all.
FY 2021 Business Highlights
During the General Session Errigo presented Konica Minolta’s FY2021 business highlights. Those included:
- Business YOY total revenue was flat despite supply chain issues.
- Managed services/IIM exhibited modest growth at 3%; supply chain issues with many IT components resulted in $9 million in backorders which are excluded from that number.
- A continued focus on operational and margin improvements.
- Service revenue was up 6% YOY although it is still not back where it was in FY2019. Errigo expects service revenue to reach 90% YOY compared to FY2019 in KM’s current fiscal year.
- The industrial print channel was up 151% YOY. The U.S. led worldwide sales for KM1 and MGI placements.
- Monthly recurring revenue (MRR) for managed IT/Intelligent Information Management (IIM) achieved 54% and core MFP business achieved 45%. “Recurring revenue means it’s highly predictable,” said Errigo. “My objective is to get that to 80%. This is one of our key objectives. If there was one lesson learned during COVID, if you are not moving to a fixed revenue stream guaranteed with locked terms and conditions, get on that bandwagon. Customers are expecting that.”
- Freight costs increased YOY by more than $18 million. “Those are things we need to absorb,” acknowledged Errigo. “We watch this carefully and hopefully we can adjust it.”
It’s DX and Diversification time!
KM remains committed to its core business, but the company and its dealers need to look beyond the core, according to Errigo. He cited managed IT, IIM (the company’s ECM offerings), security, and production and industrial print as areas for dealers to explore beyond traditional office print. During her presentation on new dealer programs, Blackmer acknowledged that in the past KM didn’t define what DX was. “It’s basically solutions,” she said. “Visual security solutions, IIM solutions, managed IT solutions, security, all the pieces that didn’t have a home are now tucked under one category—DX.” All these solutions are focused on diversifying the KM portfolio. This was a message that Konica Minolta executives relayed to dealers throughout the General Session and the breakout sessions.
In the Cloud
One can easily describe Konica Minolta’s cloud initiatives as part of its DX strategy, but we’re giving this special attention because the company is bringing its customers and its dealers into the cloud with a suite of cloud productivity solutions and new A3 and A4 MFPs with direct links to the cloud. Both breakout sessions I attended, “Supercharge Your DX Strategies” and “Go Full Throttle with Your Cloud Strategy” provided dealers with a solid overview of the company’s cloud initiatives, and new products that leverage the cloud will be unveiled later this year.
Simplifying All Covered
For years we’ve heard how the OEMs want to make it easier to do business with them. This year it was Konica Minolta’s turn to take that message to its dealer channel with its All Covered offerings. What used to look like a New Jersey diner menu, as Blackmer described it, has been simplified. One element is the KM MSP Partner Program, a highly invested program that will probably appeal to no more than 20 or 25 dealers, according to Blackmer. KM will help dealers who participate in this program hire the resources to sell these solutions, develop compensation plans, assist with demand generation and the back office, and help dealers execute the program. “It’s a highly intense, highly partnered program,” she said. For those dealers who don’t participate in this program, a separate program will allow dealers to pick and choose which solutions they want to resell under a white-label model.
Introducing KM’s Customer Experience Center
If you didn’t read our September 2021 article on the Customer Experience Center (CEC), I encourage you to click on the link to learn what makes it so special. For many dealers, it was their first time visiting the CEC and during the event, Errigo invited them to bring their customers. Even for a hybrid event, things were a little tight in the General Session between the dealers, press and analysts, and Konica Minolta personnel. The rest of the CEC was spacious enough to handle a group this size—approximately 150 overall. Two minor complaints, not enough bathrooms (the line for the men’s room was like a line at a sporting event), and not enough seating for those who wanted to sit and relax between sessions (not that there was a lot of time between sessions).
Growing Market Share
Growing market share is a high priority. Errigo pointed out that some dealers grew print volume by 50% YOY in select markets. He didn’t specify how many, but he did explain how. “The way you grow volume is you have to take market share,” said Errigo. “We want to take share from our competitors.” For the record, Errigo reported that KM currently has a 17% market share and is committed to growing that. One strategy for accomplishing that goal is through the new dealer programs that Blackmer shared with dealers. It will be interesting to see if this works, particularly since some OEMs are looking to take market share from KM in light of some of the challenges KM has been facing during the past year.
The Sum of Its Parts
There were plenty of plusses and just a few minuses from my perspective.