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What’s next for Ricoh, Konica Minolta, & Xerox?

October 21, 2008

If you follow the Copier Industry at all, you would have to be living under a rock not to know that Ricoh is buying IKON (should be a done deal in November 2008), Konica Minolta bought Danka, and Xerox bought Global. These three (IKON, Danka, & Global) were the last three independent nation wide office technology dealers. They have all since been swallowed up by a Manufacturer.

Each of these three nation wide dealerships came into being by buying up smaller local or regional dealerships. Two of the 3 (IKON & Danka) had a “resistance is futile” mentality (my apologies for the Star Trek quote). They consumed and absorbed the dealerships leaving behind no discernible trace of the former dealerships name or existence. Global had a different model, and allowed the dealerships that they purchased to pretty much function autonomously providing they turned an acceptable profit. This difference accounts for why Global was more profitable than Danka or IKON. Often time the end user would not even be aware that their local deal was now a part of Global. It is not that a growth through acquisition is a bad strategy (Global did well with it), rather it is the assimilation, and centralization that has failed in this industry.

So enough of the history lesson, what do Ricoh, Konica Minolta, & Xerox do now that they each have a large (formerly independent) sales & service organization to absorb. Ricoh really has just finished (or by some accounts is still trying to finish) absorbing Lanier. They still seem to be shaking the management tree and people seem to be still falling out of it. With the task of merging Lanier into Ricoh behind them and the task of merging IKON into Ricoh before them a state of uneasiness and “merger fatigue”  will likely continue within this organization. But they did eventually merge Savin & Lanier into Ricoh and one assumes they will get through the IKON merger given time. But to what end? Past performance is the best indicator of future performance. And those who do not learn from history are doomed to repeat it.

When the dust settles and IKON is only a historical reference what will Ricoh be? Will they be the IKON of the direct manufacturers? IKON’s model was growth through acquisition. Hey! That seems to be Ricoh’s model too. How did it work out for IKON. It was pretty good for a while. The stock price was high, and they were the 800 pound gorilla in the industry. But once the acquisitions stopped and they had to make money the old fashion way, by running a profitable business, they seemed to struggle considerably, stock tumbled, heads rolled as they kept making changes trying to find the “magic bullet” that would solve all their problems. At one point I heard that they actually split a City (B*st*n) in half, letting one branch manage one half of the city and another branch manger the other half. I guess when you are desperate to not be the next one to get fired you try even stupid ideas. But being different just to be different has never been a sound business practice. One Systems Enginer that I hired away from IKON many years ago said he got tired of someone above him alway “moving around the coconuts”, hoping that this NEW arrangement would fix their problems. But I thought we were talking about Ricoh, not IKON. We are talking about Ricoh running into the same problems that IKON did, because they have the same model (growth through acquisition) and the same mind set assimilate the purchase until there is no disernable trace left behind. Seeing as IKON and DANKA have already failed at this model why would we think that Ricoh (or Konica Minolta) will succeed? You could argue that they have more money and that’s true but that in and of itself is not a gauruntee of business success. You still need to run a profitable business, at which IKON & Danka both failed with this model. Did you notice that I have not been mentioning Global. Global had a different model and they were successful with it. When I talk to friends within the Global organization they tell me that they still have been allowed to continue, for the most part, running their own companies \ branches. There is of course a push to sell more Xerox. Will Xerox continue this model? It’s hard to say, but compared to IKON & Danka you can easily argue that it is the only one of the three that truly had a working model. I don’t know if Xerox will have the courage not to assimilate and centralize Global. Time will tell.

Back to Ricoh & Konica Minolta, I forsee them having the same problems that IKON & Danka had. Why would this be surprising seeing how they are following the same business model, growth through acquisition. Do you think that Ricoh or Konica Minolta have much smarter people running their companies than those who ran IKON or Danka? Many of them may be the same people. It is a small industry. The flaw is in the model. Global’s model worked, IKON & Danka’s model failed. Which model do you think Ricoh, Konica Minolta, and Xerox are more likely to follow? Time will tell.

That’s my $0.02
Vince McHugh
VP \ Network Solutions

vince.mchugh@yahoo.com

PS: Here we go again. Rumour has it that KM may be looking at OCE to fill their gap in the higher end segments.

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