Heidelberg looks at new ways of bringing value to its customers

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We first met Heidelberg’s new CEO Rainer Hundsdorfer at Interpack in May, together with Ferdinand Reuesch of Gallus who has now become the company’s largest individual shareholder. As a part of the Asia Pacific journalists’ delegation to the Heidelberg Packaging Days event on 8 November 2017 at Wiesloch, Patrick Howard of Print 21 in Australia and Naresh Khanna of Indian Printer and Publisher and Packaging South Asia spoke with Hundsdorfer about the print and packaging industry and where Heidelberg is going.

Patrick Howard: How do you think the industry sees Heidelberg in light of some of the setbacks in the past decade?
Rainer Hundsdorfer: “In my first days in the company, I visited around 100 customers around the world and the customers said they want Heidelberg to be successful. This is perhaps more critical for the small and medium companies (mid-sized family owned companies) who want us to help them to become industrialized companies. This is because they know that if they don’t become more efficient or industrial, they will not be around; and they want Heidelberg as a technology partner for the whole process.”

Naresh Khanna: How will you be able to help smaller companies which are owner managed since professionalism and industrialization requires investment in human capital as well?
Rainer Hundsdorfer: “It is not only human capital but also processes. It is to automate these processes that is key. To move from craft to industrial production. This is important for our smaller customers while the bigger ones are already better structured and they only want faster and more perfect machines from us.”

Rainer Hundsdorfer made clear that for Heidelberg, which is still small in the digital sphere but now ready with a digital label press placed at the more than a dozen customers and with the Primefire 106 placed at its first packaging customer, going digital means not just digital printing but to be an essential player in the larger digital ecosphere encompassing manufacturing, controls, software and turning customer data and the company’s expertise into useful tools for its customers.

Hundsdorfer: “This [digital] is not only for print . . . Innovation only makes sense if creates value for the customer . . . . Heidelberg needs to turn big data into meaningful technologies for its customers and their customers,” he said.

“When I say using customer data, we are really talking about AI [artificial intelligence]. We have the data, and now it up to us to create value with this data such as software tools and expert systems. We already have expert systems in our new make-ready software and in the new Primefire digital press.” 

PH: Tell us a bit more about the consumables and the subscription model. How is that going to work?
Hundsdorfer: “A key pillar for Heidelberg’s growth is in the Saphira consumables business, an area where we see growth for the company without the volatility associated with capital equipment sales. There is an opportunity in trying to add value and streamlining some of the purchasing and inventory costs associated with the procurement of consumables.

“We want to become the supplier of consumables to our customers where they don’t need to order anymore; where the materials are always there for customers with whom we have frame contracts. We can streamline some of these procurement and supply costs by having suppliers work with us.

“Coming from a manufacturing background, and having lived all my life with machinery and machine tools, we’ve done that. We want to take away some of the chores from our customers and automate them. Our industry is a little bit behind in this but we have to help our customers become automated. By doing this process we will become a kind of Amazon of the printing industry.

“Now one step further is not only providing to a customer all the consumables that he needs automatically from us but to say to the customer that he only needs to only pay for the output. To put ourselves into the responsibility for providing all the inputs. This is pretty much the same concept as the click charge of the digital printing industry. Ultimately, the customer will pay only for the output and we will build up a subscription model.

“This model may only work for the successful customers – they can lower their risks and get lower costs. So maybe what we can do today with four machines, can be done in the future with only two machines if we take the responsibility for high performance with 24/7 uptime. From these type of customers, we have all the data. The customers will have less risk and lower cost on one side and we will have more business. Of course this will only work if it is a true win-win for both sides. We already have ten customer machines that are using the subscription model.”

NK: To go back a bit, has Heidelberg been living on the brand too long?
Hundsdorfer: “Customers in the US recently told me that Heidelberg is still an iconic brand. Heidelberg has done an excellent job in spite of the past crises to keep its customers happy and to stay in the lead of the technology. In some of the other areas it’s more difficult to keep up in a time of huge changes; not everything is always possible simultaneously, and we need to get back on track.

“We need to do everything. The brand is important but as innovation is in the DNA of Heidelberg so is operational excellence. Heidelberg used to be the lighthouse in operational excellence. During the crisis years, we lost some of that and we have put together some projects to bring back the financial performance because that’s important too for our customers—nobody wants a supplier who is weak. I remember 15 years ago when you wanted to see how modern machine making was done, you went to Heidelberg. We want to come back to that. We’re good and better than many but we’re not the lighthouse and that’s what I tell my people and they’re with me. We want to become a lighthouse again, not only for the brand but as a company.

“That’s my goal also to bring back to Heidelberg operational excellence and the eventual outcome of this is financial excellence. Like innovation, the result of operational excellence is financial excellence. I don’t believe in financial engineering, and even for our customers the key is operational excellence, only if the business model is outstanding can you achieve financial excellence.”

PH: What is the one thing that would change in the company. Is it right sized?
Hundsdorfer: “The size is more or less right but we need to renew our structures and processes to make us faster and more efficient. We have 11,500 employees and we will grow the business. We need to make the equipment more productive in a market that is only growing by 2% or 3%.

“Of course this is a bit difficult if you increase the productivity by something like 10% or 20% like we saw on some of the new technologies on our presses this morning. It is going to be difficult and we need to go into new areas such as the digital printing business but a new area is also the life cycle business. The life cycle business is much less volatile than the equipment business. We want to be solution provider to our customers. We are the experts for print performance and productivity.

NK: Is this only for the new press customers or also the older machines? Will customers have to buy new machines with all the sensors to generate the data you need to improve their operations?
Hundsdorfer: “The subscription model only works if there is value and this means that it is largely for the better printers and more successful printers. We will use our expertise and the data to optimize the workflow. Our machines are complete; we already provide these sensors in our presses. In the machines from which Heidelberg extracts data to its cloud, there is no extra cost for the customers—the sensors are already built in. The issue is to use this customer data to create additional productivity.

PH: You have partnered with various companies. Do you see that as a part of the future?
Hundsdorfer: “In a digital world, partnerships and networking are necessary. You cannot be do everything yourself but you need to optimize the process. In our industry Heidelberg is the only one that can do that and we are closer to being able to do this than anyone else. Even with our software products such as Prinect our idea is to extend the product, to bundle and supply. To optimize the whole process, we must also look at the SAS model for making our technology available as and when it is needed.”

PH: The car charger business, where did it come from?
Hundsdorfer: Heidelberg has expertise and people and this is an area where we can use our expertise outside our main industry. Charging systems for the big automobile OEMs is interesting because mobility is a fast growing industry and with higher profitability. With a reasonable investment we can get a really good return.

“But let me say that Heidelberg can also grow in the printing industry. The graphic arts sheetfed press market is now Euro 2.5 billion and Heidelberg has almost half this this market, or let’s say somewhere about 45%. As far as the digital market, which is also about the same size of about Euro 2.5 billion, here Heidelberg is small (maybe less than 5%) but we have got our foot in the door and we can grow.

“But the really interesting part is the consumable business. The consumable market is Euro 8 billion and here Heidelberg has only 5% market share. If we can add value here and develop automated ordering, doubling our share to reach 10% is probably is no big deal and it may even be possible to reach 20 to 30% of the market. However, in former times this was not our focus and even now, if we merely act like a dealer we will not add much value.

“But if we can add value, if we do it right and if we can offer customers what they need to order but everything reaches them automatically, it is ultimately a win-win situation and we have a huge potential. If we find a way to add value to the consumables then we will grow. Additionally we will eliminate some of the risks and the volatility in our business. The customers who use our supplies will be more successful than the ones that don’t.”

NK: What is the overall perspective for Heidelberg going forward?
Hundsdorfer: “Overall the press market is flat with maybe 2 or 3% growth. Europe and North America are static, while South America and Eastern Europe are coming back, and Asia is growing. Commercial printing is also flat and while packaging is today more than 30% of our business, in five years from now it may be 50%. We are very focused on packaging as you can see from the demonstrations here with the new technologies and our partnership with MasterWork.

“The future lies in new structures and processes such as digital, streamlining the consumables with eCommerce and automation and the use of big data for the optimization of printing and the subscription model where the printer only pays for output. I believe the industry will be successful and Heidelberg with it.”

This article first appeared in the December 2017 print issues of Indian Printer and Publisher and Packaging South Asia.