You should own your core business assets!

I have been working in the manufacturing industry for 6 years now, and even if I was quite a novice when I joined, my former experience in Finance helped me get some strong strategic convictions.

One of them is that industrial players must own their core business assets.

Since my studies in engineering, and my first role in the strategic department of a major banking group, I have learnt to observe and understand the business model of several industries. Among the different organizations I have studied, I have learnt how companies understand their core business and how they outsource most of the activities that are, for them, not core business.

I have always been impressed by how far some companies have outsourced most of their activities. Flexibility was the buzz word, asset light business was the path.

Quite often, my understanding was surprised by the economics of the situation. “But it is more interesting to own some assets, even from a pure financial point of view!” I was saying...

The fact is that it is not only more interesting from an economical point of view, but as well as a strategic point of view.

• On one side, not owning its core business assets, that means sharing the value with the owner. Which company would be fool enough to share the value of its core business activities with other parties (you may call it partners, but quite often, it is suppliers!) ???
• On the other side, the difficulty to have the right asset for its core business is certainly a real (pain?) point, but let’s face it: If it is your core business, you have to take enough time to shape your needs properly and define what is the best asset for you to produce!

Now, let’s observe the industries with capital intensive activities (like printing companies, or airline companies …). Financing the assets is sometimes a challenge. That’s why leasing companies play a very important role in this. Then, many players emerged to provide solutions with “per usage” pricing for their products. “Airplane as a service” or “printing machine as a service”. Tempting right?

Yes, but in a world where everyone is using the same “printing machine as a service” where you pay on click or via ink charges, where is the differentiation, except on decreasing selling price and thus reducing dramatically margins for the printer ?

What is the impact when the provider of such a solution decide to increase the price, or service costs, or decrease lifetime of the equipment, or… You don’t control your core business asset anymore, and at the end, you disappear.

Have you seen that Amazon recently decided to buy some planes? Not to create his own airline company, but because they have understood that their logistic activity is one of their core business, and it is strategic (and economical!) to own this kind of asset!

Either you like Amazon or not (I won’t give you here my opinion on it), we all have to admit that this company is clearly a success. And in a digital world, if you want to be the “Amazon” of the printing world, you have to own your physical assets which are part of your core business.

And if you want some help to define what kind of printing technology you will need and own shortly, have a look at this article !