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An interview with Rainer Hundsdörfer, CEO, Heidelberger Druckmaschinen AG, and Felix Müller, President, Heidelberg Americas. The following interview took place on May 1, 2018, at the headquarters of Heidelberg Americas in Kennesaw, Ga.
What is the present status of Heidelberg? What kind of shape is it in as a business?
RH: Although we are adapting to change and contraction in the markets we serve, Heidelberg remains the strongest supplier to the print media industry. We continue to invest over $150 million annually in R&D. From our network of thousands of connected presses, we gather data that helps us show our customers how to maximize their uptime and OEE. This is completely unique in the graphic manufacturing industry.
FM: We are driving the digital future of our industry by offering the smart print shop for our customers. With technologies like Push-to-Stop, we are continuing to be the leader in sheetfed press equipment with about 45% share of that market worldwide. We sell more sheetfed units for packaging alone than our competitors sell into all of their market segments combined. Heidelberg also leads in digital solutions for industrial packaging printing with the B1-format Primefire inkjet press. No one else has brought such a press to market.
How would you describe the business model under which Heidelberg currently operates?
RH: Heidelberg is the only supplier that can offer printers everything they need as a digitized solution – be it production machinery, software, optimized consumables, or business consulting services. However, as a company, we still operate under a classic transactional business model based upon sales.
We are now moving step-by-step into an additional model with usage-based subscriptions for the full range of products and services that we offer. This will enable us to help our customers achieve levels of productivity that are not possible under the transactional model. (For more information about Heidelberg’s Digital Subscription Business Model, click here.)
How would you describe the business model five years from now? How do you want to see it change?
FM: Print markets are consolidating, and in five years, we want to be able to help the high-volume consolidators become industrialized companies – operating the latest equipment at the highest levels of productivity.
RH: Data makes it possible for us to do this. The data we collect from our worldwide network of connected presses gives us insight into how productively each machine is running. This lets us establish benchmarks and best practices that all of our customers can adopt. We can also use the information to optimize the performance of our Saphira consumables.
A Speedmaster press contains 3,000 to 5,000 sensors, each one generating continuous streams of operating data. Layering AI (artificial intelligence) over the data enables true predictive monitoring. As an example of how this would work, the press measures what it is consuming, and at a certain level, automatically places an order for more supplies. This is the kind of process automation we look forward to achieving in partnership with our customers.
Another part of our vision is working with our customers to help them acquire new business. At Heidelberg, when we have unused capacity in our factories, we sell it via a cloud-based platform to manufacturers who make things other than printing equipment – this is how we have built a nice side business in producing automobile parts or 3D printers. We can help our customers in the same way by creating a platform that connects people who want to buy print with printers who can produce it for them.
FM: We know printing. We are often asked to recommend printers, so why not do it in a structured, standardized way?
In the U.S., printers like to buy and own equipment. How will you convince them that the Digital Subscription Business Model, which works on a pay-per-use fee basis, makes more sense than buying and owning?
FM: We see huge demand coming from the fact that there is still so much older equipment in the U.S. printing industry. This is one of the things that makes the time right for launching a subscription based model.
RH: In Europe, printers replace their equipment every five or six years, but American customers like machines they can write off over much longer periods of time. The result is that even in the packaging segment, we see equipment that has been there since the 1990s. This comes at a cost to productivity.
Or, look at Heidelberg press automation with the Intellistart job changeover solution and Push-to-Stop technology. We have 400 such installations worldwide, but only 10 in the U.S. This is another indication of how much potential there is for a new way to help our customers get the capabilities they need.
So, the question for the printer is, how can I make more money and increase my productivity without having to make corresponding investments in capital equipment? The answer is Heidelberg’s Digital Business Subscription Model.
Could the Digital Subscription Business Model become so successful that Heidelberg would no longer need to sell printing equipment in the traditional way?
RH: It’s important to remember that the pay-per-use model is working successfully in other industries. Airlines, for example, pay for their jet engines based on the number of hours the engines are in operation. We know that this model will not make sense for all of our customers. But, we are convinced that pay-per-use models will become a significant part of our business.
This way, customers won’t have to continually invest in equipment in order to go on printing. All the customer has to do is operate the machine because Heidelberg takes care of everything else. And, if the machine goes down for any reason, it goes down for both Heidelberg as well as the customer, and we will do everything we can to bring it up as quickly as possible because that is the nature of the partnership between us.
FM: We think that the North American market is starting to understand that there are also alternatives to the traditional model of ownership. We are finding that when we engage our customers in business discussions, they want to talk about more than how many printing units are on the press. They are starting to check their numbers, and they are finding out, “These guys from Heidelberg are right. I have a great opportunity for improving margins and earning more money – to have a better cash flow that I can make use of in other areas of the business.”
Heidelberg’s “Fire” portfolio of digital printing systems is well established, but it faces significant competition from other digital system suppliers. What is the plan to overcome the competition and increase market share?
RH: We will do it by offering superior technology for industrial digital printing. This is the beginning stage, and it will take time to build the business. But, interest is very high for both the Gallus Labelfire system for labels and the Heidelberg Primefire 106 inkjet press for digital packaging. We think that the growing market for personalized products will drive demand for the Omnifire 4D printing solution as well. And, we continue to enjoy excellent results with our Versafire toner presses for commercial print.
Additionally, with Prinect, printers can run their digital and offset equipment from one workflow system. And with the Prinect Production Manager, we’re offering a pay-per-use model for our software too. (Click here.)
Please talk about the integration of Heidelberg and Gallus in the U.S. market. How will you position Gallus as a preferred provider of label printing systems?
FM: Gallus is known as the Rolls Royce of flexographic technology, but it shares the U.S. label market with some powerful competitors. We believe we can make real inroads into the pressure-sensitive segment of the market with the Gallus Labelmaster, which is soon to have its first installation in North America. There are 2,500 potential customers for Gallus products in the narrow-web market, and many of the printers who use our sheetfed presses to print cut-and-stack labels want to break into narrow-web flexo production as well. (For more information about the integration of Heidelberg and Gallus in the U.S. market, click here.)
So, with our new Gallus label lines, we have new markets to explore as well as synergies with our existing customer base. We’re also planning to broaden our offering of flexo consumables.
Heidelberg remains the largest supplier of sheetfed offset lithographic presses to the U.S. printing market, but that market is flat. Can anything be done to give it some “bounce”?
RH: It’s true that in sheetfed, the productivity gain will be higher than the output growth. That’s why we offer the subscription model, to move our customers into new solutions and to anticipate the worldwide growing printing volume. We want to do this by creating a win-win situation for our customers and us. But this naturally decreases the installed base, because when we install a new machine, it replaces two and sometimes three older machines. That is the productivity gain, and it can improve our customers’ profitability drastically.
FM: We might also mention the fact that bans on plastic packaging are cropping up everywhere. If this leads to a shift away from plastic containers to paper cartons, it could have a positive impact on sheetfed output. It’s not something we can predict, but we will definitely keep an eye on it.
Packaging production continues to be a bright spot for the industry. What is Heidelberg’s take on the state of the market?
FM: The U.S. label and packaging segments are strong, but demand is based mostly on mass market requirements because the segments are characterized by mass production. However, we are also seeing as increasing demand for highly embellished packaging.
But, whatever the job requires, Heidelberg offers the industry’s broadest range of equipment for packaging production, from our sheetfed CX and XL platforms to VLF (very large format) presses – all of which also have commercial applications – rounded off by our Primefire digital system. We are also heavily concentrating on postpress packaging and have increased our sales target by 50% in this area.
What are your closing thoughts for Heidelberg’s customers in North America?
RH/FM: Heidelberg is your one-stop partner – the right partner to help you with the transformation that every printing company must make to be successful in this digitized age.
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