I’ve had the privilege to go out a few times in the last two weeks to visit current and potential customers. We had a pretty good handle on our current customers’ wants and needs. For the prospects, we prepared our standard presentation and talked about what we thought they were interested in prior to the meetings. The bad news is, we were completely wrong on what two prospects were interested in. The good news is, we were smart enough to listen to them and provide potential solutions that meet their needs. They were interested in our newer products – integrated labels, digital printing, linerless labels, ribbons, and printers. Fortunately, the new things are exactly what I want to talk about, so I was able to “present well.”

As I thought about the conversations while sitting through an airport delay this evening (shocking, I know), I kept coming back to a common theme that came from both our customers and the prospects: what’s NEW? It is clear to me the main pain point most of our customers have is having nothing new to sell. If you’re not offering something new to your customers, you will not be selling them anything in the near future.

I had a conversation with an industry friend yesterday. He reminded me of some great advice I got early in life.  When I was very young, my Dad told me, “All of life is sales. Don’t ever forget that.”  Bob put a slightly different spin on it, “Nothing matters without an order.”   We could be the most efficient label converter in the world. Without an order, we won’t be around for long.

We all want to be lean and efficient. We all measure productivity and have developed metrics to push productivity, whether it’s in manufacturing, order processing, shipping, or any other function. In a perfect world, demand is perfectly predictable and perfectly linear. No hiccups occur in the supply chain either. Everything runs the way it’s supposed to.  No one calls off.  Customers understand that their order is in the queue and will be done in the quoted lead time.

Now that you’re done laughing, let’s get back to reality. Demand is getting more variable by the day. Customers really don’t care what impact their order patterns have on your operations. I have a metric I’ve followed since I’ve been at I.D. Images to track our weekly order bookings. Our variance in weekly order bookings has increased over 35% this year versus last year.  Last year’s variability increased 25% from 2010. I lost a bet to a member of my management last year that I could predict our weekly bookings within 10% of the actual amount. I would not have lost that bet in 2010. I also didn’t place a wager with him this year. I don’t enter battles I know I can’t win.

So those of us on the traditional “sales” or “commercial” sides of our businesses need to help the “operations” folks understand what is happening and why. We also need to work with them to develop ways to better respond to our customers. Of course, at some point metrics and evaluation/compensation practices will need to be adjusted as well. But that’s a different story for a different day.

“This offsets the concerns from yesterday’s ADP number. You’re getting mixed signals…It might not be as bad as we were thinking after ADP,” said Phil Flynn, a senior market analyst at PFG Best in Chicago. (Link to full article:

http://finance.yahoo.com/news/jobless-claims-tumble-may-calm-123228569.html)

What’s one to think with all of this confusing and seemingly contradictory data? As I’ve written in the past, I think the “new normal” is inconsistency. Expect good days and bad days, good weeks and bad weeks. Don’t get euphoric over a good week of sales and don’t panic over a slow week. Stay close to your customers. Prepare to handle emergency/rush orders. We have experienced significant inconsistency in orders this year. Our distributors tell me they are seeing the same trend.

On a business note, we have had great success with our delivered pricing program. We are dropping the minimum order requirements for the month of May. We are also adding thermal transfer ribbons to the program this month. Contact your sales rep to learn more.

Airlines have done this under the guise of billing for what you use. Check a bag – $25. Want food? $10. Numerous companies use surcharges and other fees to accomplish the same thing.

I understand technology has made it easier to charge customers for what they truly use. I want to maximize revenue too. There’s nothing wrong with that. However, I think you have to be careful in your approach. The parcel carriers could start the accessorial charge wave because they have an oligopoly. We don’t have too many choices to ship parcels. If your business is not in that situation, you run the risk of alienating customers and sending them to your competitors. Southwest Airlines has had a lot of fun with the baggage fees imposed by other airlines. I know a lot of business travelers that have abandoned the traditional airlines for Southwest because they’re easier to do business with. I want to know what I’m going to pay from soup to nuts, no surprises.

On a scary note, there’s a shortage of truck drivers and LTL carriers aren’t investing in new equipment. Diesel continues to rise. Expect higher freight rates to become the norm.

Most consumable guys respond, “Good but not great. Very unsteady order patterns.” That’s how our year started at I.D. Images – we had a great January, OK February, and OK, but unsteady, March. Typically, it’s the opposite – the year starts slow and March is a great month.

Traditionally, the pressure sensitive industry slows in April and May for seasonal reasons. I’ve never heard a good justification for the seasonal causes, but volumes generally are the lowest of the year in April and May and then pick up in June. My guess is this trend will hold true this year.

Based on the good news the capital equipment guys are reporting, I think we are just in the traditional spring slow down, just a little earlier than normal. Barring any exogenous shocks, I think volumes will pick up in May and June and we will see strength for the rest of the year.

I have two simple ways to create meaningful reform and put meaning behind fairness and simplification. Here they are:

1. To make fairness meaningful, end automatic withholding of all tax payments. Make everyone write checks to the federal government and their state and local governments if necessary. As an employer, I will deposit all pay, including my contributions to Social Security and Medicare into employees’ accounts. They can then write checks to the respective institutions their earnings support. See what that does to people’s definition of fairness of tax rates.

2. Simplification: Make every elected official do his/her own tax return. I know this will irk lawyers and accountants – good. In a perfect world, I’d have everyone complete his/her own tax return. I admit – I am not capable of doing my own return anymore. Having politicians do their own returns will accomplish my goal without creating self-inflicted pain.

There you have it. Doing these two relatively simple things will create the perfect environment for meaningful tax reform.

Yesterday, I had to conduct business in a local bank branch. When I walked in, the employees put on big smiles and said, “Welcome to XYZ. How can we make your banking experience GREAT today?” They all said the same thing, the same way. I wanted to respond to one of the tellers, “Upgrade your technology so I don’t have to be here.”

I’m all for establishing a customer driven corporate culture. However, scripting it doesn’t work, especially on a professional level. It’s one thing for the kid in the drive thru to say, “It’s a great day here at Steak-n-Shake.” It is completely different to hear a script in a professional environment. Professionals don’t want to deal with scripts; they want to deal with genuine people. It’s OK to have fun at work!

As a follow up, thank you to all who listened to my interview on Ohio Business Talks. The link below will take you to the archive.

http://ohiobusinesstalks.podbean.com/mf/web/tiiqst/OhioBiz-032812-IDImages.mp3

Al Strauss has created a radio program that allows business owners to give their perspectives on business and the economy. As I’ve written in the past, we are inundated with negativity. I think you’ll find Ohio Business Talks to be a breath of fresh air. I am looking forward to our discussion.

My title refers to the recurring theme I heard from packaging reps, packaging equipment manufacturers, packaging consumable manufacturers, and everyone in between: demand is still inconsistent. Orders remain lumpy; one good day, one bad day. Customers are still reluctant to carry inventory. Quite often, the winner of the order is determined by whom can get it there the fastest because the customer needs product or equipment ASAP. One equipment manufacturer told me they worked two weeks of overtime to meet a customer’s order request and followed it up with a maintenance week at their plant because their backlog was so low. As I’ve written in the past, that puts a lot of pressure on the supply chain. Only those that are well capitalized and well run can meet customers’ demands. The good news is, just like the basketball tournament ends up with a winner, turbulence creates opportunities to differentiate your business from your competitors. Take advantage!

For regular readers, these increases come just a few short weeks after some film suppliers announced increases. The momentum is not in our favor.
If these letters keep coming, it is just a matter of time before the laminate suppliers begin sending their letters to us. Not what any of us want to get in the mail at this point in the economic cycle. We’re just starting to see stability in prices and an uptick in demand. Price increases could squash the growth. But, we need to start preparing for the inevitable. Since it is March madness time (Go Crimson!), I’ll place a bet that the first increase letter comes out before June 30th. Start figuring out what costs you can take out now. Start preparing customers for higher prices in the second half of the year. I don’t think we’ll see the madness of 2010, but I do believe an increase is on the way. This is a bet I hope I lose.

One of the speakers was Howard Putnam.  Howard spent his career in the airline industry, serving as CEO of Southwest Airlines among other roles.  Howard said, “Turbulence is inevitable, but misery is optional.” What a great reminder.  We all do budgets and projections based on some type of straight line pattern.  We’d love customers to provide us with consistent order patterns.  That’s just not realistic.

Growth occurs in spurts, not linearly.  Our brains struggle with non-linear data.  We want a simple model that we can understand.  We shouldn’t fear the spurts – we should embrace them.  Managing the bumps gives us the opportunity to shine.  Too often, we talk about “smoothing” out patterns.  We’re wasting our time doing that.  We should build our capacity and resources to maximize opportunities and meet customer needs.  As I thought about Howard’s analogy, it occurred to me that a lot of us do like turbulence – we pay big bucks to ride roller coasters or do some other adrenalin seeking activity.  Think of your business the same way – embrace and enjoy the rush of making progress and remember it won’t be in a straight line.

That’s the objective of marketing and promotion – getting customers to communicate with you. We don’t do that well in the business to business world. We don’t view marketing as an investment; we see it as an expense. We don’t know how to track results well. We will just confuse our customers with promotions. Those are all weak excuses. Don’t fall into the trap of making excuses. Invest to grow.

We decided to do a leap day promotion at I.D. Images. A link to the promotion can be found here. Hopefully, it will generate some new business and make for some fun conversations with customers.

In the meantime, I’m off to Malley’s to celebrate Leap Day with a chocolate or two!

But, as I’ve written before, no company can be all things to all customers. You will become the proverbial master of all things and master of none. When a customer asks, however, you want to deliver. As an old friend tells me, “First, you get the order. Then, you figure out how to do it. Then, if you’re lucky, you figure out how to make money with it.” That attitude has spawned millions of businesses and created millions of jobs in this country. Of course, with that attitude comes the risk of failure.

Instinctively, I want to look for ways to say yes to as many opportunities as possible, even if yes means purchasing or modifying equipment. I want our culture to encourage people to ask how to do something rather than list reasons to say no. There does need to be a discipline regarding what you say yes to. You need to make sure you can meet (and exceed) your customer’s expectations. Balancing is a skill I lack. My wife thinks I can’t even stand up straight. If you want to learn words used in new ways, observe picture hanging at the Gale household. Lean towards yes and you will see progress in your business.

I was back in Cleveland today and took the charger to the local store of said carrier. I told the clerk my story and his initial reaction was, “We can’t help you. You have to take it back to the store you bought it at.” I said, “Really? I have to go back to Charlotte, North Carolina, when your people screwed up?” At this point the manager overheard our conversation. I’m not sure, but perhaps she heard my voice rising. She came over and the clerk said, “He bought this charger at another store and it doesn’t work. Doesn’t he have to take it back to the store he bought it at?” She very quickly said to him, “Go find the right charger.” He fumbled around and found it. She exchanged the charger without even processing a transaction and apologized for my inconvenience.

I’m pretty sure she violated some corporate policy. But she generated a grateful and loyal customer. Isn’t that the goal?

Virtually every day, I am asked something along the lines of, “Where is economic growth going to come from? Where are jobs going to be?” These questions come from employees, suppliers, customers, job seekers, parents of job seekers, and others. I ponder these questions quite a bit as I think about where we should invest as a company. While I don’t have a crystal ball, I do think there are some macroeconomic trends that will play out over the next 10-20 years that will provide opportunities for growth.

1. Aging of the world population. Get a job or invest in health care, right? Sure – that’s the easy trend everyone has picked up on. Here’s a different one: How do you make life easier for an older population? For my world, that translates to packaging that is easier to open or the trend towards single serve units. How about labels that are easier to read? How about talking labels? They’re out there, just not mainstream – yet.
2. Higher commodity prices. Yes, companies will continue to find ways to extract more commodities. Yes, they will become more efficient in how those commodities are used. But economic growth across the world will increase demand more than supply. What opportunities does that create? We already have a shortage of mining engineers. For those of us not going back to school or not so hot at calculus, focus on using commodities more efficiently. I also think we’ve only scratched the surface of recycling. There are ways to re-use virtually everything. Someone will make money figuring that out.
3. Less government spending BUT more government intervention. Let’s face it – our governments cannot continue to print money and place the burden of paying the money back on future generations. Government spending across the world will be reigned in over the next 10-20 years. The aftermath of the financial crisis, however, will lead to the government taking a more active role in many areas of the economy. Does that create opportunity? There will certainly be more opportunities for advisors to guide businesses through the maze governments set up. In my world, we are seeing more and more opportunities regarding food traceability. As many of you have heard me say, I find it frightening that the paper labels we produce can be traced back to the trees used but tracing e.coli outbreaks is sometimes impossible. I’m the last person to request more government regulations, but I have to admit there are some roles the government should play.

The point is, there are opportunities in every business related to the macro trends everyone talks about.

1. Demand. UPS released their earnings earlier this week. From an article about the earnings release:

   United Parcel Service Inc. (UPS) executives Tuesday forecast slower global economic growth in 2012 compared with 2011 but offered a relatively upbeat U.S. outlook, saying conditions clearly have improved since early fall. “I wouldn’t call [the U.S.] a robust economy right now,” Chief Executive Scott Davis told analysts on a post-earnings conference call. “But we certainly are seeing a better U.S. economy than we would have thought” several months ago. In addition, Davis said he’s hearing “a more optimistic tone” in the U.S., and he forecast continued “modest improvement” through the year.

   More shipments = more labels, not only for the products, but also for the shipments. That’s a positive for our industry. While we have to watch the global economy, the US is still the world’s economic engine.

2. Inflation. Last year at this time, we were dealing with yet another round of inflation. While there are no guarantees, input costs have stabilized for the most part. Pulp is down, oil is steady, and major chemicals are in a steady state. Tamer inflation means we can focus on growth, rather than managing costs. Another positive.
3. Packaging trends. Packaging is undergoing major disruptions. Everyone and his brother wants to rationalize packaging. In this chaos, opportunities will arise. See my post about Kashi. Start talking to customers about the advantages of pressure sensitive/flexible packaging.

All these trends point to a growing market. Let’s go earn more business!

2009: Be Creative
2010: Be Professional
2011: Build Relationships

In 2012, our theme is Be Accountable. I was inspired by a line from Stephen M.R. Covey’s book, “The Speed of Trust.” Covey wrote, “Remember – the people you rely on most in your company – the performers – like to be held accountable and want others to be held accountable, too.” That line hit me like a 2×4 across the face. High performers like to be held responsible. They like to be measured and want everyone around them to be measured as well.

Shouldn’t we be able to rely on everyone within our companies? Business isn’t like little league – we can’t stick someone in right field and hope the ball isn’t hit there. Competition won’t allow that to work; companies that keep underperformers will ultimately underperform. The performers will exit in droves. The converse is true as well – people who aren’t performers don’t want to be measured. They will self-select themselves out if you set standards.

Part of my commitment to accountability is providing a copy of Covey’s book to every member of the I.D. Images’ team. We are also spending work time discussing the book. By the end of 2012, everyone at I.D. Images will have read Covey’s book. I have also made a habit of outlining my goals and objectives each year with our management team. I spend more time focusing on the goals I missed than the ones I hit. I believe those discussions have helped our team understand I hold myself accountable and also recognize we all (even me) make mistakes.

However, there are significant costs with changing suppliers. Those range from the expected – setting them up in your system, for example, to the unknown – dealing with changes in packaging or shipping quantities. While very hard to quantify, they exist. We all do our best to plan for changes, but things happen. As a quant geek, I used to struggle with these “soft” costs. As a business owner, I know they cost me tons of money. If you want me to be interested in your product or service, you better be able to explain what I should expect. Most importantly, being able to have that conversation demonstrates you understand my business and have thoughtful solutions for my problems.

This became a huge conversation topic after my presentation. We had a long and lively discussion on how to communicate these costs and savings.

Earlier this week, we met with the leadership and sales team of a major supplier. Our discussion evolved to the hidden costs and savings associated with business. We had a candid conversation about the things we do as a customer – order patterns, order quantities, for example – that create hidden costs for them and things they do – packaging that is challenging to remove – that create hidden costs for us. Having those candid conversations with prospects and clients will help you grow your business. To do it right, you have to understand their business. Do you?

Fundamentally, there are two ways to grow:

1. Take more of the pie. Examples include taking market share and doing what you do more efficiently to improve profitability.
2. Grow the pie. Two examples of growing the pie are expand your product/service offerings or enter new markets.

At its core, every growth strategy is based on taking more of the pie or growing the pie. Most people and businesses focus on taking more of the pie. It’s not necessarily easier than growing the pie, but it’s a lot more visible. We all see market share statistics of our competitors and put dollar signs on percentage points we can take. Salespeople “know” they are better than their competitor and can win more business at an account. A lot of time and energy are focused on short term wins.

It’s a little more abstract to think about how our products can be used differently or offerings we could add that would make our customers’ lives easier. The results often take longer to achieve as well. Given that we all have developed the attention span and patience of three year olds, it can be psychologically challenging to think longer term. Most incentive systems are not built around the long term, particularly in smaller companies – we want results yesterday.

Successful people and businesses balance short and long term results. They invest time and money in both the short and long term. Think about your 1, 3, 5, and 10 year plans, for you, for your business. Do you have them? If not, now is a good time to think about them.

Focus will be a big theme in our industry this year. Just yesterday, Avery Dennison announced the sale of its office products business to 3M. The sale of this division had been rumored for a while, as 3M had developed a very strong global platform in the office products space. Avery will focus on its pressure sensitive and retail branding and information services businesses, two businesses that have much more significant market share than office products did. I expect to see a lot of companies to refocus on businesses where they are positioned to grow. Remember: one man’s trash is another man’s treasure. That axiom will hold true this year, as we will see companies exit certain markets or sell business lines. Keep your eyes open for opportunities.