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Service Provider Transformation: A Pragmatic Guide to Achieving Digital Success

Service Provider Transformation: A Pragmatic Guide to Achieving Digital Success | 3

IntroductionNew technology, changing customer behavior, an increase in data, and tightening legislation are key factors driving fundamental change in how businesses communicate and interact with customers. Today’s consumers expect businesses to be highly intentional in their interactions, to address customers based on what they know about them, and to focus relentlessly on providing a better customer experience.

Especially in regulated industries, product and price are increasingly becoming fixed, meaning it is only through customer experience that businesses can differentiate themselves. Enterprises in the regulated industries have long relied on paper-based processes for their customer communications, and many of them have already started to transform physical customer communications into digital experiences. Since printing processes are often outsourced to specialized providers, there is a clear opportunity for outsourcers to take a leading role in this digital transition.

However, there may also be serious complications. Success in digital requires different skills, different business models, and cultural changes. Digital growth often cannibalizes the much-needed print revenues from current operations. As data is becoming so critical, many organizations have started to evaluate whether data-driven, digital communications should be brought back in-house.

For outsourcers and print service providers, rapid digitization provides new challenges as well as new opportunities. In this e-book, we will look at global best practices and provide clear recommendations on how service providers can evolve and be relevant for the next wave of digitalization that is impacting our market and industry.

To collect input for this e-book, we have interviewed various service providers across Western Europe, North America, and Australia. We have asked them where they are in the transition from a print to a digital provider, what capabilities and strategies they need for success, and what are their end goals. Based on those interviews and our understanding of the changing service providers landscape, we have developed a transformation model and best practices to help service providers accelerate their transition to digital.


A short history of print and mail and document outsourcing

Common strategic management thinking in the 1990s, made popular by concepts such as core competencies theory, suggested that businesses were better off focusing solely on areas that are core to their purpose and where their competencies lie. For large business-to-consumer (B2C) organizations such as banks, insurance, telecoms, and utility providers, this meant divesting or outsourcing their print operations. Various models of CCM outsourcing have emerged — ranging from managing on-site print facilities to taking over entire business processes, and many gradations in between. Table 1 provides an overview of the various types of outsourcers in the market. Some companies may be a mix of both; especially direct mail and transactional print and mail companies are coming together.

Within the context of this e-book, outsourcing refers to high-volume, industrialized creation, management and production of critical business, service and marketing communications (in digital and physical formats), as well as associated value-added services in digital design, big data analytics, and digital/mobile engagement that further enhances that value of communications.

Outsourcing levels vary by country — some countries have a high degree of outsourcing, for example in the UK and France. Others have a balanced mix, such as the US and Canada (that still have a large in-plant market), while in other countries there are still many companies producing print and mail themselves, such as Germany and Japan.

However, due to declining print volumes and a rise in legislative changes, economics increasingly favor outsourcing over producing print and mail in-house. Within the outsourcing market itself, varying growth rates are visible: document and business process outsourcers, who are traditionally less tied to print, are seeing much higher growth than SPs and direct mail providers.


Services providers, in the context of customer communications, are companies that specialize in the printing and mailing of high-volume, transactional documents. As a result of digital inkjet printing advancements, they now also produce direct mail or graphical applications.

Transactional service bureaus provide design services, specialist data/information services, and may or may not offer print services

Companies specializing in the production of high-volume direct mail

Companies that take over in-plant facilities, modernize equipment, and provide own staff; may include mail room services (see facilities management)

Companies that take over document management processes on behalf of their clients

Companies that take over business processes on behalf of their customers; note that within the CCM industry BPO may also mean providing document services on top of printing services to address opportunities within a particular business process.

Companies that provide facility management services, including print and mail services

A new breed of outsourcers offering a managed cloud-based CCM technology platform; the HMS provider may print themselves or route print work to partners

Service providers

(SPs)

Printing and mailing of business

correspondence, direct mail, statements, policies, and other critical

business or service communications. Many SPs offer

document design, data handling, composition,

document management, fulfillment, and

electronic services.

Service bureaus

(Sub segmentof SP)

Transactional statements,

document design, data handling,

specialist services (i.e. payment

processing, security applications, publishing to

regulators/stock exchange), print management, or

print services

Direct mail providers

(Sub segmentof SP)

Direct mail, variable data

printing, cross-media marketing campaigns, data

handling, and mailing

Insource providers

Document design, data handling, composition,

printing, output management, and document management

services

Document outsourcers

Scanning, archiving, document

management, workflow, electronic invoicing, and other

services

Business process

outsourcers

Taking over entire business processes, such as HR (‘hire to retire’), onboarding, or invoicing (‘order-to-cash’), including all communications

that are part of those processes

Facilities management

Mail room services, centralized mail, hybrid mail, and

archiving

Hosted managed services

providers (HMS)

Design, composition, data

management, archiving, email/

mobile messaging, digital services, archiving, and

document managementK

EY S

ERVI

CES

Table 1: Lexicon of service providers


Key drivers of changeAs mentioned in the introduction, there are four megatrends impacting the outsourcing industry:

1. Technological change Technology is changing very rapidly. Recent technology trends, such as artificial intelligence (AI), virtual customer assistant (VSA), or home automation / Internet of Things (IoT) technology opens up new opportunities for more meaningful engagement with customers. It is estimated that 20-25% of total production output is derived from legacy systems. This fact provides an indication of the challenges service providers will have to overcome in their transition to digital providers. Regardless, it is more important than ever for SPs to fully understand technology changes because as digital providers, your customers will look to you for advice and direction. In this e-book, we will look in more detail at what technology is needed to support digital transformation.


2. Changing consumer behavior Consumer expectations are changing based on new technology that becomes available to them. Based on an evolving consumer base, businesses are adapting by offering more mobile engagement, personalized and more relevant communications, instant / bi-directional interactions, and better channel preferences. These changes will lead to more technical developments that further impact consumer behavior. Again, for SPs, it is essential that this cycle is fully appreciated and that you can advise your clients on various methods of communication which may be required by their customers (usually consumers). A key result of this changing consumer behavior is that postal letter volume continues to decline. Most Western economies, such as the U.S., France, Italy, and Spain have experienced significant declines over the last ten years. In certain countries, such as Denmark, Norway, and the Netherlands, postal volume has essentially halved since the beginning of the century. Germany has been remarkably resilient with only a few percentage points decline in 2014 compared to the year 2000, but industry experts argue that the decline in German letter volume will accelerate over the coming years as more and more German consumers are embracing digital and mobile communications.

New technology

Better CustomerExperience

ConsumerBehavior

Digital Transformation

Better CX reinforcingways of communicating

Consumers using cloud,mobile, social or othernew technology

Consumers changing howthey want to interact and communicate with brands

Desire for better CX spurringnew technological

developments

Businesses respondingby investing in more

digital capabilities

Figure 1: The cycle of change


3. Increase in data Data continues to grow, especially unstructured data. Many enterprises struggle to extract the right type of insights from data; however, companies that do understand data and its importance outperform the competition. According to a Bain survey1, companies with the best analytics capabilities are ~2x more likely to be a “top-quartile financial performer”, ~5x more likely to make decisions “much faster”, and are ~3x more likely to be “highly effective at execution”. As customer communications are moving more and more into customer experiences (CX), and stakeholders are changing, different types of data need to be collected and analyzed.

4. Tightening of regulations Many regulations now require businesses (your clients) to review their service providers’ data security practices and ensure that data is protected. Examples include HIPPA (US Healthcare), the Gramm Leach-Bliley Act (US financial services), GDPR (Europe Data Protection), and PCI (financial services). For many SPs, compliance with ISO standards such as 9001 (quality management) or ISO 14298 (security printing) was already a requirement from a printing perspective. Additional certification is expected when moving deeper into the digital space, such as ISO 27001 (data security), ISO 27034 (application security), or ISO 27017/27018 (security in cloud computing).

From a more general perspective, the rise in regulations and the ability for enterprises to effectively and efficiently respond to them are drivers of growth for outsourcers. Various outsourcers see increasing opportunities by offering modern, compliant technology that enables business users to make content changes themselves.

2xmore likely to be a “top-quartile financial performer”

5xmore likely to make decisions “much faster”

3x more likely to be “highly effective at execution”

Companies with the best analytics capabilities are:


A digital transformation model

2 Based on Porters’ book “Competitive Advantage: Creating and Sustaining Superior Performance”, 1985

Generic strategies for SPsBefore introducing a digital transformation model, let’s take a moment to review three generic strategies for creating competitive advantages that can be applied to all companies, including print service providers.

They are:

1. Cost leadership2. Differentiation 3. Focus

Note that innovation is an essential requirement for all three generic strategies.

Cost leadershipA cost leadership strategy provides the lowest cost in the market, so that either market share is maintained (or increased) by offering the lowest price, or that profits are increased. The printing industry is extremely competitive and with so much overcapacity, the focus for business in recent years has been on market share growth through consolidation. This strategy works best for the largest SPs, or for those with good access to capital. Cost leaders often lag in digital transformation because their business models are focused on keeping the machines running. They operate on very thin margins which limits investments in digital. In addition, SPs that are publicly owned will find it more difficult to accept top line revenue loss in favor of bottom line improvements. To overcome this challenge, some SPs have formed dedicated digital business units, or even new digital companies that operate independently from the print factory.

DifferentiationA differentiation strategy focuses on becoming a “full services” provider, meaning offering digital services as a complement to print. The printing cost may not be the lowest in the market, but by using digital services to reduce the overall communication costs for the client, compelling propositions can be created. Differentiation SPs typically service a diversified group of customers, presenting a wide variety of service offerings. The digital mature SPs have heavily standardized their operations, business models, and working methods.

FocusLastly, SPs following a focus strategy either select a few digital capabilities and exclusively focus on them, or provide excellence in a narrow, niche market — for instance within a specific industry. Customer intimacy is another competitive strategy that focused SPs typically pursue; they tend to build a very concise offering for a small set of clients based on a deep understanding of their customers’ needs. Focused SPs can be highly successful, but will find it difficult to scale. They also tend to be less rigorous in their execution than differentiators.

When SPs go through a digital transformation process, their generic strategy may change. Digital transformation, by nature, will give the services provider new capabilities that can then be used to redefine business models and how they serve customers.

Differentiation

Innovation

Cost leadership

Focus


2 Based on Porters’ book “Competitive Advantage: Creating and Sustaining Superior Performance”, 1985

1

Print Centric

Phase 1

2

Digital Aware

Phase 2

3

Digital Focused

Phase 3

4

Digital Challenger

Phase 4

5

Digital Leader

Phase 5

Printing Digital - ePresentment/print suppression Digital - value add

Revenue Source

Digital Transformation Model

Digital transformation for SPsThe more capital that is tied up in hardware, the more difficult it is to break away from that scenario. Not surprisingly, a 2015 study by MIT and Deloitte on digital maturity levels by industry found that the manufacturing industry was trailing the digital maturity list — only just above construction and public sector, but clearly far below the tech industry, telecom, media, and financial services industries. While digital transformation is often a challenge for SPs, there are certainly benefits associated with coming from a manufacturing background: the ability to produce communications at industrial scale, dealing with regulations and risks, and taking an engineering approach to developing digital services.

In our observations, we see a varying mix of digital maturity within the Service Providers market. Some companies have completely transformed and are essentially becoming IT service providers or CCM-specific integrators such as Eclipse (see case studies at the end), who have divested all their print capacity. Others have chosen not to transform and focus 100% on print, or alternatively have decided to separate their digital operations from their printing business, such

as Mailteck in Spain. Their Customer Comms business offers digital communications and journey mapping services and is managed completely separate from the print operations. However, the majority of transactional printing companies / service bureaus are somewhere in between. Interviews with Communisis, Digicom, Harland Clarke, and Pondres show how print-focused businesses

Figure 2 highlights a typical transformation model that describes five different steps that companies go through in their digital transformation journey.

have taken steps to successfully add digital services to their print offerings. Companies that are further along in their digital journeys tell us they need the higher-margin digital services to successfully maintain their print operations. Not surprisingly, 50% of all new Quadient software sales into PSPs this year was for digital capabilities only.


1

Print Centric

2

Digital Aware

3

Digital Focused

4

Digital Challenger

5

Digital Leader

TechnologyInvestments

Business Model

Innovation

Standard Operationg

ModelsDigital Culture

Specialized Capabilities

Focused Strategy

Transformation steps (PSP)

Pure Cost

Digital pricing models Cost +

MarginValue Selling

Cost Savings

BusinessAgility

Omni-

CXFaster

ComplianceBusiness Growth

Low digital maturity; far majority of revenues come from print; digital services are charged at cost or bundled in with print

CharacteristicsSome digital services, mainly around print suppression (electronic distribution). Up to 15% of revenues come from digital.

Digitization of key processes; redevelopment of business processes. Less than 50% of revenues come from digital.

Driving innovation by using analytics and aligning services with clients’ business outcpome. Most revenues come from digital.

Figure 2 Digital Transformation Model (continued)

Channel/

Phase 1: Print-centricCompanies in phase 1 do not focus on digital or do not see digital as a viable means of growing revenues. It does not mean that phase 1 companies do not have digital skills — every print business needs to have at least basic data integration and data handling capabilities, as well as support for composition and digital output. However, phase 1 companies usually absorb those digital costs in their printing costs and do not differentiate with their digital capabilities. When asked, they often respond that they do not have the capital to further develop their digital skills, their customers are not asking for it, or they prefer to partner with (or acquire / be acquired by) companies that have made the digital transition as they do not think they have the skills to transform.

Printing

Revenue Source1


Phase 2: Digital awareCompanies in phase 2 have started to offer digital services; often the service has grown organically. This growth is from customers demanding digital distribution of formerly printed communications — so-called electronic presentment or print suppression — or from an opportunity in the market to actively migrate print to digital communications. Smaller print companies, or those that are privately owned, may prefer higher-margin digital work (lower top line, but higher bottom line) over lower-margin print work (higher top line, but lower bottom line). The challenges with focusing strongly on digital print suppression are threefold:

1. Digital communications will soon be commoditized, if this has not been done so already Most countries in the western world see rapid declines in print volumes. With the exception of Germany, most large western economies such as the U.S., U.K., France, Italy, and Spain

have seen declines of over 30% between 2000 and 2014. Many service providers responded by embracing the shift to digital and started offering digital communications. By offering digital communications at roughly 20% of the cost of printed communications — and with workflows in place to continue printing physical communications for those customers that could not be reached digitally — PSPs were able to give their enterprise clients savings in the region of 40-50%, while significantly boosting their own margins. However, as more SPs entered this arena and buyers were better at understanding the true market value of digital, a tremendous downward price pressure has manifested in digital communications.

2. Enterprises want a different way of paying for digital communications Shifting printed communications to digital often leads to an additional four to six digital communications. For example, many businesses prefer their digital communications to be available through a secure portal so will send digital communications to attract customers to their portal. Some digital communications will be dynamic in nature, meaning that customers will be able to interact with a live document that may lead to additional ‘ticks’ every time it is generated. Enterprises do not want to be charged extra for customer behavior which they want to stimulate. For the SP, this limits the earning potential if their digital business model is based on how they charge for print.

3. Focusing on print suppression without evolving the business model and operating practices favors insourcing While print commoditization is a threat to

companies active in phase 2, if the company does not evolve their digital services offering to make it more valuable, enterprise customers may carry out their digital communications themselves. By bringing composition back in-house, enterprises have full control over how they interact with customers and relegate the service providers to a low-cost commodity printer.

In conclusion, staying too long in phase 2 brings severe risks to the SP. Either there is pressure on margin, or there is a risk of losing the client to insourcing. Both scenarios will impact the SP’s ability for further transformation.

2

Printing

Digital - ePresentment/print suppression

Revenue Source

Digital forms I Electronic invoicing I Electronic bill payment & presentment I Pro-active messaging


Phase 3: Digital focusedMost SPs have started to recognize they need to evolve their business models and look for different ways to provide value to their customers. This approach requires taking a broader perspective on where the market is going, understanding technical and service delivery capabilities, and putting a plan in place to transform. For companies that are cost leaders in print, this phase is particularly challenging because many have a very strong print-ingrained culture and generally lag in digital skills. On the flip side, because these companies tend to be larger, they are generally more likely to seek professional advice and commit the necessary resources for transformation.

Printing


Digital - value add

Revenue Source

There are various forms of digital services that can be developed – see Table 2 on page . At this stage, a natural progression of the SP is to move more upstream within their customers’ value chain and try to realize deeper cost savings through digitalization. A natural play here is business user enablement — giving business users access to communication templates or direct control over job submission, or even production. This improves business agility — the ability for businesses to speed up cycle times. Also, by giving control directly to users in the business, additional overhead, often charged by IT teams, can be reduced.

3

Phase 4: Digital challengerBusinesses that are seeing success with digital will come to a point where further transformation is necessary to unlock the next level of growth. Here is where we typically see a divergence in strategy:

• Companies that follow a differentiation strategy, meaning they try to become a “full services provider” for all clients, will need to put more efforts into standardization. That sounds counter-intuitive, but digital transformation often leads to fragmentation, and developing custom-built solutions for every customer is not viable for future growth. In addition, technology is changing very fast, so having a standardized platform for all customers that can easily be upgraded when new capabilities are instituted is a requirement. Standardization not only refers to technology but it is also about using rigorous, controlled processes for sales, consultancy, and delivery.

• Companies that follow a focused strategy aim to become digital providers for a small set of clients, or operate within a specific vertical market. This group of SPs typically adds very specialized capabilities, for example around payments, content management, data security, or adapt their platform for a specific vertical industry such as healthcare, pharma, or financial services. Those companies tend to be very strong in IT, and are generally not as concerned about printing.

Companies that are moving from phase 3 to phase 4 are often challenged by previously built applications

or home grown software, which can be overcome by investing in a modern platform. Companies, such as Pondres (see case studies) that are moving from phase 3 to phase 4, recognize that overcoming this fragmented IT application landscape is one of their biggest hurdles. There are generally three strategies to deal with this problem:

1. Keep existing applications, but begin adding new clients on your modern platform. This way, over time, your customer base will shift to the new platform and standardized way of working. The drawback is that this may take a long time, and customers on legacy, typically miss out on the benefits that the new platform brings to them.

2. Start porting “low-hanging fruit” applications from legacy customers over to your new platform. Begin with applications that benefit the most from being run on a new platform, and will lead to additional cost savings for the customer. Forms could be a good example — moving them to digital, including e-authorization / digital signatures, will help save the customer not only on printing costs, but also processing costs. Extraction, data cleansing, or additional processing will enable the services provider to charge higher prices based on the deeper level of savings.

3. Aggressively migrate all customers over to the new platform. A key component here is to look for template rationalization — many template structures can be improved by using better logic or structure content blocks according to more modern business content authoring practices. The goal is to reduce large template inventories to smaller sets, and then redevelop those on the new platform. This approach can still be costly, and the cost should be evaluated against the potential gains that can be achieved when

using a modern platform. Also keep in mind that technology in this area is advancing. With the rise of artificial intelligence and robotic software automation, automated or semi-automatic template conversion may be something that is available in the years to come.

Printing


Digital - value add

Revenue Source

4

Phase 5: Digital leadersSPs that have entered phase 5 are truly transformed to a digital provider. This stage can look different for each company. Some companies think they have entered this phase only when they have moved away 100% from print and essentially became a CCM-specific IT integrator. Others feel they are only a phase 5 company if they have transformed their business model into one that focuses on value selling, by using customer communications and customer experience practices to help their clients meet their business objectives.

Regardless of what the end stage looks like, one thing is that those companies share a digital culture. This typically means they are innovative in nature, want to push the boundaries, and actively shape the future of the customer communications and customer experience management markets. They see their role as leaders — to be a trusted advisor that successfully guides their clients through the rapidly evolving customer communications market.

Companies that embrace a digital culture are innovative, but also agile. This means they can rapidly develop prototypes, for example, based on the scrum software development process, and by using modern software that allows them to create business and mobile applications based on low-code/no-code software development frameworks. This agility allows them to quickly build, test, and iterate. Also, their nature is to be agile, meaning that they can easily pivot the direction of the company based on new technological developments.

Printing


Digital - value add

Revenue Source

5Lastly, companies with a digital culture almost never operate in isolation. They are strong in building partnerships and being part of vibrant ecosystems. For this to be successful, they need to have an open management culture, as well being up-to-date with technology that can easily integrate with other systems. For this reason, digital leaders often favor cloud architectures based on RESTful APIs or microservices that can be easily scaled and configured.


Technology transformation

Technology platformsAt the core, digital transformation is about investing in new technical capabilities that allow businesses to reinvent how they sell and service their customers. SPs going through digital transformation typically need to evolve their platforms in new ways.

Phase 1 and 2 companies typically have a very mixed IT infrastructure. It is not uncommon to have multiple composition vendors, self-scripted workflow tools, archiving solutions, network file storage, and data transform tools. It’s much better to work with a standardized infrastructure that can be easily deployed across multiple clients using virtualization technology, or can be scaled up at run time using cloud-based instances.

In addition, upcoming privacy regulations such as the General Data Protection Regulations (GDPR) in Europe force service providers to have a much better understanding of what type of personal identifiable information (PII data) is being handled. Under the new regulations, which also apply to US or non-European businesses that are handling customer data from any of the EU countries including the UK (at least until March 2019), service providers will need to know exactly what PII data is stored within their systems and where it is located. Similar to PCI, there is a strong emphasis on using security by design practices such as encryption and pseudonymization. All in all, having

a modern platform is not only useful to support new technology, but it also helps the SP to reduce the time-to-compliance for them as well as their customers.

What we see happening is that companies are starting to use virtualization more and more for their CCM platforms. Virtualization is a popular method because it helps service providers to maintain one master image that can be easily installed and updated across all servers. In addition, if the software runs in a virtual private cloud (meaning on virtual servers within a public infrastructure such as Amazon Web Services or Microsoft Azure), it will come with elastic scaling as well. Software such as Quadient Cloud Scaler is able to automatically start up new virtual servers, install the instance, and then add that capability to the increased overall throughput of the system. Similarly, the system is able to quickly scale down as well.

In addition, companies that are moving to standardized platforms may find it useful to structure their platforms around four main layers of functions (see Figure 3).


1. Platform Those functions ensure the technical integrity of the system; in other words they provide assurance that the system will work as intended under normal operating conditions. Data security is an essential component, as well as provisioning for being compliant with various legislations. Platform functions may also provide automatic scaling or other advanced features to ensure high responsiveness and availability.

2. Operations Operating functions provide the core CCM and CX capabilities; for instance, data integration, manipulation, template management, digital output, archiving, and much more.

3. Management The management layer provides functionalities that help administrators to manage the system, as well as to help business users control messaging, templates, campaigns, or other aspects. The management function is often provisioned through web-based portals and typically include dashboards.

4. Control The control function is often integrated within the management layer, but provides visibility to the users of the system in terms of usage, SLA compliance, customer communication behavior, and more. SPs that are expanding into journey mapping are also adding journey mapping capabilities to the control layer which provides deep level of insights to their users across touchpoints and channels.

From a technology perspective, it is important to recognize that the CCM market is evolving with CX management. Capabilities that are today not typically considered part of CCM may very well be so in the future; for example around journey mapping, chat bots, or speech technology in Virtual Private Assistants

(VPAs) or Virtual Customer Assistants (VCAs). Having technology platforms that are data, layout, business rule, and channel agnostic, as well as being built on a loosely coupled architecture are future-proof in that components can easily be swapped or upgraded in the future to enable those new types of capabilities.

Figure 3: Modern CCM/CX platform

PLATFORM

OPERATIONS

MANAGEMENT

CONTROL

SECURITY• Encryption• PCI / SSL• SO 27001

• SLAs

DATA INPUT

• Core Systems• CRM / ERP• Marketing• Scanning

DATA INPUT

• Core Systems• CRM / ERP• Marketing• Scanning

CONTENT• Template

Management• Campaigns• Business Authoring CAMPAIGNS

• Scheduling• Testing

• Messaging• Surveys

REPORTS• Operations(SLAs/KPIs)• Marketers(CX metrics)

DASHBOARDS• Operations

• Business user• IT Administrator

• Marketer

JOURNEY MAPS

• CX Professionals• Business users

• Marketers• Designers

ADMINISTRATIVE• System users

•Access controls• Dashboard/report

creator• Audit Controls

PROCESSING• Channel preference

management• Archive setting

• Accessibility• BPM

OUTPUT• Print & Mail• Web Portal

• Forms & Signatures• Mobile & digital

• Archive

OUTPUT• Print & Mail• Web Portal

• Forms & Signatures• Mobile & digital

• Archive

COMPOSITION• Batch

• Dynamic Communications

• On-Demand• Interactive

DATA SERVICES• Extraction

• Transformation• Cleansing

• Enrichment• Sorting

SYSTEM• Resource mgmt.

• Process Automation• Cloud Scaling

• Resource Servers

SYSTEM• Resource mgmt.

• Process Automation• Cloud Scaling

• Resource Servers

CONNECTORS• Adapters

• API / SDKs• Enterprise Services Bus

AUDIT• Change Logs

• Access Controls• Version mgmt.

• Audit Trails

AUDIT• Change Logs

• Access Controls• Version mgmt.

• Audit Trails


People and process transformationFor standardized technology to be most effective, it needs to be complemented with standardized ways of working. SPs that are transforming should not only move to more modern technology, they should also reconsider how staff is selling, using, and maintaining the platform.

Evolving people and processes is often a challenge. Companies moving from phase 2 to phase 3 regularly find that their existing employees do not have the necessary skills to be successful in the digital world. In some instances, this can be solved by more education. Tim Cooper, Sr., VP of Information Technology and Chief Architect at Harland Clarke — one of the companies interviewed for this e-book — strongly believes in educating people and evangelizing the benefits of digital. Tim mentioned that in his career he has successfully helped people to acquire the necessary skills to be successful with digital. But, as he warned, there needs to be an interest, a genuine desire, and a somewhat engineering mind-set among staff to embrace this change. This is not always the case for all staff, and many print businesses find it easier to hire new skills into their business. However, doing so often requires making necessary staffing adjustments on the printing side, which may be restricted by unions or local labor laws. Also, the amount of transformation that print operators can go through is still limited — whereas maybe some level of IT or document design skills can be learned, it is unlikely that print operators can become highly-skilled C++ programmers. Several of our SP interviewees that are further along in their transformation have mentioned that their top document designers are

typically general programmers skilled in Dot Net, C++, Java, or other programming languages that have added “Inspire” as an additional language to their arsenal.

In terms of process, SPs that are moving from phase 3 to phase 4 or 5 often find that they have a need for a more standardized approach to process as well. There are three main processes that can be standardized: sales, pre-sales, and consultancy (implementation). First, sales need to transpire according to standardized business models and the desire for exceptions should be avoided as much as possible. In the next chapter, we will look at more detail on what the implications are from a business model perspective as it is important to hold the conversation around business outcomes vs. price and functions.

Second, pre-sales will need to follow a structured methodology to gather client requirements, turn that methodology into architectural elements, and present the results to both sales for pricing and the implementers once the deal is signed.

Lastly, implementation, including document design or custom digital experiences, should follow a structured methodology based on agile best practices. The scrum framework is a useful methodology that is getting more and more adoption in the industry.

Finally, the good thing about using modern platforms and technology is that they are often built on open standards such as HTML5, JavaScript, and XML. Hiring new skills in those areas is often reasonably easy — SPs find it much more difficult to hire skills for legacy products.

1000101010101010</>html

C++

JAVA


Evolving your business model

Redeveloping business models based on newly acquired digital processes is a fundamental part of digital transformation. As set out in Figure 2, SPs have to rethink how they add value and how they can monetize the value they bring to their customers. In general, there are three different ways that SPs charge for digital.

1. Bundled in with print (pure cost) Companies in phase 1 typically offer digital capabilities at cost. The cost of data handling, design, and composition typically comprises around 15-30% of the retail price, excluding postage, of a printed impression. Those costs are often bundled in with the print prices.

2. As a proxy for print (cost plus margin) SPs in phase 2 often charge a price per digital communication, typically 20-40% of the total cost of a printed impression including postage. As mentioned earlier, this model is ready for commoditization; expect significant price pressures that will push the market value of simple email or mobile messaging output to be much closer to the actual production cost, i.e. a few cents per thousand.

3. As a value to the customer (value-based selling) This scenario is the most attractive one, but also the hardest to achieve. The two main challenges are:

a. Return-on-investment models on digital, especially when it comes to soft factors in customer experience, are very hard to calculate up-front.

b. The SP does not fully understand its risk scenario, and does not want to be exposed from a pricing perspective. This exposure can lead to an opportunity loss situation by not being valuable enough (taking too little risk), or conversely by being almost too valuable (taking too much risk), thereby demanding such high returns that the client would rather do the project themselves.

For SPs that are new to value-based selling, a gradual approach often works best. This means taking a somewhat lower-risk approach, and charging for the platform based on usage instead of its contribution to business outcomes. A higher-risk approach can be used for smaller projects, or when the SP has built up more experience. For example, personalized videos are an ideal communication type to be price-based on business impact. Control groups can be created that do not receive the video and comparisons can be made to see to what extent the video is driving consumers in the preferred direction and meeting the predefined goals of the campaign.

As a proxy for print

+ 20-40%

As a value to the customer

Bundled in with print

15-30%


There are various models that exist in the market about how to price CCM services, and much depends on your customer base, your willingness to risk, the licensing agreements you have made with your technology providers, and the licensing flexibility that you want to provide to your customers. It is very common still to set price based on at least three components:

1. Onboarding and setup cost This is a cost that is being associated with migrating or developing a number of templates, setting up the client, and providing some level of training and support to help them get going.

2. Monthly subscription fee or maintenance cost This can be a simple monthly price that includes all-inclusive functionalities, or can be transactional in nature, based on functionality, user seats, number of communications, or any other useful metrics. Most common is a transactional volume component based on various bands, which is complemented by user seat pricing (again in bands) for dashboard access and/or interactive communications. In terms of volume, some SPs distinguish between print and digital communications, while others consider them the same. Some charge double (or triple) for identical communications that go out through multiple channels, while others only charge once. Over time, expect to see digital communications moving to unlimited, all-inclusive models, while SPs will try to make their money through process savings. For example, if SPs are unable to charge much for sending a communication, they may try to make their money in processing costs (i.e. of an invoice), ensuring compliance, or storing them in a digital archive.

3. Change management cost This is charging for making template and document changes. While making small changes is more and more performed by the business themselves, making more significant changes often require design or IT skills, which tends to suit the SP better. Some SPs include a number of document / template changes per month as part of their subscription fee, or provide add-on bands to cover these changes. Regardless, clients are expecting SPs to lower their cycle times as business agility is becoming a more important feature.

Lastly, as the CCM industry is becoming more intertwined with the Customer Experience Management industry, your customers will need to acquire deeper levels of insight. It is important to recognize that different users will have different requirements; for example, an enterprise output management professional is more concerned about meeting SLAs and print quality levels than a marketing professional. That person is probably much more interested in consumer communication behavior, i.e. what links are clicked, what is the upsell/cross-sell potential, or the impact on Net Promotor Scores. Making those metrics available, or by adding journey mapping capabilities, is an ideal way of becoming more valuable for your customers.

$

Onboarding and setup

cost

Change management

cost

Monthly subscription fee or maintenance cost


Your client benefitsThis leads us to the last chapter of this e-book, which is a discussion on how you can use digital transformation to provide more value to your customers.

SPs that are transforming from phase 2 to phase 3 in particular tend to struggle with developing value-add

services that make a difference for their customers, although companies that are moving from phase 3 to phase 4 or 5 find it sometimes difficult too.

Figure 4 illustrates some generic strategies for developing added value. Automation — looking for process savings such as closing the loop (i.e. digital forms, capturing data, sending that back to customers) — is often a quick-win. For companies that are more digitally mature, the focus should be on creating data-driven, bi-directional omni-channel communications that are used to improve the customer experience. This is done by expanding physical communications to interactive mobile and web, ensuring that business users are in control, and by providing new technology around mobile messaging and chat bots.

For companies that operate in phase 4 or 5, value add may come from your ability to become a trusted advisor that supplies deep data insights and helps to increase retention, loyalty, and advocacy by optimizing the clients’ CCM strategies. An important part of this strategy is enabled by new technology as well, e.g. journey mapping software that provides clear insights across all touchpoints of a particular customer journey, or using digital engagement technologies such as testing or channel attribution software.

Practically, Table 2 below provides a number of tactics that SPs can explore to further evolve the value that they deliver to their customers. This list is not at all complete, but may provide some useful pointers.

1

Print Centric

2

Digital Aware

3

Digital Focused

4

Digital Challenger

5

Digital Leader

Automation

Omni-channel & CX

Data insights & business outcomes

Added value

looking for process savings such as closing the loop (i.e. digital forms, capturing data, sending that back to customers)

creating data-driven,bi-directional omni-channel communications that are used to improve the customer experience

becoming a trusted advisor that supplies deep data insights and helps to increase retention, loyalty, and advocacy by optimizing the clients’ CCM strategie

Figure 4: Focus areas for creating client value


Table 2: Popular tactics for SPs to create value add (non-exhaustive list)

TACTIC GOAL DESCRIPTION

DigitalForms

Lowering Operational Cost

Reduce printing, mailing, and scanning cost by substituting paper-based forms with digital forms and signatures

ElectronicInvoicing


Sending electronic invoicing, processing payments, automating order-to-cash, or cash-to-order cycles

$

Electronic Bill Payment & Presentment


Sending electronic bills, accepting payments, automat-ing bill payments

Pro-activeMessaging

Lower callcenter volume

Detect if bill is higher than contract value and pro-ac-tively send an explanation to reduce bill shock


DocumentRedesign

ImproveCX

Redesigning document to drive increased call to action

DynamicComms

ImproveCX

Allow recipients to interact with the data for a richer experience

DigitalOnboarding

ImproveCX

Provide seamless digital experiences, including eAutho-rization for omni-channel onboarding


JourneyMapping

IncreaseNPS

Understand where buying experiences are broken and direct efforts to correct

On-statementMessaging

Upsell Providing offers or educational messages on transac-tional documents, e.g. on utility bills

Multi-variate /AB testing

Cross-sell Sending emails or direct mail with targeted offerings to customers that share same characteristics as custom-ers in test group


Conclusions and Recommendations

ConclusionsPrint service providers are under enormous pressure to transform — as communications are becoming more intertwined with digital experiences, enterprise clients are increasingly demanding SPs to act as strategic advisors to help them successfully navigate through a changing industry. With data and regulations becoming more important than ever, SPs will need to evolve their business and become more digitally oriented.

If You Need HelpQuadient Inspire is the number one CCM platform used by print service providers. Contact us for a discussion on digital strategy and the future of your communications.

Aspire is an independent advisory firm that operates alongside print service providers and works with the C-suite to help them accelerate their digital transformation.

RecommendationsIn this e-book, a digital transformation model has been presented that will help SPs in their transition. SPs are advised to:

Understand where they are in their digital transformation journey and take appropriate steps to evolve their technology, operating and business models, and assess what value-add they can deliver to their customers

Develop a digital culture that fosters innovation, openness, and agility, underpinned by technology that is scalable and can be easily integrated in other ecosystems

Work toward becoming strategic advisors that take their clients by the hand and help them realize their business objectives by using communications and digital experiences in more beneficial ways

1

32

Service Provider Transformation: A Pragmatic Guide to Achieving Digital Success | 25Case StudiesCommunisisCommunisis is one of the UK’s leading business process outsourcers. It is a public company with annual revenues of £362M GBP (2016). The company specializes in customer communications, marketing services, and print management. Communisis serves a wide variety of customers, including some of the largest banks, insurance companies, telecoms, and energy companies in the UK.

In recent years, to battle a declining print and mail market, Communisis has aggressively transformed the company. It acquired marketing and digital agencies, invested in new digital capabilities, and began offering strategic consultancy services. For Nic Sheen, Communisis’ group solutions director, digital transformation entails four different steps — this can refer to the capabilities of a SP, but equally to the level of digital maturity that is found within clients’ accounts.

From the context of a SP servicing enterprise clients, these steps include:

1. Think digital The client does not realize yet that the world is changing, and that they should evolve their customer communications. There may be some sporadic digital initiatives, but generally there is no digital focus. Neither is there a central vision, or sense of urgency. Customers in this phase benefit most from education so that they will start thinking digitally.

2. Do digital Companies at this level have started to realize they need digital technology; however, initiatives

are ad-hoc, or they try to solve specific problems by investing in disjointed technology. They need a specialist enabler that can deliver transformation for them.

3. Act digital Companies in this category have started to realize that they need to change their business processes to unlock deeper savings potential, which go beyond cost savings in print, but pertain to an entire business process. Companies in this stage typically have an inside-out perspective.

4. Be digital Companies in this stage have embraced a digital culture that puts the customer first and product second. They understand the needs of the customer and are able to fit technology, process, and people around those needs and make it work for the customer. They tend to rely heavily on data insights and use data in predictive ways that drive business outcomes.

For Communisis, to be able to help their clients transform and move along this continuum, the company had to make profound changes as well. They had to implement a cultural shift — meaning not being afraid to take clients by the hand and explaining why we, as Communisis, think you should do this. This is very counter-intuitive for a traditional SP. The other change was to redefine their strategy and financial models — leading with digital requires making investments in keeping your knowledge up-to-date and constantly investing in new technology. Only in this way will we be able to stay ahead and be this strategic advisor to our clients.


EclipseEclipse is a fast growing Dutch services provider (about 20 people) that has completely transformed from a print and mail provider into a dedicated Customer Communications system integrator. The company decided in 2016 that it had to break away from its print background and focus exclusively on providing digital services.

Hans van Lith, CEO, and Gijs LeBlanc, CTO, run today’s company which was founded in 2006 as a database marketing services company, providing direct mail and e-mail campaign services. By 2010, the company had moved more into the business IT services arena, and started offering document management services and transactional print output. Realizing that critical business and service communications were converging with marketing communications, Eclipse decided that their value should lie in providing end-to-end IT services that enabled this transition for their customers. They decided to sell off their printing capabilities and hired new software talent for the development of integration capabilities and new software applications.

In 2017, Eclipse formed a partnership with EY, and became a technical delivery partner for a jointly-developed, host-managed CCM offering, deployed at a large insurance customer in the Netherlands. Where EY provides business consultancy services, Eclipse manages the cloud platform, which is based on Quadient technology.

For Eclipse, their transformation happened gradually and was more opportunistic than strategically planned. Nevertheless, they had to adapt their business model — moving away from communication “ticks” to offering

services that are based on development hours and monetizing their platform based on subscription pricing. A large part of their income now comes from developing services on their platform, ranging from document design to new applications and connectors.


Harland ClarkeHarland Clarke (HC) is a large (over 3,700 employees), US-based leading provider of payment solutions, multi-channel marketing, and critical communications, as well as a provider of call centers, and governance, risk, and compliance (GRC) solutions. The company recently acquired NCP solutions — a print, mail, and electronic communications provider.

For this interview, we spoke with Tim Cooper, Chief Architect at Harland Clarke, who was formerly Sr. VP of Information Technology at NCP solutions.

For NCP and HC, digital transformation is important because digital is where customers are heading. At the same time, the need for HC to fundamentally change its business model is less pressing, because the company is successful and has grown its print income substantially over the last few years. In addition, the company has already developed cutting-edge services in data analytics, customer experience, and omni-channel marketing, which are managed in other parts of the business. From that perspective, HC has already become highly digital. Furthermore, the company has a strong focus on operational excellence that enables them to stay very customer-focused and quick to adapt if necessary.

According to Mr. Cooper, digital transformation requires three main things:

1. Having the right capabilities and keep working on that until you have it right. What digital services do print companies want to develop that serve the needs of their customers? For NCP, this turned out to be image archiving, and

they further developed this platform until they got it right in 2013. From then on, they used this capability to develop other digital services, such as linking archiving with desktop and mobile portals.

2. Rethink how to market digital services Digital services require different skill sets, which may not always be existent. Mr. Cooper is a strong believer of “technical evangelism”; someone who educates the workforce on new digital technology, and helps them acquire new skill sets. In his career, Mr. Cooper has seen that when staff has a genuine desire to change, and if they have a somewhat engineering-based attitude, they can transform, acquire new skills, and be successful in a digital environment.

3. Continuously modify objectives within the roadmap to stay ahead of the curve Digital transformation is a journey, and the destination will change based on trends or activities within the sector. If necessary, look to acquire services that will improve success rate, or educate yourself on technology that has the potential to be very disruptive. Mr. Cooper thinks that augmented reality will be such a game changer as it gives companies new and better ways to interact with customers.


Link DigiComLink DigiCom is an innovative services provider based in Sydney, Australia. Mick Buttigieg, general manager of Link DigiCom, participated in this interview.

For DigiCom, success in digital transformation can be boiled down to the following factors:

1. Really understand customers and their objectives By understanding the customer, better products (or communications) can be developed to enhance the process for customers to achieve their goals. It is also important to get the project right the first time; better to spend a little more, or seek an outside-in perspective than to go with a product that is more difficult to repair down the line. Journey mapping is an ideal tool to gather insights, collect metrics, visualize the results, and to communicate with clients on what is the next best course of action. It also provides pertinent data that shows customers whether an idea has worked or not.

2. Ensure that customers understand how personal identifiable information (PII) data is handled and secured. Data security is a major concern in Australia and one of the reasons why cloud adoption has not really taken off. In regard to PII, strict policies must be on hand and clear to the customer; every action must be understood; and certain metrics need to be ascertained that display the level of security that is in place for a particular product or service.

3. Having great sales skills and innate client-facing skills Developing new digital products requires acquiring

employees that are technical but still able to articulate the value of the solution.

4. Operate more strategically Need to be aligned with clients’ executive suite and secure a mandate for transformation. A digitally transformed provider is able to tell the customer what is best for their business and able to effectively communicate a solution to the customer’s problems.

5. Having modern and open technology Many digital services are offered using APIs; with the ability to integrate those digital services easily and to incorporate them into new products is essential. Think about chatbots, personalized videos, requests for call backs. Also, real-time data generation is important because data changes continuously. What may be valid today may no longer be valid the next day.


PondresThis interview took place with Bert Alblas, CTO at Pondres, an innovative Dutch services provider. The company has gone through various transformations in its 60 year history, and according to its CTO, continual transformation is essential to stay ahead of the game.

Pondres is a company that has developed a strong transformational roadmap, based on where it wants to go in the years ahead. They have recognized that the market is digitalization and they want to stay ahead of their customers when it comes to digital transformation. They want to test and experiment today with what their customers are asking for in six to 12 months’ time.

They are also willing to try things and make adjustments if things do not work out. For instance, the initial outcome of the digital transformation strategy was to have two separate companies: a digital company focusing on digital services, and a physical company which was the printing factory. However, moving to two different buildings added too much overhead to the cost base, so it was decided to share the same building. However, the digital company occupies a dedicated floor and does not generally interact with the operational colleagues in the print factory. This way, the digital company has the freedom to fully develop what is best for their customers and do not get sidetracked when production encounters challenges or faces disruption.

Pondres has gone through fundamental change in the way the company runs processes and operation. Key improvements include:1. Professionalism across all lines: professional

business project management, business consultancy, scrum / agile methodology; IT became ISO and scrum-certified.

2. Investments in new skills, including replacing 30% of IT staff: the most important thing is that people were needed who have a passion to make a difference.

3. Rethinking of the business model: Pondres had to get away from traditional, old ways of thinking — profit is no longer tied to print. The difference is in how services are being re-priced to reflect value-add.

4. Strategy: by comparing a print provider with a yacht wharf builder; a print provider would ask clients to come and see the wharf, showing them capabilities and the beautiful boats that could be built. Now as a digital company, the focus is to show clients the journey (voyages) they can make with the yacht. It is no longer about demonstrating capabilities, but it is about selling a dream. That is a different mind-set.

5. Culture: Pondres feels it is very important to have the right culture. They have identified three key values: passion, collaboration, and learning — and accepting that you always need to learn.

Pondres has developed a four-step plan to fully transform into a digital provider.

1. Step 1 was digital separation; physically detaching the digital organization from the print factory.

2. Step 2 is building a modern architecture based on the latest cloud technology so that it can easily be scaled.

3. Step 3 is to address the legacy issue; ensuring that every customer is migrated over to their self-developed, layered platform.

4. Step 4 is changing the sales approach, and using value-added services such as journey mapping to build deeper relationships with clients, and offer more advisory and business consultancy services.


About Aspire Communications”

Aspire Customer Communications Services (Aspire), is a London-based CCM/CX strategy firm that works with enterprise leaders across the globe to realize high-impact customer communications transformation.

www.aspireccs.com

About Quadient

Quadient helps companies deliver meaningful interactions with current and future customers. A Neopost company, the Quadient portfolio of technology enables organizations to create better experiences for their customers through timely, optimized, contextual, highly individualized, and accurate communications for all channels. Our solutions bring together and activate the entire organization in the name of customer experience, through better collaboration and visibility into the customer journey.

Quadient supports thousands of clients and partners worldwide in the financial services, insurance and service provider industries in their quest to achieve customer experience excellence via mobile, digital, social media and print technologies.© Quadient. All rights reserved.

If you are interested in learning more about our approach to customer experience, as well as our products or solutions, please visit our website www.quadient.com or contact us on one of the channels below.

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