A nice first question! What has been the impact of COVID-19 on your organization?
'The consequences are enormous,' replies Peter. “Our factories are, among other things,
in the 'familiar' Wuhan, and that meant that our initial concern was the availability of monitors produced there. Naturally, we wanted to close our financial year at the end of March with strong figures.
That idea changed very quickly from March 15th; everyone started working from home and we thought it wouldn't be such a big deal, but by now we know better.
Furthermore, Peter continues: “Due to the urgent advice to work from home, our business has disappeared. You should know that 67% of our revenue is still generated by the sale of so-called 'ticks'."
We invoice over 1 million euros in 'clicks' monthly. This represents fixed revenue from maintenance contracts.
Moreover, if offices stand empty, those revenues disappear completely, resulting in a drop of more than 70% in week 16. Large corporate services and government are still working almost entirely from home, meaning we currently have a further decline of 25%; this is because we operate more in the SME segment.
But at some regional business parks, you see that it is almost business as usual again.
What do you think, what are the longer-term consequences; Will it recover completely or will it never be the same?
Furthermore, Hoorn says about this: “Corona has ensured that something that has been underway for some time, namely the decline in demand for printers and multifunctionals (MFPs) because less is being printed, is now accelerating.”
You notice that younger generations no longer consider printing documents to be appropriate in this day and age.
Furthermore, that decline or trend actually started years ago, and that in turn has to do with changing working methods; such as the digitization of documents, for example. We have seen a similar movement before in the sales of point-of-sale systems.
For example, SHARP sold its POS systems through dealers, primarily in the hospitality industry. We stopped doing this as of April 1st, because demand has decreased enormously due to the rise in digital payments.
Moreover, payments are virtually no longer made with cash. The Netherlands is quite far ahead in this regard, whereas POS systems are still being sold in abundance in Germany, but the Germans will likely follow suit soon.
My vision was and is that people will work 'anytime, anywhere, anyplace'. The coronavirus outbreak has only accelerated this. I had expected that a massive drop in print volume in the Dutch market would not occur until 2024.
Incidentally, I do expect a slight recovery in the short term, but the decline has now set in firmly. Many companies have realized that work can be done differently: through the accelerated digitization of documents.
In short, for us this means that if we want to maintain our profitability, we must change and, for example, offer many more solutions for work-from-home situations, something we hardly do now.
SHARP, the company that first marketed a mechanical pencil, is known as an innovative manufacturer of printers. If that market is going to change so much, where does your future lie?
Peter van Hoorn: “In addition to printers and MFPs, SHARP also supplies professional information screens, for offices but also in shops, etc. We also have touchscreens for lecture halls at AVANS University of Applied Sciences, FONTYS, and the University of Utrecht, among others.
Incidentally, the Microsoft Windows Collaboration Display (MWCD) was developed over the past year in collaboration with Microsoft, with Microsoft supplying the software and SHARP the hardware and the screen. This MWCD fully integrates with Microsoft 365 and Teams, where employees collaborate with each other.
Thanks to the built-in sensors, the screens can also integrate with the new Azure IoT (Internet of Things) applications.
a. with regard to spatial intelligence and the intelligent office building.
However, by participating in this, SHARP is taking the first steps towards IT services. 'My vision,' Peter continues, 'is that we need to develop into a company that provides what I call “managed services,” so not only printing, but also IT services.'
We need to develop in that direction to compensate for the recurring revenue, in the form of subscriptions, that we are now losing from printing.
Therefore, sharp has grown not only through innovation but also through acquisitions. Two years ago, we made a strategic move with the 100% acquisition of DYNABOOKS, the PC division of Toshiba.
As a result, we now also sell laptops, but you can buy those anywhere. The step we need to take now is to add value through our IT services.
After all, we are already working with an IT partner at the moment. In the future, this will only grow, and we will shape it ourselves. We are therefore transforming into an IT company, just as IBM did years ago.
Where does our added value or distinctive capability lie? Companies offering IT services stop at printing.
Nevertheless, we have large clients; take a major cinema company, for example. Their IT is handled by an IT service company, and we handle the printing. These companies irreverently call that peripherals.
In the future, our strength must lie in full-service 24/7. Printing will never stop, but naturally, I will not close my eyes to the visible decline. That would be very foolish.
What does this change mean for your organization and the people who work there?
On the other hand, Peter: “That transformation has a huge impact on the organization, because no one within SHARP currently possesses the necessary in-house knowledge of IT services. It should be noted, however, that we set the bar high.”
We need to build up that knowledge through retraining and recruitment. All our salespeople, young and old, are currently involved in the sale of MFPs or printers, a very specific field.
Still, wherever a fluorescent light is lit, there is one. Because every product is replaced once every five years, there is a replacement market of 20%. It is a “hit & run market”; if you have sold something here, you go to the neighbor.
Our people are doing that very well right now. But the IT services market is a completely different market. It is a market of long projects, more business consulting; so, totally different. It will be a challenge for our current employees to make that transformation.
Also, I can refer to the following example; four years ago, I decided to place the sale of touchscreens with our direct sales as well.
I'm amazed at how long it took for a successful document solutions account manager to become successful in the touchscreen market.
So, it is apparently a completely different matter, and many salespeople find it difficult to step out of their comfort zone, the good ones excepted.
That is therefore what we, as an organization in transition, have to deal with. On top of that – and this has always been my vision – I do not believe in all-rounders. You are distinctive, and therefore enormously powerful, if you possess vast know-how of your product.
Moreover, this allows you to stay out of the price war, because you are distinctive and can provide high-level advice. Clients don't get what they ask for, but what they need.
We sell Document Solutions situated at the center of a network, where you have to deal with security, among other things; and that is no easy task. That cannot be done by a generalist.
How are you going to fight with your existing organization in a market that is already quite active and therefore quite divided?
Therefore, Peter: “We are focusing primarily on our existing relationships. Research has shown that our customers most certainly view SHARP as a potential provider of IT services. SHARP is known as a reliable partner with high-quality service.”
As a result, customers are also open to a broader portfolio of services. The research has therefore yielded important information on which we can base our future strategy. We have a head start because we do printing.
Likewise, for example, we are currently working with IT companies that outsource their printing to us. In the future, we will become the provider of the complete package, whether or not in collaboration with those IT companies. Incidentally, we are already doing this nationwide with a larger IT partner.
As a manufacturer of peripherals, we have the opportunity to create “Manage IT services” as a comprehensive package, where everything is under one roof. To achieve this, we will need to develop software, partly in-house and partly in collaboration with partners.
Are you thinking about collaborating with companies such as Capgemini and Sogite?
At the same time, Peter: “That could very well happen. We have long believed in partnerships; after all, you can’t be good at everything. Our ambition is, however, to eventually become self-supporting through growth and development.”
For example, I do not rule out an acquisition either. We know the ropes, because in the past we deliberately targeted acquisitions of peers, and that could now be an IT company. Especially since it is difficult to recruit new people ourselves.
This is a huge challenge for you and your people?
Finally, van Hoorn: “We will have to make choices. Initially, our existing people will continue to offer so-called 'document solutions'.”
In addition, we will expand through the active recruitment of IT business consultants. Ultimately, we will also need to retrain our current employees, and I am of the opinion that, as a company, we have an obligation to facilitate this for those loyal employees.
Moreover, I do demand an open attitude from my people. In short, my biggest challenges are: – how do I bring my people along in this transformation? How do we ensure that we enrich our people's knowledge and skills? Well, we do that together with our European organization.
It doesn't all have to happen 'today', but we do have to do it more quickly. We should not underestimate the level of our knowledge and organizational structure. Our service level has been at a very high level for years, so the foundation is there!”
How do your people react to that now?
Finally, Peter: “There is certainly understanding, especially because I have been preparing them for these changes for years. You do notice, however, that once you have told the story and people do the same thing at work the next day, they think: ‘whatever.’ Change is difficult.”
This crisis is really forcing people to face the facts, causing the acceptance rate to suddenly rise. We have an open and transparent culture, so employees see the 70% drop in the number of 'clicks'.
All in all, that affects employees; it suddenly makes them very aware but also uncertain. That is also the reason for my update sessions; I cannot offer them any guarantees, but I do try to alleviate the uncertainty. I impress upon them that they must go along with the change.
We at SHARP will certainly facilitate that, but they must take their own responsibility. The latter might not be feasible for everyone.
In a crisis situation, the standard human response is; flee, fight or freeze. Do you have enough fighters?
First of all, Peter van Hoorn: “We have a young and very talented team up front. We certainly have a number of fighters in it, but whether we have enough of them is always the question.”
I especially need pioneers and fortunately there is a widespread awareness that we have to be very alert to whether we have enough of them, and we don't know that at the moment.
In addition, we must take into account the possibility that back-office employees, as well as sales and service staff, may become rigid and start to find it very difficult. We will certainly need to anticipate that.
Then you will also have to focus on recruitment, does Corona offer extra opportunities?
Van Hoorn: “We currently have a hiring freeze, but that gives me the space to think about what kind of people we need to recruit in the future based on our vision and strategy.
Moreover, I have appointed a manager who needs to think about what kind of people we will need in the future and which collaborations would be useful.
A crisis always offers opportunities, also in the field of recruitment.
Furthermore, as a manager, you seek balance. A balance between, on the one hand, solving problems in such a way that your company does not collapse, and on the other hand, maximizing your opportunities. That is the core task of a manager.
First survive, but immediately after the crisis you have to be ready—especially in our industry—because I expect things to change very quickly. Companies are well aware that you can work in a different way.
Next, for example, are all the offices here in Papendorp still necessary, or will they be apartments in 20 years because people will be working from home much more?
I expect a kind of hybrid model to emerge where people work two or three days in the office, the rest of the time at home, and with much broader working hours. The office will then become more of a meeting place.
Where will this company be in five years?
Also, Peter: “In that case, we as SHARP hold a leading position and focus on managed services, which is much more comprehensive than just printing.”
So, a complete offering when it comes to IT solutions in an office environment; ranging from printing to screens, from laptops to security and everything in between.
In short, we work agile with project teams comprising diverse specialists.
As stated before: 'I do not believe in generalists'. Consider, too, increasing revenue from existing clients by adding value in terms of efficiency and effectiveness.
Incidentally, that even applies to our own company, and I know there are many companies like ours. So that is a huge market. For SHARP, that is primarily the SME market, companies with between 20 and 100 employees.
Due to the crisis, these companies in particular are realizing that they need to start working differently. Our strength lies in completely unburdening these clients through a single point of contact, high-quality hardware, and top-quality IT services.
Our Achilles' heel is still that we are seen as a manufacturer, so we will have to create a different perception there. Our DNA is still that we have to sell machines, while we are actually much more focused on generating revenue.
However, the global organization will still have to get used to that, especially since we here in Western Europe are truly leading the way.
And finally
Peter Hoorn: “Corona has created enormous dynamics from which I have also gained a tremendous amount of energy. It was a huge shock at first, but that quickly turned into an opportunity creator, at least if you handle it well.”
Therefore, we at SHARP must reinvent ourselves, and that presents many opportunities.
KENNETH SMIT BlogBusters Pieter Willemse