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June 17, 2013 12:36 pm
Canon’s circular offices at Stockley Park west of London were once the sales and marketing outpost of a camera maker run entirely from Japan.
Now they are the regional headquarters of a consultancy business, where customers are brought in and dazzled with an array of high-definition screens and the latest Canon equipment.
Canon, long synonymous with cameras and printers, is changing its business as it follows others in the industry by placing less emphasis on hardware sales and more on subscription services.
Revenues at Canon are falling. Sales for 2012 were down 1.4 per cent to Y951bn. The company posted a net profit of Y61bn, also slightly down from 2011. Performance was also affected by the strength of the yen against the dollar and euro .
Much as IBM shifted its focus towards consulting services in the 1990s, Canon is trying to replace lost revenue by selling additional subscription services on top of its hardware sales. This includes consultancy and outsourcing, putting Canon up against the likes of Accenture and Capgemini.
The move has required big organisational changes. Canon, which makes all of its product decisions in Japan, has given its five regional headquarters autonomy to tailor these services to the market. The Europe, Middle East and Africa region, run from Stockley Park, is the biggest in terms of its contribution to total revenue.
“When you move away from global hardware products and you go more into software solutions and services it’s important that you develop and market those products close to the customer,” says Mr van Iperen, president and chief executive of Canon Europe.
The model is being applied to consumer and business technology.
Canon leads in market share globally for digital single-lens reflex cameras. Sales of these more complex models have continued to rise despite the growing popularity of smartphones, which has hurt sales of simpler point-and-shoot cameras.
Canon’s answer to the encroachment of smartphones on to its territory is Project 1709, currently in development but set to be launched in September. The Europe-led service gives users a single view of their photo collection across devices, social networks and Canon’s cloud storage.
Canon is starting to integrate these services into its hardware, too, with cameras that can access the internet and share pictures on social media.
“On one side we will develop the connectivity of the cameras to the same level as the smartphone, on the other side we will make sure that functionality of the camera is superior to a smartphone,” Mr van Iperen says.
Although the beta version of Project 1709 is free, competitor Nikon has a similar service called Image Space that charges for extra storage. It takes the model a step further by offering cheaper rates to owners of Nikon cameras. Adobe, the maker of Photoshop, has a similar service called Revel that operates on a subscription basis.
All three are following in the footsteps of Apple and Google by trying to use content and online services to keep customers loyal. But given that independent services like Facebook, Instagram and Flickr are already well established with hundreds of millions of accounts, it may be an overly optimistic strategy.
Mr van Iperen has a background in services. He was formerly chairman and chief executive of Dutch print services company Océ, which Canon bought in March 2010, and took charge at Canon Europe in April last year.
The Océ acquisition helped to kick-start the group’s move into services. In addition to managed printing and so-called professional services, which generally involves creating bespoke technology for business customers, Canon also offers a managed document service.
Mr van Iperen describes Canon’s traditional business model as “break and fix” – they sell customers photocopiers then charge them to keep them running.
“You constantly have to optimise that service operation because the machines are becoming more and more reliable all the time,” he says, pointing to reduced demand for support and maintenance.
With its consultancy, Canon wants to provide services that are harder for competitors to replicate, which means higher profit margins.
“If you deliver a simple service, like mailroom service, then the margin is small because you can also be replaced very easily. The only way to do that better is to add value – more knowledge, more technology, so that you become much more important for your customers, and then you can really protect your margins.”
One example of this is litigation. In the US an average law suit consists of 600,000 documents. Canon sells a service to help lawyers collate and prepare documents for a relevant case, with the work being done in the Philippines.
But Canon is not abandoning its core. The “paperless office” is far from reality. If anything, Mr van Iperen says, the digital era has spawned a culture where documents are printed on demand and recycled immediately, leading to higher printer use. The company’s medical imaging business continues to grow and Océ has given the group a foothold in 3D printing, although Mr Rokus is cautious about the latter.
“It’s not an exploding market yet, but everybody knows it will go in that direction, and the combination of Canon and Océ is on top of that.”
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