One of my favorite philosophical traditions from which to draw eternally relevant aphorisms is Daoism. Perhaps not as well known to the Western world as famous names like Zen or traditional Buddhism, in Chinese, Daoism is simply known as "the way" and espouses a philosophy of attaining harmony with the universe. But a key nuance is recognizing that harmony is not static and unchanging; harmony involves understanding that everything is forever in flux and that as the universe changes, so must the individual.
The Dao of printing
While you ponder that spiritual insight, let me now argue that we may find investing and business wisdom in that truism as well. Take the printing industry: While it's become fairly standard business practice to outsource a company's payroll management to ADP or website hosting to Rackspace, a lot of companies still haven't recognized the efficiency of outsourcing their printing needs. On the surface, it seems simply arcane: Why keep such a specialized operation in-house? That's anachronism No. 1: The universe has changed, but outdated printing practices have stubbornly remained.
Anachronism No. 2: Those organizations that have brought themselves past the 19th century have, on the whole, refused to enter the 21st. Back in the glorious 1990s, for instance, if I bought a book it'd be from the local bookstore. I didn't know if I was getting a decent price, but I didn't really have much of a choice. Fast-forward 10 or so years: I now buy books from Amazon.com because I know it'll aggregate and find the cheapest suppliers and give me, the customer, the absolute best price anywhere. Makes sense right? Yet again, the printing industry and its customers have steadfastly refused to acknowledge the myriad efficiencies that having this sort of centralized, aggregating network can deliver. Joe Company goes to Jane Printer for no other reason than, well, that's just the way it's always been done.
Disruption: An act of delaying or interrupting the continuity
With two major Luddite holdovers, the printing industry has been in need of a disruptive savior for a long time. InnerWorkings
To be clear, InnerWorkings doesn't do any in-house printing. But unlike other print brokers, the company doesn't rely on just an old boy's network. InnerWorkings consolidates information on more than 8,000 printers – their equipment, their capabilities, past jobs that they've run, and the prices they ran them at. When an organization comes to InnerWorkings for a print job, a procurement manager can search through this vast database to find the best price and service to offer the client. Jane Printer simply can't match that nationwide network and that flexibility.
The key challenges for InnerWorkings are (1) getting prospective customers to realize how much the 21st century can benefit them and (2) scaling up and building out that network and the eBay-like moat that comes with it. As far as the first part goes, I had the opportunity to talk to CEO Eric Belcher last Friday and asked him: "Why, if your solution is so great, aren't you seeing stampeding hordes knocking on your doors?" In my humble estimation, the answer can be entirely explained by this seemingly unrelated statistic: Sales of VHS cassettes in Britain more than doubled from 2008 to 2009. Seriously, guys? Do you not have DVDs, Netflix, or iPads across the pond? (That was a rhetorical question.) In any case, people hold on to what they're used to, so Mr. Belcher, as far as my first point goes: Good luck.
But as for the second point, the company had an exciting announcement on Friday that the market completely overlooked. InnerWorkings is going international with the acquisition of CPRO, a South American print manager. The purchase adds a new group of suppliers and set of capabilities for the InnerWorkings network. Beyond that, it's a sign that the company not only has its eye on the $400 billion global print market but has the gumption to move on it.
The great thing is how early we are to this story. Belcher noted that InnerWorkings has less than half a percent of the total U.S. printing market (traditional printing powerhouse R.R. Donnelley
Sean owns shares of InnerWorkings and Amazon.com. Rackspace Hosting is a Motley Fool Rule Breakers pick. Amazon.com and eBay are Motley Fool Stock Advisor selections. Automatic Data Processing is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.