Darren Metz CEO NovaCopy
Darren Metz is CEO of NovaCopy, a company he founded back in 1999. Since its founding it has become one of the top Konica Minolta dealers in the U.S. and has offices in Dallas, TX and Memphis, Nashville, Chattanooga, Jackson, and Nashville, TN. NovaCopy is also on the bleeding edge of 3-D printing, having started down that path three years ago. Clearly, Metz and NovaCopy are serious about 3-D with that technology prominently featured on the dealership’s website, www.novacopy.com.
Metz was kind enough to share his experiences in managing his dealership as well as observations about the industry along with the challenges of being one of the first dealers in the U.S. marketing 3-D printers.
You founded NovaCopy in 1999, but actually started in the office equipment business back in the 1980s when you inherited, at a young age, your late father’s typewriter business. Are you still having fun after all these years?
Metz: I’m having a ball.
How’s business been the last 12 months?
Metz: The past 12 months have been among the most challenging. We had about 20 percent organic growth and then we switched from OMD to e-automate and around the same time acquired a $6-million dealership. We’ve had tremendous growth, going from a run rate of about $40 million a year to about $60 million a year in the past 12 months while changing our core systems.
What segments of the business are doing well?
Metz: One thing about NovaCopy that’s a bit different from other dealers our size-$60 million dealerships—is we’re a single line dealer with Konica Minolta. That’s a bit different. We’re doing really well with production print and follow Konica Minolta’s lead in that space. We were recently awarded their Production Print Dealer of the Year.
While the office copier business is in decline, the digital printing press business is actually on the increase. It’s a growth industry for us with extremely high revenues. We’re with the right manufacturer who has an outstanding product line.
What are you doing right in production print?
Metz: In production you have to execute on the service, you have a different customer expectation. The service call time can be 4-8 hours. The way you run a break-fix service for office copiers doesn’t translate to the production print space when you have guys spending $10,000 a month per machine and it takes 8 hours to do a PM. You can’t do the five calls per day model with production. It’s a different service dynamic and it took us a while to adjust to that. We’re now running two service departments—one for production and one for office copiers.
I understand you’re doing well in A4 too?
Metz: Reluctantly, due to market demands, our A4 business is expanding, and like the rest of the industry we wish that it wasn’t. We’re dealing with lower revenue per unit with a lot of the same transaction costs and the same connectivity burden. The machines are just cheaper and price oriented. We’re experiencing success in A4 even though we long for the good old days of A3 only and higher quality products and higher sales prices.
Even though you’re reluctantly doing well with A4, you must be doing something right?
Metz: On A4 it’s giving in to marketplace realities. Obviously customers don’t need 11 x 17 and they’ve gotten wise to the fact they can get the speed and competitive cost per copy in the A4 space. Lexmark and HP have done a great job of undermining the traditional BTA channel and we’re just reacting to what they’ve done with their product lines.
Konica Minolta has recently come out with some A4 products that are on par with HP and Lexmark who have been kings of the hill in that space. Now that we’ve got a competitive product offering we’re able to compete in an area where we just tried to argue with the customer and get them to buy that A3 instead of that Lexmark A4 or whatever. Now we can get down in the dirt on price and speeds and feeds in the A4 space.
What segments of your business can be doing better?
Metz: We would definitely like to see more success in our 3-D space. We spend a lot of time and effort on that. We became a 3D Systems dealer about three years ago and have a tremendous amount of investment in demo inventory and marketing. The actual sales we’ve been receiving from that have been very low whereas the market interest and the people that want to talk about it are extremely high.
Getting people to buy that machine has proven to be extremely difficult. There are a lot of tire kickers and not a lot of buyers.
Is there anything you can do to change that dynamic?
Metz: We’re at the beginning of a new technology and a lot of it is customers understanding how to adapt what we call rapid manufacturing or additive manufacturing. Adapting additive manufacturing technology to transform the prototyping and design process is causing many customers to rethink the way they do business. We think time is going to make that happen.
Education is a big part of it so a lot of our marketing efforts are geared towards seminars and Internet activity [around 3-D printing]. Typical buyers spend a lot of time on the Internet researching a product so we have to do educational marketing. It’s just a matter of educating the marketplace and the manufacturers themselves who we represent, 3D Systems, the leader, introducing products at a price point and with a feature set that’s acceptable to the customer.
What was the original inspiration to get into 3-D?
Metz: I’m reminded of an old Microsoft ad I once saw with someone with a dinosaur on their head. Being in the copier business we feel like we’re just dinosaurs running around and on the horizon we can see mushroom clouds, but so far the weather is still good. Clearly there’s tremendous shifts taking place, and customer buying power is a generational thing. As today’s twenty something’s become tomorrow’s managers, they definitely don’t have the propensity for paper that today’s Baby Boomers have. That’s what keeps us up at night and constantly on the lookout for alternative revenue streams like Managed Services, which we didn’t opt for. We chose the 3-D route, the road less traveled if you will.
Who are the customers for 3-D?
Metz: It’s a totally different customer. Businesses that are buying may be the same people buying [from you already], it may be a hospital or an auto parts manufacturer, but it’s a totally different decision making process and totally different areas of influence. For 3-D the buyers are engineers, directors of research and development, people who wouldn’t get anywhere near a copier decision and are all of a sudden knee deep in some very technical performance considerations on a 3-D type transaction. We have found that nothing on the sales side transfers over into the 3-D world. So we have 3-D specialists. That’s where we have a lot of expense. We have three people, a president of 3-D systems and two 3-D specialists dedicated to that space on the sales side.
You’re also doing rapid prototyping, correct?
Metz: We’ve put a lot of investment into that. It’s the equivalent of a copier dealer that also runs a copy shop. In the rapid prototyping space we’re selling prints, if you will, off the devices. We have a full-time specialist in that area.
How do you expect your 3-D business to grow?
Metz: It’s been disappointing so far and there’s a lot more hype in the market than there is revenue. The copier business is maybe a thousand times bigger than the 3-D business in order of magnitude. We’re expecting double-digit growth, but when you draw the numbers out, when is it going to become a meaningful business for us dealers and even the manufacturers? I don’t know, but we hope sooner than it has so far.
Is there one thing you know about 3-D printing today that you wish you knew when you first got into it?
Metz: How unproven and undependable the technology is. We have multiple iterations of the same machines that have a lot of bugs in it. It’s kind of like the first PCs or first copiers, you have reliability issues and design issues. Today’s model fixes the bugs in the model from six months ago and you wind up stuck with obsolete demo inventory. It’s a much more challenging business to try to manage.
Let’s change the subject away from 3-D, what’s the biggest challenge facing your dealership today?
Metz: The change in end user behavior patterns, which is less and less dependent on print. Everybody knows that although it’s taken a lot longer for the bell curve to decline. We hit peak paper output probably in 2009 and 2010. There are different opinions about what the decline rate is, anywhere between 3 percent per year to 15 percent per year in pages printed year over year. That’s going to have an impact on our industry, our competition, pricing, and margins.
We’re in a classic shakeout phase. Not only a shakeout phase, but a period of market decline and it’s going to go nowhere but down from here. Print on paper is going to decline. Does it have 100 years or 10 years? Who knows, but we’re definitely not in a growth industry in terms of the traditional copier printer space.
What trends are impacting your business today, a lot of people are talking mobility and cloud?
Metz: Before starting NovaCopy I founded a cloud computing company in 1997. It was a failure and I lost a fortune on it. It’s definitely having an impact [today]. The question becomes how do I make money and how am I relevant to it?
Of course we use things like hosted PrintFleet software and everything is in the cloud these days. In terms of how do we make money on it, we’re more of a participant of it on the peripheral versus finding a way to get any revenue stream. Like social media, we know it’s out there, but what do we do to make money from it?
What’s NovaCopy’s take on Managed IT Services? Is that something you’re planning on doing?
Metz: I did Managed Network Services with a previous company form 1987-97 and pretty much had my fill of it. I wish everybody well in that space. My personal belief is that managing customer satisfaction and all the IT complexities is difficult. What my experience was, and I’ve talked to people who are doing it, you have a lot more problems with technician turnover because there’s a shortage of qualified IT people in that space.
While we see the market opportunity and we think that people who are doing it are great, with labor shortages in our marketplaces, we’re just afraid we wouldn’t be able to execute and deliver consistent service levels because of the labor market and the challenges of what you can’t control. It’s hard enough when you have a manufacturer standing behind you fixing their problem, but when you’re out there with Managed IT, the buck stops with you and it’s often difficult to say we’re going to fix it by the end of the day tomorrow at the latest. It’s a complicated business model and one that we wish everybody who’s in it well.
What do you do for fun when you’re not working?
Metz: I have three daughters and a lovely wife so I’m one man in a household of girls and I cater to their every need and we have a good time together.
What gets you excited about coming into work every day?
Metz: For me it’s a people business and I enjoy seeing people come into our industry and grow and prosper. I enjoy solving problems for our customers and having customers appreciate our excellent service and the whole team environment. That’s what gets me going, customers acknowledging and appreciating our core services and witnessing the growth of our team members.
What’s the future look like for NovaCopy?
Metz: More transformation, and finding new revenue streams and new technologies to replace old ones.
