Product deletion decisions are tough calls to make for CEO's but Lexmark CEO Paul Rooke had to do exactly that with the Lexmark inkjet business. Lexington, Kentucky will lose 550 jobs and global job losses will be 1700 including workers in their Philippines plant. Lexmark will also sell 1000 inkjet related patents.
The Lexmark share price went up by 20% today because investors liked the move by Lexmark to leave a business where 90% of the inkjet market is controlled by HP, Canon and Epson. In addition, store brand inkjet refills and increasingly affordable laser jet printers has squeezed margins and added pressure. The decision by Lexmark to focus on imaging solutions, software was also appreciated and will fit well with user behavior that is increasingly going away from printing as people take to mobile devices like iPads and collaborate through the cloud.
So why are product deletion decisions so difficult? Because calling it "quits" is the most difficult thing to do in new product development and innovation - particularly if the product is already in the market. Sort of like Newton's first law of a body in motion staying in motion. There are workers,managers,suppliers,distributors and the entire supply chain that are in motion and work... only not so profitably because of changed markets,technology or competition.
Once a product deletion decision is made managers tend to go back and try to think of ways to revitalize the product. According to research on product deletion there are three options delete immediately, do a phased deletion by winding down or sell off. Lexmark will probably arrange to continue to supply the ink for its jet printers in the market as the inkjet market continues to rationalize. It's likely that the dominant inkjet players like HP,Canon and Epson will face increasing pressure from store brand ink-jet cartridges like Staples and Costco and we might see further exits in this industry. Contact StratoServe.