#325 - The Global Reset For Print: A Conversation with Dario Urbinati, CEO, Gallus

In this episode of the FuturePrint Podcast, Marcus Timson welcomes back Dario Urbinati, CEO of Gallus Group, for a timely and far-reaching conversation about the structural changes reshaping print, packaging and the wider industrial economy.

Two years ago on this podcast, Dario predicted that the market was not simply going through a temporary downturn, but entering a more fundamental reset. In this follow-up discussion, he explains why he still believes that this is happening now - and why the old pre-2019 model of global stability, easy growth and predictable supply chains is not coming back.

The conversation explores the long-term macro forces behind this reset, including demographic decline, labour shortages, geopolitical fragmentation, inflation, supply chain disruption and the end of the old globalised operating model. Dario explains why these are not cyclical challenges, but structural ones, and what that means for converters and label printers trying to plan for the future.

Marcus and Dario also discuss what the most successful print businesses are doing differently, why mindset matters as much as machinery, and how technology must now be viewed not only as a productivity tool, but as a resilience tool. Key themes include modularity, smart connected printing, workflow, total cost of ownership, operational flexibility and long-term investment security.

Dario also reflects on the thinking behind Gallus’s System to Compose strategy and why modular production environments may be increasingly important in a more volatile world.

A thoughtful, realistic and ultimately optimistic conversation about what print businesses need to do now to adapt, invest and grow.

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Transcript

SPEAKER_00 0:01

Welcome to the Future Print Podcast, celebrating print technology and the people behind it.

SPEAKER_02 0:11

Welcome to the Future Print Podcast for this episode and welcoming back a guest who two years ago um was on the podcast and um that was when we sat down with Dario Urbanati, who is the CEO of Gallus, and we talked about where the industry was heading. And back at that time he made a really bold argument that we were living through a not simply a downturn, but actually a more fundamental reset in how the global economy operates. And if we fast forward to today, many of those predictions have played out. And actually, you know what? Getting predictions right is not a common thing. There are many famous examples of people making incorrect predictions. So in this episode, what we're going to do is step back to look at the bigger picture. What has really changed? Why it is not going back, according to Dario, and where the opportunities now lie, and perhaps what print businesses need to do to adapt, invest, and grow in this new industrial reality. So welcome back to the podcast, Dario. That was a rather long introduction, but I think I felt we needed that. So welcome, welcome back. Thanks, Lord Marcus. Thanks for having me. Yeah, looking forward to this chat because you gave us some really good insights and so on last time and um looking forward to this follow-up. So Dario, sort of looking back two years ago, you talked about structural shifts, demographics, labor shortages, supply chain disruption with some of the themes. And you were clear that this was not temporary. So two years on, were you right?

SPEAKER_01 1:53

Yeah, in a certain sense, fortunately, but uh also unfortunately, I was right. Um I remember we had an extensive extensive discussion about demography, uh generation change, and so forth. And uh, I mean numbers don't lie. What I said that time is still valid today. And you remember I I placed a thesis on the table which said that uh demography, generation change, and our ability to uphold the globalized system are the two crucial drivers of our today's generation uh economic system.

SPEAKER_02 2:35

Right, yeah, yeah, yeah, absolutely. So so, like you say, unfortunately, in a way, you were you were right, and it's definitely the plates of change perhaps have even accelerated further, haven't they? Um, and I guess we were hoping perhaps things would normalize. Um but before you said that this is not cyclical but structural, what what why do you believe this is a reset in the global industrial landscape rather than a phase that will eventually pass?

Demographics Drive Permanent Economic Change

The End Of Pax Americana

SPEAKER_01 3:08

Well, if you look if you look into uh fertility levels uh on a global scale, um those are not a reset, those are permanent. I mean, if you look into the fertility rate, for example, of China, Japan, Germany, Korea, and so forth, it became clear already years back that we are going to approach a demographic tipping point which has an influence on uh consumers, on producers, and uh on the way how our societies work. Uh, because essentially we will end up with many much more mature older people which will absorb capital and not really investing them into the capital markets anymore, which on the other side also demands for uh uh new methods in capital allocation and distribution, but that's a that's another story, that's a story for another time. And uh based on just based on the demographic shift and the generation change, the economic model has started to shift and started to work differently than it uh than it used to do in the past. And the second part of this thesis um was the ability to uphold the globalized system, which we took uh until a certain point in time for granted, and it became clear that uh our today's the system which we had and which we got used to until 2019 has reached uh an infliction point. Uh, the US uh itself as the global superpower is not able to uphold the global economic system anymore, which was basically introduced uh after the Second World War around Bretton Woods when the US said we are opening our markets for you. In return, uh, we guarantee freedom of the seas, and uh you let us write uh your uh security policy, which led to a point where the US, in a certain sense, took control over the world, but also indirectly subsidized all their partners. So we have reached a point where the US, due to economic and also political constraints, uh, is on the on the way to pull back from its traditional role, um, which it held uh I would say after the Second World War until around uh the 2020 years, and uh that has an in uh huge implication if it comes to currency to the way how the world operates, um, and that's a part of the uh you know uh situation we where we find ourselves in today, where we see shifts in geopolitics and uh economic models.

SPEAKER_02 6:02

Yeah, and and and I guess that's a fundamental shift in ideology and for a variety of reasons. I guess the was it the Truman Doctrine post-war, which kind of was established around the security of Europe and the Cold War and everything else. And I I think that kind of while it while it was a tense period, it was actually a very stable one, wasn't it? It was it was almost guaranteed economic growth. The system was very settled, and now it's not none of those things, is it? It seems that the new it's a new age of uncertainty is what typifies the world we live in now.

From Stability Back To Volatility

SPEAKER_01 6:40

Yeah, I I would say so. I mean, what what happened that time we had this uh paradigm and you know the assumption that uh it will always continue like it like it did. And uh, you know, until uh it's certainly true that until uh 1989, the fall of the Iron Curtain, uh there was also a great deal of uncertainty. And I I had uh an extensive discussion with one of my relatives not long ago, which is way past uh 70 years in age, and he said to me, Look, uh, in between uh the years post the Second World War and 1989, we had the Cuba crisis, we had oil crisis number one, oil crisis number two, we had Nelson Mandela, we had uh you know 9-11, we had uh the disintegration of the Soviet Union, and we had 20 currencies in Europe, of which uh Italy alone devaluated its currency in this period over 10 times. So there were some you know uncertainties also uh in the in the decades in between uh the second world war and uh 1989, but since the fall of the Iron Curtain, we have enjoyed a kind of uh anomaly of stability. Um we had low interest rates, we had Pax Americana, we had growth, we had hyperglobalization. Uh, Europe's business model, in a certain sense, was cheap energy from the east and large profits in the Far East, and uh we saw that tipping point somewhere around 1919, pre-pandemic. Pandemic was certainly an accelerator, and if you look what happened uh since then, uh you know uh we had unrest in Hong Kong, we had uh tensions in uh US between US and China following the unrest in Hong Kong. We had the pandemic, we had the supply chain crisis, we have the Taliban back in uh in Kabul, uh, we have the Ukraine war, we have uh certain uh Middle East crises and the one or the war, uh especially the one in Gaza lately, we had the BRICS extension, uh, we had Trump II, economic fragmentation, tariff war, Venezuela and Iran. So um, somehow we are back uh in the modus operandi which we had pre-1989, and in between we had uh you know 30-35 plus-ish uh years of of stability and globalization and growth, and it just seemed that we need to move back uh to the mindset which we had pre-1989, and maybe maybe we need to ask our grandfathers to give us advice how to run our companies and how they did it that time.

Reset Without A Depression

SPEAKER_02 9:35

Yeah, yeah, exactly, because it's about adaptation, I think, overall, and um uh yeah, and considerable challenges, but and adaptation perhaps becomes more difficult if we're set into a certain system and way of thinking. So it's much uh as much about the way we use our minds and how we adapt. Uh so thinking about it, are you are we talking about a decade-long downturn in your view, or even a depression? And and for a converter, perhaps listening to this podcast, what does this new reality and reset actually mean in terms of the tangible shifts and changes?

SPEAKER_01 10:14

Well, first of all, um I think we need to get used to changes happen much faster. Um, and no, before we talk about Trump, uh Trump too certainly is not a reason for all of this. He is maybe an accelerator. Um and you know, things happen simply much faster in a in a much shorter period of time. And uh we need to adapt to that. I mean remember when when uh President Trump wanted to take over uh Greenland and Denmark actually prepared for an invasion? That's that sounds like a story from uh another time, right? But it actually only happens two months ago, speaking now, end of March. It's not long ago, but it feels like it's uh very long in the past. It's it's basically only two months ago. So and but I wouldn't go as far as uh calling the changes the route to a depression. I think I think that's I think that's too far. Um I I do not think the world stops uh on a Saturday morning. Consumers will continue to consume, uh, people need to continue to eat and drink. Maybe it has an impact on the tourism industry because people are a little bit more careful, especially now with the tensions in the Middle East. And um no, I don't think I don't think we are we are heading into a depression. I think it's an inevitable uh uh process to adjust to a new reality. I believe this process will take uh a decade for sure. Courts are shuffled in a new way. Um the Chinese and the Indians and uh some powers in between, they demand uh for their uh seat at the table uh and also being engaged and involved in defining the rules, how we globally operate, which which is fair enough, right? I mean they had uh they had uh their their fair share of growth in the in the last decades. And no, depression is too much. It certainly uh will continue to be volatile, um, as we are seeing it already today. And I believe as printers, converters, and we as the technology providers, we need to we need to adjust and we need to adopt in how we operate our businesses and what products we are providing to the market.

Shop Floor Reality For Converters

SPEAKER_02 12:32

Yeah, it's gonna take a reset of mindset, system processes, and and innovation as well. And when the plates of change are shifting very quickly like they are, I guess it does provide opportunity as well, doesn't it? Just thinking about the converters too. What in your view has changed most in converters' day-to-day reality, perhaps on the shop floor commercially or in how they serve customers? And perhaps what is the risk if they treat this like a normal downturn and just wait for it to improve?

SPEAKER_01 13:07

If you treat these structural changes which we see on a on a global scale, and I mean we really should talk about macro trends, demo demography, uh, generation change, you know, geopolitical uh changes, urbanization and so forth, those are not you know surface level changes, those are very deep-rooted changes affecting our global civilization. So as converters, I believe, or as an industry, we we do not have the luxury to ignore what's happening. Um, I believe we need to understand the mechanics beyond it. I wouldn't I also wouldn't put too many emotions into you know what really what really happens, because at the end of the day, those are just uh very large-scale long-term processes which are running. Personally, I focus on my circle of uh control and circle of influence. I I try to gather as much quality information from outside of my circle of influence, uh, because decisions taken taken there influence how we need to run our business, and you know they have they affect us in our daily operation. Um but if you if we in the long term ignore what's going to happen, uh I'd say certain participants in our industry risk to be out of business in the long term because we need to adjust, adjust and we need to adopt, and we need to rethink the way how we operate as an industry.

SPEAKER_02 14:44

Yeah, yeah, absolutely. And I and I guess that picture you're saying is it's it's it's we're in the process of that new uh normal being being kind of is firmly established. And well, what are the biggest pressures your customers, converters, and label printers are dealing with right now, from what you hear from your customers, if you don't mind sharing?

SPEAKER_01 15:10

Well, the question the question nowadays, first of all, is what is normal? Um and as we just said before, uh normal in our heads is the world which we experienced pre-2019, and that world is not coming back in the way how we experienced and maybe expected. So if you look into the challenges you know imposed on our customers and our entire industry, first of all, there's certainly labor shortage, uh, which is going to accelerate because the baby boomers are headed for retirement. Um you know, and you know, migration certainly really solved uh the issue. And if you look, for example, into Switzerland, my home country, we you know, in in a certain sense, we imported resources, labor from Germany, Germany imported from Poland, Poland imported from Bulgaria, and Bulgaria nowadays has 30% lesser population than they had 30 years ago. So, you know, democ demographic changes they affect everybody. Um and you can try to shuffle people around uh the continents, which uh which also might lead to political tensions as we experience. So there is not really an easy way out of that. Uh however, we need to adjust uh the way how we operate our factories in order to have higher automation and so forth, about which I'm sure we talk about later. Um another uh challenge which our you know the industry itself, so our customers face is costs. Uh we have inflation, and I believe now with the happenings in the Middle East, inflation is going to push upwards again, uh, certainly because the oil price uh has an as a certain effect. Um eventually we're ending up into uh into a situation where supply chains get disrupted again, and we had that already uh pre-pandemic post-pandemic. Uh, we are used to you know deal with this situation now. It's not the first time anymore, but it it might happen again. And what we what we really see is that um the industry has to have a strategy to make itself more resilient, uh, which also goes along with investment security.

SPEAKER_02 17:25

Yeah, yeah, absolutely. And and and I guess um, with all that in mind, that kind of um shift, which um, like you say, is it what is normal and the definition of normal, and also the point you make about making decisions, because I guess the temptation with humans is to stay safe and not do anything, but that's still a decision in itself, isn't it? Um it's just just for that moment, you know what I mean? It's like there is no decision doing nothing is a decision. Um from your customers, are you seeing kind of you know, maybe more short runs, faster turnaround expectations, or perhaps more or less predictability from end customers?

SPEAKER_01 18:09

Well, that's certainly what we see. We see much more turnaround, we see, I mean, you have this, it's it's nothing new, right? It didn't happen the last six months. I mean, the amount of SKUs drastically increased. Uh we have a tsunami of uh different variations of labels uh and packaging uh itself. We had, you know, we see just in time delivery, you see uncertainty in do I have long-term jobs or is the is my brand owner going to shift uh to auto vendors, and you know, it it becomes more unstable for our customers, and many of them are in a conversation with us uh to find ways, technological ways to adjust and adopt their business as they have the need, they see the need to evolve.

Skills Gaps And The Training Fix

SPEAKER_02 18:58

Yeah, yeah, and that's that's that was taking place already. But like if anything, I would imagine it's a it's acceleration as well. Um a couple of years ago we talked, and you gave a really good talk at our events, and we recorded the podcast. Um we're talking about this kind of post-COVID people retiring early, and a lot of the skilled labor within the industry was starting to we're starting to lose because of that. Um significant is the challenge around skills and operator availability now?

SPEAKER_01 19:30

Is that still an issue or is it I I have not experienced in the market uh that the that the situation has become easier or the tension get got loose. I I I I personally think that or I know from many of our customers that really struggle to find skilled labor. There is labor in the market, but you know, it it has become increasingly difficult to motivate uh young people uh to pursue a career in printing and packaging. And sometimes I I have the feeling that they prefer to be a barista at a Starbucks somewhere in a city compared to well, instead of running a printing machine and making good money somewhere in a factory. Um, so there is labor available, but at the end of the day, you also need skilled labor. You need people which are trained, uh, which by the way is one of the reasons why we have introduced the Gallus Academy, because we saw that there is a gap in the market and there are people out there which are willing to work in factories in printing and packaging, but they need to have you know training and they need to have exposure to technology, and you know, they need to learn the fundamentals. And uh we decided to build a tool and provide it for the market to actually help the converters to to train up uh lesser skilled stuff which they which they might acquire.

Cost Pressure And Total Ownership

SPEAKER_02 20:53

Yeah, yeah. And that and again, I think there's uh the the fast-paced digital world that perhaps younger people operate in. There may even be a sense of impatience among that and and one wanting to get to the to the point of earning money and understanding things is is um perhaps got shorter. So that that solution you've created there probably accelerates that and makes it more intuitive and more more familiar, perhaps. Um you also in the past mentioned about cost pressures among converters, you know, it uh um energy, labour, uh, we've already mentioned material substrate costs. Is this still a fundamental concern shaping investment decisions?

SPEAKER_01 21:35

Of course. Of course. I mean uh energy consumption, waste, uh oh, you can call it the input factors, whatever you need to put in inside your value creation process. Uh it's it's labor, it's it's energy, it's it's substrate cost, and so forth. And by having seen now that the oil price has increased, we will see where it goes. Certainly we see an upwards pressure also in energy costs. We see an upwards pressure in subtrade costs and so forth. So cost has become one of the major drivers certainly in investment decisions. We follow the concept of total cost of ownership because I believe that's the most fundamental, fair, and transparent way of how you might calculate costs associated with a certain set of technologies. And that involves certainly the investment price for the equipment, the consumables, but also the footprint, energy, you know, labor input, substrate, converting effort, and so forth. And we ran already years back, together with customers, I must say, not internally, with with customers and based on data provided by customers sensitivity analysis, which allowed us to figure out which screw do we need to turn in which direction in order to reduce the total cost of ownership. Because not every cost within a TCO calculation has the same effect on the total cost of ownership. So you really need to figure out what do you need to change in what direction in order to have a total cost of ownership reduction over the entire system and the technology. And working together with customers with very detailed and it was a long project actually to get it really right, uh has tremendously helped us to understand the cost implication of our technology within a factory of a customer and helping us to you know push forward in total cost of ownership reduction.

Technology As A Resilience Tool

SPEAKER_02 23:41

Yeah, and I guess that that analytical data, incredibly powerful in building trust and um helping the customer understand because there is a I guess a habit where people just look at the surface of the cost and not the full cost of ownership because digital has a in particular has a very uh strong um you know offering to make in that regard. Um which leads us on to technology really. Um in this environment then, where does technology really fit? Is there a new role for technology and growth and industry evolution, in your view?

SPEAKER_01 24:23

Well, traditionally we have seen technology as a driver for productivity and for growth. That's that's how we were speaking about technology all these years. I believe we need to add an element to this conversation. We need to add the element of uh resilience. We should use technology also to improve the resilience of our industry against external shocks. Uh, we have seen now the last couple of years that's that's necessary. Uh shocks have increased, uh, as we just said, uh, since 1989, uh since 2019, I'd say. And I think technology really has to drive uh the resilience up. Um I also think that infrastructure has become a relevant point uh because the the good old cozy times of uh the conventional industry is over, um in which in which we basically had to, you know, we had to grease the gearbox and move on with our lives. That was a relatively simple environment from a technological perspective. Nowadays we need uh workflow systems, we need ink supplies, we need you know a stable framework to run technology. We enjoy all the benefits of modern technology, but there is also an infrastructure level to it. And if I if I speak about workflow, I'm not just speaking about workflow in the sense of software. I also speak about workflow in the sense of how do you organize your factory and your back office in the most efficient way in order to reduce operational costs, increase the output, and get the necessary flexibility to adjust wherever you have to adjust to maybe changing uh circumstances.

SPEAKER_02 26:10

Yeah, yeah, and I guess it's making that strategic decision. I I I I know certain and I can understand why new technology is introduced, and many print shops will add technology here and there, but over that the in the short term makes sense, but over a longer period, the strategic kind of direction of that stack of technology may not be serving the business best. So it's having that granular understanding, I would imagine. How uh on that note, then how can technology help increase productivity, create resilience, and even unlock new demand rather than just replacing labor?

Modular Production With System To Compose

SPEAKER_01 26:49

You know, you you just mentioned an interesting point. Basically, you know, the long-term strategic view, which in the old world meant I buy now a piece of equipment or a piece of technology, I will install it and I depreciate it maybe over the next 10-15 years and I run it, and that's my long-term strategic view. Now we have a break in that because as the environment we're operating in has become more volatile, and I think nobody doubts that anymore, uh, we need to we need to have a different perspective on what means strategic long-term view in case of technology. It has changed. And we have seen that coming, the situation we are we are in today, um, based on macro trends we have been you know investigating already for four and a half, five years ago. And that time we made uh a large series of interviews all around the globe. We planned 100 interviews and we held 60, and after 60, we had to stop the exercise because we heard 60 times essentially the same. And that time already our customers told it us that the challenges are in demography, generation change, input factors, consolidation, and so forth. And nowadays I would add uh supply chain, resilience, uh maybe inflation, uh, and the geopolitic tangents, but in the essence, the macro or the macro uh economic conditions uh uh and the societal decision uh situation has been the same already. And that time we started thinking about how do we position ourselves as a technology provider for the future, given the fact that the technology we need to develop or we are we are starting to develop today, maybe comes alive only in a couple of years from now, because you have development cycles, you need to go to a beta testing program, you need to industrialize, and only then you actually bring a product to the market, especially in our industry in machines and the digital technology. And we said that in order to improve resilience and provide a higher level of investment security, we need to give us some cornerstones. First of all, certainly is automation. Um, but the second one we added later was modularity. So we decided to bring um the system to compose to the market as we call it today, which is a a modular, flexible production system which can evolve on the go as your company evolves. And um nowadays I would say the the most significant part of our turnover today comes out of the system to compose. And the beauty is that we do not we actually do not want to sell machines in the sense of machine in a closed system within system boundaries, uh, because there you have many problems. You have one system boundary, and within that, you have a spell parts catalog, and uh, you know, a software, and you have a trained operator. And essentially, in the old world, in a production environment, you had many factories within a factory, because every machine had, as I said, different spell parts and different software and different operator training and different everything. So we said, let's let's break this and let's let's take out complexity, let's add a level of standardization, while at the same time keeping the flexibility in in application. And we broke apart our uh production portfolio and designed it in building blocks. In you can you can envision, or you can imagine it like you have Lego bricks, and you know, we give to the market certain bricks, and one brick might be a flexor station, one be might uh a DPU, a digital print unit, one might be unwind-rewind, or uh cold foil, a hot foil stamping, and so forth. And we give these bricks to the market, to the converter, and based on his needs, currently in this moment, at the stage of his development of his company, he selects the building blocks he needs and designs his own production environment. Now, the beauty is you can build out of these uh technology modules, you can you can build conventional presses if you don't add the digital print unit, or you can build a standalone uh inkjet uh system uh in case your mindset and your history of a company focuses on uh offline embellishing, or you can produce uh build hybrid machines with upstream, downstream, conventional elements, it's really fully adjustable. And because it's a it's a modular system, you can evolve it on the go. So if your if if your production you know setting, your jobs you you're producing uh are changing due to whatever reasons, you might add a building block. Maybe you add a flexor station to you know maybe you have a top coat or something like that you want to add, or you remove one because you don't need it anymore. And that's how, based within the system to compose, you adjust in the long term the production environment of your factory. Um, based on that, we believe we have found a very good compromise in between the long-term investment strategy uh of a converter and the needed short-term flexibility, and at the same time add a layer of standardization. Because you know, you you end up in if you if you walk into a printer nowadays, global-wide, there is a high likelihood that you're running several different brands of equipment and technology, and the complexity is too high, I believe. Every machine has a different, you know, a set of unilogs and and and maybe tapes and uh printing cylinders and whatnot. Running such an environment is insanely complex and it's costly. The operational costs are too high. And I believe we need to work together with the industry to bring down the operational costs and at the same time improve the resilience, the flexibility, and add, as I said, uh a layer of standardization.

SPEAKER_02 33:30

Yeah, yeah. And that's that's something is developed within the business, isn't it? That modular strategy, which um, like you say, provides that flexibility and you can therefore make an investor or your customers can make an investment and adapt and adjust to market changes without creating islands of technology in your business that don't talk to one another or don't sit with one, you know, so you end up having higher cost and restrictions placed on you. So that makes a lot of sense. Just with that in mind, really, just a question. It's one of the, in your view, then, it's one of the industry's mistakes that it sometimes focuses too heavily on that kind of race, you know, for the latest innovation, the next machine, rather than actually thinking more strategically about systems and infrastructure.

SPEAKER_01 34:22

Well, I would I would answer that in a broader context. And what we did in uh a couple of years back, we consciously stopped the discussion or the argument conventional versus digital. Because this this discussion has led nowhere. It's it's not about it's not about whether it's conventional or digital, it's not about whether it's the latest innovation. It's the question is does the technology which we provide today serve the need of the customer, which which in our case are the printing companies. Do we have the right set of technology available? Do we have it in a modular way? And are we relevant as a company in a sense? Are we solving the challenges of our customers with the offerings we provide? That's the answer we need to give. And we have decided that's where we want to be. We decided we do want to listen to the customers, that's why we have started uh the development of the system to compose together with our customers for the customers to solve their challenges. And um by changing the mindset or the paradigm of conversation within our company in radically focusing on what the customers need today and how he might need to adjust his production environment in the forthcoming year. I believe we ended up at the point, at the unique point in our industry uh where we can demonstrate that we do have uh the technology and the products ready to serve the customers now and in the future.

What Strong Performers Do Differently

SPEAKER_02 36:10

Yeah, absolutely. And that's um I know you've done exceedingly well really um at Label Expo last year as a you know standout, and that um the strategy is working really well because the technology is is aligned really well with the needs of the of the market. Um I was just curious about your customers really. So Gallus, you know, you didn't just talk about this shift, did you? You acted on it with the strategy. Looking at your customers today, what's different about the ones who are performing well? Is there some characteristics that that that these customers that are doing really well have that perhaps provides them with an advantage or a yeah it it it's that's a difficult one because success has many fathers.

SPEAKER_01 37:06

Um certainly it's it's a management mindset, it's a forward-looking mindset, it's a mindset which anticipates uh necessary evolution and pivot of the business. Uh certainly you need to have state-of-the-art production technology in place. Uh, certainly you need to have partners which you can rely on, especially if it comes to service and uh supply of consumables. Um certainly it has become relevant that you have partners which are somehow located in your geographic environment. What do I mean with that? If you have global supply chain disruptions, which might happen again, uh you need to have partners which are located you know close to your factory, so they still can travel uh to your site and do the necessary uh in order to keep your factory running. And we are in a very fortunate uh situation. Carlos, we are part of the Heidelberg Group. Heidelberg has in a very large amount of countries, uh, local sales and service uh hubs, uh they have uh legal entities uh all around the world, which really brings us closer to the customer in a way which uh maybe others are not able to do that. And I believe that's a part of resilience. Um as we see now, and it's a bad situation, it's it's it's a good example, but it's a bad situation. Air travel to from Europe uh to Asia and back uh is affected by by the current situation. It became costly. Um, you know, the ports in the Middle East, you know, they are uh you know under in danger uh in this in this situation. Um, you know, it it might happen that air travel from Europe to Asia is affected even further, and therefore we are very fortunate that we have local engineers in Asia trained which can serve the Asian customers in their geographic environment. So that's also a part of the resilience uh uh discussion we need we need to have. Um what we also think that is important that um what we did, we partnered with uh with companies in the Gallus Experience Center, which we introduced uh two years back. Um companies which uh share the mindset of you know shared generated innovation. Um because we have uh built the experience center with the mindset of you know it's a place to learn, to teach, to to experiment, to innovate, sometimes to fail. That's also part of an innovation process. And uh if you have the right partners on board with whom you can work together and work towards a common goal, you can share the burden uh if it comes to innovation project, but you also can speed up the process because they might have complementary uh skill sets and experiences to your own company.

SPEAKER_02 40:24

Yeah, yeah. And the more I listen to you, the more it's so much about the mindset. Um digital transformation is not something to join. Whether we like it or not, we're already a part of it. We may be a passenger of it, of that transformation, or it's to some extent if we're not prepared to join the train, we may be a victim of it. But it's it's actually the person's mindset and the way they understand and lead and and don't necessarily leave move forward without not you know with confidence to try things out, isn't it? It's it's kind of try, fail, try, fail. Are these people faster at making decisions, the ones that are succeeding compared to the ones that don't? Or is there just in it a dynamism, or is it really it's uh because it requires thought. It's not just about moving super quickly, because we can all move super quickly and fail too quickly, and it'd be quite damaging. But it is it kind of is in the learning facility you have there, probably gives people a lot of time to immerse themselves in the technology, understand the advantages, and you help them do that. And I think that that must be quite critical to some of these people's success.

SPEAKER_01 41:38

You know, there is there is this debate what's more important, having a fast decision with the chance that it's wrong, or waiting with the decision until you're certain that it's right. I believe it's maybe a little bit a combination of both. What I try to avoid is start to run in one direction, and on the way, I realize that I ran in the wrong direction and then need to turn around and run double speed in the other direction in order to catch up the rest of the pack. Um, so I I believe moving, marching, running in the same direction in the right direction is of essence because you lose a lot of resources if you do otherwise. Um, and of course, if you possess the ability to understand our industry we are in, um based on extensive experience of markets and technologies and competition and so forth, it really helps you to take a faster decision because you need less time to you know run analytics. And on top of that, since we are in a in a more volatile environment, sometimes gut feeling also plays a role. I hate to say it because I'm I'm somebody trying to uh take my decisions based on data, uh, but uh uh in in a volatile environment where you do not know in which direction something might go, gut feeling, risk management, uh you know, conversation with people which might cover one of your blind spots is of essence. So it's a it's a different framework we're operating in today if we want to take good quality decisions, because it's not so easy and not so stable anymore. And that's why we're having the conversation with our customers. That's why we're having a conversation with our suppliers, because they might know something which we don't know, and vice versa. Um, so it's it's a more it's also a more dynamic environment if it comes to decision making.

SPEAKER_02 43:34

Yeah, and I and I guess that requires us a willingness to collaborate, to connect, to get out of the fact that you could talk to people, learn, listen, share ideas. Um, you know, then that you're not going to necessarily find those answers on the internet or or whatever. It's sort of um it's at least validating uh and and and like you say, it can re really create spark. And ideas to make the right investments and the right choices. So you've kind of already given us a little bit of a feel for how businesses need to respond now. But if you're running a convertible or label printing business, what do you need to do perhaps differently? So one of them I think is probably getting out and collaborating and gathering as much information as possible. But you've almost got to unlearn some of the old habits that perhaps that used to be okay that aren't any more. And I guess it requires almost a relearning of things.

SPEAKER_01 44:37

Yeah, and that's a challenge because our industry traditionally employs people which work for a very long period in this industry. Maybe they change the jobs and you know different companies and so forth. But usually what we say, especially in narrow web, the industry doesn't lose anyone. Now the the recent development since 2019, that's that's a period of you know five, six years now. Five years is not a long time, especially if you are used to do the things in the way you always did it for a period of 30 years. And then you have this, you know, uh you have your own workflow in your brain, and you have your set of uh you know cornerstones where you orient if you if you take decisions, and then the environment changes in a relatively short period of time, and one of the sudden the experience you had harvested in your 30 years of maybe being active in this industry doesn't sh doesn't show the same value anymore as it used to have five or six years ago. Um so it you know there is a certain there's the boiled frog, you know, the boiled frog syndrome. You know, the you put the boil the you put the frog in a pan, you heat up the pan, and the the frog would have the chance to to jump out, but it doesn't because he doesn't realize that he's slowly cooked. I think our industry is a little bit at this moment uh to be compared with this boiled frog. Slowly, slowly things are changing. Uh slowly the environment uh becomes more volatile, demands for more flexibility, demands for more um modularity, demands for smart connected printing, and the water getting hotter and hotter, and either you realize at a certain point that you are the frog and you should now jump out of this pan, uh otherwise you might be cooked. And that that's I think that's a bit that's a bit uh the situation we are in. I do not think it's too late, not at all. Um, in our industry, uh things certainly don't change overnight. I mean, we have long development cycles, innovation cycles, and so forth. But uh the last couple of years have set things in motion, um about which we talked already, which show now effect uh in our industry. And that's why I believe it's the it's the right moment in time if somebody doesn't hasn't start the conversation about how to set up a production system in the future to start this conversation.

SPEAKER_02 47:15

Well, yeah, yeah, it's kind of critical. So from what you're saying, it's change doesn't necessarily need to happen overnight, but there is more urgency placed on the leader of the print business to be willing, willing to sort of change their way of thinking and to uh you know create a strategy that is either inbuilt modularity and try things out more experimentation. Is cost is if cost and efficiency still a major driver? Is it you know should businesses still be optimizing mainly on that front? Or is the flexibility piece more important?

SPEAKER_01 47:55

I think you need both. Um if you're flexible but not efficient, nobody will buy from you because you're too expensive. If you're efficient but not flexible, the market you might cover might be too small to really run a business. And no, no, that was also one of the discussions we held a couple of years ago before we decided to put the process in motion to develop the system to compose. You need both. You need to be efficient, you need to drive down operational costs, you need to, on a certain level, standardize and take out the friction in your system. At the same time, you need to be flexible. Our our industry very own packaging survives or has its right to exist because of differentiation. Look at the supermarket, everybody wants the better label, everybody wants the more beautiful uh packaging, because you compete for the attention of the consumer. So differentiation is one of the key drivers in our industry. So we need the flexibility on the on the on the production uh shop floor because the brand owners, the print buyers, they demand the flexibility in application. You cannot compromise on that. Otherwise, you lose the right to exist in the in the packaging industry.

SPEAKER_02 49:18

Yeah, yeah, absolutely. It's it's um there's a lot to consider, isn't there? And that and and and like you say, just having flexibility is one thing, but it must be integrated with efficiency, and that is uh a key thing. Um beyond equipment, I suppose, what else needs to come into sharper focus, perhaps given the current current climate? Because we've talked about you know labour shortages, and I think you've got a strategy there, Gallus, that helps serve that or solve that problem by investing in the right technology as well. Um and I guess that's an ongoing thing. But beyond equipment, what what else needs to come into sharp focus in your opinion?

SPEAKER_01 50:03

I mentioned it before and already, the ability of how you organize a production environment. How do you how do you design the the logistics within your company? Where do you store the raw material, for example, the substrate? How does it run through your factory? Do you need 10 people to move around the toolings or the ink from the ink kitchen or the inkjet canisters, or do you need two because you organize this in a smart way? I think um there was in in general, they are very, very good companies. I know very, very good companies which really do that in a in a in an utmost fantastic uh way. But in general, there is room for improvement in the way how you organize your your factory, yeah.

What To Change First As CEO

SPEAKER_02 50:54

And and uh I I I guess there's technologies and ways and experts and that that can help you. It's not necessarily have to be I say yourselves being a key one. So if you uh just a question for you, Derek. So if you were walking into um a mid-sized converter tomorrow as CEO, what would you change first on a practical level?

SPEAKER_01 51:21

First, I would first as always you look into the numbers. That's I think that's the most important step first. Maybe I would do that before I even walk into the factory. Um then I would uh I would investigate whether what kind of mindset in terms of production is there? Is it an old-fashioned mindset based on assumptions which are not valid anymore? Do we have already achieved a certain level of understanding that there is a change needed? Um do we have a modular uh production environment? Do we have total cost ownership calculation in place? Uh do we have an operational model which reduces energy and substrate waste uh out of economic necessity and not just due to sustainability ambition? There I would start. And the next the next uh question I would raise, of course, is how do you organize, let's say, the back office, the administration part, in order to uh reduce uh human intervention and possibly implement an automated workflow there. So but I think the first the first uh the first point which I would investigate is on the shop floor. How do I how is the production environment designed today? How is the machine park? Do we have state-of-the-art machines? Can we take out um you know complexity uh by replacing uh you know different machine brands with one which is modular and forward-looking? Uh that's that's the that's the place where I would start.

Who Is Most At Risk

SPEAKER_02 52:57

Yeah, and I I I think it must be hugely helpful to have outsiders come into a business to point out some of the facts that are not necessarily obvious when you're working inside a business. You just can't see as much when you're so close to it or you're so wedded to a certain way of working you don't even realise you're doing it. And I love that boil frog, and I think that's applicable. I feel sorry for frogs, by the way. I we don't recommend anybody doing that, that's not very nice, but that but that's true, isn't it? Change suddenly becomes evident and you haven't even noticed it because it's been happening incrementally, and that goes with human behaviour as well, um, doesn't it? Because it's our comfort zone and we operate within it because it feels nice, but it's uh gains don't happen when we're in that place. And I guess the exciting thing with all of this change and all this unpredictability means that our opportunity to grow enhances with it too. So that's a that's a positive. Just sort of on a reality check, really, about the in the industry. Who's most at risk in this environment, in your opinion? When I say who's most at risk, I mean you can answer however you like, but what kind of way of thinking and could be a certain industry or a certain segment in the industry? Who do you think is most at risk in this environment?

SPEAKER_01 54:27

I think on a general level it's those which uh do not understand and acknowledge that we are in a process to reshuffle the cards on a civilizatory level, but also in an economic operation model. Um and uh you know, if you don't acknowledge that, you also don't really uh you know take the necessary actions, which in the first place would start thinking about implications on my business, possible outcomes. It's it's a little bit crystal ball, but at least you start having the conversation in what might happen to my business if this situation continues. And I believe, you know, people say hope dies last, but it dies. Um if you hope that we might go back on uh in into a framework in a setting pre-2019 where the world was uh you know a little bit more in order, uh a little bit less chaotic than today, I believe these uh people might be uh disappointed. Uh, because we have, as we said, macro trends demography and you know, uh fundamental change in in geopolitics and so forth, which will not be reversed. These trends will continue, and those have a fundamental impact on how we operate or how we have to operate our our businesses, supply chains, and factories and so forth. I think those are the most at risk to answer your question.

SPEAKER_02 55:57

And following on from that, then what what are you seeing as the most sort of common mistakes maybe converters are making now? I I guess the ones that are most at risk are they operating their businesses similarly to how they always were?

SPEAKER_01 56:14

Is that is is that yeah, we are back we are back with our boiled frog. Yeah, um I think that would be a mistake to maybe not really understanding that partly in our industry we are now this frog. Um and that we need to you know observe the the situation uh maybe from a different perspective and start thinking about how can we how can I change the production environment, the way how we do business and the technology I'm using in order to be more resilient and more flexible for the years to come.

SPEAKER_02 56:46

Yeah. It sounds crystal clear flexibility, modularity, efficiency, and so on. Do you see people making mistakes at the moment then, or even investment mistakes, or whatever there's any sort of commonality in those sort of mistakes that are being made at the moment? Well that people might regret, perhaps, in three, five years' time?

SPEAKER_01 57:05

Well, um, every business decision which does not allow an eventual need to evolve or an event incorporate an eventual need to evolve or an eventual pivot of your business uh based on the assumption that everything will continue as it did in the good old times, incorporates a risk to be regretted, let's put it that way.

SPEAKER_02 57:33

Yeah, it makes sense. Um so looking ahead five years, maybe even ten years what does a successful converter look like? What kind of characteristics you're kind of playing into that, and I can see some of the things in that the right mindset, the right technology stack, the right people. Um what kind of capabilities will they need to have?

SPEAKER_01 58:06

A successful printer, how I see it in five years, is a smart connected printer with a modular production environment, uh well-designed workflow in the back office and on the shop floor. Um state-of-the-art technology with the ability to adjust, evolve, and pivot if necessary.

Reasons For Realistic Optimism

SPEAKER_02 58:28

Yeah. Yeah, and it's impossible to know, right? Because the pivots we we don't know yet. And and there would be problems and opportunities that arise that we don't expect, and it's being agile enough in mind and action to be able to respond to that, isn't it? Um, yeah. I d uh just looking ahead, is there reason for optimism, do you think? Um just sort of thinking about how challenging it might sound to people listening at the moment, but um, you know, uh if it affects every everybody in every area of life and the disruption and change and so on, but um sort of thinking about the the past few years have been obviously challenging. There are signs the environment may be turning a corner, but do you see the real opportunities emerging? And what should leaders feel optimistic about as they look further ahead into 26, 27, 28?

SPEAKER_01 59:23

Yeah. Look, I'm I'm not I'm not a pessimist at all. Uh I'm also not an optimist, uh, really by nature. Uh I I consider myself more one one of the realist uh guys uh trying to understand the world based on data and in some form of experience. Um yeah, I mean the hope is not lost, not at all. Um we have many opportunities. I mean, on the bright side, we today have the technology to uh make us as an industry more resilient, uh, reduce total cost of ownership and uh improving sustainability at the same time. Yes, it's true, we had a couple of uh challenging years. Um but as I said, don't I my my advice be not to put too many emotions into that because many things we are not going to change directly ourselves anyway. So we had we only have the possibility to understand what's going on, to harvest good quality information, to select the right partners to have a conversation about how we should build our framework uh moving forward. Um we do have the modular technology which allows you you know significant significantly uh reducing operational costs and frictions in your daily operational life and uh and you know uh erasing uh unnecessary redundancy and so forth. And there are many, many, many opportunities for converters which start a conversation amongst themselves or with us. We are very open to that, and we invite everybody to have this conversation with us, finding a way forward uh in order to build more resilient, more flexible, more modular, a cheaper and more sustainable production environment. And we we do have it today ready. I mean, we have built products, we have invested money the last couple of years into building a set of uh technologies and a framework which allows us to do that. So I I'm not uh I'm not pessimist at all. Um it's just uh here we are in this situation, we have to somehow accept it. Uh, none of us is going to change uh maybe the global circumstance in a significant way. And uh our job is to adjust, keep an open mindset, use the technology we have on hand and manage our way through.

SPEAKER_02 1:01:46

Yeah, and and and the reality, and you keep saying that, and I think that's right, it's that you we do need to accept where we are and what that this change is uh is is a fact and it's not going back. And I guess optimism can then grow from that reality, right? And you need optimism to move forward because you know, with confidence and and and try things out, not necessarily know the answers. And I guess you on the converse get optimists that think it will go back to the normal, and maybe they're they're the boiled frogs, aren't they? I suppose. Um, and and with your technology as well, I I I get you I guess um there will be new applications that come out of this change, won't there?

SPEAKER_01 1:02:26

Are there any any you see at the moment? Uh yeah, well, we had we had brought quite a number of new applications uh in the past uh in the past couple of years. Uh the the recent one was uh uh Matt Jet, uh which allows you to modify inkjet printed inks which are naturally a bit glossy at the push of a button and make it matte and therefore more appealing, maybe for luxury uh environment, uh, for a more elegant, you know, optical appearance, allowing inkjet to enter segments where it maybe was not so present in the past. We are working on a couple of uh very exciting uh products which uh we will introduce in the next uh I would say 12 to 18 months. Um we also work together with partners uh in order to drive forward innovation and uh further drive smart connected printing with the goal to reduce total cost of ownership, uh improve sustainability, and uh as we just discussed today, resilience, of course. Um yeah, I'm as I said, I'm not pessimistic at all. We have our chances. Uh you know what they say, happiness is not a stage, happiness is a continuous process of taking the right decision at the right moment, and that's the mindset we have, and that's how we try to drive our business.

SPEAKER_02 1:03:47

Yeah, and I think I think Gallus is a great great case study of adaptation. So, what you're talking about now is how the market needs to adapt to take different technology stacks, making the right choices with the right modularity and flexibility and so on. But but you've you've actually practiced that yourselves, haven't you? Gallus, that is a fundamental change in Gallus now compared to five years ago.

Final Thoughts And Listener Next Steps

SPEAKER_01 1:04:12

Yeah, yeah, yeah. I mean, we are a more than 100-year-old company, which uh Gallus was one of the founding companies of the narrow web industry. If you go back all the way to Stan Avery and uh Ferdinand Ruesch that time, um but Gallus always had in its DNA uh this uh you know possibility to reinvent itself. We did it many times over the last hundred years. We have introduced uh digital technology already decades ago, maybe a little bit too early in time. We introduced technology of and so forth, right? You have all this technology and on this S-curve, you always go up the S-curve, you go to a learning curve, you you improve your technology, then you reach a certain platform, then you try to get the next technology, and you know that's a that's an innovation cycle. And we are running this innovation cycle since 100 years, and we are continue to do so. And um, meanwhile, we can say proud that we are one of the respected players in the in the digital space in the in the in the global industry. Uh, as you have seen at Label Expo in Barcelona last time, we have brought uh uh two new machines, the Galus Alpha, which is a gateway press for those which do not have digital technology or maybe are not satisfied with the existing digital technology, and we have the Galus 5, which has uh 100 meter speed uh plus LED curing, uh 32 uh most used uh gamut colors or pantone colors, which are covered and which we believe is currently the gold standard of the industry. Um, incorporating the best of different technologies. And we have enjoyed uh very good success. You you're right, you said it at the beginning at the Leblex. We're very happy and very grateful for the trust we we get from our customers and we work every day. to uh to prove that we are worthy of that trust um and try to to evolve to try to evolve our business meanwhile meanwhile meanwhile as i said it um uh the most significant part of the of our turnover uh comes from uh the system to compose which is the modular system and um it took uh you know a year we introduced it for the first time at Drupal last time and then you know the industry has slowly started to understand what we are trying to achieve with this and that we are trying to really help our industry to be more resilient more modular more flexible and uh meanwhile it is introduced very well and uh I I'd say I'd say that uh we have developed a you know an industry standard with that system to compose which really solves uh challenges uh uh on the converter side yeah yeah yeah and um and I guess that renewal and and and so on it's sort of um yeah a constant fire and you're looking at different um uh opportunities going forward building on the success um listen thanks so much for joining us Darry it's been a really fascinating wide ranging deep at times and dynamic conversation as always there's calls for optimism but on a realistic level isn't it and you be optimistic when you with uh embrace change and move forward with it but but yeah it requires that agility of the mind as much as anything else by the sound of it and um don't be a boiled frog is what is is is what I I tamed for that um I've probably said that four or five times already but I think it's uh it's a great analogy and um we have the power to we have the power to move within us to move forward don't we but it it does require adaptation change or be changed basically so yeah any final thoughts Daria? Well it's I just want to uh express my gratitude uh always a pleasure talking to you um thanks for your support in the last uh couple of years um you know to the audience listening to this uh the most important question is maybe when do I pick the phone and call Galus to have this conversation if you have not started we are here to have this uh conversation about you know resilience and modularity and what we just said and we are we are very happy to support and we we consider us as a part of uh companies which have dedicated their existence to drive our industry forward to help our industry and uh to bring it to the next level super thanks so much for joining us see you at a I think Valencia for our next event so yeah thanks for joining us maybe yeah maybe I will I will see when I can make it thanks a lot all the best thank you so much thanks very much thank you for listening if you enjoyed this episode you can subscribe now for more great audio content coming up and visit futureprint.tech for the latest news partner interviews in depth industry research and to catch up on content from future print events we'll see you next time on the Futureprint podcast