J. Paul Grayson of Micrografx
Greeting Opportunities with Innovation
We talk with J. Paul Grayson, Chairman and CEO of Micrografx, Inc. about the Web's role as a business tool and its potential to expand human interactioninterviewed by Terrie Lloyd
After getting a BS in computer science from the University of Missouri in 1974,J. Paul Grayson worked as a programmer, analyst, and software development manager with several companies. An entrepreneur in the truest sense, he co-founded Micrografx in a Dallas garage in 1982, and has grown it into a $60 million developer and marketer of graphics software. In 1991 he co-founded Axxis Software, developer of an innovative personal mapping product; Axxis was subsequently acquired by News Corp.
Mr. Grayson has served as chairman ofMicrografx since the company's incorporation in March 1984, and as CEO except for a 9-month period in 1993-94 when he assumed the role of VP of product development. He is founder and chairman of the Windows and Presentation Manager Association and a director of the Software Publishers Association. Inc. Magazine and Ernst & Young named him "Emerging Business Entrepreneur of the Year" in 1989 and "Socially Responsible Entrepreneur of the Year" in 1994, and the Dallas Chamber of Commerce selected him as "High-Tech Entrepreneur of the Year" in 1991.
Micrografx is one of the top two PC graphics software publishers in the world, and number one in Japan. Of some 260 employees worldwide, about 70 are outside the US, and just over 10 in Japan. In April, Micrografx KK released the Japanese version of ABC Graphics Suite for Windows 95/NT.
I understand that business in Japan is good, and that Micrografx has done well in bundling its products with Japanese manufacturers.
J. Paul Grayson: Yes, business is good, and the Japan operation in particular has had resounding success with its recent bundling of the ABC Graphics Suite with NEC's CanBe PC -- Japan's most popular PC today. The bundling deal has increased our sales revenues substantially.
But the graphics software market must be a tough one to compete in. What are you doing to help shore up your position as the competition intensifies next year?
Grayson: Well, for one thing, we have a greeting card product in the States that has done very well. Until now, we've been working pretty much exclusively in the US with Hallmark on bundling greeting card stationary and graphics software. Many people want to do personal publishing during their spare time. Just recently, however, we decided to go to a new partner, called American Greetings. It is almost as big as Hallmark, but quite a bit more aggressive about electronic distribution and media.
What kind of market share do both Hallmark and American Greetings have?
Grayson: They're the two largest players, and share over 80% of the greeting card market between them. We pioneered the electronic greeting card market with Hallmark, but decided to switch partners so we can have more say over the Internet aspects of the product.
Are you promoting greeting card sales via the Internet?
Grayson: Yes. We'll have a new greeting card product out in late summer or early fall, which will include an Internet version. The users will point to a site where they can look at content, then make up their own card electronically by choosing the content. They can even order cards for remote fulfillment -- the cards will be printed and even mailed for you. We hope that with a product like this, we will get a lot of local content providers outside the States wanting to create and register their art with us, on the Internet.
The greeting card industry here in Japan is relatively undeveloped, but what about the hagaki (postcard) and nengajo (year-end postcard) markets?
Grayson: We're sure that there are some opportunities here in Japan; we just haven't figured out what they are yet.
We've been talking to companies such as Kodak, however, where we've been looking at putting personal photographs inside electronic and traditional greeting cards. Nowadays, there are a lot more scanning devices out there, so the infrastructure is in place for us to do something.
What do you see as the global markets with greatest growth potential?
Grayson: The two main growth markets for personal graphics are electronic photography and personal greetings cards. That growth will lead to a high demand for color scanners and printers -- which is good for us, given that we are the largest OEM [original equipment manufacturer] vendor of software for scanners in Japan. Sony, for example, just came out with a high-quality unit that can scan a 3x5 photo into your computer with very little image degradation.
And the color printer business is just going crazy in the USA, thanks to the huge growth in the personal greetings business. Canon, for example, bundles our product in an agreement with Hallmark, and they have shipped over a million color printers in the past five months. That certainly exceeds our expectations.
But isn't the hard copy output of a color printer fairly primitive? Is the image of a card made this way really good enough for a person to give it to someone else?
Grayson: You might be surprised. The quality you can get out of a $300 color printer is remarkably good. Besides, much of the content you see on greetings cards is line art and graphics, rather than photographs; this type of material reproduces much better. The kits we send out with the software also include nice quality paper samples, which really make the card look good.
This Christmas, you'll be able to buy printers that can produce output quality that is virtually indistinguishable from the commercial product. There will be special paper for a smooth, glossy finish.
So why aren't you selling these kits of paper and software through Canon here in Japan?
Grayson: Well, it's a combination of a Canon marketing decision and of Hallmark not having any suitable international content. Now that we're with American Greetings, though, I think what we're going to do is to put our design offerings out over the Internet and see what kind of response we get back from each country. From there, we'll formulate a marketing strategy.
Tell us more about how you're using the Internet to market your products.
Grayson: Well, we're doing a couple of things. From a marketing perspective, we put our first Web site up about a year ago, to distribute marketing and technical data. We have been working on improving it, and have about 10,000 to 15,000 hits a day. Not a huge amount, but we expect to see that go up significantly once we start placing graphical content and greeting card formats on the site.
We also have something that we call Graphics at Work, where customers have created great looking images and we highlight them on the site. We have a lot of interesting stuff there. A nice touch is that we include pointers to the home pages of people who have used our products to produce those pages.
The Internet is a big part of our strategy. At the moment, a lot of people are using the Internet for e-mail, so we're working on a way for them to include electronic greeting cards in their mail.
Are those Graphics at Work images or your product line-up available for resale over the Web?
Grayson: No, not yet, although I'm really interested in that area. There is definitely a big opportunity to distribute content over the Internet, but a lot of stuff available both traditionally and on the Web right now is just overpriced.
We believe in value for money, and so we sublicense a lot of the content that goes into our products. For example, we have over 30,000 symbols and 10,000 photographs and clip art images in the library that we distribute with our ABC Graphics Suite. They're all royalty free.
I don't know that we'll ever compete with the traditional stock photo houses. In any case, we're just not ready yet to offer products or images over the Web. We're not sure that there would be enough demand. So, instead, we're going to concentrate on the greeting card business, where we know there is already significant demand. It's an issue of crawling before we walk.
What about the difficulty of using graphics software? Isn't there an easier way of getting the images onto the screen than trying to draw squiggly lines with a mouse?
Grayson: There are things you can do to make it easier, such as providing lots of canned content that is easy to manipulate. Customers really go for that. Even if we could make it easier to draw straight lines, most people don't want to start from scratch. After all, our target is business users; no one wants to go back to the third grade and learn how to draw again.
Another thing is "wizards" technology, as pioneered by Microsoft. We use these to step the user through the process of drawing a predefined object.
Of course, we haven't forgotten the kids. We have a tie-up with the Hallmark subsidiary, Crayola, and through them we offer a product that is real fun -- very activity oriented.
And what do you have coming up in the virtual reality arena?
Grayson: We're in the process of acquiring a company that is a supplier of 3-D products, including a virtual reality package that we'll be working on developing further.
We view the graphics market as a triangle: the professional at the top, the business user in the middle, and the general consumer at the bottom. Micrografx is definitely targeting the consumer and business markets. We see our role in the marketplace as reaching up into the professional market for the techniques and technology, then releasing that know-how at much lower price points to the average person. We want to do the same thing with virtual reality.
My vision is to make some canned virtual reality environments instead of having to build them from scratch -- which costs millions of dollars -- then making those environments available to business people to turn into commercial sites. Eventually, I want the man-in-the-street to be able to start up his own virtual shopping mall by simply installing a software package and defining some parameters, so that he can do a Saturday morning garage sale!
Two years from now, what are people going to be using their computers for?
Grayson: Well, I expect Microsoft to dominate the corporate intranets. I'm not sure about the Internet -- maybe that will stay with Netscape. I'm sure that Microsoft will try to completely integrate the Internet into its operating system and applications, so that it looks just like another feature. You'll start to see the browser user interface emerge as the default for both workgroup computing and for those working on documents on the Internet.
This means that all the Microsoft document types, such as Word, Excel, PowerPoint, Project, Access, and so on, will become native file formats for the intra- and inter-nets. Certainly, we expect that our ABC file formats will also become native formats for the Internet, so that you will be able to pull up any of our, or their, documents through a standard web browser. Your computer will start to acquire a universal interface to documents, whether you're on a corporate LAN or at home -- and regardless of what kind of data or graphics they may contain.
How about for the home users?
Grayson: From a home perspective, I think that there is an opportunity for a more mass market "Internet PC" to develop. I don't know what this will look like, but perhaps it will be [Sun Microsystems] Java-enabled. Probably the Internet PC will become more like the set-top boxes being promulgated several years ago. This will revolutionize the distribution of information content to the home.