DOMINO PRINTING SCIENCES
1 INTRODUCTION
The Ink Jet Printing industry emerged around the early 1970s. It is still populated by a number of
specialist companies which own, develop and licence the technologies and supply the equipment.
They are connected to their end-users by a complex network of dealers, distributors and licensed
printer manufacturers. They are supported by ink manufacturers, which in some cases have been
bought into the company. This is a study of an enterpise spun-out from Cambridge Consultants
Ltd using a new technology, ink jet printing.
Domino Printing Sciences Ltd (Domino) was founded on 1 September 1978 by Graeme Minto, a
Cambridge graduate and employee of Cambridge Consultants Ltd (CCL). The company was set
up to exploit the continuous ink jet technology developed at CCL, manufacturing and marketing
machines under licence from them. It is now a major world player, represented in Europe, the
Americas, Asia/Pacific and the Middle East, Africa and India. The rapid growth of Domino in its
early years led to its flotation in 1985, with a full listing on the London Stock Exchange. This
success was sustained by an extensive new market in coding, created by the introduction of date
code legislation, with ink jet printing being ideally suited to cans, packets and other items where
conventional printing is difficult.
1.2 TECHNOLOGY DEVELOPMENT
1.2.1 The Ink Jet Printing Market
Before the development of ink jet printing (IJP), the process was essentially a contact process
with a roller running over the substrate to produce an image. Ink Jet printing was developed to
meet an emerging market for surfaces on which it was difficult to print, variety in the printed
form was required and higher quality and speed demands were making existing technology
obsolete. IJP met all of these needs:
• it did not require contact and therefore allowed uneven or fragile surfaces to be printed on to.
• computer-controlled, with infinitely variable output possible.
•
high speeds capable of matching production lines.
1.2.2 Early Project Work and the Conception of the Technology
During the early part of 1970 David Paton of CCL created a concept for printing textiles at high
speeds in wide widths and in colour. ICI, owning many patents on the Fabric printer, was
looking to develop a printing machine and based a research project on this technology with CCL.
ICI was looking for diversification and ploughed a substantial amount of money into the work at
CCL, representing nearly one quarter of its total work at its peak. The objective in this project
was to produce a machine that could print in 2m widths in colour. This would require
approximately 4000 jets. In 1974, ICI commissioned an external consultancy to evaluate the
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potential of the technology. The company was told that feasibility of successfully developing the
technology was low and that reliability of a product, with so many jets, would be poor. At this
point ICI got cold feet and withdrew completely from the project. As Minto, the leader of the
research group commented:
"We tried to build Concorde before the Wright brothers had first flown."
The project had proved over-ambitious and as far as ICI was concerned had failed, The prototype
machine, on test, had printed at its full design speed on an unusual surface:
"Undertaker's winding sheet was used as the printing surface...but it probably had a morbid
effect on the project, which eventually died."
However, the project was not a failure for CCL. The project had served to build up the
technology and expertise in the CCL ink jet printing group. Ultimately the project was to have
far reaching effects and to influence the founding of Linx, Videojet, Domino, Willett and Elmjet all of whom would ultimately benefit from this knowledge base. An ambitious research project
had created a wide competence base for future research and development.
Minto had suggested that ICI continue the project on a much simplified level, limiting the width
to 30 cm. But ICI was simply no longer interested in the work and wrote off its investment.
1.2.3 Commercial Exploitation for CCL
After ICI withdrew from any further development of the technology, CCL was left with an
uncertain future for the work that had been undertaken. Attempts to attract potential clients to
fund further development projects were unsuccessful. Having failed to identify any companies
interested in pursuing this technology, CCL bought it back from ICI, in the form of patents and
IPR, with the support of A D Little, the US owners of CCL.
Dismissing the failed attempts to exploit the wide-web array format, Minto tried to realise the
potential of a simplified version of the technology. He could see a market for a single ink-jet
printer and sought vainly for support, contacting companies in industries including computing
and label printing . It was only after all attempts had failed that Minto proposed carrying the
work out himself to Nick King, then the director of Engineering at CCL:
"...if we can't get any company interested in this I might have a go at it myself."
With the aim of exploiting the IJP technology that had been created within CCL, Graeme Minto
was asked to propose a business plan that could exploit this simpler form of IJ printer
commercially . CCL was well aware of Minto's entrepreneurial inclinations and his ambition to
run his own company. He seemed an ideal candidate to lead this spin-off.
To an outside investor the technology was risky, the company would be entering a market with
existing strong competition from A.B. Dick. Moreover ICI had invested heavily and pulled out.
But CCL had little to lose much by supporting a spin-out. It could afford to take a benevolent
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view of the venture since lost revenue from contract work would be small. The technology was
seen as unlikely to attract many other contract projects. During this period, CCL continued
undertaking projects in IJP. It was asked in one project to build thirty two-jet array printers for
Moore Business Forms and in another to produce a machine that could print security coding on
cloakroom tickets. All of this served to strengthen the technology base of the company in this
technology.
1.3 START-UP AND DEVELOPMENT (SEPT. 1978 - 1981)
With his business plan approved by CCL, Minto set about creating Domino. The new company
was to be based on the single jet technology, leaving its parent company to continue developing
multijet versions. On 1st September 1978 Minto formally left CCL. He then spent the first few
months drawing up a specification for the print head that CCL would produce. Mike Keeling,
who had taken over from Minto, led the work for Domino, with Colin Gray as the principal
engineer. It was not until May 1979 that the licence was signed between Minto and CCL.
3.3.1 CCL's role
Although CCL was actively involved in the formation of Domino, it did so with minimal
financial input. Its chief role was in the support and nurturing of the company in its infancy.
This can be seen by the amount of development work that CCL undertook for Domino and by the
attention that was given to following its growth. The Licence agreement that CCL gave Domino
entitled the company to non-exclusive access to CCL know-how and patents to enable it to
manufacture and sell Ink Jet Products. In exchange for this, CCL would receive royalties on the
sales of all products. If sales fell below a threshold value then CCL would be entitled to grant
licences to other companies. Domino was also obliged to offer CCL 'first refusal' on
development programmes for further ink jet products. The licence was taken up by Domino
along with the delivery of the first working prototype. The first CCL/Domino prototype was
produced for Moore Business Forms Ltd.
CCL was willing to involve themselves in Domino, with an equity stake, for two reasons:
• to create a capital gain for the shareholders of CCL
• to influence the manner in which the Domino licence on Ink Jet Know-how was exercised.
The company saw benefits accruing from a 50% representation on the board of Domino, with
detailed constraints on possible Joint Venture work for Domino requiring Board authorisation.
The equity stake was also seen to show the true extent of the commitment of CCL to Domino's
success. However, there were concerns that CCL would have to continue support for the
company even if goals were not achieved, that further equity finding might be needed and that
CCL may become embroiled in the patent difficulties that Domino was facing with A.B. Dick.
The desire for a less committed long term position for CCL appealed to Minto, who wanted sole
control of the company.
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1.3.2 People
Domino was championed by Minto. He had been the leader of the project team that had
developed the technology, his initiative had suggested the potential for spinning-off the
simplified version of that technology and he alone had been prepared to back the venture with his
own money. This all served to make him the focal point of the company.
Minto was fully prepared to handle the organisational and cultural changes that would be
necessary. He was equally happy to use high quality consultants whenever possible, to supply the
short term skills to which he did not have access within the company. Although he had the
technical support of CCL he still needed to recruit a production and a marketing director. He
recruited Melita Marshall as administrator and Toni Gorski as production expert. He saw himself
as a competent leader, with the ability to understand the technology and the critical factors
associated with it, to identify problems and set direction.
Minto's greatest fears for the survival of Domino were premature obsolescence of the technology
and poor management. He drew an analogy between spinning-off a company and putting a child
up for adoption or fostering; no matter how gifted or wonderful the child is on birth, if it is
maltreated afterwards it will rarely meet its full potential. Both seemed to have been ill-founded
worries.
1.3.3 Control
He constantly sought to maintain control over the company to ensure its flexibility and
responsiveness. His share-holding fell from 60% to 40% after the flotation, but he still remained
a major investor. Minto identifies the flexibility and agility of Domino as a key determinant of
its success. This arose from the high level of control that Minto had achieved by avoiding the
venture capitalist market. Accordingly:
"...no time [was] spent convincing venture capitalists, with long elegant reports."
Further from this he indicates that his personal qualifications for leading the spin-off from CCL
lay in his awareness of both the market and technology (including the patent background). He
had been on the IGC Ink Jet conference lecturing circuit for several years.
1.3.4 Technology
Though the technology was not what ICI had called for, Minto knew it would have useful
applications in a simpler form. In essence, it had the right ingredients and was 'good enough to
work'. It was economically attractive in that it was low cost to make, used little energy and
consumed little material and the design was simple.He saw the primary objective for Domino in
its early years as getting the technology right and not early profitability. Having to turn to only a
few investors made this possible, since he could avoid the pressures to achieve early profitability
that would have been imposed by venture capitalists. In the industries in which Domino was
hoping to operate machine reliability was seen as of paramount importance.
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1.3.5 Market
Minto's new team set about trying to identify the potential market that the company could serve.
It was calculated that the European market could represent a few thousand conveyor lines that
would require a coder, and that achieving a 30% share of this would provide a sustainable market
for a business.
Two products had already been developed by CCL for immediate sale. Unijet (A and B) had
orders in excess of £50,000 negotiated and awaiting confirmation by the end of February 1979,
with prototypes due for testing within a month. Production was to start immediately afterwards.
The only other manufacturer of ink jet printers was ABD in America. Within Europe, Domino
had targeted the printing industry, in contrast to A. B. Dick, which stuck to its own strong field of
beer and soft drinks canning industries. Domino was, at that time, the only ink jet printer
manufacturers in Europe.
1.4
GROWTH OF DOMINO (1981 - 1985)
The first few machines that Domino sold were acknowledged to be of poor quality and reliability,
and sales were low, mostly to the printing industry. The breakthrough came on All Fools' Day in
1981 with the launch of the Solo machine. The printer had been completely re-engineered, with
the exception of the print head, and the price had dropped from £11-12,000 to £7,500.
Profitability, which had prior to launch been slowly falling, suddenly and dramatically took off.
In 18 months, all previous losses had been covered.
The next major step came in the development of the packaging sector. This had earlier appeared
to be a minor or irrelevant area for sales. But as a result of impending EEC legislation requiring
'best before' or 'sell by' dating on all perishable foods, a whole new market opened out for noncontact printing. . Minto was aware of this early on and could see the almost limitless market
that could be available to Domino. The timing of the legislation required companies to mark
goods that could potentially be on market shelves in 1983. This meant that production needed
coding well before the deadline, and often over a year in advance. Manufacturers also needed
time to install and test. new equipment. All this created a market which was desperate for a
coding machine and which was willing to gamble on the technology. Domino was to capitalise on
this market, aided by the low running costs of its products in comparison with the American
competition. This advantageous position was not fortuitous but the result of several carefully
planned agreements. Domino had sought to broaden its product range and in 1982, took out a
second licence from CCL for a short (eight jet) array print head that was to become the Polyjet
product.
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1.4.1 Joint Ventures
In 1983 a development occurred that was to push Domino into the US market. The American
Can Company that had been appointed to represent A. B. Dick in Europe stopped sourcing
Videojet products and joined up with Domino. This temporarily removed ABD from the
European market and gave Domino a foot-hold in the American market. American
Technologies, Inc., (formerly the American Technologies Division of the American Can
Company), and Domino combined UK sales and service departments into Domino Amjet.
American Technologies, Inc.(ATI), which already had established sales and service teams in the
USA and a distributor network in Europe for A. B. Dick's products, then became the distributor
for Domino in the Americas, Australia and New Zealand, with a licence to manufacture Domino
products. The partnership resulted in substantial sales to companies including Coca-Cola, Del
Monte and J&J. However, ATI wanted a new image to promote Domino's products in the USA
and therefore needed a new product. Codebox and Solo 4 were launched. The former was the
most refined and compact printer on the market and sales soared.
1.4.2 Development of Inks
In parallel with this market development, progress was made on the ink front. In the early days
ink was sourced from CCL, then from Coates Brothers and finally from American Technologies
(ATI). Domino achieved a cross licence agreement with ATI, who built the Codebox and Solo 4
under licence in the USA. In 1983 Domino acquired ATI's UK ink supplier with its licence to
manufacture ATI's inks. In 1987 Domino bought out ATI and created an 'in-house' R&D facility
for inks. In terms of revenue, inks provide a substantial proportion of Domino's annual turnover.
It has been said that "Domino floats on its ink revenues".
Proprietary inks were significant because at that time ink manufacturing costs of ≈ £0.55 could
realise an end-user cost of £24, with little in cost associated with packaging or delivery. The final
volume sold affected profitability as development costs had also to be borne. The development
of the printer and the ink needs to be undertaken concurrently to ensure the robustness of the final
product. This vertical integration of ink supply gave Domino a further competitive advantage in
both cost and technical compatibility.
1.5 FLOTATION (APRIL 1985)
The year in which Domino won the Queen's Award for Technology, the company went public at
200p per share. This valued the company at £26m. The shares opened publicly at 260p and
climbed to around 300p, revaluing the company at £40m. Domino had asked its investors to
retain a certain percentage of their equity to show confidence in the sale. The CCL licence had
become royalty- free, though CCL still retained a small equity stake.
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1.5.1 Market
In 1985 Domino was given the opportunity to invest in a large character printer from a German
company and hence broaden its product range. It was realised that this product was something
that the company did not have the ability to develop in-house and therefore should acquire
externally. The machine would complement the existing range. The Macrojet would support the
Polyjet in its high speed addressing applications.
1.6 FUTURE DEVELOPMENT
In looking to the future, Minto ploughed much of the early turnover into Research and
Development, which together accounted for over 50% of turnover. He made a clear division
between the two: research, to him, was the investigative, high risk work into new concepts or
technologies that may represent the future plans of the company. Development applied to
production and required highly organised, disciplined work to take the concept through to
manufacture.
However, within a few years of floating his company, Minto decided to leave Domino, which
was rapidly making the transition from entrepreneurial start-up and becoming a professionally
managed company soon to out-strip its parent company, CCL in size and revenues.
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