This is one hi-tech company that began with a bang but has continued to explode. Jeff Ferry.
In July a new European Commission directive comes into force, requiring every food item sold in the supermarket to be marked with a "sell-by" or "use-by" date. No longer just fresh products like milk, but everything. When on your next French holiday you drop into one of those delightful little epiceries where you choose your eggs individually, every single egg will have its use-by ("consommer avant") date printed right on the egg. Does this sound like a bureaucratic nightmare designed only go please the Brussels Eurocrat? To many European food manufacturers, it sounds like a conspiracy to benefit those dastardly Englishmen at Domino Printing Sciences. Domino is world leader in the non-contact printing process known as continuous ink-jet. Thanks partly to those meddling Eurocrats, Domino increased its 1991 sales in France by 80%, and its already dominant market share throughout Europe. Last year Domino clocked up pre-tax profits 47% up to £9 million on turnover of £60 million. With earnings per share up a dazzling 40%, Domino's admirers in the City were asking: recession, what recession?
Everybody knows the familiar saga of the great British high-tech company: it starts out with a brilliant new product, hits the market with a bang, and then a few years later, loses out to better-capitalised and more marketing-oriented competitors from overseas. Domino Printing Sciences has succeeded in putting a completely new spin on the story.
Domino took a technique developed in the US by an American scientist, simplified it and launched it successfully in Europe. Today, with customer service as their credo, they are rapidly gaining market share on their well-established US competitor, Videojet. Howard Whitesmith, the dynamo who runs Domino, puts their success down to a company philosophy of being customer-service-led in an industry where most companies are typically technology-led: "We are about making sure our customers can achieve what they need, that every can of Coca-Cola is coded, that every packet of biscuits is coded, and that when the Daily Mirror wants to put a different number on every copy, that they get a different number on every copy, and at 70,000 copies per hour. Reliability and service, that's what Domino is about.
Domino was founded in 1978 by engineer Graham Minto, who had developed an ink-jet printing product at high-tech research centre Cambridge Consultants Ltd. The continuous ink-jet printer (CIJP) is an ingenious invention: a continuous stream of tiny ink droplets is ejected from the nozzle of a print head at the rate of 64,000 droplets per second. Each droplet is given an electric charge, and two charged inch-long plates control the trajectory of the droplet as it travels down towards the substrate (the surface to be printed upon) deflecting it by just the right distance to form letters or, when a blank space is called for, sending the ink stream into a tiny spout to recycle unused ink back to the top for re-use.
The process has two outstanding advantages over traditional printing: it is non-contract, ie, only the ink touches the substrate. This makes it suitable for printing on delicate or uneven surfaces like eggs, jars, plastic bottles, circuit boards, etc. In addition, when combined with a powerful computer, the CIJP can print variable data (a different lottery number onto each Daily Mirror, or a different address on each envelope for a direct mail service) at enormous speeds.
The technology is made even more demanding by the need for specialised inks. Domino's team of chemical engineers includes seven PhDs working on ink development, producing inks in a variety of colours, edible inks, and inks visible only under ultraviolet light. All of them must have the right viscosity and flow qualities to be atomised into 64,000 particles per second.
In the early years, Domino's growth was nothing short of dramatic. "We went from a three or four-person company to a full Stock Exchange listing in 1985," says group managing director Whitesmith. The Stock Exchange offering was 43 times oversubscribed. With some 80% of its turnover going overseas, the company was a high-tech and export-driven success story. Today, the company has subsidiaries in France, Germany, Holland, Spain, and the US. Its products sell in 60 countries around the globe. Wherever you are in the world, the odds are that the soft drink can you buy has a use-by date or batch number printed on it by a Domino printer. Evian, Spa, and Vittel water bottles all use Domino for their use-by dates. Perrier, on the other hand, retains its quaint system of clipping the date out of the label. "They don't use us ... yet," comments Whitesmith.
While dairy, food and beverage products account for some 60% of Domino's customers, newer fast-growing users of the CIJP include cosmetics and pharmaceuticals makers, and commercial printers where new uses of CIJP are still being discovered. For example, the American news magazines, Time and Newsweek, both use Domino printers to print subscribers' addresses directly onto the magazine. The main attraction of this process is that it enables the magazine to print subscribers' names directly into advertisements inside the magazine. So when subscriber Joe Bloggs, deep into one of Time's expert analyses on the recession, politics, or why Madonna wears pointy bras, turns the page and finds himself confronted with a full-page ad saying "Joe Bloggs: Have you thought about insurance today?" he sits up and takes notice. "Advertisers like personalised ads because they get a far higher response rate than ordinary ads," explains Whitesmith.
Domino's growth was not all smooth sailing. In 1987, ambitious overseas growth engendered a crisis which almost wrecked the company. Flush with growth and optimism, the company bought its US distributor, American Technologies. Within weeks, Domino realised it had made a dreadful mistake. Says Whitesmith: "They had been manufacturing our product under licence in the States, but they had been subtly modifying the equipment. The result was that six months after installation, a lot of quality problems began to appear." The costs involved in rectifying the faulty equipment hit Domino's earnings hard. Worse was the damage to Domino's reputation in the States.
Repercussions of the American deal were felt back home too. "When you borrow £23 million for an acquisition that was probably worth only 25% of that, you have a problem," says Whitesmith. The City, which had financed the US takeover via Domino's 1987 rights issue, figured Domino had got crockered - ie, stuffed by a slippery American, as when Midland bank bought Crocker National, a California bank pumped up with bad loans. Domino's share price hit the basement, and many thought the company might limp along for yeas waiting, like Midland, for a foreign takeover to put it out of its misery.
Fortunately for Domino, a 1989 house-cleaning of senior management brought in Howard Whitesmith. Tall, direct, impatient, Whitesmith, 42, is the sort of man who holds meetings and makes decisions in Domino's corridors, with colleagues trying to keep up with his long-legged gait as he strides from one department to another. If Graham Minto, the founder, was the typical charismatic entrepreneur, perfectly suited to get a high-tech start-up like Domino off the ground, then Whitesmith, who has manufacturing in his blood, is the perfect man to transform it into a well-managed, established, world-beating, specialised electronics company. (Minto, who resigned in 1989, today runs a sports equipment company).
Born and raised in Wraysbury near Windsor, Whitesmith studied manufacturing engineering at Lanchester Polytechnic. He first worked for Philips' subsidiary Pye, STC, and then Northern Telecom before joining Domino in 1986 as operations manager. At STC he transferred from engineering to purchasing, where he broadened his skills into people and materials management, developing along the way an intense interest in the manufacturing process.
The key to manufacturing, says Whitesmith, is time. "it's all about how quickly you can get your materials from the raw material stage to the finished product stage." From the moment he was appointed group managing director, Whitesmith set about creating systems to increase the quality and efficiency of Domino's manufacturing. He instituted just-in-time systems, statistical quality control, and the Japanese kanban system where each assembler in the factory signals to his supplier when he needs more components to be produced. "Every machine is pulled through the system by demand," explains Whitesmith. In 1986, the company built printers in batches of 50. Today each printer is built to order, in three days.
The Japanese-style manufacturing system produces enormous efficiencies in working capital, higher levels of quality and, thanks to greater employee involvement, workers who are much happier. Diane Shubotham, 27, has been with Domino for five years. She's cell supervisor of the "Red Cell", eight people who make electronic sub-assemblies for Domino printers. Quality control is very rigorous: every employee writes his/her employee number with a ultraviolet market on each assembly. When faults occur, the employee is identified, and a discussion takes place to identify the reason for the fault and ensure it doesn't happen again. Quality results are posted, weekly, on the factory wall.
The members of the Red Cell like the system because it puts them in control of their own work. "It's all down to the individual. You're very aware of exactly what you're doing," explains Shubotham. This system of quality control has only been in operation in this area of Domino's assembly for some two months: "When we started we had 38 faults per week (on about 500 sub-assemblies produced weekly). Now we're down to about three. As cell supervisor, Shubotham has her own personal technique for rewarding the cell for a good week's work: "If we have no faults by the end of the week, I have to buy the cream cakes."
There are more significant rewards for the 300 employees at Domino's Bar Hill, Cambridge facility. The company gives bonuses twice a year, in the summer and before Christmas. Fixed according to company profitability and personal performance and attitude, Shubotham puts the typical bonus in her cell at 7% of annual salary for each of the two bonuses. "The company pays very well - and the bonuses come at a time of year when you really need it," she says. Labour turnover is minimal. There are no unions at Domino. Shubotham says they're unnecessary: "Andrew Herbert (plant manager) is a people's man. He's a director, but he's in tune with us. His door's always open to anybody."
Under Whitesmith, Domino has become a modern, professionally-managed company in other respects too. It includes a cash flow statement in its latest annual accounts, a model of clear, comprehensive disclosure. Whitesmith has turned the US business around, essentially by running it from the UK and requiring Domino's Chicago plant to produce to the same standards and quality levels as the Cambridge operation.
The 1991 accounts show that turnover of Domino America rose by 20% while its operating profit surged by 42%. Whitesmith attributes that to getting the quality of the product right, evidenced by Domino's ability to offer a five-year warranty on its printers. Says Whitesmith: "None of our competitors do that, except on a special occasion when they're trying to match us on a specific bid."
Quality and reliability played a major role in Domino's recently winning an order of 500 printers from the Post Office. This order is the largest single order ever placed for jet printers in the UK. According to the Post Office, Domino was chosen because the use of its printers would cut their ink cost to one-fortieth of previous levels and the speed, at 36 milliseconds per printed item, will be faster than anything the Post Office had before.
In addition to the US, Whitesmith is also looking for significant growth in eastern Europe. Domino's German subsidiary is busy finding new clients among fledgling eastern companies, including Czech beer producers coding bottles of their increasingly popular brews to meet EC standards. A new £2-million headquarters for Domino Amjet Gmbh is currently rising rom the foundations in Wiesbaden, near Frankfurt. Earlier this year, Domino cheekily published figures showing it is now number one worldwide in ink-jet printing. US competitor Videojet was, predictably, annoyed. "They still have more placements than we have, but in terms of new machine sales we believe we overtook them in 1991," says Whitesmith. Videojet's UK general manager Adrian Shepherd disagrees vigorously, claiming that Videojet is 40% bigger than Domino. But Videojet's business also includes some laser printers, a different product and market. Shepherd declines to disclose figures for Videojet's turnover or profits.
Videojet's claims are hampered by the fact that it is a subsidiary of Lord Weinstock's GEC, and his Lordship doesn't believe in giving investors or competitors too many facts and figures. What is certain is that Domino is way ahead in Europe, Videojet is way ahead in the US, and the two are increasingly in head-to-head competition. From a national perspective, one an savour the fact that well over half of the fast-growing world market in ink-jet printing is now controlled by British-owned companies.
The most fundamental of Whitesmith's changes was to re-redefine Domino's core objective, its corporate mission. "Ink-jet is what we started with and we happen to be pretty good at it, but what we're really about is all forms of variable printing technology. Our expertise is manipulating data and offering a service to our customers which allows them to identify people."
From this new concept of Domino's mission comes a determination to provide the best possible customer service, and also a new focus on diversification into other forms of variable printing. First hard evidence of the bold new strategy came last year, when Domino bought a company called Packtrack for £500,000. Packtrack uses an entirely different - and rather unglamorous - technology to print information on cardboard cartons. It involves a stencil on a drum, mimeographic ink, and can even be accomplished by hand via a handle to turn the drum, a system which will stir memories among former clandestine political campaigners from Czechoslovakia to Chile to the London School of Economics.
Domino knew that what its customers wanted was a quick, economic and reliable way to mark cartons and it felt that Packtrack satisfactorily fitted the bill. An early customer uses the product to identify cartons for pizzas with the name for pizza variety on the carton.
"A customer who produces six flavours of pizza in two sizes on overnight delivery to Tesco would have to have a warehouse full of packaging because he'd never know how many of each Tesco might want for the next day," explains Whitesmith. "With Packtrack, all he needs is one of these printers and stocks of blank cartons. It simplifies things tremendously."
Domino is preparing the worldwide launch of Packtrack. Whitesmith plans a series of small acquisitions over the next several years, which will further diversify the company's business.
Remember the golf ball printer? (IBM do, rather wistfully). Manufacturing history is littered with the corpses of companies who fell in love with their technology, only to be left high and dry once it was surpassed. Domino Printing Sciences has evolved into a company where the key asset is its relationships with its worldwide network of customers, its understanding of and its ability to anticipate their needs. One day ink-jet may go the way of the golf ball. But if and when it does, Domino will by then probably be five or 10 times the size it is today, and may scarcely notice it has happened.
Of course there are risks in this strategy, and predictably, one or two City experts are a bit worried about it. But surely that's what business is all about. "The most exciting thing about this company and what I love most about it, is that everybody is always willing to learn," says Whitesmith.