Look Ma, no ink!
Professor William Sahlman (Harvard) looks at the case of a company born in 2005 out of the Polaroid corporation. ZINK Imaging has developed the technology and paper for inkless printing from mobile devices.
ZINK Imaging was incorporated in 2005 and has its roots in the Polaroid corporation. Its technology allows for inkless color printing using miniaturized printers. The first generation of technology has recently been built into mobile printers and digital cameras sold under the Polaroid, Dell and Takara-TOMY brands.
Professor Sahlman’s case (see reference below) looks at the history of the venture and the solutions devised to solve the manufacturing and marketing problems encountered on the way. It was back in 1977 that a team within Polaroid was first entrusted with the long-term project to produce film images without resorting to any chemical interaction. In 2000, Polaroid scientists hit upon the solution of a special paper that is colorless at room temperature but then takes on colors when different temperatures are applied for varying lengths of time.
Unfortunately, shortly thereafter in 2001, Polaroid went bankrupt. After first being sold to the private equity firm One Equity partners, the company was resold in 2005 to the Petters Group Worldwide which saw value in the Polaroid brand. But the group did not want to invest money into the ZINK technology so in 2005 a team consisting largely of former Polaroid employees bought the Zink intellectual property and physical assets for $8.2 million. The team was led by Wendy Caswell, formerly in charge of strategy and business Development at Polaroid, who still serves as ZINK’s CEO. It included Steve Herchen who had been part of the initial 1977 scientific team and had risen to the position of Chief Technology Officer at Polaroid.
Which market?
A first market possibility was standard high quality hard copies of digital images. The problems here were the relative maturity of the market and the intensity of the competition. The printer manufacturers were selling printers at a loss and making their money on replacement cartridge and toner sales. The market was highly competitive and ZINK was not keen to take on these well-established giants.
Digital photographs seemed to offer a more attractive future. In 2006 there were more than 3000 billion images stored on digital cameras and camera phones. Expectations were for the number of digital cameras and camera phones to grow by over 15% a year with the number of images growing by over 10% a year. Mobile photography printing turned out to be the answer. ZINK’s product model was to offer a mobile and miniaturized solution: mobile unlike bulky standard printers, miniaturized so it could fit into digital cameras or digital phones.
How and where to make?
One of the company’s first operational concerns was to find a partner to manufacture the thermal print heads which would go into the printers. Before setting out on a trip to visit Asian print technology leaders, the ZINK team took a standard Japanese printer and modified it to print ZINK Paper. The first step on the trip was to visit the manufacturer of this printer (the company is not named in the case), a Japanese company that Polaroid had worked with in the past. The head of engineering was thrilled with the partnership idea and immediately sought management go-ahead. Six months later, in March 2006, Zink signed the joint development agreement with its print technology partner (PTP). The PTP was issued a royalty-free license to commercialize ZINK based printers and both parties committed to developing their side of the work.
Another operational task was to solve the problem of where to manufacture the revolutionary paper. At first ZINK explored working with a third-party manufacturer. In the summer of 2006, they were considering a Chinese printer (with the disadvantage of geographical distance) and an American one (with the disadvantage of greater cost and less efficiency) when the team came across a film paper plant in North Carolina that Konica Milton had been unable to sell and was closing down (as part of a larger restructuring process). Quickly, the ZINK manufacturing team realized that they could manufacture the paper there and a year later, final terms and conditions were settled with Konica Minolta.
On its own or OEM?
As to the question of whether to sell the final product under its name or not, ZINK decided to offload some of the commercialization burden by becoming an OEM supplier. Having opted for the OEM solution, the issue became one of building and managing a partnership model. The model brought together four sets of players.
Zink Imaging worked with a print technology partner (PTP) for the design and development of print engines. The PTP had an OEM supply agreement with a device manufacturer – for example, the device manufacturer for Takara-TOMY was the Taiwanese firm, Foxconn Technology Group. The agreement covered the volume and conditions for supply of print engines. The device manufacturer in turn had an agreement with the consumer electronics brand for supply of printer devices. Finally ZINK had an agreement with the consumer electronics brand for volume and conditions surrounding the supply of ZINK Paper™ (ZINK would not sell the paper to end consumers).
ZINK worked with the brand partner to fine tune the specifications of its product, worked with the device manufacturer to optimize the performance of the ZINK Technology and with the PTP on improvements to the print engine. Pricing and supply terms were negotiated directly by the partners involved. If the brand partner wanted exclusive rights to a particular format of ZINK paper it could negotiate a license fee.
A few sources of frustration arose out of the partnership model. ZINK had suggested to its brand partners a sheet price of $0.25-0.30 but brands were pricing the sheets closer to $0.50. Also, the operational partners were slow in committing capital to tooling. The device manufacturers would tend to wait for the print partner to have finished, before gearing up for device manufacturing. For ZINK, speed to market was essential to get as quickly as possible to breakeven volume. The partners however had multiple commitments and were not inhabited by the same sense of urgency. The case raises the discussion question of how to improve the partnership model.
All this while, the research and development staff is moving forward on the next generations of ZINK technology. The second generation (Z2) focuses on larger formats. Polaroid was planning a camera to print 3x4 pictures, that is to say the format used by the original Polaroid Instant Land Cameras. A marketer of digital picture frames was considering the commercialization of a frame equipped with a 4x6 printer. The third generation (Z3) focuses on simplification and cost reduction. By reducing the cost of printing, plain paper applications from mobile devices, such as printing receipts or tickets become feasible. At that point, ZINK could become a player in the budding mobile-commerce (m-commerce) market. The soothsayers in Cambridge see some mobile inkless printing in your future.
Reference:
Harvard 9-810-050
"ZINK Imaging: 'Zero Ink™'"
Professor William Sahlman and Sarah Greene Flaherty
Harvard Business School
Published April 2010
