AKI

FOR YOUR INFORMATION.....

Publishers agree that the most significant change in their industry over the last decade has been the surge to offset printing and "cold type" composition.

Offset lithography, the modern descendant of Gutenberg's printing press, has been with us for a quarter century. But until recently publishers with offset presses still set type for them by means of strike-on machines much like standard typewriters. Others used galleys printed by linecast, or "hot metal" type.

Then, in the early 1960s, photocomposition came into its own.

Photocomposers - machines that photographically reproduce type that is eventually used on the offset printing press - accelerated the pace of change in the publishing industry. A flood of photocomposers hit the typesetting market, wearing such labels as Harris Intertype, Photon, ATF, Alphatype and Mergenthaler. Others soon followed: Compugraphic, VariTyper, Friden and Fairchild. Publishers scrambled to stay on top of this photo-composing revolution.

For a time, however, the revolution was incomplete. Although output units, the photocomposers, were becoming electronic and highly sophisticated, the input devices - keyboards which feed information to the typesetters - were not keeping pace.

One single corporation was, historically, the major supplier of input devices to the typesetting industry. Their keyboards were mechanical. As photocomposers became the rule rather than the exception, publishers needed input keyboards that could take full advantage of their speed and versatility.

In the 1960s photocomposers were available that could set a complicated display advertisement, such as a grocery ad, and deliver large portions of it on a single galley, with type sizes and styles interspersed as needed. This development greatly reduced the time needed to paste up pages for the offset press, and speeded up production in the newspaper shop. The problem? Existing keyboards could not transmit instructions to these typesetters quickly enough to be efficient. Very often it took longer to set up a job on the keyboard than it did to type the job copy itself.

If a computer was involved, to count and space the typewritten characters and produce a “justified tape” for this typesetter, even lengthier commands (for type size, typeface, line length and leading, the space between lines) where required. Much extra work and extra training was needed from the “input people”: mark up men and keyboard operators. Much time and money was lost correcting errors.

An urgent need for rapid mixing of type had developed, but the major suppliers of input keyboards did not respond.

AKI did.

AKI was actually born in the Renton, Washington print shop of Thomas J. Coad, now chairman of the board of directors.

Coad and several colleagues wanted a fast, sophisticated input device for their own photo typesetter. They develop a prototype in which 6 formats - sets of commands for type size, type style, line length and leading - could be stored within a keyboard itself for rapid, repeated recall. An operator could call out or “access” these often used formats within tw quick motions, rather than dozens, and then proceed to type the text or advertising job.

Coad's “keyboard with a memory” eliminated the need for keyboarding lengthy, illogical strings of command information at the beginning of each new text or advertising entry. Production speed was increased. Even more important, errors were reduced.

After several encouraging market tests in early 1968, Automix Keyboards, Incorporated was formed to market Coad’s device.

ON OPPORTUNITIES….

When AKI entered the typesetting input market in mid-1968 the opportunities were legion. No single company was specializing in the design and sale of tape-perforating keyboards for the many phototypesetters then in use.

Phototypesetter manufacturers themselves offered keyboards to drive their own particular output unit, but it seems they were designed almost as an afterthought. They were large, clumsy, limited - and prices ranged from $10,000 to $30,000 a piece.

These keyboards were not only expensive, they were severely limited by the standards of the phototypesetters they were intended to drive. Many could store only one or two formats, and obviously could not mix type as rapidly or efficiently as users demanded. These machines were also very complicated with numerous mechanical parts which made repairs costly and time-consuming.

Our goal in 1968 was to become the most significant supplier of keyboard systems to the domestic typesetting market with units that were easy to operate, easy to service and easy on a publisher's pocketbook. Very simply, our goal was to fill a long overlooked gap in the typesetting industry and, in so doing, provide a valuable service to people in the graphic arts.

In terms of dollar volume and numbers of units sold, we aimed at capturing 50% of the U.S. market in two and one-half years and plan to enter the international market in 1972. At the present time we estimate the domestic market potential at $14-$15 million dollars per year with annual growth projected at 12-15%. The foreign market is estimated at $4-5 per year with annual growth of 20-22%.

ON STRATEGIES….

Since the original Automix keyboard had been designed to drive one particular brand of phototypesetter, AKI’s first marketing overtures were toward the manufacturers of that phototypesetter. Donald E.Rodgers, then the western regional manager for this large equipment company, was quick to recognize the marketing potential of the Automix keyboard and endorsed AKI’s efforts. Others in his company, however, we're not so farsighted. When this manufacturer failed to respond, Rogers left the firm to become general manager of the fledgling company. His knowledge of typesetting systems and equipment and marketing expertise is a major reason for AKI’s success.

Rogers, then, is the man behind the original AKI strategy. Realizing that the first obstacle was the credibility gap facing every new firm with a brand new type of product, he set out to build a solid business reputation.

At that time - 1967 and 1968 - one single company was supplying 90% of all import keyboards to the graphic arts industry. Others had entered the keyboard manufacturing field but we're practicing a “Me, too” kind of marketing. T heir goal seemed to be slicing away part of the major supplier’s market share by offering an almost identical product. Each of their “new models” was actually a warmed-over version of the larger company’s last.

Rogers’ approach, however, was to offer a product that no one else had attempted, to fill the gaps in the market that no other manufacturer had tried to fill. He began by tailoring Automix keyboards to specific kinds of output units - phototypetters and “hot metal” linecasters. Customizing was the key.

A vital part of the original strategy was modularity. At the time AKI entered the market, no single manufacturer of phototypesetters had gained dominance - several had equal shares of the typesetting equipment business. AKI built its keyboards in modular form for easy adjustment in the field should one type of phototypesetter achieve dominance and customers require changes in their input system. Modularity also makes field repairs fast and simple. One of our magazine ads says it: Rebuild our keyboard in 20 minutes.

Once the quality of the AKI custom keyboards was recognized, Rogers felt, the company would have a firmer position from which to develop a general-purpose product line and negotiate manufacturing agreements with other companies.

To quickly capture a dominant share of the typesetting input market, then, AKI split its marketing efforts into two fronts: direct retail sales and sales to selected manufacturers of primary typesetting equipment (OEM, or “other equipment manufacturers”). Rogers planned to maintain a 50/50 ratio between the two sales efforts.

To achieve the optimum through OEM contracts, Rogers looked for manufacturers with three important qualities: rapid growth, large sales potential and credibility. Companies with these ingredients, he reasoned, would help AKI establish its own credibility and thereby enhance its marketing position. He focused on three and set to work.

GETTING IT TOGETHER….

For the first two years of its corporate life, AKI was primarily a sales and marketing company for keyboard systems. Actual engineering and keyboard production was done by vendors to AKI’s specifications.

The name of the game was applications, and most of the business was custom business. AKI built a strong solid reputation on its ability to customize a keyboard to any computer, phototypesetter or linecaster then in use. No other firm was providing such a service.

Rogers assembled a small but sound direct sales force and equipped them with these input systems. At graphic arts equipment shows and individual demonstrations across the country sales representatives displayed the benefits of AKI products. The sales force served as the AKI market research team. As soon as another keyboard - related problem surfaced, AKI designers got the word: solve it. Each feature of an AKI keyboard system is an answer to a specific problem encountered in the field or anticipated by the marketing staff.

An important part of the original marketing strategy was product pricing. AKI intended to build the finest keyboards possible and to sell them at a reasonable price. The formula was simple: determining the manufacturing cost of the product and adding a reasonable profit. Rogers knew he could produce his keyboard systems at a lower cost than the competition so there was little consideration of “what the market would bear”.

While AKI was busy filling customer orders the firm also began developing a line of general-purpose keyboards - with one eye on future OEM agreements. Then an active self campaign was launched, armed at three specific companies: Company A, four years old, had doubled its sales each year and now controls 25-30% of the typesetting equipment Market; Company B is a large Fortune 500 firm with a 500 man sales force in 90 branches throughout the U.S.; Company C is an old-line Fortune 500 conglomerate which commands a great deal of respect and has a small but consistent market share of 10-15%. These efforts were rewarded: two long-term manufacturing agreements were negotiated in 1970 and a third in 1971.

By the end of 1970 AKI had moved into first place for tape-perforating keyboard sales in the United States, both in terms of dollar volume and in units sold. In addition to OEM units produced, we had expanded our general purpose line to include more than 30 types of keyboards. Many of the systems which began as “specials” were later added to the general product line.

AKI entered 1971 with a sales backlog of nearly $1 million and projected sales of nearly $5 million for the year. Still, most of the actual production work was being contracted to outside vendors.

Numerous vendor delays during the previous year made had made it apparent that 1971 would be the Year of Consolidation. With OEM contracts to satisfy and a flood of direct sales orders pouring in the impact of each delay was multiplied. To get a firmer grip on production schedules and to assure quality control, AK I moved to bring keyboard manufacturing under its own roof.

Piece by piece, sub-assembly operations were added to the list of in-house production procedures. Over the year AKI grew from a marketing operation of less than 30 people to an engineering, manufacturing and marketing company with over 200 employees. From a small shop where only final assembly and testing were done the plant expanded to encompass all phases of design, engineering, assembly, test, distribution and promotion. The sales force doubled in size to include eight field representatives, a sales manager and a special products manager. A local advertising agency was engaged to coordinate AKI’s magazine promotion and in-house public relations efforts were expanded.

In February, 1971, Robert M. Helsell was elected president of a corporation as Tom Coad became chairman of the board. Helsell’s impressive credentials in the business and finance fields have done much to enhance AKI’s position vis-a-vis the investment community. Earlier, Helsell had joined Automix as a representative of a real estate-investment company which had an interest in the growing Bellevue firm.

From month-to-month sales orders doubled, then tripled. The company began to attract attention. Business editors from both Seattle daily newspapers wrote about AKI’s almost incredible growth in a year when unemployment rosters 12 throughout the state.

Between May and October, 80% of the AKI product line was replaced by completely redesigned keyboards which were more sophisticated and less expensive than their predecessors. These new keyboard systems, like the original ones, are of modular design.

By the end of 1971 AKI had captured 55% of the domestic keyboard market and was shipping at an annualized retail rate of $9.6 million.

LOOKING BACKWARD…..

The numbers alone tell an impressive story.

We have met our original goals for the domestic keyboard market, having achieved a 55% share of all new keyboard sales in three years. Both in terms of dollar volume and in unit, AKI sales have more than doubled each year.

Very briefly, shipping totals were as follows: 1968, $300,000; 1969, $875,000; 1970, $1.9 million with a backlog of $800,000; 1971, $4.6 million with a backlog of $1.6 million.

In 1972 we foresee shipments totaling 10 million dollars or more. By the end of this year we should control 65% of the U.S. keyboard market and 25% of the foreign market. AKI is currently establishing an office in Europe to a coordinate international sales. Until now the company's foreign marketing efforts have been channeled through distributors in Norway, Sweden, Germany and the Netherlands

As AKI has grown and claimed a larger and larger share of the keyboard market, the part belonging to the major supplier mentioned earlier has been drastically cut. This supplier, a graphics division within a larger Corporation, once furnish 90% of all new keyboards to the typesetting industry. Since AKI emerged as an active competitor three years ago their sales have dropped significantly. The entire division is presently being sold by the parent corporation.

AKI’s dramatic success with keyboard systems has inspired the company to extend its product line. This year we are entering the data communications field, coupling our expertise in tape-perforating keyboards with AKI’s new error-free data transmission system, DATATRAN. Another venture in 1972 will be a Markup / Edit terminal system (METS), a highly sophisticated device for the publishing industry.

These and other developments mark the beginning of a new phase in AKI’s marketing expansion, and 1972 promises to be another challenging year for the growing Northwest corporation.