“Some decent-looking pixels and a really excellent vision.” That’s all it took for Russ Wilcox to fall for the technology that would become E Ink, a company supplying the electronic ink for a new world of digital reading devices. Now, as CEO, he prepares to lead the company through its latest evolution in the Darwinian world of high-tech business.

Russ Wilcox (MBA ’95) was two years out of HBS, married to classmate Gina Wilcox and working as a strategy consultant following a stint as a product manager at a Boston-area technology firm. But he had always wanted to launch and build a company. So Wilcox went back to HBS to ask some of his former professors if they’d heard of a new technology that could be the basis of a start-up. Faculty member Jeff Rayport threw out a few ideas before Wilcox got specific: He was looking for something that would change the world. So in true networking style, Rayport offered this: His father was friends with the father of an MIT professor named Joe Jacobson, who was working on something at the MIT Media Lab that might fit the bill.

What Wilcox saw when he followed up on Rayport’s lead — a thumb-sized patch of electronic ink smeared on a lab slide, with individual pixels blinking on and off — didn’t inspire immediate excitement. Then Jacobson and his crew showed him another example, this time under a microscope, in which the pixels migrated over an electrode to spell out MIT.

“You could see the individual particles moving around,” Wilcox recalls. “It was beautiful and elegant. And the magic of it hit me right there.”

That moment, the moment Wilcox fell in love, was the starting point for a wild ride called E Ink, which manufactures the electronic “paper” used in e-readers like Amazon’s Kindle, cell phones, and graphic displays of all kinds. Based in Cambridge, Massachusetts, the company now has 140 employees and forecasted revenues of $125 million in 2009. Behind those figures, however, is the story of a company that has survived more than one brush with the void by reinventing itself through continuous, deep-seated cultural and organizational change.

“I’ve always viewed entrepreneurship as a trip on a roller coaster, not a rocket ship,” says HBS professor and entrepreneurship expert Bill Sahlman, an early investor in E Ink and longtime adviser to Wilcox. “Very few companies go straight up, and E Ink is no exception. It’s come close to going off the rails, and the person in the lead car was almost thrown out several times. But the company has actually managed to change the world, which is pretty cool. That doesn’t happen all the time.”

“The vision has always been compelling, and it’s always been bold,” Wilcox says during my visit to E Ink’s offices, which house everything from R&D and manufacturing to marketing (the company also owns a small plant in South Hadley, Massachusetts). That vision, which Wilcox attributes to MIT professor Joe Jacobson, was nothing less than the ability to hold all of human knowledge in a portable, digital “book” with the same readability as any print version.

Jacobson’s eureka moment came to him in the summer of 1995, after completing his postgraduate work at Stanford. With a job offer from MIT in hand, he spent a good amount of time reading on the beach. One day, after finishing a book, Jacobson found himself wishing he could push a button to create a new one. Like any good scientist, he started to imagine and invent what it would take to make that happen.

Two MIT students, J.D. Albert and Barrett Comiskey, were the pierced, purple-haired “rebel scientists” who would push the boundaries of technology to help realize Jacobson’s vision. “Joe managed people by saying, ‘I don’t think you can do X, Y, and Z,’ which makes a 19- or 20-year-old want to immediately prove him wrong,” Wilcox remarks. Joined by the steadying presence of longtime publishing executive and LexisNexis founder Jerome Rubin as chairman, Wilcox and the three MIT scientists founded E Ink in 1997. “I was the business guy,” says Wilcox, who over time has held senior leadership roles at the company in areas ranging from sales and marketing to finance to R&D.

Twelve years later, the company Wilcox now heads as CEO is growing through the recession at 200 percent a year and is poised on the cusp of enormous change. In June, Prime View International (PVI) signed an agreement to acquire E Ink for about $215 million. Based in Taipei, Taiwan, PVI is E Ink’s largest customer and the world’s leading supplier of the electronic hardware “backplanes” used in handheld e-readers that can download and carry thousands of books, newspapers, and blogs in one device. E Ink will continue to be based in Cambridge.

Wilcox views the injection of resources as essential to speeding up E Ink’s R&D process to bring color and video to market, two key hurdles in the race to win new customers and e-reader converts. It will make the company a truly global entity, bringing it closer to its customers in Asia. And the acquisition will simplify the supply chain, driving down costs (the Kindle DX, introduced in June, comes with a $489 price tag for those willing to pay for a larger screen, more storage, and other improvements over the Kindle 2, which sells for $299).

“I’m 100 percent committed to making this deal close and making it a successful deal,” Wilcox told the Boston Globe in a June 13 article that cited some investors’ concerns over what was perceived to be a relatively low price for E Ink, given its essential role in manufacturing a device that some predict will become “the iPod for reading.” In a May 2009 report, Forrester Research predicted that the number of e-readers in the global marketplace will grow from about 1 million in 2009 to 5 million in 2012 to 14 million in 2013. The question remains, however, whether displays that use E Ink’s technology will continue to dominate the market.

“We absolutely expect that others will figure out ways to create a competitive product,” Wilcox says. “When you have 99 percent market segment share, there’s only one direction that can go.” As novel technologies enter the market in coming years, he sees the company entering a new phase: “How do we go from a one-technology company to an organization dedicated to providing the world’s best digital reading experience?”

“I think the PVI deal is a great tribute to Russ, who has been involved in the company from day one,” says Bill Sahlman. “When a company needs money, it doesn’t have a lot of options, particularly during a time of intense competition and terrible economic conditions. In a different capital market there might be a different outcome. But it’s not going to happen in this one.”

Two cases authored by HBS professor David Yoffie and taught in the elective course Strategy and Technology track E Ink’s evolution and highlight some of the challenges it has faced over the years. “The objective was to look at a very immature technology that required a massive amount of investment before it could take off,” says Yoffie, who served on E Ink’s board from 1999 to 2004. “The truism is that getting to that point takes longer and costs more money than the most pessimistic forecast. It’s a very similar challenge to that faced by a biotech company in developing a new drug.” The case “E Ink in 2005” charts the multiple rounds of financing E Ink attracted over the years from a range of private investors, venture capital firms, and technology and publishing companies, including Hearst, Intel, Motorola, Philips, and Toppan Printing Company, for a total investment of more than $150 million.

The case also highlights the difficulties associated with a component-based technology. “You may own a great technology, but when it’s one part of a broader system, you have to worry about all the pieces around it, too,” Yoffie notes. Once E Ink developed an imaging material comparable to paper, it would need to partner with others to build the display modules, handheld devices, digital content libraries, and e-commerce services to take advantage of it. And before sales could really take off, consumers would need to change a truly fundamental behavior — how they read.

Eager to earn its first revenues, E Ink searched to find a customer that could use an early form of the technology. In 1999, JCPenney placed an order for four displays for use in its shoe departments. While limited to just two jumbo lines of text, the sign’s message and prices could be changed in real time, wirelessly, to pitch a particular brand or model. “There was this scary moment of telling the scientists, ‘Guess what? We’re going to use your brilliant invention to sell sneakers.’ But they got into it, and we began a large program to develop wireless signage for retail chains,” Wilcox recalls.

Along with retail signage, E Ink entered new fields such as watches, even as it worked to develop its futuristic e-reader display. By 2003, it had become clear that the company was too small to keep up with the shifting demands of its retail customers. On top of everything else, it was having trouble delivering a stable, consistent product. That fall, the company stopped everything to focus on a single deal with Sony to deliver materials for its new digital reader.

“It was a critical moment to realize that we had to focus on making a proprietary material — our electronic ink — not end products,” Wilcox says, “and we bet everything that electronic publishing would become a big industry.” The move came too late, and by January 2004, the remaining technical issues had exhausted the last of the company’s cash reserves. Then CEO Jim Iuliano (MBA ’86) proposed that E Ink reorganize and resigned.

As the new CEO, Wilcox raised $11 million by asking all existing investors to pitch in a dime for every dollar they had already put into the company — enough to keep E Ink solvent for almost another year. Within two months, tech-nical issues with their e-reader display were successfully resolved, and the Sony eBook launched in the United States to extensive media coverage as the first mainstream offering in the e-reader market (the Kindle would not appear until November 2007). Over time, E Ink added new customers in cell phones and data storage devices. The company returned to signage as well, but this time used licensed partners NeoLux (Korea), Midori Mark (Japan), and Motion Display (Sweden) to sell its trademark Ink-In-Motion displays for point of sale promotion.

Wilcox recalls another near-death experience for the company in early 2007, when demand for E Ink technology was growing rapidly, and the company had begun to scale up its production. “We were an R&D company trying to be a manufacturing company,” he remarks. One of the company’s largest accounts reneged on a confirmed purchase order, leaving E Ink with $10 million tied up in custom inventory; on top of it all, the company was experiencing new technical problems at its factory.

“That was like a heart attack for us,” says Wilcox, clutching his chest at the memory. “Twelve weeks of zero revenue ahead, and no cash in the bank. And we still had paychecks to write. It nearly killed us.” Bit by bit, Wilcox eked enough money out of the customer (using “charm, logic, bluster, you name it”) to keep the company going for six more months. Coming out of that moment, he also took steps that changed the company’s culture substantially by hiring new operations management to bring the necessary rigor and protocol to E Ink’s manufacturing efforts. And a new commitment to employee training resulted in E Ink University, an effort subsidized by a Massachusetts state grant that offered courses in Six Sigma, lean manufacturing, and project management.

“That was a tough moment as a general manager, realizing, ‘OK, my company will die if we do not change our culture immediately. How are we going to do that?’ ” Wilcox says. “Our R&D people didn’t like to be constrained by processes, but it was clear that they did like going back to school. So, training was the answer. That first year, E Ink University awarded 400 course certificates. We transformed ourselves into a company that can make what it invents, which has been vital for profits.” Wilcox has become a convert. “You should spend 1 percent of your payroll expenses on training. It’s one of those things that everybody puts off, but we do it and we see huge dividends every year.”

Today E Ink’s technology is used in a variety of applications, from luxury watches to cutting-edge cell phone displays. Last year, Esquire magazine’s 75th anniversary October issue even featured a high-tech E Ink cover that actually flashed the message, “The 21st Century Begins Now.” For the moment, however, the technology’s primary customers are the manufacturers of e-readers like Amazon’s Kindle (the market leader, at least for the moment), Sony’s Reader, and the others sure to follow. (Hearst, Plastic Logic, and new companies in China and India plan to launch devices in the coming year.)

What’s it like to use one of these devices? Thanks to electronic ink’s clarity and contrast, the screen display requires no backlighting, making it easy on the eyes and readable in direct sunlight. (See the facing page for a diagram of how E Ink’s technology works.) With its 6-inch screen, the Kindle 2 weighs in at just over 10 ounces; holds up to 1,500 books; can go for days without a recharge; and offers the wireless capability anywhere in the United States to download a new book from Amazon’s online store for less than half the price of a hardcover edition (most bestsellers cost $9.99; a public domain work like Charles Dickens’s Bleak House can cost as little as $0.99, depending on the edition).

HBS senior lecturer Peter Olson sees huge potential in digital readers. “I think this is a great opportunity to make reading more attractive to a generation that we might lose otherwise,” comments Olson, former chairman and CEO of publishing giant Random House. “Teenagers and young people in their 20s are not print-oriented. We see that in regard to newspapers, certainly. They expect online content to be available at a bargain price, if at any price at all.” Olson also believes that we are still in the early stages of realizing the full potential of e-books and e-readers. “Imagine a book with a video introduction by the author,” he says. “Or, if you were reading a novel set in contemporary Mumbai, maybe you could cut to a shot from a scene in Slumdog Millionaire to get a sense of what it’s like there. An e-book can be a much richer and deeper experience than anything we’ve seen before.”

The implications for education are significant, Olson notes: “If we as a society are concerned about the next generation acquiring knowledge and skills, the e-reader offers tremendous potential to bridge the gap that a lot of young people experience between a very exciting digital reality and the dead world of the textbook.”

Olson adds that most publishers are overpricing e-books, effectively subsidizing the declining business of print publishing. “The savings from an e-book are not just limited to the costs of paper, printing, and binding,” he points out. “They relate to the book’s distribution, the absence of returns, and the absence of a physical bookstore with the associated costs of rent and staff.” Lower prices could attract more readers, Olson believes, while still delivering the same or higher profits to publishers and royalties to authors.

Olson predicts print books won’t go away anytime soon — at least not until the baby boomers are gone. He owns a Kindle but doesn’t use it much. “Readers are creatures of habit. I love my books, many of which are falling apart, as I am physically, and I sort of take comfort in that. But I’m also very excited about the addition of this new technology.”

“Book publishing is an $80 billion industry in which half the money is wasted on making and moving around and sometimes destroying physical books,” says Russ Wilcox. “Going digital represents a huge savings. We can never say it’s inevitable that E Ink is the winner out of all this. But I do think it is inevitable that digital reading will supplant physical production.” Of its titles available in print and digital formats, Amazon reports that 35 percent of sales currently go to the Kindle format.

Despite the Kindle’s early hype (Oprah called it her “favorite new gadget”), which e-reader will dominate over the next few years remains an open question. Will a separate e-reading device even exist? Or will it morph into some version of a light, energy-efficient notebook computer? Wilcox’s paranoia about E Ink’s market share seems healthy, too. The battle to dominate by offering new color and video capabilities promises to unfold with all the drama of a high-stakes horse race in a market that some analysts predict will be worth $3 billion by 2013.

In the waiting area of E Ink’s offices, visitors can thumb through a copy of The Smithsonian Book of Books by Michael Olmert, tracing the history of text from ancient scrolls to illuminated manuscripts to Gutenberg’s invention of the printing press and beyond. Published in 1992, it makes no mention of digital books. That chapter promises to be written over the next few years — with all the usual ups, downs, twists, and turns — by Russ Wilcox and other innovators in the e-reader industry.

How It Works: Cross Section of Electronic Ink Microcapsules

Electronic ink is made up of millions of tiny microcapsules, each about the diameter of a human hair, each containing positively charged white particles and negatively charged black particles suspended in clear fluid. To form an E Ink electronic display, the ink is printed onto a sheet of plastic film that is laminated to a layer of circuitry. When a negative charge is applied, the white particles move to the top of the microcapsule, and the black ones move to the bottom. When that process is reversed, the black particles move to the top, making the surface appear darker at that spot. A single microcapsule can handle both positive and negative charges simultaneously. The electronic circuitry forms a pattern of pixels that can then be controlled by a display driver to create letters, numbers, and images. The display, which uses no backlighting (unlike LCD screens), has the appearance of the printed page, can be read in direct sunlight, and uses only small amounts of battery-powered energy.


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