3D Printing Archipelago: CAPEX Heavy or Asset Light

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Previously, we’ve seen how I anticipate that the 3D printing industry will split into multiple islands of competitiveness. In a more specific, fragmented market, companies will fight heavily in their own segments, but may never encounter other firms outside these segments.

We looked at how high part variability, geopolitics, China, and high and low service requirements can all impact the fragmenting of the additive manufacturing (AM) market into an archipelago. Now, we will consider more trends that could cause the sector to split, all variations on a theme that settles around the difficult area of determining what is core and what is not.

Split 4: Build or Buy

Glidewell Dental has made a lot of its own very specific software tools to make its own processing of parts service more efficient. The company even has its own CT scanners, optimized for its components and workflow. This raises Glidewell’s initial investment and slows it down as it diverts resources to build tools.

However, we would also expect the company or a similar firm to be able to process parts more quickly with a more optimized physical and software workflow. We could also see how another firm could opt to simply buy the closest software tools for its needs and move more quickly. It would be faster out of the gate, but may not end up with the best tool for its culture, business, workflow or general needs. At the same time, it would have less overhead.

In some cases, the part cost would be very much in favor of a firm willing to vertically integrate everything, like Glidewell. In other cases “store-bought” parts and machines might offer better performance or about the same. It would be difficult to determine when exactly one approach would be superior to the other.

Generally, however, we can say that these companies would approach the market in very different ways. One firm would be more likely to specialize as it focuses on developing IP in the design or processing phase, rather than in handling and software or machine design. One would have much higher headcount and get heavily involved in problem solving. This may be dandy, but not if the problems can be solved more cheaply using other peoples tools.

A certain amount of ¨eating one’s own dog food¨ is very good for providing companies with a deeper understanding of the market and their offering. It is also true that too much of that will make them more likely to go into Not Invented Here territory. There is a fine line between being inefficient at making things that others can produce better and knowing that you’re doing things others can not. Often those making a lot of the day-to-day decisions have a stake in the outcome since their jobs either depend on slimming down and outsourcing everything or in continuing to develop a tool that they were hired to develop. Not a lot of employees will raise there hands and say, ¨You know what, folks? I think we should get rid of me.¨

Choosing whether to build or buy fundamentally changes the type of people and expertise that you have and can develop. It also predetermines some outcomes. For example, Glidewell could become like Materialise in selling its own technology to the market. Materialise had the market knowledge and understanding to beef up on its medical unit and transition away from simply prototyping.

Meanwhile, highly specialized firms using standard equipment are often much more agile and efficient. At the same time, they are much more likely to stay in their lane and not diversify or pivot to new markets—which is weird weird trend about which I haven’t seen much literature. In the case of these firms, the strategy becomes more of a truer arrow than a shotgun blast.

Split 5: Are You a Materials Company or Not?

Thinking about what is core and what is not can sometimes result in strange business models and strange behavior. Mindsets are often very dependent on ego and one’s way of thinking rather than pure ratio. Many companies have now outsourced so much that they’re a holding company listening to consultants.

I was once working as a consultant on behalf of a business, negotiating with a technology firm acting as a consultant and another company acting as an advisor to sell my clients´ technology to their client. We were in meetings for an hour with three people, each of us billing a business for a decision that would not affect anyone on the calls’ bottom line. Our path to maximizing profit lay not through making the best decision but, perversely, in making the call last longer.

There are many corporates now that are simply not good at anything. At the same time, if we look at them through the lens of efficiency, revenue, or maximization of profit, we get weird situations the other way as well. BMW sells four times as many tires as cars. Does it mean that BMW should outsource the manufacturing of the automobiles and instead become a pure play tire firm? Tires also have more margin than cars and require less investment. Clearly, the most profitable thing to do is for car companies is to pivot to making tires.

Thinking in an asset-heavy or -light manner has very different effects on firms. One of these is the simple question: are you a material company or not? Oerlikon, GKN, Xían BLT and Falcontech are examples of metal 3D printing firms that have gone into making their own powder. Falcontech doesn’t sell its materials, while BLT sells machines. This is a very different approach from the other service-oriented companies that buy powder. It means very different investment as well and a very different approach to the market.

For polymer material extrusion, having your own filament line is a no brainer to me. However, others keep seeing material production as not core, or consider the conversion cost as not worthwhile to pursue such a strategy.

The question of how one sees oneself is almost existential and yet is not really considered at any point by many firms. Are you a company that puts titanium in the human body? Well, then, of course, you should get an EIGA machine. Or do you see yourself as someone who helps people with orthopedic problems? Then, look beyond titanium and at Ossiform. Or do you aid orthopedic surgeons in helping patients? Then, look at tools for orthopedic surgeons, as well as software to help them. In each case, am AM business could be an identical company in the orthopedics industry with identical finances, structure, and products but they would opt for starkly different tactical and strategic choices, depending on how the company perceived itself to be.

Conclusion

It is easy to see that, if we take a CAPEX-heavy or asset-light approach, we can have very different outcomes. A sense of identity and purpose would also split the AM market into very different players with very different cost structures and areas in which to play.

If all of the orthopedics firms were wedded to titanium, we would see a delay in more bone-like 3D printing and a continuation of a deeper understanding and design of metal structures. If everyone was Stryker and saw 3D printing to be a core source of differentiation, we’d have a lot more large, secretive manufacturing sites around. If, on the other hand, firms opt to be designers of orthopedics, then Tangible and AMNovis would become the largest companies in implant production and 3D printing as a skill will not percolate through to the orthopedics or other markets. In other words, we will see very different competitors that will diverge so much through these fundamental choices that they will find themselves in very different outcomes and markets.

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