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Richard D Aveni
Industrial 3-D printing is at a tipping point, about to go mainstream in a big
way. Most executives and many engineers don t realize it, but this technology
has moved well beyond prototyping, rapid tooling, trinkets, and toys. Additive
manufacturing is creating durable and safe products for sale to real customers
in moderate to large quantities.
The beginnings of the revolution show up in a 2014 PwC survey of more than 100
manufacturing companies. At the time of the survey, 11% had already switched to
volume production of 3-D-printed parts or products. According to Gartner
analysts, a technology is mainstream when it reaches an adoption level of
20%.
Among the numerous companies using 3-D printing to ramp up production are GE
(jet engines, medical devices, and home appliance parts), Lockheed Martin and
Boeing (aerospace and defense), Aurora Flight Sciences (unmanned aerial
vehicles), Invisalign (dental devices), Google (consumer electronics), and the
Dutch company LUXeXcel (lenses for light-emitting diodes, or LEDs). Watching
these developments, McKinsey recently reported that 3-D printing is ready to
emerge from its niche status and become a viable alternative to conventional
manufacturing processes in an increasing number of applications. In 2014 sales
of industrial-grade 3-D printers in the United States were already one-third
the volume of industrial automation and robotic sales. Some projections have
that figure rising to 42% by 2020.
More companies will follow as the range of printable materials continues to
expand. In addition to basic plastics and photosensitive resins, these already
include ceramics, cement, glass, numerous metals and metal alloys, and new
thermoplastic composites infused with carbon nanotubes and fibers. Superior
economics will eventually convince the laggards. Although the direct costs of
producing goods with these new methods and materials are often higher, the
greater flexibility afforded by additive manufacturing means that total costs
can be substantially lower.
With this revolutionary shift already under way, managers should now be
engaging with strategic questions on three levels:
First, sellers of tangible products should ask how their offerings could be
improved, whether by themselves or by competitors. Fabricating an object layer
by layer, according to a digital blueprint downloaded to a printer, allows
not only for limitless customization but also for designs of greater intricacy.
Second, industrial enterprises must revisit their operations. As additive
manufacturing creates myriad new options for how, when, and where products and
parts are fabricated, what network of supply chain assets and what mix of old
and new processes will be optimal?
Third, leaders must consider the strategic implications as whole commercial
ecosystems begin to form around the new realities of 3-D printing. Much has
been made of the potential for large swaths of the manufacturing sector to
atomize into an untold number of small makers. But that vision tends to
obscure a surer and more important development: To permit the integration of
activities across designers, makers, and movers of goods, digital platforms
will have to be established. At first these platforms will enable
design-to-print activities and design sharing and fast downloading. Soon they
will orchestrate printer operations, quality control, real-time optimization of
printer networks, and capacity exchanges, among other needed functions. The
most successful platform providers will prosper mightily by establishing
standards and providing the settings in which a complex ecosystem can
coordinate responses to market demands. But every company will be affected by
the rise of these platforms. There will be much jockeying among incumbents and
upstarts to capture shares of the enormous value this new technology will
create.
These questions add up to a substantial amount of strategic thinking, and still
another remains: How fast will all this happen? For a given business, here s
how fast it can happen: The U.S. hearing aid industry converted to 100%
additive manufacturing in less than 500 days, according to one industry CEO,
and not one company that stuck to traditional manufacturing methods survived.
Managers will need to determine whether it s wise to wait for this
fast-evolving technology to mature before making certain investments or whether
the risk of waiting is too great. Their answers will differ, but for all of
them it seems safe to say that the time for strategic thinking is now.
Additive s Advantages
It may be hard to imagine that this technology will displace today s standard
ways of making things in large quantities. Traditional injection-molding
presses, for example, can spit out thousands of widgets an hour. By contrast,
people who have watched 3-D printers in action in the hobbyist market often
find the layer-by-layer accretion of objects comically slow. But recent
advances in the technology are changing that dramatically in industrial
settings.
Some may forget why standard manufacturing occurs with such impressive speed.
Those widgets pour out quickly because heavy investments have been made up
front to establish the complex array of machine tools and equipment required to
produce them. The first unit is extremely expensive to make, but as identical
units follow, their marginal cost plummets.
Additive manufacturing doesn t offer anything like that economy of scale.
However, it avoids the downside of standard manufacturing a lack of
flexibility. Because each unit is built independently, it can easily be
modified to suit unique needs or, more broadly, to accommodate improvements or
changing fashion. And setting up the production system in the first place is
much simpler, because it involves far fewer stages. That s why 3-D printing has
been so valuable for producing one-offs such as prototypes and rare replacement
parts. But additive manufacturing increasingly makes sense even at higher
scale. Buyers can choose from endless combinations of shapes, sizes, and
colors, and this customization adds little to a manufacturer s cost even as
orders reach mass-production levels.
A big part of the additive advantage is that pieces that used to be molded
separately and then assembled can now be produced as one piece in a single run.
A simple example is sunglasses: The 3-D process allows the porosity and mixture
of plastics to vary in different areas of the frame. The earpieces come out
soft and flexible, while the rims holding the lenses are hard. No assembly
required.
Printing parts and products also allows them to be designed with more-complex
architectures, such as honeycombing within steel panels or geometries
previously too fine to mill. Complex mechanical parts an encased set of gears,
for example can be made without assembly. Additive methods can be used to
combine parts and generate far more interior detailing. That s why GE Aviation
has switched to printing the fuel nozzles of certain jet engines. It expects to
churn out more than 45,000 of the same design a year, so one might assume that
conventional manufacturing methods would be more suitable. But printing
technology allows a nozzle that used to be assembled from 20 separately cast
parts to be fabricated in one piece. GE says this will cut the cost of
manufacturing by 75%.
U.S. hearing aid companies converted to 100% 3-D printing in less than 500
days.
Additive manufacturing can also use multiple printer jets to lay down different
materials simultaneously. Thus Optomec and other companies are developing
conductive materials and methods of printing microbatteries and electronic
circuits directly into or onto the surfaces of consumer electronic devices.
Additional applications include medical equipment, transportation assets,
aerospace components, measurement devices, telecom infrastructure, and many
other smart things.
The enormous appeal of limiting assembly work is pushing additive manufacturing
equipment to grow ever larger. At the current extreme, the U.S. Department of
Defense, Lockheed Martin, Cincinnati Tool Steel, and Oak Ridge National
Laboratory are partnering to develop a capability for printing most of the
endo- and exoskeletons of jet fighters, including the body, wings, internal
structural panels, embedded wiring and antennas, and soon the central
load-bearing structure. So-called big area additive manufacturing makes such
large-object fabrication possible by using a huge gantry with computerized
controls to move the printers into position. When this process has been
certified for use, the only assembly required will be the installation of
plug-and-play electronics modules for navigation, communications, weaponry, and
electronic countermeasure systems in bays created during the printing process.
In Iraq and Afghanistan the U.S. military has been using drones from Aurora
Flight Sciences, which prints the entire body of these unmanned aerial vehicles
some with wingspans of 132 feet in one build.
Three-Dimensional Strategy
This brief discussion of additive manufacturing s advantages suggests how
readily companies will embrace the technology and additional savings in
inventory, shipping, and facility costs will make the case even stronger. The
clear implication is that managers in companies of all kinds should be working
to anticipate how their businesses will adapt on the three strategic levels
mentioned above.
Offerings, redesigned.
Product strategy is the answer to that most basic question in business, What
will we sell? Companies will need to imagine how their customers could be
better served in an era of additive manufacturing. What designs and features
will now be possible that were not before? What aspects can be improved because
restrictions or delivery delays have been eliminated?
For example, in the aerospace and automotive industries, 3-D printing will most
often be used in the pursuit of performance gains. Previously, the fuel
efficiency of jet fighters and vehicles could be enhanced by reducing their
weight, but this frequently made them less structurally sound. The new
technology allows manufacturers to hollow out a part to make it lighter and
more fuel-efficient and incorporate internal structures that provide greater
tensile strength, durability, and resistance to impact. And new materials that
have greater heat and chemical resistance can be used in various spots in a
product, as needed.
In other industries, the use of additive manufacturing for more-tailored and
fast-evolving products will have ramifications for how offerings are marketed.
What happens to the concept of product generations let alone the hoopla around
a launch when things can be upgraded continually during successive printings
rather than in the quantum leaps required by the higher tooling costs and setup
times of conventional manufacturing? Imagine a near future in which cloud-based
artificial intelligence augments additive manufacturing s ability to change or
add products instantly without retooling. Real-time changes in product
strategy, such as product mix and design decisions, would become possible. With
such rapid adaptation, what new advantages should be core to brand promises?
And how could marketing departments prevent brand drift without losing sales?
Operations, reoptimized.
Operations strategy encompasses all the questions of how a company will buy,
make, move, and sell goods. The answers will be very different with additive
manufacturing. Greater operational efficiency is always a goal, but it can be
achieved in many ways. Today most companies contemplating the use of the
technology do piecemeal financial analysis of targeted opportunities to swap in
3-D equipment and designs where those can reduce direct costs. Much bigger
gains will come when they broaden their analyses to consider the total cost of
manufacturing and overhead.
How much could be saved by cutting out assembly steps? Or by slashing
inventories through production only in response to actual demand? Or by selling
in different ways for example, direct to consumers via interfaces that allow
them to specify any configuration? In a hybrid world of old and new
manufacturing methods, producers will have many more options; they will have to
decide which components or products to transition over to additive
manufacturing, and in what order.
Additional questions will arise around facilities locations. How proximate
should they be to which customers? How can highly customized orders be
delivered as efficiently as they are produced? Should printing be centralized
in plants or dispersed in a network of printers at distributors, at retailers,
on trucks, or even in customers facilities? Perhaps all of the above. The
answers will change in real time, adjusting to shifts in foreign exchange,
labor costs, printer efficiency and capabilities, material costs, energy costs,
and shipping costs.
A shorter traveling distance for products or parts not only saves money; it
saves time. If you ve ever been forced to leave your vehicle at a repair shop
while the mechanic waits for a part, you ll appreciate that. BMW and Honda,
among other automakers, are moving toward the additive manufacturing of many
industrial tools and end-use car parts in their factories and dealerships
especially as new metal, composite plastic, and carbon-fiber materials become
available for use in 3-D printers. Distributors in many industries are taking
note, eager to help their business customers capitalize on the new
efficiencies. UPS, for example, is building on its existing third-party
logistics business to turn its airport hub warehouses into mini-factories. The
idea is to produce and deliver customized parts to customers as needed, instead
of devoting acres of shelving to vast inventories. If we already live in a
world of just-in-time inventory management, we now see how JIT things can get.
Welcome to instantaneous inventory management.
Indeed, given all the potential efficiencies of highly integrated additive
manufacturing, business process management may become the most important
capability around. Some companies that excel in this area will build out
proprietary coordination systems to secure competitive advantage. Others will
adopt and help to shape standard packages created by big software companies.
Ecosystems, reconfigured.
Finally comes the question of where and how the enterprise fits into its
broader business environment. Here managers address the puzzles of Who are we?
and What do we need to own to be who we are? As additive manufacturing allows
companies to acquire printers that can make many products, and as idle capacity
is traded with others in the business of offering different products, the
answers to those questions will become far less clear. Suppose you have rows of
printers in your facility that build auto parts one day, military equipment the
next day, and toys the next. What industry are you part of? Traditional
boundaries will blur. Yet managers need a strong sense of the company s role in
the world to make decisions about which assets they will invest in or divest
themselves of.
Aurora Flight Sciences can print the entire body of a drone in one build.
They may find their organizations evolving into something very different from
what they have been. As companies are freed from many of the logistical
requirements of standard manufacturing, they will have to look anew at the
value of their capabilities and other assets and how those complement or
compete with the capabilities of others.
The Platform Opportunity
One position in the ecosystem will prove to be the most central and powerful
and this fact is not lost on the management teams of the biggest players
already in the business of additive manufacturing, such as eBay, IBM, Autodesk,
PTC, Materialise, Stratasys, and 3D Systems. Many are vying to develop the
platforms on which other companies will build and connect. They know that the
role of platform provider is the biggest strategic objective they could pursue
and that it s still very much up for grabs.
Platforms are a prominent feature in highly digitized 21st-century markets, and
additive manufacturing will be no exception. Here platform owners will be
powerful because production itself is likely to matter less over time. Already
some companies are setting up contract printer farms that will effectively
commoditize the making of products on demand. Even the valuable designs for
printable products, being purely digital and easily shared, will be hard to
hold tight. (For that matter, 3-D scanning devices will make it possible to
reverse-engineer products by capturing their geometric design information.)
Everyone in the system will have a stake in sustaining the platforms on which
production is dynamically orchestrated, blueprints are stored and continually
enhanced, raw materials supplies are monitored and purchased, and customer
orders are received. Those that control the digital ecosystem will sit in the
middle of a tremendous volume of industrial transactions, collecting and
selling valuable information. They will engage in arbitrage and divide the work
up among trusted parties or assign it in-house when appropriate. They will
trade printer capacity and designs all around the world, influencing prices by
controlling or redirecting the deal flow for both. Like commodities
arbitrageurs, they will finance trades or buy low and sell high with the
asymmetric information they gain from overseeing millions of transactions.
Responsibility for aligning dispersed capacity with growing market demand will
fall to a small number of companies and if the whole system is to work
efficiently, some will have to step up to it. Look for analogs to Google, eBay,
Match.com, and Amazon to emerge as search engines, exchange platforms, branded
marketplaces, and matchmakers among additive manufacturing printers, designers,
and design repositories. Perhaps even automated trading will come into
existence, along with markets for trading derivatives or futures on printer
capacity and designs.
In essence, then, the owners of printer-based manufacturing assets will compete
with the owners of information for the profits generated by the ecosystem. And
in fairly short order, power will migrate from producers to large systems
integrators, which will set up branded platforms with common standards to
coordinate and support the system. They ll foster innovation through open
sourcing and acquiring or partnering with smaller companies that meet high
standards of quality. Small companies may indeed continue to try out
interesting new approaches on the margins but we ll need big organizations to
oversee the experiments and then push them to be practical and scalable.
Digital History Replicated
Thinking about the unfolding revolution in additive manufacturing, it s hard
not to reflect on that great transformative technology, the internet. In terms
of the latter s history, it might be fair to say that additive manufacturing is
only in 1995. Hype levels were high that year, yet no one imagined how commerce
and life would change in the coming decade, with the arrival of Wi-Fi,
smartphones, and cloud computing. Few foresaw the day that internet-based
artificial intelligence and software systems could run factories and even city
infrastructures better than people could.
The future of additive manufacturing will bring similar surprises that might
look strictly logical in hindsight but are hard to picture today. Imagine how
new, highly capable printers might replace highly skilled workers, shifting
entire companies and even manufacturing-based countries into people-less
production. In machine organizations, humans might work only to service the
printers.
And that future will arrive quickly. Once companies put a toe in the water and
experience the advantages of greater manufacturing flexibility, they tend to
dive in deep. As materials science creates more printable substances, more
manufacturers and products will follow. Local Motors recently demonstrated that
it can print a good-looking roadster, including wheels, chassis, body, roof,
interior seats, and dashboard but not yet drivetrain, from bottom to top in 48
hours. When it goes into production, the roadster, including drivetrain, will
be priced at approximately $20,000. As the cost of 3-D equipment and materials
falls, traditional methods remaining advantages in economies of scale are
becoming a minor factor.
Local Motors can print a good-looking roadster from bottom to top in 48 hours.
Here s what we can confidently expect: Within the next five years we will have
fully automated, high-speed, large-quantity additive manufacturing systems that
are economical even for standardized parts. Owing to the flexibility of those
systems, customization or fragmentation in many product categories will then
take off, further reducing conventional mass production s market share.
Smart business leaders aren t waiting for all the details and eventualities to
reveal themselves. They can see clearly enough that additive manufacturing
developments will change the way products are designed, made, bought, and
delivered. They are taking the first steps in the redesign of manufacturing
systems. They are envisioning the claims they will stake in the emerging
ecosystem. They are making the many layers of decisions that will add up to
advantage in a new world of 3-D printing.
Richard D Aveni is the Bakala Professor of Strategy at Dartmouth College s Tuck
School of Business.
The Tipping Point in Patents
Want to know how fast the 3-D future is coming? Don t look only at adoption
rates among manufacturers. Look at the innovation rates of inventors. In 2005
only 80 patents relating to additive manufacturing materials, software, and
equipment were granted worldwide, not counting duplicates filed in multiple
countries. By 2013 that number had gone into orbit, with approximately 600 new
nonduplicative patents issued around the globe.
What are some of the companies behind these patents? Not surprisingly, the two
leaders are Stratasys and 3D Systems, rivals that have staked out positions in
additive manufacturing. They hold 57 and 49 nonduplicative patents
respectively. As befits its printing heritage, Xerox, too, has invested heavily
in additive technologies for making electronics and has developed a strong
alliance with 3D Systems. Panasonic, Hewlett-Packard, 3M, and Siemens likewise
hold numerous patents.
But surprisingly, the largest users of 3-D printing have also been active
innovators. Fourth on the list, with 35 patents, is Therics, a manufacturer of
medical devices. These commercial companies understand additive manufacturing s
potential to give them important advantages over competitors.
Also noteworthy among patent holders are companies that straddle both worlds.
GE and IBM are important manufacturers but are increasingly invested in
platforms that optimize value chains run by other companies. GE (11 patents) is
developing the industrial internet, and IBM (19) has worked out what it is
calling the software-defined supply chain and optimization software for smart
manufacturing systems. Both are well positioned to take on similar roles with
regard to additive manufacturing and both bear watching as models for how
incumbents can capture disproportionate value from a highly disruptive
technology.
Three Ways to Wade into 3-D
Any manufacturer whose strategy for the future includes additive techniques has
to lay out a road map for getting there. Companies already on the journey are
taking things step-by-step, but in three different ways.
Trickle Down
Some start with their high-end products, knowing that their most sophisticated
(and price-insensitive) customers will appreciate the innovation and
flexibility. The luxury will trickle down in the time-honored way as the
technology matures and becomes more affordable. Automotive manufacturers, for
example, tend to engineer one-off parts specially for Formula One racing cars
and then find ways to introduce versions of those innovations to high-end
sports and luxury cars. As engineers familiarity with the technology grows,
they spot opportunities to bring it to parts for mass-market car segments.
Swap Out
Other pioneers proceed in a less splashy way, focusing first on the components
of a given product that are easiest to migrate to additive manufacturing. The
objective is to develop the organization s know-how by advancing to
more-challenging components of the same product. This is common in aerospace,
where companies have selected a specific product, such as an F-35 fighter jet,
and started with mundane brackets and braces before moving to, say, internal
panels and partitions. As the manufacturers learn more, they begin printing the
fighter s exterior skin. Experiments with printing its load-bearing structures
are now under way.
Cut Across
A third approach is to find components that show up in multiple products and
use them to establish a 3-D foothold. For example, a design improvement for a
fighter jet could be transferred to drones, missiles, or satellites. Such
cross-product improvement builds knowledge and awareness throughout the company
of how additive manufacturing can enhance performance on key dimensions such as
weight, energy use, and flexibility.
The common theme here is small, incremental steps. In all three approaches,
engineers are being given fascinating new puzzles to solve without having their
world upended by still-evolving methods and materials, thus minimizing risk and
resistance to change. It is up to more-senior managers to maintain the
appropriate level of pressure for taking each successive step. As they push for
further adoption, they should allow naysayers to explain why 3-D printing isn t
right for a given part or process, but then challenge them to overcome that
roadblock. Traditionalists will always be quick to tell you what 3-D printing
can t do. Don t let them blind you to what it can.