Disruptive Innovation & 3D Printing Part II

Agenda

1.  What is a disruptive innovation?

2.  3D Printing Disruption

3.  Traditional Manufacturing vs. 3D Printing

4.  Consumer manufacturers?

5.  Implications

6.  Specific disruptions

7.  Downsides

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What is a Disruptor?

Disruptors are innovators…

…but not all innovators are disruptors

According to Clayton Christensen (HBS):

•  “Disruption displaces an existing market, business model, industry, or technology and produces something new and more efficient and worthwhile. It is at once destructive and creative.”

–  Internet, smartphones, UBER

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3DP Disruption- Why Now? •  Advances include improvement in:

–  the performance of additive manufacturing machinery, • Speed, quality

–  an expanding range of possible materials, •  Increased range of materials = more sophisticated end products. •  Incorporating sensors, microprocessors, electrical circuits

–  and falling prices for both printers and materials. • The average industrial printer now sells for about $75,000, and some

machines cost more than $1 million. • These costs are widely expected to decline rapidly in coming years as

production volumes grow.

•  Major initial patents have expired or will expire soon –  open source projects spread free software and encourage rapid

innovation for 3D printing

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Direction of 3DP Technology

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Gartner predicts that 3D printers with the capabilities and performance that is required by organizations will be available for less than $1,000 by 2016.

Source: PriceWaterhouseCoopers. (2014). 3D printing and the new shape of industrial manufacturing.

How are SMEs and large companies adopting 3DP?

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Source: PriceWaterhouseCoopers. (2014). 3D printing and the new shape of industrial manufacturing.

Traditional Manufacturing vs. 3D Printing

•  For large production runs, traditional manufacturing processes cost less per unit than 3DP.

•  High up-front tooling costs make traditional manufacturing more expensive for small production runs.

•  Time to produce a 3-D printed product is much shorter than the time to make tooling, though actual production time for each unit is longer than in traditional manufacturing.

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Goodbye to Economies of Scale?

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As economies of scale come into play, traditional manufacturing can be more beneficial for producing larger quantities of products. 3DP can provide an efficient alternative for low-to-medium-sized production runs. 3DP marginal costs do not change with volume Expected reductions in material costs + improvements in 3DP tech will increase the production quantities at which 3DP might compete with traditional manufacturing methods.

Bottom Line (for now…)

•  Although traditional manufacturing will likely still hold place in the competitive landscape in the years to come, the next 10 to 20 years will see a rapid increase in the innovations made possible by 3D printing

•  Companies based on economies of scale will continue to support commodity and high volume production.

•  3DP is a viable, competitive option when: –  end-user customization is highly desirable, –  where production is very small volume, –  where the end product requires features that are not easily manufactured by traditional means

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Where will the disruption start?

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Source: PriceWaterhouseCoopers. (2014). 3D printing and the new shape of industrial manufacturing.

Consumer manufacturers? •  Unit sales of consumer 3D printers remain small, with about

23,000 printers sold in 2011, but these sales are growing rapidly, with more than 300 % in average annual growth between 2007 and 2011.

•  The ability to easily design and self-manufacture products could create significant consumer surplus and even influence consumer culture

•  Right now, it is unlikely that consumers will be willing to invest the time and effort required to make objects, as opposed to buying them.

•  A gradually rising share of sales in categories such as toys and personal accessories could shift to either home production or 3D printing centers.

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Implications •  The 3D production ecosystem will have major effects

in each of the three major stages of the design-build-deliver model.

–  Design and production will be tightly coupled through experimentation.

•  It will change the nature of design and production: –  GE printing a fuel nozzle in 1 piece as opposed to

assembling 20 different parts (annual cost savings of up to 75%)

–  Boeing printing cool air nozzles with complicated designs at a 30% cost savings, large reductions in labour costs

•  Planning will go from long term to real time.

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Implications

•  Proximity between supplier, manufacturer, and customer will matter, and localized production will be not only more feasible but more desirable.

•  Goods will be infinitely more customized, because altering them won't require retooling, only tweaking the instructions in the software.

•  Companies will benefit from savings in materials, labour and transportation costs

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Supply Chain Disruption

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Reducing the supply chain to one link by eliminating the connections between development, prototyping, production, delivery and warehousing of products.

Disrupted Industrial Workers Will the manufacturing industry lose jobs to this labour-

saving technology?

•  According to PwC, it is too early to discern how 3DP will impact this industry

–  It may cut into unskilled factory floor jobs, but will create opportunities for workers with technical know-how

• Opportunities for re-shoring and retraining workers new programs

•  45% of manufactures attributed their “lack of current expertise within their company” as one of the top barriers to implementing 3DP in their business.

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Some industries are poised to be positively impacted by this disruption:

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Especially manufacturers of:

•  Low volume and/or new designs not economically attractive through subtractive methods

– Aerospace

•  More customized products – Medical devices, helmets, footwear

•  Complex, older generation products with many parts and obsolete parts that are still in demand

–  heavy manufacturing, energy, agriculture

Some industries are poised to be negatively impacted by this disruption:

Especially…

•  Transportation and logistics industries – More goods being produced locally, freight volumes may be impacted – Warehousing

•  Patent reliant industries with weak IP protection

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The Downside of 3DP Disruptions

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•  Regulatory and policy issues, most notably intellectual property rights

•  3D scanners and easily shared CAD files make IP infringements possible and very easy

–  Similar to sharing music online

•  Gartner forecasts $100bn annual global losses by 2018 due to 3DP IP infringements

Important: Policy makers face the challenge of evaluating and addressing these risks without stifling innovation or limiting the value that this technology can provide