stratasys case study

The Emerging 3D Printing Industry | TG

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The 3D Printing Solutions Company

Marketing 576 – Fall 2016

Submitted to: Professor Shanna Bruer Hess

Submitted by: Tamalika Ghosh

Submitted on: October 4, 2016


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Introduction

According to the 2016 Wohlers report, for the second year in a row, the 3D printing industry has

grown by $1 billion to a total of $5,165 billion. The findings are based on information from 51

industrial system manufacturers, 98 service providers, 15 third-party material producers, various

desktop 3D printer manufacturers, and 80 3D printing experts from 33 countries worldwide.

The $5 billion represents a total growth rate (CAGR) of 25.9% in 2015, which is slightly lower

than the 33.8% CAGR of the past three years, still extremely promising. Wohlers also indicated

that over the past 27 years, the CAGR for the industry is 26.2%, demonstrating impressive

consistency. In 2014, the 3D printing industry grew 34.9 %, the highest growth rate in 17 years.

With a sale of $750 million in 2015, Stratasys is the industry leader. Driven in part by demand of

the new Object500 Connex3, by continued demand for PolyJet and industrial FDM 3D printing,

and by new acquisitions such as Solid Concepts and Harvest Technologies Stratasys grew by

54%. Though the industry growth estimation gives a rosy picture for moving ahead, but the 3D

printing industry has its own challenges. Starting from high level machines costing million

dollars, production time, limitation of mass production, risk of intellectual property rights

violation, etc. there are lot of areas that needs to be considered for maintaining the projected

growth rate.

Company History

In 1988, a young engineer frustrated by a sluggish prototyping process chose to reimagine it

rather than accept it. His invention, FDM Technology, marked the inception of Stratasys, a major

milestone in the history of 3D printing. Stratasys was founded by the couple S. Scott Crump and

Lisa H. Crump. He studied mechanical engineering at Washington State University and then in

1982 moved to Minneapolis to help found IDEA, Inc., which manufactured force, load, and

pressure transducers. It was in 1988 when once he decided to make a toy frog for his daughter

using a glue gun loaded with a mixture of polyethylene and candle wax. His idea was to create

the shape layer by layer. He then automated the process using a $10,000 digital-plotting

equipment. With motivation from his wife he converted his passion into business and Stratasys

was born. In 1989 he patented Fused Deposition Modeling technology. Since then the company

has come a long way. The FDM modeling Crump invented in the home lab, eventually grew into


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an industry defining company worth $980 million that has put additive manufacturing into

operation with more than 20,000 manufacturers around the world.

The Journey

Since 1988...

Scott Crump Invents FDM Technology

Frustrated by the long and expensive lag time

between CAD model and manufacturing

prototype, aviation engineer Scott Crump did

what inventors do: He searched for a solution

that didn't yet exist.

1988

1989

A Hobby Became a Business

Crump began devoting weekends to

refining his idea, which at first meant

automating the process using modified

2D plotter. Obsession became more

than a hobby and Crump founded

Stratasys.

1994

1994Stratasys Goes Public

Stratasys funded its future corporate growth

through an initial public offering in 1994.

Material for Printing

Stratasys introduces the first ABS

thermoplastic available for 3D printing.


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1998

Inkjet Entrepreneurs Found Objet Geometries

1999

FDM Tested in Microgravity

A Stratasys FDM 1600 was flown aboard

the NASA KC-135 Reduced Gravity

Aircraft to assess the feasibility of using

FDM in a microgravity environment

2002

Cost Effective Printer

Stratasys introduces the first 3D

printer under $30,000

2007

World's first multi-material 3D Printer

Objet unveiled its PolyJet Matrix

Technology and introduced the world’s

first 3D printer to simultaneously jet

multiple materials

2008 3D Printer for Production

Stratasys launches the first 3D printer

for production.


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2012

Desktop 3D Printer

Objet announces world’s first desktop 3D

printer with seven materials and later with

100 materials

Objet and Stratasys Merge

David Reis, chief executive officer of the

new combined company, stated, "We are

excited to move forward as one company

and deliver the benefits this combination

creates for our shareholders, our

customers and our employees.

Stratasys Acquires MakerBot MakerBot's 3D printers are rapidly being

adopted by CAD-trained designers and

engineers," said Stratasys CEO David Reis

at the time of the merger in 2013.

Stratasys Introduces First Color and

Multi-material 3D Printer

Objet500 Connex3 was the first 3D printer

in the world to simultaneously 3D print

multiple colors and materials. Today

Connex3 sets the industry standard for multi-

material 3D printing.

Stratasys acquires GrabCAD

which connects people, 3D content and

technologies.

2013

2014


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Competitors and Stratasys Market Strategy

Since 3D printing industry is a rapidly growing industry, we find many players including a large

number of successful small startup companies. The top three position is predominantly occupied

by Stratasys, 3D Systems and Hewlett- Packard. Stratasys’s priority is to accelerate its market

share, marketing and R&D to strengthen its marketplace leadership and reduce current and

potential competition. Stratasys wants to capitalize on the first mover advantage. Acquiring

strategic companies early in their life cycle, helps in getting skills, knowledge and technologies

faster. Accelerate innovation by picking winners, become owners of 3D content, technologies,

materials, talents, and last but not the least – acquire large chunks of market share, this is the

2015

Stratasys Direct Manufacturing

Services

Stratasys combined three leading 3D

printing service bureaus to form

Stratasys Direct Manufacturing.

Stratasys acquires Econolyst

and creates Stratasys Strategic

Consulting

2016

Stratasys Invents 3D Printing Again...

The Stratasys J750 3D Printer isn't just the

latest addition to the PolyJet portfolio. It's

the first-ever full-color, multi-material 3D

printer.


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strategy Stratasys has adopted. However, this strategy comes with a cost and temporary revenue

loss is one of them. [Exhibit: 1].

The 3D printing industry has witnessed quite a few interesting acquisitions in the last few years.

Both the leaders of 3D printing manufacturing market, Stratasys and its rival 3D Systems, have

managed to counter the threat of competition by acquiring a number of companies’ like

MakerBot, Objet, Z Corporation, DTM, Solidscape, etc. This strategy allows to gain the

proprietorship of a larger number of important patents. For instance, the milestone patent of

PolyJet technology is the result of the merger with Objet in 2012. Being in the innovation sector

puts Stratasys at the advantageous position of industry pioneer but at the same time, there exists

the risk of ‘Patent War’. Expiration of the original patent for FDM in 2009 triggered an

enormous open source movement. Production of low cost 3D printers from all sort of companies

massively expanded. Competition is the harbinger of change. It is not just the external growth

that fuels Stratasys’s expansion. Significant and continuous investment in R&D is what drives

Stratasys towards the future.

Key Stakeholders and Industry Operation

Stratasys serves a wide variety of industry. It includes Aerospace & Defense, Architecture,

Automobile, Commercial Production, Consumer Products, Dental, Education, Entertainment and

most importantly Medical[Exhibit:2]. Over the years it has helped professionals in all these

fields to achieve remarkable outcomes by using its technology. A few mentionable achievements

where Stratasys played the role of a catalyst are: -

In 2002, 3D Printed Model Helps Surgeon Plan Separation of Conjoined Twins -

Maria Teresa and Maria de Jesus Quiej-Alvarez were born with separate, complete

brains, but with intertwining blood vessels that made separation a challenge. With help

from a 3D printed planning model, the operation to separate the twins took about 22

hours. For comparison, Biomedical founder Eitan Priluck said that similar procedures had

taken as long as 97 hours in the past.

Encouraging Young Inventers Through Extreme Redesign Contest - Their first

Extreme Redesign Contest in 2005, accepted submissions from students worldwide in

three categories: high school teams, college individuals and post-secondary. First-place


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winners were selected by a panel of independent judges. Winning entries included a stair

climbing robot, a lighted retractable dog leash and a mouse radio.

In 2010, Urbee Develops the First 3D Printed Car - KorEcologic produced a prototype

of the first automobile with an entirely 3D printed body: the 200-mpg Urbee. Stratasys

was a development partner on the project, which required geometric freedom to make

strong, lightweight parts.

In 2012, 3D Printed Exoskeleton Lets Little Girl Lift Arms and Play - Using a

Dimension 3D printer, researchers at the Alfred I. DuPont Hospital for Children in

Philadelphia were able to create what little Emma called her "magic arms." The device is

a custom-designed robotic exoskeleton that enables her to conquer greatly limited joint

mobility and underdeveloped muscles.

Based upon the varied client requirement, Stratasys provides 3D printers with different features

and technologies. The major categories are: Idea series, Design series, Production series and

Dental series. [Exhibit:3] The materials used for the printer also varies based upon the

requirement [Exhibit:4]

The diverse range of solution [Exhibit:5] and their benefits that Stratasys provides includes:

Rapid Prototyping

• Design iteratively

• Reduce scrap and rework

• Communicate ideas

• Test in real world

Additive Manufacturing

• Reshaping traditional manufacturing

• Discover New possibilities

• Deliver just in time

• Reduce tooling costs and risks

Professional & Consulting Services

• Identify efficient low- volume production opportunity

• Reduce environmental impact

• Increased product functionality

• Realigned supply chain


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• Strategic transitional services for project implementation and management education

• Expert on-site services

Advance Material & Direct Manufacturing

• Better solutions in development and production of custom polymers and compounded

materials

• Innovative manufacturing process development

Challenges in 3D Printing Adoption

The benefits of 3D printing application are impressive; design freedom, part consolidation, no

tooling required, just-in-time inventory, to list a few. Still, companies are struggling to find ways

to incorporate the technology into their product development and manufacturing operations.

According to the 2014 Wohlers Report, additive manufacturing is still less than 2% of the entire

manufacturing market. The problems faced by Stratasys’s clients are indirectly the problems

hindering Stratasys and its growth. To understand these challenges better, Stratasys performed an

industry survey of 700 users. The analysis reflects the following as the major issue concerning

3D printing application by its customers:

Equipment cost, limited material availability and post processing requirements.

Lack of in-house additive manufacturing resources and high manufacturing cost.

Lack of expertise and/or training among workforce/employees.

Longer production timeline and limited recyclability.

Lack of formal standards and limited repeatability.

Software development and data storage limitations.

Risk of litigation and legal implication.

Graph: Top Industry Challenges as per Survey (Source:Stratasys.com)


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What Stratasys believes is that the industry need to change its perspective about how and where

to use 3D Printing. From emphasizing additive manufacturing’s technical benefits, its customers

are required to move towards the overall business enhancement. Identifying applications and

parts to build with 3D printing is not enough, rather looking at their manufacturing strategy as a

whole to see how the technology can enable innovation and add value to overall operation is the

way to advancement.

A presentation by Dr. Mark Cotteleer, clearly reinstates that making the customers ready, to

adopt using 3D printing is a time intensive affair. [Exibit:6]

Moving Ahead

August 2016, Stratasys Ltd. (Nasdaq: SSYS) reported its financial results for Q2, 2016

[Exhibit:7]. This quarter was the final reporting period for CEO, David Reis, who stepped aside

for Ilan Levin. Reis will still be involved with the company as an executive director. Like Reis,

Levin held leadership positions in Objet, before Stratasys acquired the company in 2012. In May,

2016 Tim Bohling joined Stratasys as the Chief Marketing Officer. Prior to Stratasys, Bohling

served as VP of Marketing at HCL Technologies and held a number of senior marketing and

strategy roles at IBM. Bohling is responsible for branding, demand generation, digital & field

marketing, public and industry analyst relations. Clearly, these are important moves in shaping

the future of Stratasys.

Speaking about performance Levin said “Compared to the first quarter, we observed stronger

margins and a substantial increase in non-GAAP operating profit. Our margins benefitted from a

sales mix that favored our higher-end systems, including the recently launched J750, the

industry’s most advanced full-color, multi-material 3D printer, as well as our ongoing efforts to

improve operations, and reduce operating expenses.” A quick look at the 5 year share price trend

of Stratasys and the income statement and other key performance indicators give the clear signal

that things are going haywire for Stratasys [Exhibit: 8, 9, 10]. So what exactly is going wrong?

The industry projections indicate growth whereas the company financials doesn’t reflect the

same story.


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Root Cause of Problem

• As rightly said by a 3D printing user, Rick Twiggs “Many companies have purchased

millions of dollars in machines to use in-house and will not be purchasing any more

machines for a while.” Definitely there is a mismatch in the potential customer demand

forecast and the actual sales. As already identified by Stratasys, equipment cost and

operating cost is pretty high. Heavy capital investment is a concern for a lot of potential

customers.

• Processing time of the 3D printers hinders when it comes to applying the technology for

mass production. From prototyping point of view definitely the technology has done

wonders in terms of design complexity and precision. However commercial production

use needs much faster printer technology.

• Lack of expertise and trained personnel is a concern for many existing and potential

customers. The technology and its benefits are known to all but how to implement the

same for their business is where companies are struggling.

• The approach companies are deploying to ripe the benefit of 3D printing needs to change

and the change need to happen at the leadership level. Stratasys believes, instead of

finding products that fits the technology, users are required to make the technology fit the

product and business model.

• Expiring patents are making ways for new smaller manufacturers penetrating the desktop

3D- printing market traditionally dominated by the big players. By offering more reliable,

cheaper and easier to operate printers, these small companies (DeltaWasp, Ultimaker,

Lulzbot) are disrupting their bigger competitors.

• Reorganization and a series of write downs against subsidiaries (MakerBot) in 2015

effected the income statement of Stratasys. Ongoing performance and quality issues

forced write off of significant asset value tied to acquisition.


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Solution

Increase awareness among existing and potential customers about how implementing

additive manufacturing for true business value effects multiple areas beyond just design

and engineering. Productivity, training, supply chains, product optimization,

environmental impact, R&D, all these needs consideration for overall manufacturing

ROI. Partnering with the core industries and providing consulting services, workshops,

etc. can help to grow the market.

Focusing on the personalized consumer market of desktop 3D printing and advertising

the product rightly to this target group. A robust marketing strategy to capture this

growing market is a must.

Innovate to reduce the existing barriers of high cost and speed issue to attract a greater

customer base and make the technology more easily accessible. Increased spending on

R&D is unavoidable, hence realigning and controlling other business and operating cost

is need of the hour.

Relaunching brand, reorganizing business and developing comprehensive ecosystem is

essential for growth [Exhibit: 11]

Final Solution & Implementation

For Stratasys it the long term vision that matters and a bumpy ride along the journey is

unavoidable considering the industry is still evolving. The four key strategies Stratasys is

implementing are: expanding support for prototyping and tooling uses across industries while

developing a new approach for the manufacturing market in key vertical markets, cultivate a

“high touch” sales team to introduce 3D print technologies and solutions into new accounts and

applications such as high-value manufacturing while continuing to leverage its reseller partners

for sales, product and service delivery, deliver engineered materials and printers capable of

supporting and extending its strategy and incorporate Stratasys material extrusion technologies

into MakerBot so its “Replicators” function at the level necessary to continue growing in the

enterprise desktop printer and education markets.

This alone won’t be sufficient though to turn the fortune. With HP’s dramatic entry into the 3D

printer market with the Jet Fusion 3D printer (which is much faster and less expensive) Stratasys


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must step its game up for 3D mass production. The new services and consulting branch is again

a great move to partner with current and future customers to build relationship with educators,

researchers, partners and leverage this network to increase revenue. Obtaining operational

efficiency and improving the financial performance should be the top priority of the new

management team to gain investors’ confidence in the business. With big names like HP,

Canon and GE entering the 3D printing industry, Stratasys needs to evolve and adopt more

nimbly to retain its share of the growing 3D pie. Relaunching the brand, strengthening the to

go market and strategic partnering and acquisitions focusing long term growth is the way

forward.


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Exhibits & Photos

Exhibit 1: Stratasys Financial Results Q3, 2015

Source: Stratasys.com Exhibit 2: Industries Served by Stratasys

Source: Stratasys.com

Exhibit 3: 3D Printer Series



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Exhibit 4: 3D Printing Material


Exhibit 5: Solutions Provided


Exhibit 6: AM Adoption Timeline by Dr. Mark J. Cotteleer, Deloitte Services, LLP.


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Exhibit 7: Stratasys Financial Results Q2, 2016


Exhibit 8: Stratasys Ltd SSYS, Nasdaq Share price

Source: Nasdaq.com

Exhibit 9: Stratasys Ltd. Income Statement

Source: Nasdaq.com


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Exhibit 10: System Unit Sales


Exhibit 11: Stratasys Ecosystem



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References

Wohlers Report 2016 reveals $1 billion growth in 3D printing industry by Kira | April 5, 2016

(Source: 3ders.org)

Stratasys report Q2 financial results, 3D printing industry, “maturing and evolving” by Michael

Petch | August 4, 2016 (Source: 3dprintingindustry.com)

Underperformance of Stratasys & 3D Systems: Causes and What Can Be Done

by Eddie Krassenstein | May 14, 2015 (Source: 3dprint.com)

Stratasys could face some challenges when implementing long term plans, says Gartner by Alec |

December 23, 2015 (Source:3ders.org)

“Top Challenges to Widespread 3D Printing Adoption” | August 27, 2015

(Source:stratasysdirect.com)

2015 Roundup of 3D Printing Market Forecasts and Estimates by Louis Columbus | March 31,

2015 (Source: forbes.com)

Stratasys in New 3D-Printing Partnership (SSYS) By Shoshanna Delventhal | September 29,

2016 (Source: Investopedia.com)

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