In a previous example, we looked at Cathy’s 3D printed braces business.She dropped $350,000 on machines and equipment, and the tiniest tiny difference in packing density collapsed her business.Now of course its not only that low price of $50 that was killing Cathy’s business, its the fact that its spread out over this massive massive object, this huge brace.
Now, for you, a hand brace may not be huge, but it’s gigantic in 3D printer land.At Materialise, they taught us how to think of 3D printing in a teacup.We were told to look for 3D printing applications that were golf ball-sized.
This has led me, for 15 years, to look for high-value, meaningful, golf-ball-sized things everywhere.Since then, the economics have changed a bit.But I fear the massive.
Instead, I look for thin things.I seek things with few layers.And as good 3D printing people, we should have warned Cathy about these massive braces.
Let’s guide her instead toward something better.Something wispy thin, 25 grams of thinness perched on your nose.So thin and personal, and meaningful.
Let’s make glasses frames.What does this mean? That we’re getting six times as much product per kilo! And that means that if one fails, it won’t be 15% of our build that fails.We won’t have this gigantic penalty if one massive 150-gram thing fails QA or is returned by the customer.
And if we can charge $50 for the glasses just like we did for this brace, then we’re golden.Value to the customer is expressed by her, in her thoughts.And it’s wholly dependent on what she is buying, and when.
A brace could be $50, but if I told you it was $85, you might believe that was the price of a brace.Sunglasses at $50? Expensive.Designer sunglasses at $50? Cheap.
Do the other sunglasses not have a designer? Who made them? So this is already amazing, because if I told you that you could sell an ear of corn and you just thought maybe you’d sell one for $1, you’re missing the point.One ear of corn could be a third of a cup of kernels, which could be turned into 3 cups of popcorn.You could sell that at the movie theater for $6.
What can we make with additive is a question that usually turns to the personal, the obvious.We’re blinded by possibility, so we pick the same stuff others do.But we may also pick something fundamentally limiting, like a massive personal brace.
A svelte, thin, gossamer glasses frame, on the other hand, has much better economics.So don’t think just of an ear of corn.Don’t think only in terms of what you can get out of the printer or what’s available now, but what you can make with it.
Invisalign sells smiles.People will pay much more for a smile than a little flimsy plastic aligner.So the 3D printed part could be a part, an intermediate, a part of a system, or a dream.
So what happens when, with the same machines, we switch to glasses? Above, we can see a (generally well-working, far from perfect, but made to illustrate the levers on production) model of what would happen if we printed braces on our machines with a 5% scrap rate, a $ 35-an-hour labor rate, and 5 minutes of labor time per part in coneyancing, post-processing, and packaging.We can also see a significant difference if we, or someone else, just comes in on the weekends to turn around the machines.So no post-processing or anything; just take the build box out and turn the machine around, which should be doable in about 15 minutes per machine.
Below is what happens when we switch to glasses frames.Now, of course, profit in the table below is very, very far away from meaning actual profit.We need to calculate a lot of things, like taxes, financing, and other business-related expenses, on top of some 3D printing expenses, which we will add later.
But the idea is to take you on a journey where you can see the wild swings in yield and revenue once we change these important levers in the process, business, or design.Oh yeah, baby, it’s time for Cathy to surprise her husband Tom with a Lexus with a bow for Christmas.Bad news, I’m afraid.
We now have a huge scrap rate because these glasses must fit together and be even.People will notice if they’re askew.People will notice color differences, too.
People have higher expectations for the detail level and surface finish of glasses.And we will definitely need some extra post-processing for closing the surface texture, dyeing, or similar.So a 30% scrap rate is more like it.
And if we add that to our little model, then the picture changes again.Ouch, but still, at 10% packing density and at a 30% scrap rate, we’re producing so many thin glasses per month that we’re rolling in dough.If we had a lower 8% packing density, we might leave as much as twenty grand a month on the table in this (rather optimistic) example.
We’re still doing 2 minutes of cleaning and handling per part, 3 minutes of QA, and we’ve now added 5 minutes of assembly and post-processing since we want to snap some glasses in there and glue in a hinge.And we have to add $13 for the lenses.And the solopreneur thing has to go, of course.
In the HP scenario, the workload would lead up to us needing five full-time employees.With Formlabs, we would need 7 full-time employees and 1 part-timer to handle all this work.Now again, this presupposes that we’re selling out all the time.
The machine can produce $1 per minute, but we have to sell the right amount per minute as well.If they’re aligned (or we can build in buffers, or scale at will), we’re good to go.We’d also have to look long and hard at whether this business was even worthwhile at this point.
With less than 100k in revenue per employee, we’ve essentially just started a high-tech Chipotle franchise.And what is this business? We’re investing a lot of people and time, but where are we building up the capacity to win? Where are we investing in a strategy? Where are we making a plan and path to victory more likely? Am I a pizzeria where 7 full-time people are building an oven? Have I actually maneuvered myself into a corner and am I paying miners to dig when I should be designing jewels like Swarovski? Shine Like Swarovski Always remember Swarovski: Swarovski is an industrial crystal-cutting business.They then made crystal-cutting tools.
In 1935, they parlayed their crystal expertise into binoculars.How many people do they have digging out quartz? How many people do they have designing jewelry? The cost per kilo of their products increases over time; it’s insane.A kilo of raw quartz may cost $10 per kilo; cut it, and its value increases to $100; turn it into a rhinestone shape that Swarovski retails to jewelry makers, and you could sell it for $ 1,500 per kilo.
So a lot of people would be happy to do that or diversify into a business that enables it; it seems like a solid play.Instead, they also sell jewelry made from that cut crystal and metal for $5,000 per kilo.And the genius of it? With retail prices of around $100 to $200, they’re affordable for relatively many consumers.
A lot of people are super focused on “core business.” Well, Swarovski could be defined as the “enoblement of quartz crystals.” If it saw itself as digging for quartz, it would never have gotten so far. And a lot of people think of focusing on not retailing jewelry, selling stones, and making equipment all at the same time, but these businesses do aid one another and help insulate them from downturns.In our brace business, what’s defensive here? How can we win? How can we really grow? How about in our sunglasses business? What have we really bought ourselves here? It’s all stuff to do with marketing, and may be tied to very quickly dissipating trends.Now we could take advantage of them and quickly produce models faster than others can.
Or we could make some really exciting models that get press or bring people in the door without having to worry about whether they sell.This could help us win, but if we’re not doing this, then we’re not really taking advantage of additive.And we’re not likely to win against people who have lower per-unit costs than we do.
But we’ve changed our offering too.What we see is that we have a much more complete final product, but if we had designed it as just a 3D printed product, it would have been so much more profitable for us.So adding parts in combinatory manufacturing lets us make end products but also significantly reduces profitability.
And we didn’t include a box; look at COGS from the customer side, look at marketing costs, and all sorts of other expenses.Marketing costs could add $15 per pair for online campaigns, but Cathy may have to pay as much as $40 per pair to influencers, branding, or Google in a crowded landscape.That may not make them profitable.
And the costs here are significantly higher than the production costs of many glasses sold by retailers, even the high-end ones.In reality, you’d struggle to make this work.Building a brand and getting attention would be super important.
Now, if Cathy focused on a particular niche or had amazing designs, she could survive.But in this business, is she investing to thrive? She’s making stuff, but is she building skill and differentiation? And is she using the technology and her time well? Let’s imagine that she buys a 3D scanner and then spends about 10 minutes per customer scanning their faces to make custom-fit safety glasses.Maybe some premium, super-comfy glasses for the nice people at SK Hynix or something.
So we’ve killed our TAM and SAM, which has made our market much smaller.And we’re spending more.So, on a spreadsheet or VC slide, this may seem like a worse business to many people.
But this may be a much more defensible business.Maybe Cathy can really use additive here to push a better product.Maybe she can do research and prove that her custom-fit safety glasses are, in fact, much safer? Maybe she can conduct additional research showing that, because they are more comfortable, people are more likely to wear them longer, which will reduce the number of accidents per employee-hour.
Away from fickle consumers, Cathy can get long-term contracts with big companies to scan all of their employees.For a reasonable premium and a reasonable price, she can make ASML‘s employees safer.She may even be able to make realistic calculations of how her safer safety glasses save money.
And she can fill her machines with long-term contracts and long-term relationships.So this may actually be the best business for additive.And by optimally using the individualized 3D printed face scans for safety shes’s going to be optimally using additive to differentiate and sell.
Now, she has a custom product, which is much more difficult.But by now she’s got the manufacturing, quality control, and shipping aspect down.She’s trained her people well and knows that the team is up to the challenge.
And with care and attention, they can grow into doing these glasses better than anyone.Now her investment in a place, machines, and staff can go straight to differentiation and improving the value proposition relative ot others.This means that she’s in control of her future.
It also means that excellence in scanning, design, additive, or her software could give her a lasting advantage, something difficult to imagine in sunglasses.I hope this was useful in showing the logic of designing a 3D printing business.This model is frankly OK.
But, more importantly, you can understand what is going on and why things changed.This model is meant to help you understand the right levers in laser powder bed fusion costing.I wanted you to understand the cost drivers and the different influence they have.
I also hope that you can now see a clearer path to additive success.A lot of things really matter in the business of making matter matter.Hopefully you’ll now look at the world through a teacup.
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