Clayton Christensen's classic article "Skate to Where the Money Will Be" describes the shift in computers from a vertically integrated model in the 1970s – where IBM earned the lion's share of industry profits by controlling the whole stack, from components through sales and distribution – to a more horizontal model. This change had major implications for where profit pools were to be found, as companies that managed to dominate in the most challenging layer, such as Intel in microprocesses or Microsoft in operating systems, now captured most of the value. The article's key insight that the difficulty of meeting customer needs determines whether a vertically integrated or horizontal model will be the most profitable has implications for the 3D printing industry today.
Christensen's observation that "when the product isn't good enough… being an integrated company is critical to success" is exactly what we have found in 3D printing, particularly for production parts. Because it is relatively immature as a manufacturing technology, meeting customers' cost and performance with 3D printing requires a complete and well-integrated ecosystem to ensure that all the components, from material to printers to design and workflow software, work together seamlessly.
Industry participants have understood this dynamic well. Stalwarts like Stratasys have long had their own proprietary materials and software as well as part production, and newer entrants like Markforged and Carbon have taken the lesson to heart, building their own integrated models. Even materials companies that see an opportunity in 3D printing have been looking to replicate this approach by making moves to vertically integrate, such as BASF with its acquisition of Sculpteo and Arconic's strategy of offering printed parts.
However, just as improvements to computer technology helped create an industry where new OEMs like Dell and Compaq could build from modular components, the maturation of 3D printing over the next decade will make it easier for users to pick and choose from different suppliers for different layers of the 3D printing "stack." This change in computing led to profits concentrating in the layers where the biggest technical challenges to performance remained (Intel's microprocessors) or where the benefits to accessibility and ease of use were greatest (Microsoft's operating system). What will it mean for 3D printing?
The segments that profits will likely migrate to are 3D printing software and services. While materials and printer technology have ample room for improvements, particularly in metal 3D printing, advances in software are most likely to push the technological frontier. Both design software, such as generative design approaches from the likes of Desktop Metal and Autodesk, and manufacturing workflow-optimizing and process automation software from players like Siemens will help make 3D printing competitive in manufacturing. Meanwhile, service providers with industry expertise that can help facilitate the design and adoption of 3D-printed parts in new industries, and even provide turnkey production lines to traditional manufacturers – as Formlabs is moving in the direction of doing with its Form Cell concept – can capture value by making the technology more successful.
Companies today should not get too far ahead of themselves – vertical integration is still the best model today in most cases, and will be for years to come. However, those that are building a 3D printing strategy today with an eye toward being in it for the long haul should "skate to where the money will be" and be sure they are building strong and clearly differentiated capabilities in those areas that will capture the most value as the industry matures.
