This is a re-post of Steve Faktor’s original article on Forbes
Writing “HP is in trouble” is like a newscast starting with “Trouble in the Middle East today…” A sad cliché. Lucky for HP, no one dies… But no one truly lives, either. The company just laid off 29,000 people, its stock dropped 50% in a year, and yet another turnaround is brewing. I do admire Meg Whitman for taking this on. She could easily have kicked back in Florida with a Honey Boo Boo marathon. Instead, her strategy announcement got the kind of reception typically reserved for Syrian dictators. That got me wondering – can a stagnating behemoth ever live again? Could HP lead the 3D Printing revolution?
As I wrote in Econovation, 3D Printing is the next Internet. Just like the web revolutionized entertainment, shopping and communication, 3D printing will power a local and personal industrial revolution. It will eliminate the distance between idea and product, unleashing the creativity of geniuses and imbeciles alike. Some will make amazing physical objects that improve our lives. Others will build a clone Kardashian army to rule Los Angeles. And like the Internet, 3D printing will create entire new categories of jobs that are impossible to explain to your parents.
3D printers are evolving fast. It’s just a matter of time before our breakfast, drugs, and dinner tables come out of one. Need a new house? Get dirty looks from Frank Gehry as you download and print your own Guggenheim. Don’t want to look like sausage at the royal wedding? Print a new shirt that actually fits. Dog eat your Legos? No need for a messy extraction; print replacements. Trouble finding the perfect gift? 3D printers can make jewelry, crafts, or a new liver for that college buddy who had one thousand too many.
CHART: Here is my brief collection of industries with 3D applications, the commercial readiness of the technology, and who the likely users would be. (Red arrows indicate uses across customer segments.)
Don’t expect to print a homespun iPhoney 6 just yet. 3D printers are just starting to mix materials and create complex gadgets. They also can’t do large volumes. For that, you still need Foxconn. Things will change as new capital fuels innovation and lowers prices. Machines by Pandabot will cost around $800 and Makerbot sells a $2200 model. Piper Jaffray projects 3D Printing to be a $1.5B market in 2012. Wohlers Associates predicts it will be $6.5B by 2019. But don’t try to deposit analyst predictions at Chase. Mayan apocalypse permitting, a lot will change before then. An aggressive entry by a cash-rich market-maker is one of them. That company could be HP.
Are you sick of all your MacBook-toting friends lusting after your HP laptop? Do the beeps from your HP Deskjet put your lover in the mood? OK, you get the idea – HP isn’t the sexiest consumer brand these days. Their PC’s are a low margin stepchild often offered for adoption. Printers are also a low growth business that can’t stop printing money. Those inks cost more per ounce than caviar. Krug champagne filtered through Queen Elizabeth’s hat would cost less. That kind of cash is a tough habit to give up. But physical consumer products isn’t where HP sees itself. Enterprise hardware, software and services seem to be its true loves, but polyamory has a price. It turns HP into a spork – a clunky multitasker that mangles every menu item at KFC.
The good news is the recent combination of the printing and PC businesses positions that business unit for a clean break and a possible entry into 3D printing. Here are some reasons this makes sense:
- Endless possibilities: 3D printing is the first physical technology that can also go viral – by combining design, crowdsourcing, social sharing, web services, and physical products.
- The physical world is still where all the action is. For all its amazing growth and innovation, a whopping 90% of all transactions still happen in the real world. As every other competitor goes mobile or digital, contrarian opportunities to double down on the physical world open up.
- Green: 3D printing is a green technology. As fuel costs rise, printer “cartridges” would weigh less, consume less space, and be cheaper to ship than finished goods. By increasing the volume and efficiency of these printers, HP can put a legitimate green wind in its sails.
- Political goldmine: Republicans and Democrats talk about US manufacturing and small business job creation. 3D printing is like a gift from bipartisan gods. It will allow small businesses and individuals to make and sell things they previously had to learn Cantonese to do. Plus, this is a golden opportunity to make the printers themselves domestically – before they make themselves. A great American industrial story in waiting. In fact, GE is already pursuing that in commercial markets. HP could dominate the small business and consumer segments.
- Consistent model: HP’s lucrative razors and blades model for ink makes sense for anything that needs refills, except beer. There’s plenty of opportunity to innovate around the composition, procurement, distribution, and application of all the “inks” required for 3D printing. Control of the materials supplies alone is worth it’s weight in magenta cartridges, just ask China.
- In fact, it’s a win for the entire value chain. HP can use its existing distribution network to reach many of these small business customers – through Staples, Best Buy and others.
- Deeper customer relationship: Early generations of 3D printers will be a boon to the very large and lucrative small business segment. From printing custom clothes to toys and auto parts, HP can establish a deeper, ongoing relationship with a group of customers they already serve. Except this time, their product won’t just print invoices, but make an actual product sold by those businesses. It’s a major step up. That lack of focus could kill the company, no matter how many strategy consultants scrawl “synergy” on HP’s whiteboards.
- Deep R&D pockets: No major player with the size or recognition of HP has entered the space yet. The company spends $3.2B a year on R&D. By redirecting a fraction of it, HP can also single-handedly move the market through brand recognition, marketing, and distribution. The resulting scale will drive down costs of printers and materials.
- New Customers, new services. This gives HP a way to attract new commercial customers. 3D printing juggernaut Stratasys is already valued at $1.3B and its stock has tripled in the last year. By entering this space, HP can sell other software and services to their new commercial printing customers.
Food for thought
Turning the world into your inkwell is no easy feat. It’s like the old adage about how to make a sculpture – you have to cut away whatever doesn’t look like it. If the company wants to try, here are a few thoughts for HP’s next cocktail party:
- Focus: Any good 3D printer is likely to find uses never imagined by the manufacturer. So, flexibility is key. That means letting the best technology decide which verticals to pursue. The first generation of printers will likely suit hobbyists and small businesses, not raging masses of Black Friday zombies.
- Innovate the business, not just the product:.There’s no shortage of promising technologies, but many of the most interesting innovations in 3D printing will be in creating new business models, communities, apps, and distribution methods. Consider Ponoko. Like FedEx Kinkos, Ponoko allows customers to print their designs through networked printers anywhere in the world. No more waiting for lead-encrusted Chinese “Barbeez”.
- Acquire: I’ve seen firsthand how a large company can crush the soul of whatever it acquires. HP can reduce some of that risk by focusing on technologies that fit their existing customer base and distribution channels. Buying a larger player, like Stratasys would be an uneasy fit without a strong vision for linking it to other HP services.
- Experiment: With plenty of cash, HP doesn’t have to bet the farm on any one technology. It can afford to experiment.
- Materials. The procurement and differentiation of 3D “inks” will determine if HP can be as profitable in 3D as it is in 2D. After choosing the best printing technology, HP should have its scientists evaluate which materials have the most potential for developing new IP…as long as my
Barbiesmodel cars don’t cost $2,700 to print.
These are exciting times for those of us who still enjoy the 3-dimensional world. I personally won’t be satisfied until we can print at the molecular or subatomic level. After all, why should we need anything but neutrons, protons and electrons to build our dream home…or spouse? Until then, HP can play a big role in shaping our physical world, but probably not in its current state.