3D Printing: How to Get Rich?

So, 3D Printing: How to Get Rich?

This started off when I mistakenly responded to a post in a scale modeling FB page thinking it’s in a 40k FB page.. yeah lack of sleep does that to you. Urgh. But since I have it written up, you, dear reader, gets both barrels! Huzzah!

The question started out innocently enough:

[..] curious as to see how the proliferation of 3D printers will impact the hobby. If I were a model company, I would jump all over this so that customers could download kits to print on their own 3D printers. Break a piece? No problem, download the part, and simply print. Thoughts?

Remember, I initially thought this was talking about 40k models, not actual scale model.. so I wrote the following replies, now edited a bit for blog posting. And yes, those of you who know me when I start going knows that this is NOT going to be easily readable.

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There’s a number of things to consider. I will go with Technical, Business Model and Digital Proliferation for now.

From a Technical perspective, the current consumer models of 3D printers are not currently capable of printing a miniature model of comparable quality to GW products. And that’s likely to remain that way for some time, as the impetus of technological development seemed to have stalled a bit (but don’t quote me, I only dabble).

To print out custom structural components in the initial build and development process, a 3D printer is very useful, and a number of modeling companies do that. To print out gaming models for use? Well.. if I want a good looking piece, I’m in for a lot of work that is not “consumer friendly”. If I don’t care about that, I may as well go with cardboard standees or markers, it’s a lot faster.

From a Business Model perspective, it boils down to how a company is supposed to make money out of this. If each customer only needs to purchase the digital model once to print an unlimited amount of the part or entire model, how much can the company charge for selling the model to a customer?

Long and short of it, it either boils down to “charging so much that the customer won’t buy” — which defeats the purpose of going into business — or “free”, which defeats the purpose of going into business. The crux of the matter is that digital product has an incredible per-unit cost, it’s even better economics of scale than mass plastic production that GW and other model companies engages in. Once you create/ develop the digital product, essentially it’s only the cost of reproduction — everything else is profit margin. And once you pass the reproduction cost to the end user, well, every sale is profit, yes?

Well no. You aren’t selling a reproduced product to the end user, you are selling your design specs to the end user, and have no control over the production; So you can only sell ONE copy to that one customer — he decides how many physical copies he makes, not you. Thus, you have fundamentally two business approach: Either you sell that one copy for a ton of money, or you lower the price of that product to compete for mass market appeal, seeking to make money through high number of sales… the problems of either approach should be self-evident.

Now that’s a simplified case. There are other business approaches, one of which is that the design specs/ 3D model is actually the complimentary product and the main revenue driver (i.e., thing you charge money for) is something related. That’s a separate story altogether.

Porter’s Five Forces model. See, that education IS useful. 🙂

EDIT Extra: Here’s an interesting thought. Technologies such as 3D printing really serves to increase the bargaining powers of consumer by moving — in theory — the production capabilities from traditional companies to consumers. The implication is that the technology is transforming the economy from one of Product Sales to well… something else. Typical answer is Service Provision.

The English version of the preceding sentences is simply that you can no longer rely on selling a physical product — or more precisely, having the economic capital advantage of production capabilities — as the emerging technology distributes that capital advantage directly to the consumer. Rather, you have to find another way to continue to get your consumers interested enough in you to cough up money.

Now, I’m not sure selling design rather than product is the correct way to go here… in the theory sense. Evidently in the pragmatic sense it is not, as the Internet has already demonstrated that ideas alone are plentiful enough to not make money. (It is the ability to uniquely transform ideas into economically efficient solutions that make money.)

Rather, it is the sale of ancillary services that provides value addition that will become the main source of income for these ex-production companies that are threatened by emergent technologies. The business model thus turns from one that provides production capability, into one that provides efficiency and consumer experience. However, how much margin you can make off providing customer experience, well….

The other thing to note that the transfer of bargaining power is only in theory. Practically, the evolution of this technology looks to be hitting a hump that prevents it from becoming household. That prevents a real shift of bargaining power at this time, and that means production companies still have clout.

Then there’s Digital Proliferation. The first part of this is piracy. What’s to stop people from simply copy + paste your design specs to everyone else? One problem is that the 3D printing technical community has essentially embraced a set of common standards for printable files; if you have the files that govern the printing movements, you don’t even need the 3D model; you can run the 3D printing just fine with the basic control movement.

If you include Digital Rights Management (DRM) into your printing files, you run into the problem that some printers may not be able to read your specs, and so that sets up barriers of entry for your potential customers. Not to mention, some bright spark will inevitably overcome the DRM and then you’re back to square one… after wasting money for some DRM tech that has been rendered useless.

The other perspective of digital proliferation, from a legal design perspective, is that of competing/ complimentary designs. How many “Right arm holding a weapon” pose can you have in the electronic sphere? In the real world right now, there can be dozens of small companies producing that and as consumers we have a choice; in the virtual world, the number of people who can just tweak a model file to adjust the pose and then put up the files is well.. let’s just say more than the number of people who can perform consistent high quality vacuum resin casting of a Human Right Arm.

So you are going to end up with dozens if not hundreds of digital “Human right arm”. How are you going to convince the end user to buy YOUR product? In this case, the incredible levels of competition will drive your profit margin essentially to zero — this is the effect of “Open Source”. This is great for the consumer… not so great for a business, since they can’t make money from direct sales.

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So now, to value add in this post… 😛

There are a number of other ways to make 3D printing profitable for a business, in theory. One is simply not to try to fight the open-source crowd. Instead, to build network externalities to the whole process — i.e., to aggregate suppliers and demand and make money off that.

You can for example, build a platform to host 3D designs and tools on one side, allowing the Cloud/ Internet to do what it does best.. well second third best; porn and kitty pics take first and second place respectively. Just let the Internet pile together and produce 3D designs for use, maybe enforce a few common points to ensure compatibility. This becomes one side of the network — the provision of 3D modelling expertise.

On the second side, provide for 3D printing capabilities; this supplies production capability to people who don’t have the means to produce. This can be from hobbyists up to professional printing capabilities, and should let the consumer decide who and how they want to print with.

On the other side would be the consumer, who will choose a design and print it with a printer. The platform basically just provide a bridge between consumer, design artist and printer. Ideally, the printer gets to recover material costs and a bit of revenue, design artist gets a bit of per-print revenue, and the consumer gets what s/he wants.

Also, if we want to extend the idea further, we can set up supply chain and discussion forums for both sides of the “professional” networks, to provide full services. And how does the platform make money? Well, transactional costs, obviously. Advertisements, etc.

This isn’t anything particularly new, to be honest. Shapeways and Thingiverse does a lot of these, at least for the Americas. Regionally, there might be niche markets that can be exploited.

So yeah, some ideas there.