2014 is, if promises are borne out true, set to be a red letter year for HP – or at least will mark a step in the right direction. It is the year it will unveil its 3D printer, which it assures will be a game changer.
When the tech giant fell on hard times in 2011, the calamity and its fallout revealed the company had been suffering its share of woes: its attempt to enter the tablet market were eclipsed by veterans such as Apple, it found the smartphone industry trussed up by an oligopoly of providers, its title as number one PC-seller was snatched from its mantel by Lenovo, revenues across the board were consistently low and declining, and talent either left of its own accord or was excused in one of the company’s notorious layoffs, in which tens of thousands of jobs were axed. Since its new CEO Meg Whitman took the helm just after the collapse, she outlined a vision, which some called quixotic, to turn the company around. In truth, under her command the company has been seeing the faint flicker of recovery, and she has no plans to let it burn out just yet.
True, lackluster global PC demand over the past years has depressed HP’s fourth largest vertical, one that accounts for 10% of its estimated value. However, under Ms. Whitman’s shrewd eye and iron hand, and notwithstanding poor consumer sales, HP’s commercial PC transactions enjoyed an 8% boost as recorded this past quarter. Though the news isn’t all rosy: another 30% of HP’s estimated value is derived from its enterprise services division, which caters to companies’ technological, hardware, and software needs, and it has experienced a 7% year-over-year decline. But mobile phone and tablet sales are improving, and revenues from cloud-computing services are rising, which could signal a change in the overall environment.
This bit of good tidings has emboldened Ms. Whitman, not contented her. An old adage spells out the theme to her platform: out with the old, in with the new. A careful, scrutinizing, and realistic look at HP’s books expose dead spots, which Ms. Whitman would rather carve out than spend any more time or money trying to revive. Subsequently, she wants to free up those funds that once went to now-suffering sectors and redirect them to areas that have already proved lucrative in the marketplace, or are prophesied to do so. Particularly, Ms. Whitman is looking to retrench HP’s software outlays and start transitioning to a cloud-based system, allocate even more funds into R&D, reposition the company’s printing vertical to make mobile printing more user-friendly and popular, and turn the company into a major player in 3D printing game. It is this last that deserves considerable attention.
What is 3D Printing?
3D printing is the process by which 2D models designed on or downloaded to a computer are rendered into tangible, material objects. Whereas conventional modeling is a reductive process (large slabs of marble ore are chiseled away until a statue is left standing, for one), 3D printing is additive: meaning specific and thin layers of polymers, metals, etc., are stacked onto each other sequentially until the desired object is completed. Since its inception, the process has evolved greatly, and will continue to do so, such that the renderings will accord more accurately with their software designs, will be able to accommodate almost any kind of constituent material already commonplace in traditional manufacturing, and can be used on bigger and more complicated projects.
Though recently 3D printing has gained meteoric cache as a byword for glamorous though disruptive technology, its origins are in the 80s (while the PC boom was stirring up public commotion, 3D printing was humming away in the surreptitious back rooms and underground labs). The first recorded 3D printer was created by Charles W. Hull, who would go on to found 3D Systems Corp., which along with Stratasys are the industry’s two pioneers and M.V.P.s to beat. These two industry leaders, plus several, more fractured competitors, have been building printers to be used by biologists and life scientists to materialize from scratch viable human organs, manufacturers experimenting with alternative methods to constructing industrial products, developers prototyping architectural schematics, and more. The annual growth rate of a positive 27% over the past three years is symbolic of the global interest in and slow-coming ubiquity of 3D printing. 3D Systems and Stratasys still lay claim to most of the industry – in 2012, the former boasted 16% market share, as opposed to the latter’s 10, even though Stratasys sells more printers, but the landscape is definitely changing.
This is due in no small part to the legal framework undergirding the 3D printing scene. 2014 was the year by which many patents protecting 3D printing processes will have expired, allowing challenger brands to muscle their way in and partake of some of the pie. Many patents have fallen into the realm of free-use, but major as well as minor players have submitted collectively more than six thousand new patents into the queue for approval. If HP is smart, it will already have submitted as many patents as their R&D department could have dreamt up to compete in this arena down the line.
The future of 3D printing is golden, and now is the time for HP to establish itself as an industry leader, something Ms. Whitman has no doubts her company is capable of. Forbes estimates that the 3D printing industry will reach a valuation of $3.1 billion worldwide by 2016, and $5.2 billion by 2020, with some seers pundits it at a multiple of that; and considering HP’s posted revenues in last October were just north of $100 billion, this is nothing to scoff at. The 3D printing industry has by no means reached a level of perfection, and there is still much HP can bring to the table if it plays its cards right.
3D Printing Hasn’t Printed a Critical Mass Yet
The 3D printer has yet been unsuccessful in penetrating the consumer market for a number of reasons, not least of which being size and price. The first lumbering monoliths, like the first computers, occupied massive amounts of space. In the case of 3D printers, their ancestors took up about the same amount of space as an A.T.M. if not more, and as such were unsuitable and unsightly for any private residence. Naturally, over the past three decades companies’ offerings have shrunk in size, and price, though personal 3D printers have quite a ways before they’re capable of producing designer clothes and cars. Right now, demand comes primarily out of the medical and manufacturing fields, to produce human tissue, or to design early stage prototypes. Average consumer models under $1000, even under $500, are readily available, but come with their litany of drawbacks: many require self-assembly, their designs are unstable and structurally fallible, and their production scope is limited. Advanced models that can generate elaborate and sturdy material objects are priced well above $2000, and require expert knowledge to use. 3D printing hasn’t yet hit its stride for this reason alone.
Additionally, the industry suffers from too much commonality – a blow to competition, but a potential benefit to HP. When an analyst from Jefferies, a global investment bank, Peter Misek attended a 3D printing trade show hosting 15 different companies, he was disappointed at the representatives’ inabilities to cogently articulate their product’s competitive advantage. This is not to say that the 3D printers that run the gamut are identical – some are more reliable, others produce brittle renderings, polymers can vary – but that either these idiosyncrasies are negligible, or they’re major and the companies just don’t know how to emphasize them. In a marketplace with hardly distinguishable offerings, the spoils go to the most beloved brand, usually by virtue of advertising or loss-leading, the former being nothing more than a gimmick and the latter an unsustainable model in the long-run. HP would be better off introducing a superior product rather than competing on price and brand value alone: because of its scale, HP could run off an inexpensive printer, but should be wary of risking its reputation which is already in jeopardy.
Perhaps the most glaring problem plaguing the 3D printing marketscape is the elusive demand for the thing. At the moment, the 3D printer has yet to reach a level of saturation the 2D printer has for two reasons, among others: one, it’s a relatively young phenomenon, and two, the devices that fall in a consumer’s budget are so lacking in functionality and capability they’re not worth the price. The printers toting consumer-friendly prices do not come close to being able to substitute for store-bought designer clothes, food, cars, even organs...yet.
The poor man’s models are much better suited for fabricating trinkets, unique iPhone cases, and other non-essentials. If HP has its sights set on one day delivering a model fit for consumers and panning the floodwaters for gold, it would need to have the utility of a high-end device, able to fashion stable, complex, and retail-equivalent products, at a discounted rate. That’s if Ms. Whitman seeks to one day become a household name in 3D printing, though at the moment she seems readier to nurture her business-to-business relationships rather than target end-consumers directly. But that could change.
HP’s High Hopes
But before it looks too far ahead, HP must first play a lot of catch-up. The company launched its public foray into the 3D printing market when it began distributing a line of such devices manufactured by Stratasys, a competitor, in 2010. In partnership with Microboards Technology, HP jointly holds a claim to three relevant patents, which protect processes related to the design–model interface, as well as the physical additive construction of the final product. But now Whitman avers HP will rise to the top of the 3D printing industry as its fearless and trailblazing leader. Where does she get the gumption to make such claims? She looks to the brains at HP Labs for reassurance.
The HP Labs houses highly trained, visionary, and hard-working researches and engineers, all under the supervision of Martin Fink, its CTO and director. In the basements there, he has paid special attention to the highly-classified research and development project that would be HP’s contribution to the 3D bazaar. Few non-HP personnel have laid eyes on the prototype; those that have are sworn to little less than secrecy, but they have called the it a thing of beauty. Mr. Fink has attributed HP’s relative sluggishness in joining the club to more time spent perfecting a prototype in secret. When Mr. Fink beholds the consumer 3D printers on the market at the moment, he sees inadequate, seriously wanting gizmos suitable for little else but the time-consuming creation of curios and other unimportant objects. Even the most advanced offerings take time to produce a single object, and Mr. Fink is set on changing that.
Mr. Fink’s complaint is mostly true: 3D printers of any real merit and ability to produce sophisticated, complex, and therefore in-demand goods are prohibitively expensive and bulky, unfit for the average end-consumer. Even those that do run higher-level design projects are unimaginably slow, a drawback Ms. Whitman likens to “watching ice melt.” Mr. Fink envisions that his prototype and all the scions modeled after it will be much more efficient, technologically advanced, and user-friendly. Rather than targeting end-consumers directly, he sees first servicing third parties like Kinkos or Staples, facilities at which consumers can print their ideas for a fee, essentially renting the hardware rather than owning it themselves – which means you probably won’t be seeing HP coupon codes for 3D printers just yet. This aligns with Ms. Whitman’s scheme to emphasize maintaining, strengthening, and striking up corporate and enterprise relations. As technology progresses, hopefully Mr. Fink will direct his efforts to bringing the devices into the home.
HP: Printing a Pretty Picture
At this point, HP’s future success in the market is about as speculative as the 2D idea which precedes the 3D rendering. But there are indications that HP has what it takes to contend with the heavy weight champions. Most obviously, HP has years and years of printing experience. The company introduced the LaserJet printer, and revolutionized the technology from then on. Though that was on a two-dimensional scale, some of the concepts carry over into the third dimension: a gantry system used to layer one stratum of ink can be modified or built-upon to do the same but with thousands upon thousands of separate layers. It is not ludicrous to assume that some, if not many, of the gears and parts in the HP Labs once assembled into conventional printers were then thrown into Fink’s prototype (or perhaps a prototype of a prototype).
To boot, HP has perfected the razor and blade business model as applied to their conventional line of printers. The company practically gave the printers away for nothing, and then reaped the majority of profit on ink cartridges. This model is immensely rewarding, and HP has already implied it will adapt and apply it to their 3D printers: offering them at incomparably low upfront costs, but marking up the HP-exclusive polymers and post-purchase materials to protract growth into the future. If HP is looking for a way into businesses and homes, this might just be the way to do it.
Finally, HP ought to work harder and more concertedly at building early and many relationships with big business clients in need of 3D printing services. GE is one such company HP should consider, and strongly. GE’s aerospace manufacturing branch in particular is poised to partner with a 3D printer supplier this year, and has already started auditioning 3D Systems for the role. It may be too late for HP at this point to secure that specific deal, but the two companies have had successful relations in the past, joining hands on a number of deals, which might augur well for any future contracts. Considering GE has vowed to dump tens of millions of dollars into 3D printing above and beyond its aerospace needs, HP does not want to let this opportunity slip by.
The Multi-Dimensional Roadblocks for HP
The 3D printing market wellspring is not nearly deep enough to sustain and ensure the behemoth’s future health and status on its own. That said, if HP manages to overtake, on technical as well as on numerical grounds, industry leaders like 3D Systems and Stratasys in the next five to ten years, it would be an emblematic as well as a monetary victory. Ms. Whitman has, in almost every speech she’s delivered with regards to HP’s recovery, invoked the company’s exploratory and research-driven spirit. But the proof is in the pudding, and Ms. Whitman plans on serving up a mess of it the middle of this year. If the speculation and hype circulating around this machine is validated or surpassed, it would lend much credence to a company that has failed to innovate in meaningful ways in many years. Such an accomplishment would also be a boon to Ms. Whitman, the successor to a long line of underwhelming, damaging, even corrupted HP executives that never long occupied its chambers; leading a campaign into not just a new field of technology, but a new era of personal and industrial manufacturing altogether would be a hallmark for her career, would guarantee stockholder satisfaction, and inspire trust in her word and leadership thenceforward.
But the road ahead is not free and clear. Disruptive technologies are met with the aspersions of anxiety-ridden, old-regime members who feel threatened their livelihoods are at risk of being shook up, or even summarily wiped out. The question to ask is not “Will 3D printing change the world,” it’s how, and when. Likewise, HP must prepare for the battles that it will no doubt find itself embroiled in when this revolution dawns brightest. 3D printing has the potential, and not just the Asimovian potential, to upend countless industries, like manufacturing, and level markets entirely, like the luxury one. If the assembly line was waning thin since Ford introduced it, how will 3D printing, which can fashion entire models in one (albeit long) sitting, shock the workforce? When consumers can print bespoke Versace dresses in the comfort of their homes, what will happen to brand identity? HP’s competitors won’t simply be 3D Systems and Stratasys, it will be the unions, lobbyists, titans, and moguls holding on tight to old, obsoleted standards. Vocal and political assistance could come from President Obama, who does seem supportive of the advent – his State of the Union address spoke rather sanguinely of 3D printing. But even if he continued to defend the new technology, it would not be the first time his administration has been in favor of an otherwise unpopular, sternly opposed project.
And speaking of battles, wars in technology are fought over precedence, and HP had better get cracking on its patent proliferation and protection if it envisions itself a major player. Unless it plans on licensing technologies from other companies, or possibly, one day, absorbing patent-rich startups into its system, it must continue to innovate and publish its genius. Simultaneously, it will no doubt meet head-to-head with competitors claiming infringement, so HP must vault some capital for potential settlements and attorney’s fees.
Lastly, and it may seem obvious, but HP must avoid at all costs rushing an inferior product to market. If HP seeks to raise its company flag at the vanguard of 3D printing, it must read the writing on the walls (or the sculpting in the statuary) – there’s no room for more of the same. Whatever’s in HP Labs has got to be a radical addition to the lineup. Ms. Whitman has placed a great deal of faith in Mr. Fink and his team, so it would be a shame and a source of public embarrassment were the freshman product, in hindsight, over-hyped. Then again, HP may not be able to afford any more time than what they’ve already used up. So will 3D printing change the world? It absolutely will. Will HP ride the wave, or be drowned in the wake? Only time will tell.