Stratasys Case Study

The Emerging 3D Printing Industry | TG
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The 3D Printing Solutions Company
Marketing 576 – Fall 2016
Submitted to: Professor Shanna Bruer Hess
Submitted by: Tamalika Ghosh
Submitted on: October 4, 2016

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Introduction
According to the 2016 Wohlers report, for the second year in a row, the 3D printing industry has
grown by $1 billion to a total of $5,165 billion. The findings are based on information from 51
industrial system manufacturers, 98 service providers, 15 third-party material producers, various
desktop 3D printer manufacturers, and 80 3D printing experts from 33 countries worldwide.
The $5 billion represents a total growth rate (CAGR) of 25.9% in 2015, which is slightly lower
than the 33.8% CAGR of the past three years, still extremely promising. Wohlers also indicated
that over the past 27 years, the CAGR for the industry is 26.2%, demonstrating impressive
consistency. In 2014, the 3D printing industry grew 34.9 %, the highest growth rate in 17 years.
With a sale of $750 million in 2015, Stratasys is the industry leader. Driven in part by demand of
the new Object500 Connex3, by continued demand for PolyJet and industrial FDM 3D printing,
and by new acquisitions such as Solid Concepts and Harvest Technologies Stratasys grew by
54%. Though the industry growth estimation gives a rosy picture for moving ahead, but the 3D
printing industry has its own challenges. Starting from high level machines costing million
dollars, production time, limitation of mass production, risk of intellectual property rights
violation, etc. there are lot of areas that needs to be considered for maintaining the projected
growth rate.
Company History
In 1988, a young engineer frustrated by a sluggish prototyping process chose to reimagine it
rather than accept it. His invention, FDM Technology, marked the inception of Stratasys, a major
milestone in the history of 3D printing. Stratasys was founded by the couple S. Scott Crump and
Lisa H. Crump. He studied mechanical engineering at Washington State University and then in
1982 moved to Minneapolis to help found IDEA, Inc., which manufactured force, load, and
pressure transducers. It was in 1988 when once he decided to make a toy frog for his daughter
using a glue gun loaded with a mixture of polyethylene and candle wax. His idea was to create
the shape layer by layer. He then automated the process using a $10,000 digital-plotting
equipment. With motivation from his wife he converted his passion into business and Stratasys
was born. In 1989 he patented Fused Deposition Modeling technology. Since then the company
has come a long way. The FDM modeling Crump invented in the home lab, eventually grew into

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an industry defining company worth $980 million that has put additive manufacturing into
operation with more than 20,000 manufacturers around the world.
The Journey
Since 1988...
Scott Crump Invents FDM Technology
Frustrated by the long and expensive lag time
between CAD model and manufacturing
prototype, aviation engineer Scott Crump did
what inventors do: He searched for a solution
that didn't yet exist.
1988
1989
A Hobby Became a Business
Crump began devoting weekends to
refining his idea, which at first meant
automating the process using modified
2D plotter. Obsession became more
than a hobby and Crump founded
Stratasys.
1994
1994
Stratasys Goes Public
Stratasys funded its future corporate growth
through an initial public offering in 1994.
Material for Printing
Stratasys introduces the first ABS
thermoplastic available for 3D printing.

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1998
Inkjet Entrepreneurs Found Objet
Geometries
1999
FDM Tested in Microgravity
A Stratasys FDM 1600 was flown aboard
the NASA KC-135 Reduced Gravity
Aircraft to assess the feasibility of using
FDM in a microgravity environment
2002
Cost Effective Printer
Stratasys introduces the first 3D
printer under $30,000
2007
World's first multi-material 3D Printer
Objet unveiled its PolyJet Matrix
Technology and introduced the world’s
first 3D printer to simultaneously jet
multiple materials
2008
3D Printer for Production
Stratasys launches the first 3D printer
for production.

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2012
Desktop 3D Printer
Objet announces world’s first desktop 3D
printer with seven materials and later with
100 materials
Objet and Stratasys Merge
David Reis, chief executive officer of the
new combined company, stated, "We are
excited to move forward as one company
and deliver the benefits this combination
creates for our shareholders, our
customers and our employees.
Stratasys Acquires MakerBot
MakerBot's 3D printers are rapidly being
adopted by CAD-trained designers and
engineers," said Stratasys CEO David Reis
at the time of the merger in 2013. Stratasys Introduces First Color and
Multi-material 3D Printer
Objet500 Connex3 was the first 3D printer
in the world to simultaneously 3D print
multiple colors and materials. Today
Connex3 sets the industry standard for multi-
material 3D printing.
Stratasys acquires GrabCAD
which connects people, 3D content and
technologies.
2013
2014

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Competitors and Stratasys Market Strategy
Since 3D printing industry is a rapidly growing industry, we find many players including a large
number of successful small startup companies. The top three position is predominantly occupied
by Stratasys, 3D Systems and Hewlett- Packard. Stratasys’s priority is to accelerate its market
share, marketing and R&D to strengthen its marketplace leadership and reduce current and
potential competition. Stratasys wants to capitalize on the first mover advantage. Acquiring
strategic companies early in their life cycle, helps in getting skills, knowledge and technologies
faster. Accelerate innovation by picking winners, become owners of 3D content, technologies,
materials, talents, and last but not the least – acquire large chunks of market share, this is the
2015
Stratasys Direct Manufacturing
Services
Stratasys combined three leading 3D
printing service bureaus to form
Stratasys Direct Manufacturing.
Stratasys acquires Econolyst
and creates Stratasys Strategic
Consulting
2016
Stratasys Invents 3D Printing Again...
The Stratasys J750 3D Printer isn't just the
latest addition to the PolyJet portfolio. It's
the first-ever full-color, multi-material 3D
printer.

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strategy Stratasys has adopted. However, this strategy comes with a cost and temporary revenue
loss is one of them. [Exhibit: 1].
The 3D printing industry has witnessed quite a few interesting acquisitions in the last few years.
Both the leaders of 3D printing manufacturing market, Stratasys and its rival 3D Systems, have
managed to counter the threat of competition by acquiring a number of companies’ like
MakerBot, Objet, Z Corporation, DTM, Solidscape, etc. This strategy allows to gain the
proprietorship of a larger number of important patents. For instance, the milestone patent of
PolyJet technology is the result of the merger with Objet in 2012. Being in the innovation sector
puts Stratasys at the advantageous position of industry pioneer but at the same time, there exists
the risk of ‘Patent War’. Expiration of the original patent for FDM in 2009 triggered an
enormous open source movement. Production of low cost 3D printers from all sort of companies
massively expanded. Competition is the harbinger of change. It is not just the external growth
that fuels Stratasys’s expansion. Significant and continuous investment in R&D is what drives
Stratasys towards the future.
Key Stakeholders and Industry Operation
Stratasys serves a wide variety of industry. It includes Aerospace & Defense, Architecture,
Automobile, Commercial Production, Consumer Products, Dental, Education, Entertainment and
most importantly Medical[Exhibit:2]. Over the years it has helped professionals in all these
fields to achieve remarkable outcomes by using its technology. A few mentionable achievements
where Stratasys played the role of a catalyst are: -
 In 2002, 3D Printed Model Helps Surgeon Plan Separation of Conjoined Twins -
Maria Teresa and Maria de Jesus Quiej-Alvarez were born with separate, complete
brains, but with intertwining blood vessels that made separation a challenge. With help
from a 3D printed planning model, the operation to separate the twins took about 22
hours. For comparison, Biomedical founder Eitan Priluck said that similar procedures had
taken as long as 97 hours in the past.
 Encouraging Young Inventers Through Extreme Redesign Contest - Their first
Extreme Redesign Contest in 2005, accepted submissions from students worldwide in
three categories: high school teams, college individuals and post-secondary. First-place

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winners were selected by a panel of independent judges. Winning entries included a stair
climbing robot, a lighted retractable dog leash and a mouse radio.
 In 2010, Urbee Develops the First 3D Printed Car - KorEcologic produced a prototype
of the first automobile with an entirely 3D printed body: the 200-mpg Urbee. Stratasys
was a development partner on the project, which required geometric freedom to make
strong, lightweight parts.
 In 2012, 3D Printed Exoskeleton Lets Little Girl Lift Arms and Play - Using a
Dimension 3D printer, researchers at the Alfred I. DuPont Hospital for Children in
Philadelphia were able to create what little Emma called her "magic arms." The device is
a custom-designed robotic exoskeleton that enables her to conquer greatly limited joint
mobility and underdeveloped muscles.
Based upon the varied client requirement, Stratasys provides 3D printers with different features
and technologies. The major categories are: Idea series, Design series, Production series and
Dental series. [Exhibit:3] The materials used for the printer also varies based upon the
requirement [Exhibit:4]
The diverse range of solution [Exhibit:5] and their benefits that Stratasys provides includes:
Rapid Prototyping
• Design iteratively
• Reduce scrap and rework
• Communicate ideas
• Test in real world
Additive Manufacturing
• Reshaping traditional manufacturing
• Discover New possibilities
• Deliver just in time
• Reduce tooling costs and risks
Professional & Consulting Services
• Identify efficient low- volume production opportunity
• Reduce environmental impact
• Increased product functionality
• Realigned supply chain

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• Strategic transitional services for project implementation and management education
• Expert on-site services
Advance Material & Direct Manufacturing
• Better solutions in development and production of custom polymers and compounded
materials
• Innovative manufacturing process development
Challenges in 3D Printing Adoption
The benefits of 3D printing application are impressive; design freedom, part consolidation, no
tooling required, just-in-time inventory, to list a few. Still, companies are struggling to find ways
to incorporate the technology into their product development and manufacturing operations.
According to the 2014 Wohlers Report, additive manufacturing is still less than 2% of the entire
manufacturing market. The problems faced by Stratasys’s clients are indirectly the problems
hindering Stratasys and its growth. To understand these challenges better, Stratasys performed an
industry survey of 700 users. The analysis reflects the following as the major issue concerning
3D printing application by its customers:
 Equipment cost, limited material availability and post processing requirements.
 Lack of in-house additive manufacturing resources and high manufacturing cost.
 Lack of expertise and/or training among workforce/employees.
 Longer production timeline and limited recyclability.
 Lack of formal standards and limited repeatability.
 Software development and data storage limitations.
 Risk of litigation and legal implication.
Graph: Top Industry Challenges as per Survey (Source:Stratasys.com)

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What Stratasys believes is that the industry need to change its perspective about how and where
to use 3D Printing. From emphasizing additive manufacturing’s technical benefits, its customers
are required to move towards the overall business enhancement. Identifying applications and
parts to build with 3D printing is not enough, rather looking at their manufacturing strategy as a
whole to see how the technology can enable innovation and add value to overall operation is the
way to advancement.
A presentation by Dr. Mark Cotteleer, clearly reinstates that making the customers ready, to
adopt using 3D printing is a time intensive affair. [Exibit:6]
Moving Ahead
August 2016, Stratasys Ltd. (Nasdaq: SSYS) reported its financial results for Q2, 2016
[Exhibit:7]. This quarter was the final reporting period for CEO, David Reis, who stepped aside
for Ilan Levin. Reis will still be involved with the company as an executive director. Like Reis,
Levin held leadership positions in Objet, before Stratasys acquired the company in 2012. In May,
2016 Tim Bohling joined Stratasys as the Chief Marketing Officer. Prior to Stratasys, Bohling
served as VP of Marketing at HCL Technologies and held a number of senior marketing and
strategy roles at IBM. Bohling is responsible for branding, demand generation, digital & field
marketing, public and industry analyst relations. Clearly, these are important moves in shaping
the future of Stratasys.
Speaking about performance Levin said “Compared to the first quarter, we observed stronger
margins and a substantial increase in non-GAAP operating profit. Our margins benefitted from a
sales mix that favored our higher-end systems, including the recently launched J750, the
industry’s most advanced full-color, multi-material 3D printer, as well as our ongoing efforts to
improve operations, and reduce operating expenses.” A quick look at the 5 year share price trend
of Stratasys and the income statement and other key performance indicators give the clear signal
that things are going haywire for Stratasys [Exhibit: 8, 9, 10]. So what exactly is going wrong?
The industry projections indicate growth whereas the company financials doesn’t reflect the
same story.

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Root Cause of Problem
• As rightly said by a 3D printing user, Rick Twiggs “Many companies have purchased
millions of dollars in machines to use in-house and will not be purchasing any more
machines for a while.” Definitely there is a mismatch in the potential customer demand
forecast and the actual sales. As already identified by Stratasys, equipment cost and
operating cost is pretty high. Heavy capital investment is a concern for a lot of potential
customers.
• Processing time of the 3D printers hinders when it comes to applying the technology for
mass production. From prototyping point of view definitely the technology has done
wonders in terms of design complexity and precision. However commercial production
use needs much faster printer technology.
• Lack of expertise and trained personnel is a concern for many existing and potential
customers. The technology and its benefits are known to all but how to implement the
same for their business is where companies are struggling.
• The approach companies are deploying to ripe the benefit of 3D printing needs to change
and the change need to happen at the leadership level. Stratasys believes, instead of
finding products that fits the technology, users are required to make the technology fit the
product and business model.
• Expiring patents are making ways for new smaller manufacturers penetrating the desktop
3D- printing market traditionally dominated by the big players. By offering more reliable,
cheaper and easier to operate printers, these small companies (DeltaWasp, Ultimaker,
Lulzbot) are disrupting their bigger competitors.
• Reorganization and a series of write downs against subsidiaries (MakerBot) in 2015
effected the income statement of Stratasys. Ongoing performance and quality issues
forced write off of significant asset value tied to acquisition.

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Solution
 Increase awareness among existing and potential customers about how implementing
additive manufacturing for true business value effects multiple areas beyond just design
and engineering. Productivity, training, supply chains, product optimization,
environmental impact, R&D, all these needs consideration for overall manufacturing
ROI. Partnering with the core industries and providing consulting services, workshops,
etc. can help to grow the market.
 Focusing on the personalized consumer market of desktop 3D printing and advertising
the product rightly to this target group. A robust marketing strategy to capture this
growing market is a must.
 Innovate to reduce the existing barriers of high cost and speed issue to attract a greater
customer base and make the technology more easily accessible. Increased spending on
R&D is unavoidable, hence realigning and controlling other business and operating cost
is need of the hour.
 Relaunching brand, reorganizing business and developing comprehensive ecosystem is
essential for growth [Exhibit: 11]
Final Solution & Implementation
For Stratasys it the long term vision that matters and a bumpy ride along the journey is
unavoidable considering the industry is still evolving. The four key strategies Stratasys is
implementing are: expanding support for prototyping and tooling uses across industries while
developing a new approach for the manufacturing market in key vertical markets, cultivate a
“high touch” sales team to introduce 3D print technologies and solutions into new accounts and
applications such as high-value manufacturing while continuing to leverage its reseller partners
for sales, product and service delivery, deliver engineered materials and printers capable of
supporting and extending its strategy and incorporate Stratasys material extrusion technologies
into MakerBot so its “Replicators” function at the level necessary to continue growing in the
enterprise desktop printer and education markets.
This alone won’t be sufficient though to turn the fortune. With HP’s dramatic entry into the 3D
printer market with the Jet Fusion 3D printer (which is much faster and less expensive) Stratasys

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must step its game up for 3D mass production. The new services and consulting branch is again
a great move to partner with current and future customers to build relationship with educators,
researchers, partners and leverage this network to increase revenue. Obtaining operational
efficiency and improving the financial performance should be the top priority of the new
management team to gain investors’ confidence in the business. With big names like HP,
Canon and GE entering the 3D printing industry, Stratasys needs to evolve and adopt more
nimbly to retain its share of the growing 3D pie. Relaunching the brand, strengthening the to
go market and strategic partnering and acquisitions focusing long term growth is the way
forward.

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Exhibits & Photos
Exhibit 1: Stratasys Financial Results Q3, 2015

Source: Stratasys.com
Exhibit 2: Industries Served by Stratasys
Exhibit 3: 3D Printer Series

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Exhibit 4: 3D Printing Material
Exhibit 5: Solutions Provided
Exhibit 6: AM Adoption Timeline by Dr. Mark J. Cotteleer, Deloitte Services, LLP.

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Exhibit 7: Stratasys Financial Results Q2, 2016
Exhibit 8: Stratasys Ltd SSYS, Nasdaq Share price
Source: Nasdaq.com
Exhibit 9: Stratasys Ltd. Income Statement
Source: Nasdaq.com

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Exhibit 10: System Unit Sales
Exhibit 11: Stratasys Ecosystem

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References
Wohlers Report 2016 reveals $1 billion growth in 3D printing industry by Kira | April 5, 2016
(Source: 3ders.org)
Stratasys report Q2 financial results, 3D printing industry, “maturing and evolving” by Michael
Petch | August 4, 2016 (Source: 3dprintingindustry.com)
Underperformance of Stratasys & 3D Systems: Causes and What Can Be Done
by Eddie Krassenstein | May 14, 2015 (Source: 3dprint.com)
Stratasys could face some challenges when implementing long term plans, says Gartner by Alec |
December 23, 2015 (Source:3ders.org)
“Top Challenges to Widespread 3D Printing Adoption” | August 27, 2015
(Source:stratasysdirect.com)
2015 Roundup of 3D Printing Market Forecasts and Estimates by Louis Columbus | March 31,
2015 (Source: forbes.com)
Stratasys in New 3D-Printing Partnership (SSYS) By Shoshanna Delventhal | September 29,
2016 (Source: Investopedia.com)

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