Re: Strange alliance

From: C.McArdle (
Date: Mon May 19 1997 - 08:07:25 EEST

Yakov -

From a commercial point of view, it suggests to me a continuation and
extension of the existing trend of (bureau) consolidation. This crossover
marketing is typical in markets that have reached saturation and must
compete for essentially static total market (industry growth numbers not
withstanding). An easy place to observe this phenomenon is the competition
for your savings and investment and insurance and borrowing dollars (life
insurance and mutual funds from your bank, money market accounts from your
broker). While a greater and greater volume of business is available each
year, nothing really _new_ is happening.

The underlying condition in such situations typically is that further
meaningful product differentiation is either no longer possible (I doubt
that is ultimately the case here), or stalled for some reason. In this
case, I'll speculate, it is a function of limits on what is possible in
terms of materials combined with what it would cost in time and money to
achieve what is possible -- versus the affordability of already available
and very acceptable means of achieving those results. I'm thinking
specifically here of the potential value, in terms of the existing market,
of being able to build production injection molds, minus the large portion
of the existing market that would continue to be served by existing methods
(e.g. CNC machining). [note - the subject of this example is a whole
thread in itself - don't sic the dogs on me, I'm keeping it brief]

In consumer goods, this is where marketing typically rises in importance.
A good comparison might be the personal computer (hardware). It gets
faster, and increasingly better software is possible, but essentially it is
the same box connected to a not-really-new display, etc. The leaders are
those who can compete on price, quality, and delivery. Features are more
or less standard. Remember the early '80's, when "personal computing" (the
term didn't even exist, me thinks) was the domain of hobbyists?

One way or another, somebody (3D would be the logical business case study
candidate) has to provide leadership and redefine the business. This means
someone with critical market mass and a healthy cash flow and strong
management decides to, for example, break the market in a key segment of
the industry, redefining the competitive framework in that segment in the
process. Inevitably, some competitors are driven out, and overcapacity is
eliminated. Such a move is a forerunner to innovation, albeit by that
market leader for it's own business sake.

By breaking the market, the leader will establish pricing power (versus an
environment of falling prices and overcapacity), which will allow adequate
margins to fund new product development, and reliable markets for the new
products when they are launched (Microsoft). The weaker competitors
frequently join forces in one way or another attempting to leapfrog the
leader in terms of market share, cash flow, economies of scale, technical
standards, etc. (European banks buying American outfits in different
segments; the network computer gang adopting standards that Microsoft can't

Another strategy, one that might have worked, or might yet work, in rapid
and compression technologies is downward integration. Using control of key
technology and production capability, combined with a strong brand
identity, cash flow, and installed base, the company goes retail (GE
dominates each of it's product segments, now it is expanding into servicing
equipment no matter who made it). Examples of some who might be accused of
missing the boat in the rapid prototyping & time compression area: nah,
better not.

Another possibility is that someone breaks through technically, making
something that was a fond dream a profitable reality. Elaine's remarks
after the conference (you push the button....), about the technical state
of the industry, address what I'm saying very succinctly, and I really
can't speak to this possibility in detail.

>Your self-styled RP news service takes pleasure in distributing the
>following item:
>> (SANDERS/HELISYS)(HELI) Sanders Prototype and Helisys enter into OEM
>> agreement
>> WILTON, N.H.--(BUSINESS WIRE)--April 30, 1997-- Sanders
>> Prototype, Inc. announced today that it has entered into an OEM
>> agreement with Helisys, Inc. (NASDAQ:HELI) of Torrance, California,
>> a leading supplier of rapid prototyping systems.
>Is this the start of a new trend?
>Yakov Horenstein, Marketing

Best regards,

C. McArdle

203.853.4971 (facsimile)

124 Rowayton Woods Drive
Norwalk, CT 06854-3938

"Technology will allow us to be whatever we are already, only more so."

-- Arno Penzias

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