Episode 21: Stratasys talks Manufacturing in the Digital Era

Andrew Powell: Hey everybody! On this episode of the podcast, OST’s Vice President of sales and marketing, Lisa Jilek, interviews Pat Carey, Senior Vice President at Stratasys. Technology Leaders in 3D printing. She talks with Pat about the evolving manufacturing space and how they’re addressing these changes head-on. Enjoy!

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Lisa Jilek: So welcome Pat Carey. I’ve known you for some time now through our time at Stratasys, but would love to have you introduce yourself to our listeners, a little bit about who you are and your background.

Pat Carey: Great. Thanks Lisa. So, I’m the Senior Vice President of Strategic Growth at Stratasys. Been there for six years. I’ve had a number of roles, mostly in the sales and business development side. Before that, I was at a small Silicon Valley startup and Israeli startup. One of the reasons I was recruited to Stratasys because Stratasys is a unique Minnesota / Israeli company. We share headquarters. So I was recruited there. Moved back to Minnesota for this role. I was kind of living out of a suitcase for a long time. Prior to that, I worked for Siemens. I ran the national sales and marketing for their smart grid division. Prior to that, I worked for IBM a couple of times. I was there a total of 18 years and also worked for two other Silicon Valley startups, so kind of a wide range of experience.
Lisa: Can you share a little bit more about, first of all, Stratasys and also then your role there.

Pat: Sure. So Stratasys is the leader in what we call 3D printing. It’s kind of the common word. We tend to call it additive manufacturing. So we’re the leader. We’re based here in Minneapolis area plus Tel Aviv. It’s a combination of a number of large companies, but one was based in each. So we share headquarters and we sell printers, 3D printers not normal printers, 2D, to the world’s largest manufacturers, product developers, schools, basically a lot in the medical space. The background on that is… started as a prototyping company thirty three years ago. So making product prototypes. So one of trying to develop in product development to the point now where we have machines on manufacturing floors making parts that are part of cars and airplanes and medical devices…

Lisa: I saw some recent press about that in going into space.

Pat: Yes, going into space. We have a lot, we have hundreds of parts on the space station, literally hundreds. So we live in manufacturing, we tend to be outside of manufacturing of prototype around product development but now we’re actually in manufacturing. Now myself, I’ve been… I am headed to what’s called “strategic growth”.

So we’re entering a period of new technology. We have a lot of new technology coming this year and next year. I was VP of sales for three years, but really shifted to this. So how do we bring these new products to market? It’s new market segments and new applications. So things that our customers are not used to us doing. So it’s kind of a… needed more of a focal area than the highly transactional VP of sales job.

Lisa: Yes, so I would imagine with that kind of a role, right? SVP of strategic growth, in a company that manufacturing, as a leading manufacturer itself, but also serves, as you mentioned, the world’s largest manufacturers, other manufacturing companies. You have this unique vantage point, I would imagine, of just what’s happening in the manufacturing industry in general.

Before we get to the digital side, I’ve got a few questions for you on that, but just in general, what are some of the things that you’ve seen over the last several years that have remained the same at an industry level and what are some of the shifts that you’ve seen over the last few years?

Pat: Well, you know, things change but actually things always remain the same. It’s kind of the conundrum we live in. So, in terms of the process around new product development, so gathering voice of customer, doing development iteration, bringing the product out and then differentiating in a very loud marketplace. That’s kind of the same. That’s good and bad good. Good is we know the process, that people are doing the right research, they’re bringing the right products out, focus on what we think are the customer needs. It’s always a gamble.

What’s changes the speed? So the digitization of everything is really challenging people. So on the prototyping side, we’re working with customers that are actually able to develop prototypes daily. It used to take months or multiple months to you know, let’s just say a plastic housing or something, anything you can imagine. We can print that in a day, iterate with it and it used to be kind of a rough, white plastic print we’d make, now we’re able to do texturing, full-color, flexibility. So you are able to get really close to a real prototype. Sometimes it’s three or four hours.

Lisa: Yes. It’s amazing.

Pat: So the good thing is, the things that haven’t changed in the process is I’m finding customers saying “we could iterate faster than our process can keep up”. We actually can get new products faster than we can decide what to do. So it’s kind of an interesting thing we’re starting to see is process has become the problem. And then all the way to the point now, we’re seeing digitization and maintenance, so spare parts after the fact. So we digitized at the front end of the product development. We’ve digitized a lot of the manufacturing. Now, we’re seeing a lot of digitization on the spare parts. So if you look at a product development cycle, people always forget about spare parts. Some of the industries we serve have spare parts for a long time, like I was at Siemens, we had spare parts for fifty years because we’re serving electrical grid.

So you can you imagine? So we’re seeing processes are robust, things are the same, people are making good decisions but now how do we keep up? Because if you don’t, your competitor is.

Lisa: Yes…

Pat: They’re surpassing you.

Lisa: Exactly. One of the things you just mentioned a second ago this idea of voice of customer that’s nothing new.

Pat: Can’t do that anymore and it’s got a… So we’re starting to see, not just in the Stratasys’ but just what I am seeing in the marketplace is that it’s got to be digital. We’ve got to see what people are doing, how they’re interacting. We can actually, as we know, the Evil Tech Empire, right? Controlling us, we won’t dare say the names on the podcast here, but I am sure they know I am here in the room but how do you track customer behavior? How do you see where people have gone and stopped? Abandon a cart for example, gone and continued to transaction.

So rather than asking a customer their opinion, we’re actually able to digitally see where they’re going, what they’re researching, what they’re interacting with. That’s very interesting, and then how do you deal with all that data? How do you make a decision with that data? That’s the challenge.

Lisa: Exactly, exactly and on that same thread, when you think about product development process, most of the companies that we’ve known that have been around for a hundred years plus, so a lot of them out there. The traditional product development process is very lengthy. It’s one to two to three to five-year processes. Moving into this digital world and adding in whether you are trying to have it be a connected product or a smart product, a device or printer or whatever it is that has a digital component, that world is very different. Marrying those two can be a really difficult thing to do. What are you seeing as some of the challenges and ways companies are overcoming marrying the traditional product development process with a digital development process?

Pat: I’ll have an answer I don’t think you expect, that we’re seeing mass customization, which is kind of an older word to the point of personalization. So, there’s a car company that I really like that didn’t make two of the same car last year. Every car was different and this is a big company. So how are you able to personalize, and again that requires from the order entry to the ability to manufacture, to the ability to deliver credibly. Track the data, track the process. So that’s what we’re starting to see.

So I work with some of the largest car companies. I am not going to say any names here, obviously. Some of the largest car companies and was dealing with the head of manufacturing of one of these companies and he said, “Pat, I used to plant two million of a car. Now I plant two hundred thousand of a car.”

Lisa: Wow.

Pat: So I have to undo decades of process, decades of structure and design and putting things into place because that’s what customers demand. They demand, “I want a personalized car. I want the leather to be this color, whatever, whatever…” You get it. That’s what people want. They’re willing to pay and if you don’t do it, somebody else is going to do it. So that all requires lots of data, lots of input, lots of quant analysis and then turning that into a new product. And then delivering that new product on the fly, because like inventing cars, tractors, you are going to pay a couple hundred thousand dollars for a combine. It better be nice.

Lisa: Yes. Absolutely…

Pat: It better be high quality.

Lisa: Speaking from a farmer’s daughter. Yes. Yes.

Pat: Yes, it better be high quality. If you look at almost anything, expensive is highly customized and that’s where we from out of the manufacturing 3D printing get involved kind of on the edges today.

Lisa: Yes.

Pat: Part of the manufacturing, tooling and some of what we call [inaudible] parts. So the parts on planes, cars, motorcycles, et cetera but also it’s the product design. So knowing how to develop a product and then how to do it efficiently, build it fast because when you introduce customization into manufacturing, that adds complexity.

Lisa: And cost.

Pat: And lots of cost, and can I get the money back? Yes.

Lisa: Yes. So you mentioned the actual manufacturing process, twisting that a little bit to more the customer experience or the customer buying motion as it relates to personalization, that’s one element, I would say, is of a changing expectation that customers have today is they want to personalize. In addition to personalization, they also want it to be really easy. “I want the buying experience to be easy. I want it to be connected. I want to be able to get a notification back that tells me where it’s at and track it.”

There’s all of these expectations that we all have today. Different than we did maybe ten years ago, five years ago, even two to three years ago given the… just massive impact of technology in the… I am holding up my phone right now for the listeners, but the ability that you have to do things with the click of a button, right? We all have this expectation that’s different than it was in the past. For companies to keep up with that, specifically manufacturing companies on what the buying experience is with the thing that they’re manufacturing. How are you seeing not just personalization impacting the buying motion but what else do you think is impacting that buying experience?

Pat: Where do you put your effort? That’s a question. Where do you put your effort? Right? So the Amazonification of buying, right? If Amazon has that feature, we expect that feature in all purchasing. Right? Because they dominate everything, they dominate our expectations, right? So, do I as a Manufacturing Company, do I want to go higher or get my IKEA group to say, “replicate that process.” and then three years later have the process fail, the project fail, right? This is a big problem we’re starting to see. So do I outsource the front end of my company or do I do part outsourcing, part expectation setting, part custom development. That’s the question you have to ask because we have these robust business systems that we spent, being in the business of selling large ERP implementations, right?

So we’ve all spent a lot of money putting the systems in. Those do not need to change but the interfaces to change and the question is, “Do I do that myself? Do I pay somebody to do it?” Because the expectation is, it’s instant. I was thinking when you held your phone up. I was thinking that I ordered some carpet tiles the other day?

Lisa: Yes.

Pat: Great process, some company, I googled it. How do I find this? This is exactly what I want. I click a button and they came like forty eight hours later. I got the tracking hit, it was there. It was in the back of the office, right?

Lisa: Yes.

Pat: Five years ago that wasn’t possible.

Lisa: Yes. Exactly.

Pat: Yes, and they set an expectation that the best price, it got delivered. I am thinking of all the people, all the companies that went out of business because this company does a good job. I do not even know where they are. I was thinking, when you heard that, I do not even know where that company is at and do not care, right? So how do how do small manufacturers or any manufacturer, how do they keep up with the expectation setting we have as consumers? Because in that case, I am not a carpet expert. I just needed a certain color, it’s this carpet square. I need a couple hundred of them.

Lisa: Right. How do you create that buying experience that’s relevant today and how do you do it in a cost effective way because to try to create that experience on your own and build an army in house to be able to do that, in a lot of cases.

Pat: Can you imagine having a focus group in a carpet, just to make, picked a carpet because it’s generic. I mean, so the old world we have a focus group. What does the buyer need? What’s the customer know? Amazon has set the expectation. I have to meet that expectation of data integration. Delivering it fast. All the processes are complete like the FedEx tracking number.

Lisa: Yes. Yes. That’s an awesome example. So we’ve been talking about Direct Customer connections and shifts that manufacturing companies are taking to actually get access to data, maybe the next question is, what do you do with all that data once you have it? How do companies know what to do with that?

Pat: Yes. How do you analyze it? How do you make decisions? How do you know… is the data all the data? We live in this Echo Chambers. Just turn on the TV, you know, there’s a channel for a subsection of a subsection of a subsection of subsection, right?

Lisa: Yes.

Pat: I just listened to that I think, “well, I live in a perfect world.” Everything on TV is my hobby. It’s like me and the car channel, right? So that’s is an interesting question. What do you do with it? How do you know you have all the data? How do you compare it? That is a hard question to answer and then how do you get out of your—your Echo Chamber, your bubble? Earlier I was thinking about one of the concepts of how do we develop disruptive technology?

So most of what we’ve talked about is iterative technology. How do I make it better? And most of the iterative technology about how do we make it better but at the same time as a manufacturer how to make more money? Because I want to reduce cost, right? Then how I disrupt? Because if you watch the companies that are coming in with a different idea disrupt amazingly and they tend to just consume the market and then everybody eats away at them, right? So, how do I innovate, at the same time we’re getting more efficient? That’s the real question. I do not have the answer to it but that’s as I was thinking about is when you were talking earlier. It’s like, how do we disrupt in all this? We tend to talk about efficiency, but how do I know what’s really needed? I do not know.

Lisa: Yes, and that’s an interesting thing as it relates to the culture of an organization too. It’s not just about, so okay, we’ve got all of this great data that our customers are saying, hey, they like this, they do not like this, they use it for this or there’s this feature that they would like or whatever that is. Not only do you have to be able to have the mechanism to do something with it. Who’s going to analyze that? How is it going to inform the R&D spend? How’s it going to inform the marketing spend and the Go To market plan and the… right? All of those things, there’s a huge cultural shift that organizations need to go through oftentimes as you think about this shift into digital and innovation and bringing things to market faster. How is Stratasys starting to take on some of that… I mean, are you seeing a cultural shift at your organization? Or even just in the manufacturing market in general, more broader cultural shifts?

Pat: Let me talk about what I’ve actually been thinking about working on is around prototyping. I talked about this a little bit earlier. So we’ve done prototyping. We have a machine that does prototyping and it’s a very expensive machine. So some very high-end companies have bought it, and really changed their product development cycle. We’re coming out with a new machine that is a lower price, significantly lower.

So one of my projects, in my new role is to really study this new market segment that’s served by it. So the old market segment, we knew who they were, it’s based on how expensive the machine, how much budget do they have for prototyping because if it’s an expensive machine, you have to have a budget. As we look at this new machine, it enters a whole new market segment. The thing I am worried about the most is, how do I get to these people?

The people at old market segments, they do development, product development, iterative design and printing of these prototypes. It’s obvious. This next market is, there’s tens of thousands of these people, these design firms. To me, it’s part of my fun challenge at my new job. How do I get to these people? How do I speak, they speak a different language. They–they group differently, right? The other people group and these people group up in a different place. They gather in a different place, they use different words and for me that’s part of… that’s why because it’s a new role. I really need to think about that, find influencers in that space, go find some initial customers and say, “hey this worked.” So that’s the challenge I have in my personal role and that’s what I see customers struggle with as well as they do something new. Are you just copying a company that’s your competitor? You are copying somebody aftermarket you are going in? And how do I gather data?

So what I am doing is, for example, I am saying, how many designers are in that space? I can get that number if I search hard enough. Where do they group? So consortiums, conferences, et cetera, et cetera. In this cases, an education group that’s part of that. So they’re developing future designers. So, how do I find those people? So I have lots of numbers and I thought, trying to do data analysis and even to the point of influencers. I was looking at this yesterday how many Facebook friends through these influencers have and I was Force ranking them, right? So this guy has literally seven million followers, right? How do I get to that person first and say, “will you be my customer?” and if you do it, then this customer is–then other customers say that person is doing it.

So, I am really trying to be data driven in this process. We’ll see how I do but that’s what I am starting to see our customers do as well with their–as they develop products. Some follow down the old path follow down and those are the ones that aren’t doing so well and other ones are kind of saying “digitally, with data, how do I look at this? How do I find new markets or how do I buy a customer?” I’ve talked to a lot of people buying other companies. So I am looking at this company. Does it get me to that place quicker? Do they have a customer set? Or is it just, maybe you are buying somebody to get rid of a competitor. That will be, maybe okay. That’s more of a cost saving things but how do I grow? How do I accelerate my brand in a new space. Again all digital all data and then lots of analysis and then some risk on top of that, right?

Lisa: Yeah.

Pat: Take a risk.

Lisa: What I like about what you are saying if I am hearing you right is… just thinking back to our conversation, it’s about recognizing that customers have these massively different expectations today, personalization being really important, this notion of getting access or building that direct connection to customers so that you’ve got the data, to actually inform it, but then they’re actually having a plan for what to do with that data. Also, just the tail end of what you were saying is investing the time and exploring what… how does your business model need to shift given those things? Is there a new market you should be exploring? Is there a new way to access that market? I love that Stratasys has invested in a role like yours and certainly you being the one in it to really help, I think, take what you are doing to the next level.

So with that, maybe a final question which is jumping back to… we talked a little bit about your career path with the various organizations and now being at Stratasys. One thing that I do not think I’ve ever asked you about, but that I am curious about as we close this out. I see that you went through the Harvard Executive Education Program a while back in your career. I am just curious at what that experience was like for you? What was the big aha coming out of that?

Pat: Yes, interesting. So I did it as part of a… so, there’s like the advanced management program for mid-career executive. So IBM has it for people on the way up. So it’s kind of a IBM centric even though you are going to Harvard but you are with a cohort of people that are with IBM. So part of the Harvard experience, the Harvard Business School experience is you develop a cohort of people. You are with them together like eighteen hours a day going to school and studying and you bond as a group. So that was idea. It was an IBM version of it, but it was the same thing.

I like to tell the story but if you ask me that, the biggest aha was we got… and I went through it in a long time ago. So we had books still, right? We had to go pick up books and one of the books was the budget from when Reagan was President, the federal budget. So it’s this giant like ten inch thick piece of paper, like, it was the budget from the office of management and budget and you just… we’re all together, we all look at this thing like, “Oh my God, this is going to be the worst class ever!” We’re going to go through the federal budget. We know the Senators do not even read it, right? That’s always a joke.

So I just wrote this thing off in my head. It’s going to be a waste of time. So we get to the class and the teacher and I do not remember his exact name. I think it was Stockman. He was the head of office management budget under Reagan. The guy who wrote it was actually the teacher. I am sorry, if I knew you’d ask the question, would’ve looked it up, but it was the most amazing class. The most amazing class because he was talking about how they had changed the depreciation law and how it affected tax income and how it was going to affect investment on factory floors and all this and we’re just… and he really took us through like the truly macroeconomic impact that it had, and at the time the economy was stagnant. You know, Jimmy Carter was not President anymore.

The interest on my home was twenty one percent at the time. So he said, we needed to change the economy around. They had voodoo economics and drip down and all this crazy stuff that only some old guy like me will remember but maybe some of the listeners will remember, right? So we went through this and he says “here’s the levers we pulled, here’s the things we changed, here’s the laws that we changed and here’s the accounting that we changed in this budget.” The impact is our economy today. So that was the biggest aha. I went in, I went in with like the thought, “this would be the worst class” it had to be the best class and really understand the economy.

At the time, I was a salesperson, kind of what I was now as always, right? But I was able from that to have the most interesting conversations with CFO’s after that. So before I would only… I was always scared to talk to a CFO, what do I have to talk about? So I use it as a way to talk to CFO is about depreciation and amortization…

Lisa: Yes. You understand their world. You can relate.

Pat: It actually became a huge deal that I was able to go in and understand things and it became like a career changer and who would’ve known? At the time.

[laughter]

Lisa: That that class would have been a turning point for you.

Pat: Yes.

Lisa: Interesting. So you may or may not know this but our corporate headquarters is based in Grand Rapids, Michigan in an old game factory. So, to honor our tradition here in our podcast series, I am going to ask you what is your favorite game?

Pat: Wow, interesting question. So I grew up in a household that my parents limited us on screen time before it was popular. We got one hour a day. So we played a lot of games and I would say that my favorite game is Scrabble.

Lisa: Scrabble!

Pat: Yes.

Lisa: Oh, that’s one of my worst games.

[Laughter]

Pat: We should play.

Lisa: I’ll play Scrabble with you if you play Chess with me.

Pat: Oh, okay.

Lisa: So with that, thank you so much Pat for being willing to share your insights with us here today. Really appreciate you coming in.

Pat: Happy to be here. Thank you.

Lisa: Thanks.

Lizzie Williams: OST. Changing how the world connects together. For more information, go to ostusa.com/podcast.