MBA case study
Dimensional Innovations – The 3-D Print LSAM: Opportunity or Dilemma? Design, Make, Innovate Between a stretch of Merriam Drive and railroad tracks in Overland Park lie the offices of Dimensional Innovations. With concrete slab walls studded with docks, it looks like a million other industrial buildings --- until you go inside. Dimensional Innovations is a magic place where imagination becomes reality. On any given day, employees may be working on a replica of Death Star from “Star Wars”, a giant goalie mask, or a dinosaur. Technology adds another dimension to the company’s work. An interactive exhibit for a museum combines a motorcycle with virtual reality technology to let people experience jumping the bike over buses like Evel Knievel. For another project, a 360-degree video let’s users see what it’s like to skydive without ever leaving the ground. Dimensional Innovation’s own story is as dream-come-true as some of its projects. In mid-April, 2019 the greater-Kansas City-based Dimensional Innovations (DI) took delivery of an LSAM (L-Sam or Large Scale Additive Manufacturing system, 3-D printing system). Thermwood Corporation, a 50-year-old Indiana-based manufacturing firm, had designed and manufactured the printing system. Thermwood was a major supplier of CNC (computer numeric controlled) traditional manufacturing equipment. The firm was taking the lead in developing 3D/additive printing technologies about 2016 and had begun to develop a series of patents related to 3D printing. The LSAM printer, like others Thermwood produced, used carbon-fiber reinforced thermoplastic composite materials as its “printing” material. The LSAM could produce “…large to very large reinforced thermoplastic composite parts” through a “…two-step, near-net-shape production process.” Companies in aerospace, automotive, boating, foundry, and other thermoforming industries were looking for equipment that could produce “…large-scale tooling, masters, molds, fixtures, patterns, and plugs”. However, in early 2019 there were very few large-scale 3-D printers available. The LSAM was the largest 3-D printer available for printing with carbon fiber reinforced thermoplastic materials. It could print shapes, parts or completed products, up to 10’ high, five feet wide, and 100 feet long. In a meeting in mid-April, just before the printer’s delivery day, Dimensional Innovations (DI) CEO Tucker Trotter and COO Tom Collins talked over coffee. Collins was looking at the brochure from Thermwood that depicted the 3-D printing machine to be delivered the following week. Collins said, “Well, you saw---we have the space for the LSAM all ready in the back.” Trotter mused, “That is the largest investment we have made to date. When the project we bought the LSAM for is completed later this year, we have to have the plans to utilize laid down carefully and be ready to go to market with its capabilities. We haven’t let grass grow under our feet when opportunities have arisen in the past and the 3-D printer is no different. We need to start generating a revenue stream from this investment --- a profitable revenue stream.” DI-History Jim Baker founded Dimensional Innovation (DI) in 1993 with three business partners. Baker had already been successful in commercial photography and was owner of a photography lab. Like many startups, DI began in the founder’s garage. The company’s 1993 origins as a sign shop were modest --- as the company put it, “A small space with an equally small client list.” In 1994 along with two partners, Baker and his three business partners incorporated the company as Schofield Design. (See Appendix #A for a Company Timeline 1993-2017.) Schofield got its first big break in 1995 with AMC Entertainment Inc., a major motion picture theater company headquartered in Kansas City. The motion picture theatre industry had entered a period in which the theatres the competition among the industry entrants heated up and cinema companies needed help. AMC asked Jim Baker to design interior signage and themed architectural décor. Between 1995 and 1998, DI completed 60 projects for AMC. The AMC projects were DI’s “bread and butter” company in these years. CEO Trotter reported ultimately being in involved in 200 cinema projects. However, in the late 1990s, the motion picture industry ceased the multiplexing craze that had fueled the building and renovation activities. As a result, DI’s stream of work dried up and, in response, the company broadened its client base. Trotter had originally joined the company in 1995 as its first intern. At the time, he was midway through his University of Kansas program pursuing a Bachelor of Fine Arts in Industrial Design. After graduation Trotter founded a firm called Outdoor Innovations, a firm that had several patents on consumer products related to the automotive industry. Trotter came back to Dimensional Innovations in 1996. Within a year, he became a partner in the firm. Over the next several years, Trotter was involved in numerous DI project that ultimately resulted in work with over 200 cinematic theatres and expanded the firm into pro and collegiate sports, along with major installations in museums, halls of fame, and entertainment districts across the country. By 2005 the company had 70 employees including 10 engineers; six artists with a variety of skills; fabricators who worked in a broad array of medium including foam and metal; and a marketing team that worked on building DI’s world-wide network of relationships with architectural and development firms. DI had invested in what a local reporter described as: …lots of expensive high-tech equipment, such as the high-resolution printer that cranked out the 25-foot-tall book spines for the library and giant dinosaur pictures for Science City's new Dino Lab exhibit. The facility also houses three computer-operated routers, which carve out pieces for digitally designed, three-dimensional projects -- such as the floatplane replicas it makes for Scheels All Sports stores. In the middle of the first decade of the Twenty-First Century, Trotter described his firm as "a signage and specialty architectural fabrication business." At the time, the company's motto was "If you can dream it, we can build it." DI had won many awards for its designs and installations, commendations from client companies and users alike, and had been a noticeable growth company. The firm ended 2018 with revenues slightly more than $40M and an A+ credit rating. (See Exhibit #1 below for selected financial information.) Dimensional Innovations – Exhibit #1 Selected Financial Information 2016-2018 2016 2017 2018 Revenue $ 32,000,000 $ 36,000,000 $ 40,000,000 Direct Margin % (of Rev) 50% 48% 51% EBITDA % (of Rev) 5% 6% 10% Total Assets $ 11,500,000 $ 13,500,000 $ 15,000,000 Note: Author's Estimates By early 2019 DI’s capabilities and processes had evolved to include design, technology, engineering, and custom fabrication. The company’s workforce included nearly 250 employees with a variety of skills contributing to these processes. (See Appendix #B for backgrounds of DI’s senior executives.) DI’s CEO was Tucker Trotter whom COO Tom Collins described “the guiding vision” behind DI’s success. Collins went on to explain that Trotter was “…always asking what’s next and what can we do to improve the customer experience and the user experience.” DI’s Business Model DI was essentially a designer of special displays and interiors. In addition, the firm had the capabilities to build most of its designs in house. DI could be basically described as a “design-build” firm. However, that moniker belied the complexity of describing the company. As CEO Tucker Trotter put it, describing what kind of business DI was “…one of our biggest challenges.” The company’s business operated primarily in the Sign Manufacturing (SIC #3393-02 and NAICS #339950) arena, but also had its foothold in Designers-Industrial (SIC #1541-02), Display Designers and Producers (SIC#7319-01), Industrial Building Construction (NAICS#236210), and Outdoor Advertising (NAICS#541850). Its projects were primarily for commercial and industrial firms. The company had completed projects at the local, regional, and national levels. Although the company generally stayed away from RFP work, it had undertaken some government projects at various levels. The DI Process and Technologies Dimensional Innovations eschewed the usual Design-Bid-Build (D-B-B) process and, instead, worked in partnership with its clients in a Design-Build Process. As DI pointed out, the D-B-B process consisted of as many as 17 steps including initial design, putting to bid, discovery of over-budget situation, redesign, negotiation, new drawings, build (manufacture/assembly), install, and punch list (check off list to see that all items included in the bid were completed satisfactorily). Instead, DI utilized a six-step “Experience design” process. Within each phase, the firm worked closely with its clients. Aspects of each of these phases --- 1) discovery, 2) concept design, 3) design development, 4) construction documents, 5) fabrication & install, and 6) launch --- appear in Appendix #C. An explanation of experience design appears in Appendix #D. DI pointed out to potential clients that: Even though it’s now a buzzword, the practice of experience design has been a long time coming. And for DI, experience design is not a hot business we jumped into, but a modern discipline we’ve been growing into since our inception in 1993. It’s really about defining the purpose before designing the place. We look at the story of your space, think about your audience first, and with all the tools at our disposal, create a journey that will cause a desired effect. Amazement. Curiosity. Loyalty. Talk value. Commerce. The Experience Design process involved brainstorming with clients, designing their visions and fabricating them into reality. Among the purposes of the process was to understand and undertake “brand activation”, i.e., bring a firm’s brand to life by checking such issues as: · How the brand looks · How it feels within a physical space · Whether the brand · Engages its audience · Inspires loyalty among customers · Is memorable. In all of its projects, DI’s purpose was to bring its clients’ brands to life, to tell the story, connect the client firm with its audiences, grow the client’s business and provide guidance for the direction the firm would follow for the future. As an example, DI pointed out “…a sports arena must engage fans beyond the game with surroundings, sponsorship activations and moments in time that surprise, delight and inspire.” To achieve bringing its clients’ brands to life, DI designed spaces and displays that incorporated a variety of technologies such as OLED touch screens and virtual reality displays. Electronics also included items such as innovative and inviting touch screens that both entertained, informed, and, above all, engaged. In some instances, the client design might include a single object such as the “playable” 12-foot 500-pound playable guitar with a frame of Medium Density Framework or MDF wood casing and steel with electronically generated sound.