Bracing for impact: the additive effect of Invisalign on manufacturing
Align Technology (AT) is a manufacturer of 3D digital scanners and clear aligners (marketed through the brand ‘Invisalign’) used in orthodontics. AT is perhaps the most prolific user of an additive manufacturing (AM) process called stereolithography that converts liquid materials in solids through layering and selective curing using a light process called photopolymerization.[i] Through this process AM has created, ‘the largest mass customization operation in the world’[ii] and because of its scale, earnt the company inclusion on the S&P 500 index.[iii] Similar to the braces many of us endured as teenagers, the end product works like a traditional metal brace by exerting soft pressure on individual teeth to move them into a desired position. AM has allowed the company to prototype faster,[iv] create a highly differentiated product,[v] execute a faster manufacturing process[vi] and operate with high material productivity.[vii] In essence the success of AT has been its ability to offer a highly customized product to consumers through mass manufacturing techniques. To this end, AT has established a user base of 5.8 million customers with a manufacturing output of more than 320,000 unique aligners per day.[viii]
Whilst not apparent to the average orthodontic patient, AT has significantly disrupted the orthodontic supply chain,[ix] centralizing orthodontics away from dentists and labs and, ‘hundreds of labor-intensive production steps’.[x] To achieve manufacturing cost efficiencies, AT has long operated out of a single factory in Mexico meaning a highly centralized supply chain, longer lead times and expensive transportation costs. In the short term, executives are tackling this problem by localizing production in factories more closely aligned to major demand centers. To this end, AT has recently build a factory in China to meet growing Asia Pacific demand. As the industry matures, maintaining product differentiation through innovation is a key concern.[xi] AT views its research and development as a key business advantage. Speaking to Forbes in late 2017, Vice President of Product Innovation, Srini Kaza highlighted the strong focus of AT on maintaining their innovation pipeline,
“One key area where the field is rapidly progressing is the development of highly innovative materials. Early materials could be brittle but today’s polymers have improved in leaps and bounds. These new emerging material formulations will even surpass the quality we are seeing now, enabling the industry to print more functional and bio compatible parts directly in the printers” [xii]
The company actively holds 420 US patents, 465 active foreign patents and 416 pending global patent applications.[xiii] To maintain their innovation competitiveness AT continues to invest in a yearly research and development spend of about $100 million.[xiv] This investment allows AT to develop new designs, features or highly individualized products[xv] at a low marginal cost.[xvi] One example is the ability to print a unique patient ID directly onto the aligner, better enabling AT technicians to manage the shipment and production of a patient’s set of aligners whilst preserving patient anonymity.[xvii] AT’s ability to continue to improve the patient orthodontic experience over and above emerging competitors, through patient-centric innovation will further cement its dominance in the industry.
In addition to the high risk of design piracy prevalent within the industry,[xviii] many of AT’s early patents are now expiring which is democratizing access to AM technology not only for large competitors such as Danaher and 3M Company but also orthodontists themselves. Given the risk that small dental labs may be able to use localized manufacturing to supply Invisalign themselves, AT should understand whether this could compete at scale with their large centralized manufacturing plants. If this is so, AT may be wise to begin funding decentralized manufacturing at orthodontic clinics over the medium to long term. This would allow them to achieve the same degree of customization but bring down the high transportation costs which would be a source of competitive advantage.
A further risk for AT is the specialized and nascent nature of the AM market which necessitates single source relationships with manufacturers of tools like rapid prototyping machines and advanced materials. This leaves AT highly dependent on a small number of machine suppliers[xix] which is a key supply risk.[xx] As the industry matures over the next 5 to 10 years, AT may wish to consider diversifying their supply away from single suppliers to avoid disruption in AT’s ability to deliver aligners in a timely manner. Of course, the trade-off would be to risk the intellectual property and innovation security that single source suppliers facilitate.
In reflecting on whether AT will be able to sustain the pace of innovation that has defined their success there are three outstanding questions. Firstly, will AT be able to maintain the pace and differentiated innovation that has set them apart in a world where access to additive manufacturing is decentralizing and democratizing? Secondly, will AT be able to create a supply chain that can service the needs of a geographically diverse customer base? Finally, should AT remove their reliance on single source suppliers?
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[i] Ultimate Guide to Stereolithography. Formlabs.com, November 2018, (link to article)
[ii] Griffiths. Align leverages 3D Systems’ 3D printing to produce 320,000 custom aligners per day, tctMag, September 2017, (link to article)
[iii] Align Technology. ALIGN TECHNOLOGY TO BE ADDED TO THE S&P 500 INDEX. Investor Release. June 2017. (link to article)
[iv] Deloitte. Disruptive Manufacturing. The Effects of 3D Printing. Deloitte Insights and Issues, 2014
[v] Ford. Additive Manufacturing Technology: Potential Implications for U.S. Manufacturing Competitiveness. Journal of International Commerce and Economics, 332, September 2014
[vi] Turpin. Interview with Align Technology Executives. American Journal of Orthodontics and Dentofacial Orthopedics, 122, no. 2, (August 2002): 19A – 20A
[vii] Kelly. Additive manufacturing: A long-term game changer for manufacturers. McKinsey Insights, September 2017. (link to article)
[viii] O’Neill, 3D Systems’ SLA 3D printers help Align Technology produce 1.6M aligners per week, 3D Printing Media, September 2018, (link to article)
[ix] Alexandar. Is Your Supply Chain Ready for Additive Manufacturing? Supply Chain Management Review. October 2017. (link to article)
[x] Alexandar. Is Your Supply Chain Ready for Additive Manufacturing? Supply Chain Management Review. October 2017. (link to article)
[xi] Holwef. The limits of 3D printing. Harvard Business Review Digital Articles (June 23, 2015).
[xii] McCue. 3D Printing Moves Align Technology Toward $1.3 Billion In Sales. Forbes. September 2017. (link to article)
[xiii] Align Technology. 2017 Annual Report. Investor Release. February 2018. (link to article)
[xiv] Align Technology. 2017 Annual Report. Investor Release. February 2018. (link to article)
[xv] Wong. Invisalign A to Z. American Journal of Orthodontics and Dentofacial Orthopedics, 121, no. 5, (May 2002): 540-541
[xvi] Kelly. Additive manufacturing: A long-term game changer for manufacturers. McKinsey Insights, September 2017. (link to article)
[xvii] O’Neill, 3D Systems’ SLA 3D printers help Align Technology produce 1.6M aligners per week, 3D Printing Media, September 2018, (link to article)
[xviii] Kelly. Additive manufacturing: A long-term game changer for manufacturers. McKinsey Insights, September 2017. (link to article)
[xix] Kelly. Additive manufacturing: A long-term game changer for manufacturers. McKinsey Insights, September 2017. (link to article)
[xx] B. Roca et al., Getting past the hype about 3-D printing. MIT Sloan Management Review 58, no. 3 (Spring 2017): 57–62.
Interesting piece and something we can (almost) all relate to – having lived through the hells of the head-brace. To your final question ‘should AT remove their reliance on single source suppliers?’ I agreed that it most certainly should. Given that AT’s earliest patents are soon to be expiring, and taking into account the plethora of other risks that you outline, I would suggest that it is time AT shift their focus from R&D, to scaling as rapidly as possible. A single source supplier will always present a challenge to the speed of this expansion.
Thoroughly enjoyed reading your piece. Could benefit from more puns.
Great article! Given that Align only holds a 10% market share of the orthodontic appliance market, I think there is massive whitespace for growth. [1] However, they need to move incredibly quickly, as Danaher, 3M, and other large conglomerates have deep pockets and are likely highly attracted to a product that is highly complementary to their existing product portfolio and that they can charge $3,000-$8,000 for and make for a fraction of the price, achieving high margins. Given that 40 of Align’s patents expired in October, I think they need to immediately diversify their supplier base and try to lock in long-term contracts. [2] With regards to your first question, I think it will be hard to maintain the pace of innovation that led to their success thus far, as additive manufacturing is decentralizing. However, I do think they can use their existing products and apply learnings to adjacent technologies. For instance, they can start working on dentures and teeth implants, where they work closely with top dental researchers to advance innovation in the overall dental field. This being said, I think there is a lot of room for growth with their existing technology, and they should focus on maximizing their returns on Invisalign while secondarily innovating in new areas.
[1] https://www.forbes.com/sites/michelatindera/2018/05/02/bracing-for-competition-cheaper-challengers-enter-invisaligns-1-5-billion-market/#4832fb1a2392.
[2] https://www.forbes.com/sites/michelatindera/2018/05/02/bracing-for-competition-cheaper-challengers-enter-invisaligns-1-5-billion-market/#4832fb1a2392.
Very interesting work. Within a month of certain patent’s expiration, five startups have started making products that will compete with Invisalign at half the price, using e-commerce and telemedicine to cut costs. I think AT needs to move to decentralize manufacturing and partner with more dentists as fast as possible in order to maintain market share. On the flip side, some analysts expect new entrants with cheaper offerings could mean more patients enter the space, rather than chipping into Invisalign’s existing customer base. Either way, I think the new market entrants will get AT to improve its go to market strategy.
Great piece! I agree that AT should partner with more dentists to grow their market share from 10% and build long term relationship with customers. Regarding innovation, I think customers care more about effectiveness and speed so I think that AT should focus its innovation methods on using the optimal materials and the procedure so their treatment can reduce the time needed and inconvenience of using the product. On a related note, this type of innovation can clear that path for expansion into other product areas like TOMB mentioned above!
Insightful article! To address your first question on AT’s ability to maintain pace and differentiated innovation, I think this is going to be difficult. We have already seen Smile Direct Club, Candid, and a few other direct to consumer startups eat into AT’s Invisalign market share. As this market becomes more saturated with competition and as additive manufacturing becomes more prevalent in dentistry, I am concerned the products will become even more commoditized. Furthermore, given the rise of consumerism in healthcare, AT should consider other channels to target consumers more directly as opposed to relying on the dental channel. On a more positive note, I was impressed by the number of patents the company holds (420 US patents, 465 active foreign patents and 416 pending global patent applications). I am curious as to AT’s ability to capitalize on these patents in order to further innovate and create barriers to keep the competition at bay.