How Will 3D Printing Impact Sonova?
Additive Manufacturing or 3D Printing – frequently thought of as the technology that is going to make traditional manufacturing obsolete. What many individuals fail to recognize is that this technology has been around since the 1980s (1) and is far from overhauling the current manufacturing industry.
3D Printing will primarily be a complement to current manufacturing versus a revolutionary technology due to unit cost economics. This form of manufacturing works best in areas where unit customization is vital (versus mass produced units), however, 99% of all manufactured parts are standard and lacking the need for customization (2).
Sonova (the “Company”), the market share leader in hearing aid manufacturing (3), falls in the 1% of customized manufacturing that is a perfect candidate for 3D Printing. Sonova was one of the earliest adopters of this technology, and in 2001 started using 3D Printing to improve its manufacturing process (4).
Traditionally, Sonova had employees handcraft custom hearing aid shells. The issue with this process is that ear canals are so tight that a fraction of a millimeter mistake in production can lead to severe discomfort for users. Shells printed by 3D Printers are precise replicas of silicone ear impressions taken by healthcare professionals and thus reduce the time and error previously experienced using handcrafted hearing aid shells (5).
“It’s really important that we accurately reproduce that impression in order to make sure that we wind up with a very comfortable fit for the patient and good retention in their ear,” said Bill Lesiecki, Director of Business Services at Sonova US. “There are ears that are very challenging. 3D printing is made for that kind of customization, so it can really have an impact.” (5)
Despite being a leader in its use of 3D Printing, Sonova is consistently looking for ways to remain in front of its competition. In July 2017, the Company printed its first Vitro B’s titanium casing, which is 15x stronger than the shell of an average acrylic device, is water resistant, and is the size of a fingertip (26% smaller than the average product) (6).
Scott Witt, Director of Product Management, calls the Virto B-Titanium “the most discrete hearing aid ever produced” by the company and matches demand from patients for an “invisible device” that fits well within the ear canal but also provides performance (6).
Sonova’s strategy is to lead innovation in audiological performance and consumer experience (7). The Company plans to use these innovations to increase penetration in developed and developing markets.
It’s widely cited in developed markets that individuals in need of hearing aids don’t get or wear them for reasons including: cost, unattractive look, and discomfort (8). As the Company continues to innovate and come up with improved products such as the Virto B-Titanium, management expects to increase penetration, in this case due to the “invisibility” and comfort of the Virto B-Titanium.
Penetration of hearing aids in developing markets is significantly below that of developed markets, 2% -3% and 27%, respectively. The primary drivers of this are i) access to hearing care professionals, ii) awareness & trust, and iii) purchasing power (7). As the Company continues to print products and the technology improves, it’s reasonable to assume the cost per unit will lower, especially in older model hearing aids, making access to products more achievable in developing markets.
Despite the promise that can be seen from innovation, I’d caution the Company of new competition as costs to manufacture decrease. The focus on audiological performance, or the technology within the 3D Printed shell, is where Sonova can maintain its competitive advantage for the long-term. Without strong and protected technology, it is reasonable to expect healthcare professionals to attempt to enter the hearing aid manufacturing market given the relationship with patients and relative ease associated with 3D Printing.
A similar case is currently unfolding in the orthodontics space with patent expirations. Within a month of this happening, five startups have started making products that will compete with Invisalign at half the price, using e-commerce and telemedicine to cut costs. Some analysts expect new entrants with cheaper offerings could mean more patients, rather than chipping into Invisalign’s existing customer base, however, many other analysts disagree (9).
As 3D Printing continues to evolve especially within the hearing aid industry, I’d urge Sonova to focus its attention on the technology within the 3D Printed shell to ensure the competitive advantage created to date remains in place for years to come.
Several questions remain – How can Sonova create a competitive advantage in the hearing aid shell space in a world of advancing 3D Printing (if possible at all)? Will the continued advancements in 3D Printing make it so that doctors can make their patients hearing aid on the spot?
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(1) D. Spaeth. 3D printing is changing the face of multiple industries. ECN: Electronic Component News 61, no. 9 (October 2017): 21–23.
(2) M. Holwef. The limits of 3D printing. Harvard Business Review Digital Articles (June 23, 2015).
(3) Sonova Leads The Future Of Mass Customized Manufacturing. https://envisiontec.com/inside-a-world-leading-3d-printing-factory/
(4) 3D printing technology for improved hearing. https://www.sonova.com/en/features/3d-printing-technology-improved-hearing
(5) How EnvisionTEC 3D printing is enabling the mass manufacture of hearing aids. December 8, 2017. https://www.tctmagazine.com/hear-and-now-enabling-mass-manufacture-hearing-aids/
(6) B. Jackson. Sonova Introduces First 3D Printed Titanium Hearing Aid. July 12, 2017. https://3dprintingindustry.com/news/sonova-introduces-first-3d-printed-titanium-hearing-aid-118089/
(7) Sonova. Investor & Analyst Day Presentation. October 16, 2018.
(8) E. Manfred. The Problems with Hearing Aids – and the Solutions. April 27, 2017. https://seniorplanet.org/the-problem-with-hearing-aids-and-the-best-solutions/
(9) M. Tindera. Bracing For Competition? Cheaper Challengers Enter Invisalign’s $1.5 Billion Market. May 2, 2018. https://www.forbes.com/sites/michelatindera/2018/05/02/bracing-for-competition-cheaper-challengers-enter-invisaligns-1-5-billion-market/#fd962dd23920
Fascinating article. I totally agree with your assertion that Sonova has found one of the best commercially viable applications for 3D printing. With the level of customization and precision needed for a hearing aid, Sonova was smart to think of using 3D printing to improve their product and service. You also identified an interesting Catch 22. 3D printing certainly helps Sonova, and their customers, in the short term. It’s the perfect technology for this particular problem and it is great that Sonova has leveraged it and furthered its use in this application. However, by doing so, they have opened themselves up to eventually being disintermediated out of the entire system. 3D printing could “democratize” the manufacturing of many consumer goods, even hearing aids. Like you mentioned patients, or doctors, could possibly eventually print their own devices at home. Your recommendations to the company seem spot on – they should invest in design, material science, and software programs that they can use to keep a hold on their positioning in the market.
I thought this was a very interesting topic. While Sonova is the clear market leader in this industry, I agree that the barriers to entry are quite low once competitors are able to overcome the hurdle of using 3D printing technology. One way the company will be able to maintain profitability is to cut costs. However, I’m not sure if moving to an e-commerce model is the solution–this will not necessarily work for consumers, as part of the value proposition here is to offer intricately designed aids specific to each individual’s ear shape. This level of specification would be difficult to serve through a digital channel and may take much longer to deliver the product to the end consumer. On the opposite end of the spectrum, having a physical 3D printer at each doctor to create hearing aids on the spot would prove to be too costly in the near term to be a viable solution. As a result, I think there will be a trade-off between cutting costs and decreasing customer lead time.
Your opening comments are striking – true that 3D printing has been around for years, but technology improvements and falling material costs have made the economics much more viable in the past decade. I agree that highly custom applications could present the most value gain from 3D printing (this example reminded me of many 3D-printed earbuds/headphones I had seen). I also think speed-to consumer and decentralizing manufacturing are great value adds, to your point on improving access to hearing aids in developing markets. I could imagine a philanthropic “Doctors without Borders” model with an ENT traveling with a 3D printer to diagnose and provide hearing aids in remote areas difficult for today’s distribution system to reach.
Like others have commented above, I think it was a great point to call out that 3D printing technology is not enough to stay ahead of the competition. While this company is the market leader from a 1st mover advantage, the technology itself will be easy to replicate not just by competing manufacturers but by their customers as well, like the doctors who could just buy a 3D printer and manufacture the pieces themselves. Thinking about the question posed on how they could retain a competitive advantage made me think to the first point made in the article: “this form of manufacturing works best in areas where unit customization is vital (versus mass produced units), however, 99% of all manufactured parts are standard and lacking the need for customization.” Just how high customization is a constraint necessary to make the application of this technology economically viable, I think that defensibility from competitors (including your own customers” will need to become a second constraint to make this economically viable in the longer term. They could further segment their target customers to smaller medical practices that might not have enough capital to invest in their own 3D printing machine or multi functional clinics that don’t have a large volume of hearing aids needed. Or as you mentioned they could focus on building a specifical capability, whether in designing complex shells or the hearing technology in the shell itself. One last alternative, is that they could try to differentiate themselves like companies that sell commodities do – by brand message, reaching large scale so that the volume produced decreases, providing services around the actual product, etc.