Protolabs' Pivot from Prototype to Production
Protolabs is a technology-enabled manufacturer rooted in nearly 25 years of manufacturing parts for prototyping and production. Our software-first factories are often recognized in the industry for quick-turn, low-volume parts, but there was demand from our customers for more advanced capabilities and cost-efficient parts at higher volumes. Customer demand originated from the desire to not only prototype but go to production with the same supplier.
Speed had been our priority in our first few decades of existence, but we wanted to expand our capabilities. So how do you do make a fundamental pivot like that effectively?
Expanding Capabilities through a Manufacturing Marketplace
After an extensive strategic review and global search, we acquired a broader manufacturing footprint in 2021 in the form of a marketplace platform built by Amsterdam-based Hubs (formerly 3D Hubs). The appeal: Hubs strictly vetted suppliers and held them to performance standards, taking accountability when things didn’t go well for end-customers.
We chose a marketplace over a traditional manufacturing company to quickly obtain the customer-desired differentiation of broad capabilities and high capacity. In addition, vetting and signing on new manufacturing partners was both quicker and less capital-intensive than building expanded capabilities in our owned manufacturing facilities.
We are now optimizing the capabilities of our manufacturing network along with our digital factories. In the end, our goal is to be able to provide choice, speed, lower costs and consistent quality from prototyping to production.
An Education in Business Integration
The integration of these digital businesses has been a significant source of learning. The multi-year project to combine the two companies and their complementary capabilities touches every department within Protolabs and Hubs.
The following is a summary of learnings and best practices we’ve applied as we move closer to our goal of becoming a true prototyping-to-production digital manufacturer:
Customer-driven experimentation is key: Strategies on paper are interesting. Success is only determined in rolling out a capability to your customers and evaluating their valued feedback. From our first days, we ran many experiments to communicate and capture value in the form of growth and happy customers. In short, some of the experiments worked great; some did not. The overall experimentation experience was vital in getting to where we are today.
For example, our early goal was to hold off on rolling out advanced capabilities through the network, including tighter tolerances and volume pricing, until we could offer the polished e-commerce experience our customers expect. But we learned our customers valued access to the entire offerings over a perfect experience. With that, we pivoted to short-term integrations within our e-commerce system that while not seamless, unlocked what our customers needed. For example, advanced capabilities through the network were accessible early in the integration via a link that automatically migrated the customer’s CAD file from Protolabs to Hubs’ ecommerce platform for ordering.
The pivot helped us achieve 80% year-over-year revenue growth at Hubs in Q2 2023. We were able to reach customers earlier in the process that we otherwise would not be able to serve. A major aerospace manufacturer, for example, needed prototype kits to validate design for a transportation project. The company used our factory’s quick-turn CNC machining capabilities to meet a fast-approaching deadline for first-test trials. Once timing was more flexible and more parts were needed, the company then leveraged our manufacturing network for cost efficiencies as part volumes grew.
We continue to work on building an all-in-one e-commerce experience in the meantime, focusing on delivering an expanded machining options during quoting and ordering, with our remaining service lines like 3D printing and injection molding following shortly behind.
Prioritize managing internal change: Protolabs is undergoing a fundamental identity shift. Direct communication with over 2,500 employees is critical to settle concerns throughout the process while fueling the flames of the internal adopters who share their excitement about the change. We created a comprehensive internal communication plan with monthly manager, quarterly all-employee, and team meetings.
In each, the communication centered around four pillars that needed to be regularly communicated throughout the integration:
- Strategy and customer benefits
- Validated customer wins, learnings and use cases
- Progress and plans with what we got done and what’s next
- People, process, and systems changes and “what does it mean to me?”
We led with mission, vision, strategy, and the customer in the early days with the goal to align employees on not only what is changing, but also what winning looks like in the process. There was, and continues to be, risk as we reinvent the brand. Validated market learnings were key. We engaged employees with their concerns about competitive positioning, how we would grow and concerns about the employee experience. Because they care about it, the customer experience was an initial concern with our team. The challenge is taking risks and accepting the associate dissonance with a temporarily degraded experience. Perfect is the enemy of learning.
We shared customer wins at every chance. They are confirmational to the believers, inspirational to the fence-sitters, and challenging to the skeptics. As with any change, you’ll find all three groups, and part of managing the change and the goal is to get everyone to be a believer.
The first three pillars are important, but the thing every employee wants to know is “How does this impact me?” As changes to roles, processes, and systems began, we were thoughtful about defining the changes, explaining the why behind them and what’s in it for the employee, and being clear about what is not changing. This pillar was likely the most impactful communication topic, but it relied on getting the first three right.
Identify early champions: As our employees learned about the new opportunities that would come with this new offering, early champions who shared excitement about the future identified themselves. The next learning? Double down on those employees and identify opportunities where they can fuel that passion to advance the integration. At Protolabs, we created new positions that would allow them to lead throughout the integration process. One example is business development manager roles offered to two strong members of our sales team who were excited about the new value proposition and effective at spreading the message to target accounts. We also targeted these employees for recognition and involved them in designing the future.
Our customers identified how we need to evolve as a digital manufacturer, and our solution through acquisition will enable us to best meet their needs. But without strong leadership and a commitment to comprehensive communication around the change, even the best laid plans will fall short of goals.
Dan Barsness is the integration leader at Protolabs.
