Disruptive 3D Printing and Using Assets More Efficiently with Dr Elliot Street (Inovus Medical)

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[General intro omitted.]

Chad Perry:

Today, we’re speaking with Dr. Elliot Street, co-founder of Inovus Medical, and award winning designer and manufacturer of medical simulation products based out of the United Kingdom. Elliot’s story of entrepreneurship and innovation is truly remarkable in that he and his partner started their operation with no capital whilst still in medical school, and yet Elliot has gone on to practice medicine while also managing their rapidly growing operation, and, on top of that, staying very active as a thought leader in the clinical entrepreneurship community in the UK. But it gets even better because Elliot and his partner have gone on to push the boundaries in 3D printing and even figured out an innovative way to monetize their innovations with a supplemental business model, which is kind of the holy grail of being a small business. So, Dr. Elliot Street, welcome and great to have you with us today.

Elliot Street:

Great to be here, Chad, and thanks for having me.

Chad Perry:

Well, let’s just dive right in and start with this crazy story about how you started a manufacturing career while in medical school. Tell me a bit more about that.

Elliot Street:

Yeah, yeah. So I think maybe the best thing to start off with is giving the listeners a bit of an idea about what healthcare simulation is, so they have an idea of what we’re actually manufacturing. And when we talk about healthcare simulation, we’re talking about products and sometimes services or software, but primarily hardware products, which are used to teach doctors and surgeons how to do their jobs. So that can be anything from mannequins for teaching CPR, right through to things that we manufacture, which are our surgical simulators for teaching people how to do things like keyhole surgery.

Elliot Street:

And at the time I was in medical school, my co-founder Jordan and I were talking about the way in which surgical education was delivered, and we both realized that with me going off to do a surgical training pathway after graduation and with him doing some research in the area of minimally invasive surgery, there was a real lack of access to, what we call, affordable, accessible and functional minimally invasive or keyhole surgery simulators. And we were looking at that and thinking, “Well, there’s going to be a paradigm shift in years to come that requires our surgeons to spend more time doing surgical training and surgical education and reaching a certain level in a simulated environment before going off and practicing on the patients, and right now, there is no way to deliver the high volume training required to facilitate that.”

Elliot Street:

So we saw that there was a need to take existing technologies and existing products, which were actually, in our opinion, quite expensive, so things north of 3000, 4000 pounds for relatively basic products, and there was a need to take those and democratize the access to them. So bring the price point down whilst also maintaining the functionality of those products and making them more accessible as well. And so, with that said, that was quite a big goal that we wanted to achieve and we were looking at doing this as a pair of students, effectively, myself still at medical school and Jordan just graduated from his undergrad degree.

Elliot Street:

And so when we were looking at this, we realized, “Well, if we’re going to start delivering a product to the marketplace which is considerably more affordable than the incumbents, and this is instead of a few thousand pounds, a few hundred pounds, and with more technology delivered as well for that price, that the only way for us to really do that is to cut out the middle man, which a lot of other people will be using, i.e. the third party manufacturer, and become the manufacturer of these products ourselves.”

Elliot Street:

So, as you can probably imagine, starting that as a fourth, fifth year medical student and a recently graduated undergrad, we had no money, no contacts and no real knowledge, but we certainly saw that there was a major need that needed to be solved and we had an understanding of how we would do that, and, as I say, that was by becoming the manufacturer. So we started out looking at this, and to give, again, the listeners a bit of perspective of what it is we manufacture, our very first product was a plastic box with a webcam inside. And that set up allows you to stream images from inside this box and those images would be similar to the images that we would see when operating on someone’s tummy or abdomen, so that allows us to put basics tasks inside the box and place keyhole surgery instruments in there and get a feeling for how those procedures are carried out.

Elliot Street:

Now, at this time, we were obviously looking to say, “Well, if we need to be the manufacturer of this, we’re going to work out how best to do that.” So we started off with a heat gun, a sheet of plastic, a drill in the garage, and we set to work around making our very first prototype product and our very first product. Again, we did this in a true lean startup fashion, so that was our startup factory, the garage and those tools, and then we cobbled together a basic website and stuck some products on there, and our original plan was to sell these directly to surgical trainees to use themselves at home.

Elliot Street:

And it was great, because within a couple of months of sticking our first product online, people started buying them, and we utilized that money to then plow further investment back into buying our first pieces of equipment, so instead of having naked flames to bend plastic boxes, we had special heat bending devices and various heat bending jigs, and then, again, as further sales came in, we were able to procure our first CNC machines, and then, eventually, moved to our first laser cutters as well. So that was our very, very first start to the products.

Elliot Street:

Now, it’s important to know that, again, important for listeners to have an understanding of the marketplace in terms of healthcare simulation. What we’re dealing in here is, relatively speaking, low volume products are relatively highly priced, so our products, whilst they are addressing the need of affordability, we’re in healthcare here, so we’ve taken a multiple thousand pound product and we’re delivering it for multiple hundreds, and then our products range from the low to mid hundreds right through the mid thousands of pounds.

Elliot Street:

So that puts us in a position where the fact that we have these products, which are relatively low volume, and we sell these in the low thousands of units per year, as opposed to the millions of units per year, and the relatively high price points and relatively good margin having become the manufacturer, what we looked at was to say, “Well how can we improve on our manufacturing processes, with a view to not only optimizing and scaling our manufacturing, but also looking to improve the actual end product, and also do that in a way that would allow us to keep these products and the new product price points down by reducing up from costs of development?” And that’s where we started to look to 3D printing to help us in that journey.

Chad Perry:

That is quite a journey. So I’ve got a couple of questions. One of the big ones is what it was like to be starting out of a garage with no manufacturing experience. Did you have any idea what you were getting into? Were you confident that you could just figure it out, or is it something you just wanted to solve that problem so badly that you then just kind of pulled in the manufacturing as necessary?

Elliot Street:

Yeah, I think the answer to that is both of the above. I mean, the thing I’ll preface this with is I’m really lucky to have a brilliant co-founder. So I think at the start we mentioned there that I was at medical school when we were doing this, and starting a manufacturing company out of a garage is not the typical thing you’d hear a medical student or a doctor doing, but having a co-founder who is the engineering side of things really allowed he and I to put our heads together and say, “Look, this a major issue that we need to solve. The only way we can actually solve this in a way that we know will have a paradigm shift in the industry of surgical training and patient care is to significantly reduce the price point of these products, and, therefore, the only option we do have is to become the manufacturer.”

Elliot Street:

So really, that was the driver behind the decision in the first instance, but then, I guess that youthful exuberance of thinking, “Well, how hard can it actually be to create a manufacturing company?” That was probably a good job we were starting this in our early 20s. Maybe a little bit later down the line, we may not have been quite so confident in our abilities. But, yeah, it’s one of those scenarios where we were driven by this need, we knew that we needed to solve it in a particular way, and we knew that it wasn’t really beyond us, especially with our combined skill set, and, as I say, a huge amount of this has to go to Jordan and his ability to work out manufacturing processes.

Elliot Street:

So he worked out the first CNC machine we had. Now, he hasn’t come from a traditional training engineering background, he’s a self trained engineer, but he initially worked out, “Well, how on earth does a CNC machine work?” And then, “How can we apply the CNC machine into laser cutting?” And then later down the line, “How do we apply that knowledge to 3D printing?” So I think it’s that thirst for knowledge and that willingness to fail, make mistakes, made them quickly, and then plow that information back into improvements has been a really important aspect to us, being able to do that literally from scratch.

Chad Perry:

Yeah, and that’s been a recurring theme that I’ve heard in a lot of these interviews and just in my work over the last 10, 20 years, is that the successful entrepreneurs, and now we’re talking the successful manufacturers, seem to have come from this background of failing fast, doing whatever it takes to get it to the next step, not trying to make it perfect, just iterating from wherever they happen to be, and it sounds like you were very much following that.

Elliot Street:

Yeah, absolutely, and I guess it goes back to everyone is quite used to people doing that in the software environment, aren’t they, where they make their minimally viable product, they get it out there in front of as many people as they can, and they iterate as fast as they possibly can. We looked at it and said, “Well, why can’t we do that from a manufacturing perspective?” In the first instance with our own products, we didn’t decide to get them perfect before we got them in front of the end users, we created what we think would be 80% of the way there, and then we got them out and we got the feedback from the surgeons, and we iterated as we went along, very much like the way that the software industry does.

Elliot Street:

Now, this is where the beauty of 3D printing comes in, into, I guess, the culture, and the way we’ve way the company from that perspective is that 3D printing further enhances our ability to take that approach to the manufacturing. It’s the minimally viable products and software based approach, but in the manufacturing arena, which, traditionally, people would never have thought that. Traditionally, people will go, “Okay, you want to be a manufacturer? Well, there’s huge capital and up front expense to go and have designs and then molds manufactured. Then we’ll have to do a run of X number of units before we start seeing anything. And if we need to make changes, there’s then further on cost, and away you go. And it’s a long old process and very expensive.”

Elliot Street:

Well, as I say, in the early days, we took that contrarian approach out of necessity because we simply didn’t have the money to do any of that. We didn’t have the money to go to a third party manufacturer even if we wanted to, to make those original prototypes for us. And, as I say, the ability to now take those lessons that we’ve learnt over those years of necessity and apply it to the newer technologies in 3D printing now is allowing us to accelerate, and grow, and iterate new products and new processes even faster than before.

Chad Perry:

Yeah, and you mentioned that mentality is found in the software development world of failing fast and iterating, and it’s funny because that actually originated in the manufacturing world, this idea of lean manufacturing started by Toyota about small incremental changes, and now we see it coming full circle back into the manufacturing world. And I would actually argue that a lot of the industrial software development that I’ve seen in my career seems to have not quite adopted that approach yet, and one of the reasons that I started this podcast and started doing these interviews is because that is a hard lesson to learn sometimes.

Chad Perry:

I have seen entrepreneurs, both in and out of manufacturing, set out to do something really big and to do it all at once, and it almost never works the way they expect it to, and so it’s much better for the business, I think for your personal health as well and stress levels, to just do one thing at a time. And in your case, of course, that was a necessity. So take me back to the beginning of your experience with 3D printing. Where did you start, and where have you ended up now?

Elliot Street:

We started like most people do with 3D printing, and when we refer to 3D printing, it’s what most people will associate with that terminology, and that’s what we call FDM printing. Now, FDM printing or Fused Deposition Modeling is the type of 3D printing where you have one of those little tabletop printers and you imagine a spool of string on the back of it, and effectively, we’re heating that spool of string and placing very thin layers of nylon or whatever the composite is down on a heated bed, and that then builds up whatever it is you’re looking to print. So that’s what a lot of people will associate with 3D printing and, really, that’s how the vast majority of people start with it and that’s the same in our case.

Elliot Street:

Again, Jordan, our CTO, he turned to me one day and said, “Look, we’ve sort of maxed out where we can go with CNC machining, and laser cutting, and heat forming. We really do need to look at how 3D printing can help us on a number of different levels,” and those levels are using it for prototyping, but more importantly, using it for our actual manufacturing of our products because of the things we’ve already mentioned. Because we’re doing, relatively speaking, low volumes with high margin at high price, we can manufacture a hell of a lot more, with a hell of a lot more scope for new product development if we bring 3D printing into our armamentarium.

Elliot Street:

Now, this was still really early on in the company’s history, and to give you an idea for this, Chad, our first factory was a combination of a double garage and the bedrooms. Our second factory was a rented facility underneath a pub in a town in the UK called St Helens, and that was a small rented facility, which if it was in New York, would have been going for a considerable amount of money because it was a very cool looking facility, but in St Helens it was nice and affordable and did the job for us. And we were still operating out of there when we looking and saying, “Well, let’s take this plunge on 3D printing.” And the great thing about where 3D printing has got to now and the technology is that, actually, taking the plunge initially on an FDM printer is not a risk that’s really going to jeopardize the health of the company. You can get FDM printers for a couple of hundred pounds right through to multiple thousands.

Elliot Street:

So we looked at that and said, “Okay, let’s take a risk on this and let’s do as we’ve always done, which is we’ll learn as we go along and we’ll just pick the right things up as we go along.” And, once again, luckily to have Jordan by my side, who looked at it and said, “Well, it can’t be really that much different in terms of the software and the way it works to the stuff we already know about.” So we bring in the first FDM printer, Jordan works out how to optimize it for things like small part manufacturing and also for manufacturing molds because we manufacture a lot of molds for injection molding purposes under gravity.

Elliot Street:

And so that’s where we started, and once we’d got to grips with that FDM printer, we added to our armamentarium of those printers, but as anyone that knows about 3D printing who has come across it before, when you see an FDM printed part, there are a number of drawbacks when it comes to FDM printing. So the first of those is generally in the resolution you can get. Often, you can’t quite get a resolution down to the sort of level that you would have with an injection molded part. And also, the ability to manufacture in higher volume. Often, with FDM printing, you’re printing just on the actual bed itself. It’s very difficult to utilize the air space above the printer bed, and so if you’re looking to do small to medium batch manufacturing over a period of time, that’s where you tap out on your limitations in FDM printing.

Elliot Street:

So, once again, we looked at this and said, “Well, okay, we’ve got this new technology, which we’ve now learnt about and we’re utilizing in this way, but there is other types of 3D printing technology, which have different applications, which we can also utilize.” And that’s when we started looking at the other types of 3D printing in the marketplace. So the main ones being SLA and SLS printing. And, again, I don’t want to be teaching a very, very clever audience how to suck eggs, so I won’t go into really how they work, but for us, when we looked at this, we said, “Well, we want to be able to utilize the 3D printer not only for mold manufacture and small part manufacture, but actually to manufacture our end user products.”

Elliot Street:

And the reason this conversation actually came around is because by this point of time, we’d designed a couple of products which were actually entirely 3D printed. Again, that comes back to the idea that they were relatively high priced in comparison to, for example, a plastic spoon at 0.01 of a penny, so we were able to utilize a more experience manufacturing process, and, again, because we were manufacturing in low volumes. Now, at this point in time, we were actually outsourcing the manufacturing of those parts to bureau printers, who offer brilliant service, in my opinion, where they’ve got the capital items, so they’ve got the right SLS or SLA 3D printer and you can go in and send them your parts and they’ll print them for you.

Elliot Street:

The problem for us was that that went against the grain of how we’d built our company and what we knew would be a successful way to grow a company that would last a long time, and that was the idea of, well, we’re now using a third party manufacturer, and that’s really caning our margins, and that will mean that we’re going to have to pass on cost to our end user, which we don’t want to because that’s not fair and that’s not why we’re here. So with all that said, again, we’d tested the water with these parts being printed by a bureau printer, and we said, “Okay, how do we bring this technology in-house?” And when we started looking at the difference between an FDM printer and an SLS printer, for example, we realized that we certainly had our work cut out for us again in terms of a learning curve.

Elliot Street:

For anyone that’s fitted an SLS 3D printer, a big production level one, they’ll know what I’m talking about when it comes to … It’s not just a printer. You need a couple of rooms and a whole infrastructure around those things to get them to work. But, again, we were unperturbed by that because going back to our vision that we’re driven by, which is we’re making a significant paradigm shift in the way we’re delivering, now, not just keyhole surgery for an abdomen, but these are simulators that are teaching surgeons how to manage airways and how to operate on the womb. We realize that, well, again, we must stay true to our view on that, and the only way to do that again is to bring this technology in-house. So that’s what we did.

Elliot Street:

In early 2019, we in-housed our first SLS 3D printer, a production level one, and this was a real game changer for us because this took, and I’ll give you an example of one of our products which we were outsourcing the 3D printing of to a bureau printer at, I think, about £650 per system just for the 3D printed parts, and by in-housing the technology we’re able to bring the cost of those parts down to just a shade under £40 per part. So it allowed us to make sure that we were able to maintain those robust margins to keep high growth of the company going forward, which is important, but also it allowed us to put a product into the marketplace which was a tenth of the cost of the nearest competitor with a better quality product.

Chad Perry:

Yeah, that’s a huge win, and that’s a theme that seems to keep recurring in these conversations is to earn more money with the people and machines that you already have, and even though sometimes it’s necessary to invest in capital equipment, you can do that in an intelligent way where you step into it, and it sounds like you’ve done that at every step of the way, particularly with the 3D printing, where you prototype the process, you test it out how that was going to work, and it allowed you to get a good baseline of what that cost comparison is going to look like, because sometimes that might actually be a cost effective long term option.

Chad Perry:

Now, I want to come back to the 3D printing, but I do also want to point out that all this time, you were still building your medical career. Is that right?

Elliot Street:

Yeah, that’s pretty much correct, yeah. Well, it kept me out of trouble, as you can probably imagine, with all that busyness. I graduated from … I trained in Manchester Medical School, in the UK and graduated in 2013, and then the way UK healthcare system is set up is actually brilliant for people who do see an opportunity to make a change and want to segue out of full-time training. So what do I mean by that? Well, after I graduated, I actually worked full-time as, everyone will know them as junior doctors. So the first two years of my junior doctor, which I completed in Oxford, and the way it works in the UK is, once you’ve done those first two years, you can actually make a decision to go into whichever pathway you wish next. So that would be GP training or surgical career, which is the one that I was on a pathway towards, or hospital doctoring, or whatever it may well be.

Elliot Street:

At that two year point, however, it requires a new application into a new job, and a lot of people will take a natural hiatus there because of the way the system works, you’ve really been going like the clappers for anywhere between 10 and seven years. My hiatus was to say, “Okay, I will come out of my full-time training program here and look to join Jordan full-time in the company,” and this is late 2015, so we’d been going for a good three years before. Yeah, and it was at that point that the pair of us came together.

Elliot Street:

Now, again, another great thing about the UK and also a point to note is that I love my job as doctor. I really enjoy it and, actually, I miss it every day that I don’t do it, but for me, there was an opportunity that I was looking at here to say, “Well, on a daily basis when I work as a clinician, I can affect one patient at a time, and maybe anywhere between 10 and 40 patients I can positively affect in a day, so my own ability to help patients and affect them positively is actually limited, there’s no way to scale myself.” Whereas, the opportunity I was looking at was to say, “Well, we can make that paradigm shift in the way we deliver training,” and I think we’re getting there now with some of the products we have in the marketplace now and some of the ways in which they’re being adopted.

Elliot Street:

And I looked at that and said, “Well, hang on, I can really scale myself and I can scale Jordan as well, and we can get to the point where we’re positively affecting thousands, tens of thousands, hundreds of thousands, if not millions of patients a day by improving their care through improved education and improved training of all my colleagues worldwide.” So that was what allowed me to say, “Okay, yeah, you know what? I’m really lucky in this scenario that I love my day job, I love being a medic, but I’m lucky that I’ve got this natural hiatus here. I’ll take a chance, let’s see how we get on for the next 12 to 18 months, and if Jordan and I realize that, actually, that opportunity isn’t what it was or we’re not able to make the impact that we need to, then I’ll go back into my medical training career.

Elliot Street:

Now, we’re four years on from me coming out of full-time training and I’m not going back in anytime soon, however, the great thing is you’re able to keep your hand in in the UK, so I do practice medicine to keep my standards going, and to keep my medical brain turned on, and to make sure that I’m still being utilized as an asset to the NHS, which is really, really important, I just don’t do that as my full-time job. And, again, in the UK and the way in which things are structured in the UK, we’re really lucky to be able to do that. And so it means that I, almost selfishly, get to carry on doing that day job, which I love, whilst driving forward this big change making organization for the rest of the week, as it were. So, yeah.

Chad Perry:

Wow. What a way to make an impact. You’re starting from scratch, you’re bootstrapping this whole thing. You’re not only keeping your competency in the core problem that you’re trying to solve, but you’re also figuring out how to build a business. And so what I’m hearing on the manufacturing side is two different points of curiosity from my end as an engineer, and that is more about the 3D printing and also, how you are scaling your digital systems around this because, obviously, you have things like 3D files, but you also have keep track of orders and you have to keep track of … I think we talked about some sort of switchover you had to make when you went into the 3D printing.

Elliot Street:

Yeah, absolutely, and, again, timing is key with everything. I think the thing I hadn’t mentioned was that the very first product we made, if we had tried to make that four years earlier, or five years earlier, it wouldn’t have been possible because the technology didn’t exist to allow it. And what do I mean by that? Well, it was quite simple technology. It was a really good quality webcam and the software to go with that webcam to drive it, and I think the same is true of the other things we’d now require to scale up further is the timing for us has been amazing. When we look at, well, what software and what platforms were we using, well, I’m sure everyone’s got onto this idea and they’ve probably realized this is how we set the company up, but we’re hugely vertically integrated.

Elliot Street:

So whilst we’re here talking about manufacturing, we actually do everything from the new product development, right through to the prototyping, through to the manufacturing, then through to the sales and marketing, so we have a commercial team as well. So when we’re looking at systems, and systems are key. I’m a big believer in systems, especially as we scale quickly. We’re having to look at systems that fit that extremely vertically integrated entity, but also that have that crossover between the very different beasts, which are product engineers, software engineers, and commercially minded sales and marketing professionals.

Elliot Street:

So that has been a challenge, but, again, because of the timing and because of where we are in life and all of the incredible products which are available to us as startups and scaleups, we’ve been able to trial products, and drop them and then pick them up, and, again, it’s much like that fail quickly idea of you mustn’t be afraid to try something and you mustn’t be afraid to bring a new system or bring a new technology in, but then you also mustn’t be afraid to cut it if it doesn’t work for you.

Elliot Street:

So in terms of the software side and specifically looking at manufacturing, and, again, Jordan is the real, real deep expert in this, but we utilize our CAD software, so we utilize SolidWorks, for example, and in terms of how we’ve integrated going from your CAD designs right through into the 3D printing, this is where making your decision around what 3D printer manufacturer and supplier do you use is actually really quite important because each of them have different types of software which will drive the 3D printing. And what do I mean by that? That means taking your designs, putting them into a software which allows you to nest all the parts and then tell the 3D printer to go off and print those parts.

Elliot Street:

Certain manufacturers have proprietary software, others use open source software, but it’s really important to know, well, hang on, does a software we utilize for our design work seamlessly, or does it work 50% well, or does it not work at all with the software that’s going to be utilized in the 3D printer, and making sure that they all marry up nicely. Now, we’re very lucky to have CAD software which works really, really well with what we call 3D Sprint, which is the software which we utilize in our 3D printing platform, and so our product engineers are able go and create a CAD design based on me coming in and saying, “Guys, here’s the new product that we need. This is what it needs to do functionally. This is the problem it’s solving from a medical standpoint. Please go away and design that.”

Elliot Street:

They can then create their designs and export it into the software which drives the 3D printer, and then nest all that, dump it into the 3D printer, and a day or two later, out comes a finished prototype or a finished product altogether. And so that ability and the importance of matching up those technologies is great, but, as I say, it doesn’t just end at the product or the 3D printing side of things. I think while we’re talking about growing or scaling a manufacturing company, all those other systems, like your CRM system and your accounting software, those are all extremely, extremely important.

Elliot Street:

Now, I’m not here to start giving plugs and promoting those various bits of software, I don’t work for any of those companies, but there are certain pieces of software that you try and you think, “You know what? This has been thought out from someone who wants to take the one man band in his garage, and service their needs, and grow with them all the way through to being a four or five thousand person manufacturing company with 10,000 skews and all these other manufacturing processes, and being able to manage that.” And there are some brilliant, brilliant applications that exist for that, but at the end of the day, it’s all about trial, error and not being afraid to say, “We tried that one. It didn’t work. Let’s see what else is available,” because there is so much, there’s so much out there.

Chad Perry:

Yeah, and then on top of that, you’ve got CRM, and fulfillment, and returns or support. All of those are systems that need to be put in place.

Elliot Street:

Yeah, absolutely. And, again, from a manufacturing standpoint, the most important systems are how do your manufacturing lines look? That’s completely analog in a lot of cases, is how do the benches look with the parts and how have you systemized that? Now, then you can take that a step further and you can actually take those systems and you can dump those into a digital system as well. So that’d be things like your work instructions, and having that digital blueprint, which then matches your analog day to day is very, very important.

Elliot Street:

But, yeah, I totally agree with you on things like the CRM and then accounting software, your manufacturing software, your CAD software, all of those things, if you can link them it’s perfect. It’s not always possible, but I think the most important thing to do is say we are in a time in life where there is an abundance of technology to allow us to be successful from nothing, and the barrier to entry on those technologies is basically nil now. You just add them in as you go, and you can add these things in on freemium models or you can add them on four, five pounds a month model in the first instance, and then scale as you go. And I think that’s a really exciting thing for anyone, whether or not they’re in manufacturing, or a technology startup or whatever it is. That’s one of the powerful things to being in the startup world right now, I think, is all that technology there at your disposal.

Chad Perry:

And this is an interesting perspective because if you talk to somebody who has been in manufacturing for, say, 30 or 40 years, and they came out of an era where software was a large, fixed package, it was a large capital investment, you had to have servers in-house, so there wasn’t this option to have the cloud model, to have subscription, to have freemium, and all of those things have made it possible not only to be much more productive at a lower cost, but to change the risk model around where you don’t have to take all this risk up front.

Elliot Street:

Yeah, absolutely, and that’s what we’re getting out there, is to say the startup and scaleup ecosystem, the game has been changed, and it’s been changed in the time that we’ve been running our company. I mean, a good example and something we haven’t actually touched on is websites. We started in 2012, the platforms like Squarespace, and Wix and these sorts of things were just coming through at that point of time. Prior to that, if you wanted a website, it was still very much in the position of teach yourself how to code and build your own website rudimentarily. Again, we’re lucky to be in position where the chief problem solving officer in our company, Jordan, did that the first time we ever had a website. He learnt how to code and built a very, very basic website, and that meant that it didn’t cost us anything, other than a couple of pounds for the domain name.

Elliot Street:

But nowadays, if you want to do that, you can have a website that looks like it cost £50,000 and you can build that in a weekend for no capital outlay. It’s incredible. And then you can link that to your cloud accounting software and your cloud CRM system, both of which would cost you either nothing or very, very little.

Chad Perry:

Yeah, and these are two lessons, and I would say one really powerful one. The first is, those manufacturers that I mentioned who have been in business for a while, you’re their competitor, and your story is remarkable, but these things that make it possible for you to do this are accessible to everyone, and that’s really the big story. Not only are startups taking advantage of this, but now a lot of entrenched companies are as well. And if you’re listening to this, and you’re one of those companies that is kind of set in your ways and you’re not taking advantage of what technology can do to make you more productive and to lower the risk that you’re taking, then you’re going to have a real problem, potentially.

Elliot Street:

Absolutely. I totally agree. It makes it really exciting for companies like us because we are so fast moving, we are so amenable to adopting all those various technologies, whether or not it be the software available to us, or the manufacturing technologies available to us, or the bridge between the two, which I think we’ll come on to when we’re talking around how to extract even more value out of capital assets like 3D printers. Yeah, I think if you’re a large … Yes, we all know that there are limitations there. At some point in time, they’ve become so systemized that to make a change it’s actually difficult, and that’s where systems actually become a slight problem. They can inhibit growth slightly, so it’s getting that balance around systems and use of technology, but that you’re not so entrenched to something that reversing will take a few years and millions and millions of pounds.

Chad Perry:

Right. And that was actually the second lesson was that you’re going to be more competitive, and more agile, and able to lower your risk if you’re able to integrate these systems, and all of these small tools that are not the hallmark of the cloud based, subscription based, low risk models, they open up their APIs so that off the shelf tools like Zapier, which is just a no code or a low code integration tool, or junior developers that aren’t really that high paid can do a lot of this work to bring these systems together. And so that was the second lesson that I wanted to mention earlier. That’s a big part of what you guys are doing.

Elliot Street:

Yeah, absolutely. I think the best example of that, actually, I can give is Stripe when we’re talking about APIs and how well thought out it is. And going right back to what we actually do as a company and the idea that we actually started with, which was the real game changer to the industry, was to say, “Not only are we going to make our products considerably more affordable than the incumbents and improve on the functionality, but we’re going to change the way in which you access this technology as well.” And so what we did was we became the first people to actually make our simulators available for sale directly online, directly to surgeons themselves.

Elliot Street:

So that brought with it another learning curve early doors was to say, “Well, how do we build an e-commerce business?” Because that’s technically another arm to what we do. In that idea of vertical integration, there’s a big chunk of our business is e-commerce. And, again, that come back to this idea of saying we’re just so lucky we’re in a scenario where technology like that of Stripe exists so that you can seamlessly integrate that into a cloud based web portal, such as a Wix or a Squarespace, such that it looks like it’s completely embedded, and to the end user, they wouldn’t actually know what’s driving that in the background, and that then allows you to automate everything that you’re doing from the backend.

Elliot Street:

Now, the reason I touch on that is because when you look at how we can actually leverage the 3D printer, and, again, I keep coming back to it and I know we’ll touch on this, you actually have to take this holistic approach to do what we believe is the best way to get the most out of your 3D printing technology, and that holistic approach is saying, “Well, I’ve got my capital item over here, my 3D printer. I need a way of being able to leverage technology like we’ve already said to deliver systems which are scalable and repeatable for me in-house.” And those systems being, taking a 3D printer for example, those systems being putting in the various designs or the various parts into that 3D printing software, printing it, tracking those parts in the post processing, taking orders and delivering things to customers.

Elliot Street:

And there’s three or four bits of, as we say, cloud based technology which didn’t exist even five or six years ago, which now exist to allow people to do that in a really smooth, really well systemized way and provide a huge value to the company and the end users.

Chad Perry:

The manufacturer of the 3D printers were impressed by what you were doing. Can you tell me more about that?

Elliot Street:

Yeah, absolutely. I think I’ve used a lot of various brand names and hopefully that’s okay, but I’ll be honest, the brand of 3D printer we use is 3D Systems, and we use one of their production level SLS printers. And so when we were going through the process of buying that, which is a considerable capital outlay, that is an expensive piece of equipment, we were standing and talking to the team that were going through that process with us, and they were talking to us about, “Well, what do you actually do? How are you going to use it?” And we were talking about the fact that we do these relatively low volume, so a few thousand to tens of thousands of units per year, product which has the high sale point with a good margin, and so we’re actually going to manufacture our products.

Elliot Street:

So when we’re talking about addictive manufacturing, which is a big buzz word that everyone loves talking about, we’re actually doing it. We are actually using additive technologies to manufacture, as opposed to, although a lot of people call it additive manufacturing and I don’t want to upset those people, but if you’re just using it for prototyping, that’s not additive manufacturing in our view, that’s just using it for prototyping. And there’s also the idea of additive manufacturing where people are using the technology to use very, very small batches, and, actually, very quickly they’ll get to a point where they can’t utilize the technology to scale their delivery of their product and they’ll have to switch over to other technologies, such as injection molding.

Elliot Street:

Now, there’s nothing wrong with that, and that’s still technically good quality additive manufacturing, and, actually, a very good approach because it’s a very similar approach to how we’ve built our business, which is utilize the technology and if run out of runway with that technology, you must look to the next piece of technology. However, our view is to say, and what we were saying to 3D Systems, was we don’t plan on running out of headroom with this technology. We actually plan to scale our manufacturing processes using additive manufacturing. And, again, when it comes to SLS printing, the reason you can do that is because if you’ve got relatively small parts as well and relative uniform parts, you can maximize all of the three dimensions within a print bed in SLS printing.

Elliot Street:

So you can set off a print run and you can print over a 40 hour period, or however long the print run may well be in terms of how much you’re maximizing the print bed or on the size of the printer you have, you can print thousands and thousands of parts in a 40 hour run, and that’s 40 hours of someone working 40 hours nonstop, which puts you in an incredible position, and you then turn your printer around and put bits back on there.

Elliot Street:

Now, what we were saying to 3D Systems was that some of our parts are quite large and, therefore, they fill up quite a bit of space and you could technically nest lots of other parts inside these. Now, the problem we have is there’s only so many small parts we need to nest inside them, and so, eventually, we’ll get to a point where we’ve maximized the amounts that we can put into the printer and, actually, there’s this spare space here.

Elliot Street:

And they actually turned round to us and said, “Yeah, we know this. This is actually a problem we have with a lot of our customers. They’ll buy a printer and their level of utilization of this technology is really, really low, and we’re sitting there saying, ‘Well, guys, isn’t there other ways in which you can use licensed technology? You’re only printing maybe 10% capacity, or you’re using it in a real uneconomical way, like you’re printing a really big part and there’s all these other parts you could fit inside that, that you could be printing if you had the requirements for them.’” And a lot of their customers will say, “Well, look, we’re not too bothered.”

Elliot Street:

Well, a lot of those customers are very, very big firms. They’re large multinationals who aren’t too worried about that, whereas a high growth startup or scaleup looks at that and says, “Well, hang on, like with everything we’ve done in our business, which is we need to make sure that we’re leveraging and utilizing all the technology we’ve bought in-house to absolutely max, whilst not derailing our primary purpose and getting in the way of all our systems and our other growth. How can we leverage technology and the possible technology that we have here?”

Elliot Street:

So when we were hearing this from 3D Systems and we were looking at this, we said, “Well, actually, there’s an obvious way of doing that,” and the idea that we were looking at and we spoke about with 3D Systems, and, actually, we’ve had quite a bit of coverage on from them following on from discussing this, was the idea to say what were doing when we first started out in 3D printing? After we’d realized that FDM printing worked and we could actually print full parts for the end user, we went to a bureau and that bureau just prints for other people, but what they have to do is they have to take lots and lots of different people’s parts, bring those parts together, and then print them in one big print run, and then send them out to all the end users.

Elliot Street:

So our view on this was to say, “Well, can you have a hybrid bureau type set up, where your primary parts are being printed, you know that you’re going to fill up 80% of your print bed or your print volume with your own parts, and that doing that in-house, as we’ve already mentioned, is considerably more cost effective than outsourcing it, but, actually, there’s an opportunity here to make it even more cost effective, and the way in which we do that is to say you can act as almost as a pseudo bureau, as one may call it, where you open up the chance for other companies to allow you to print their parts in the same way that a bureau would, but unlike a bureau printer, you’re in a position where you’re not relying on those parts to pay the salaries and keep the lights on, so you’re in a position where perhaps you can charge slightly less for the services and also you’re then in a scenario where you’re making money from, effectively, dead space in the printer.”

Elliot Street:

So that was how we looked at it, and that was something that our 3D printing manufacturer suppliers, 3D Systems, looked at and said, “That’s exactly how this technology should be leveraged and utilized.” So, yeah, they backed us and said, “That’s a really great idea.” Now, I must say that, right now, we’re not making that service publicly available because, as you can probably imagine, there’s a huge amount of systematization going back to the idea and importance of systems, which has to go into that to make sure that it works.

Elliot Street:

So we’re playing with that idea right now, but we know that it holds a huge amount of value and it holds a huge amount of value not just for us as the manufacturer where we’re saying, “We can now gain a secondary income from this machine over here that’s running pretty autonomously anyway, where we have some dead space and we can fill that space up.” We’re able to charge a good premium because it’s an extremely expensive piece of technology to acquire and then run, and, therefore, you are within your right as the bureau printers and anyone else that provides printing services is to charge a relative premium.

Elliot Street:

But we don’t have to charge such a high premium so the other people that are deriving value from this are the startup and scaleup communities both in manufacturing but elsewhere who may say, “Okay, this is cool. I either want to print small batch parts before I, again, run out of headroom and go to injection molding or other technologies, or I want to do some prototype printing, but I have limited money, or I have limited resources, or I have limited access to those potential partners that could print that for me. I’m now able to access this technology, which there’s no way I’d ever be able to access at this stage of my business otherwise, at a reduced price point and potentially reduced lead times as well.”

Elliot Street:

And that means that we’re in a scenario where we’re deriving huge value for us as an entity, our investors or whoever it may well be, all our stakeholders, but also potentially deriving massive value into a wider community with a technology which has just got so far for its utilization is anywhere near where it needs to be, I think.

Chad Perry:

Mm-hmm (affirmative). Yeah, and there’s so much to unpack there. I mean, there’s so many points to this lesson that the world is becoming much more competitive due to this technological revolution, and what I’m hearing is there’re kind of three different players in what you just broke down and multiple lessons of using your assets more productively. And so I hear the monolith, which is the big, large manufacturer that may have some of these 3D printers, but they don’t really consider them to be a primary asset, and so they don’t really care if they’re fully utilized.

Chad Perry:

That may be fine for a large manufacturer, but a small manufacturer cannot afford to waste utilization like that, especially when it’s your primary asset, and it sounds like that’s actually one of your competitive advantages is that you are using this thing that is normally a secondary asset as the primary capital equipment in this part of your business. And you’re not only figuring out how to utilize the physical space of the 3D printer to maximize your production runs, but you’re also figuring out how to make that space available when you as a company don’t necessarily have the orders to fulfill that, and you’re doing it at a competitive price point, which should be a red flag to the third party in this equation, which is the bureau printers that are relying on this as their sole income.

Chad Perry:

So this truly is disruptive, and it really just comes down to using your machines and your people more productively.

Elliot Street:

Yeah, I totally agree, and, actually, the idea of taking this expensive capital item and saying, “Where can we maximize its value?” Well, just bringing it in-house, and I’ll go back to that point I touched on earlier in that we’re taking a part that we used to pay £650 per part for and we’re printing it for just under 40, so when you look at the maths there, every time we print one of those, we do the maths and say, “How many of those parts or that product do we need to sell and therefore manufacture and print before the cost saving alone has paid for the printer?”

Elliot Street:

So even without this idea of opening up the technology to others to further maximize the asset, we’re looking at going, “Actually, because we’re not using this for just prototyping and small batch stuff, we know that once we’ve actually sold this many of this one product, and by the way, we can make unlimited number of products on this thing because it’s not like an injection mold where you can only do one thing with it, it’s part and product diagnostic, which is brilliant, but if you take one product alone and say, “Here is our cost saving per product. How many of those do we need to sell until the cost saving that we otherwise would have made because we’ve outsourced it pays for the cost of the printer?” And we’ve not far off doing that within the first 18 months of opening the system.

Elliot Street:

So that’s the first way to look at it and say when people look at this and go, “Well, that’s a really scary capital outlay,” I always flip it back and say, “Actually, if you can find out a way of using that capital item to actually generate new revenue, i.e. create new products you can sell, rather than just prototypes and very, very small batch stuff, then it’s going to pay for itself, regardless of how else you utilize it.” Then on top of that, we’re saying, “Well, let’s drive the value of it even more and say, ‘Can we actually derive more value from each print run we do?’ Which actually does technically bring our cost per part down by utilizing more of the powder and more of the substrate which is in the print bed, which is, again, a unique way of thinking about it.

Elliot Street:

And so, all of a sudden, when you pull those factors together, taking the risk to buy such an intensive piece of equipment makes total sense, but you have to have, I think, the underlying business model, the underlying product portfolio to enable you to do that.

Chad Perry:

Yeah, and that brings me to kind of a broader question. From your perspective, in your opinion, do you think that more manufacturers, more small manufacturers could or should take advantage of this idea of going back to this vertical integration that gives you such an advantage, considering that we now have cost effective and simple online technology that can make that financially viable?

Elliot Street:

I think the first thing to say on that is that everyone’s business is going to be different, isn’t it? And that’s the first thing to say. And I think that going with a prescriptive vertical integration is the only way to go, that would be silly for me to say, but I am a true believer in the value of vertical integration, and I think people maybe listening to this going, “Well, okay, Elliot, it’s all well and good. You’re in medical technology, so everything’s going to be really well priced.” Well, look, let me put in perspective for you. We’re selling a product at one tenth of the cost of our competitors. We could sell it for three or four times the amount we sell it for and we’d still be lower than our competitors, but we choose not to because that, for me, doesn’t do what I and Jordan, my co-founder, want to do, which is vastly change the environment.

Elliot Street:

So people listening to this could say, “Well, it’s all well and good. You get to charge ridiculously high prices.” Well, we’re not because we’re not charging the prices we probably could do for our technology. We’ve just taken that view that it’s going to be really, really hard, and it’s going to be difficult to create something where one minute you’re thinking about what is the anatomy of the womb, and what pathology needs to be in there, and how does that need to look, and how do I then communicate that to a product engineer or a special effects designer?”

Elliot Street:

And then the next minute you’re thinking about balance sheets and PMLs. And the next minute you’re thinking about 3D Systems and their vast array of different 3D printers that you can bring in. And then you’re thinking about the processes for not only running that system, but the processes for post processing and making sure that the parts come out as good as if they were injection molded. And then the next thing you’re thinking about is, “Oh, I’ve got to do some e-commerce.” That’s not for everyone, but when you get it right, and the thing I’ll say is, we’ve been going at it for seven years and it takes time and you have to be patient, but you have to go at it hard and fast every single day.

Chad Perry:

Right, because you’re the competitor.

Elliot Street:

Correct. I’m a huge advocate of vertical integration, as I said at the start of the this particular piece. I can’t say that it’s definitely for everyone, but I will always advocate it. And when I was speaking to, for example, I’m luck enough to … I think we mentioned it earlier, I’m lucky enough to sit on the NHS England Clinical Entrepreneur Program, which serves to help other clinicians who have seen an unmet need that they can solve in healthcare, and it serves to keep them in healthcare whilst also solving that unmet need. And so when I am at those events and speaking to the other entrepreneurs on the Clinical Entrepreneur Program, I always talk about the importance of vertical integration and how, if you can get it right, it puts you in such a good position, not only for scale, but for building something that’s going to last for a long, long time because you can control all the variables.

Elliot Street:

People, and I hate to bring up the subject, and probably, well, we’re almost an hour in and we’ve managed to avoid talking about it, but Brexit being one. People always say, “Well, how’s Brexit going effect you?” And my response every time is that because we’re so vertically integrated, we’re in a position where we can tweak things in one piece of the business to allow us to maintain, really, the status quo elsewhere because we own the whole chain of events. And that’s really the best way for me to describe how much of an advocate I am for vertical integration.

Elliot Street:

And coming back to the idea of your point on should people look at that and go back to this old school approach? It’s amazing, isn’t it, because it’s an old school approach that a couple of lads took out of a garage, where they were like, “Here is a problem we need to solve, which everyone else is just solving purely with software.” This is something I didn’t really mention at the start, a lot of the products in our category, people are saying, “Can we solve that need with just VR?” And the answer often is no, because VR doesn’t give you the feel of things and the realism of how tissues feel, for example, so you do need something tangible.

Elliot Street:

And so we took that old school approach to say, “We can’t solve it with just software. We need to solve it with hardware, therefore we’re going to build a manufacturing firm, but we’re going to have all the vertical integration around that.” And it comes back to the idea of saying the things that have allowed us to do it is timing, which is all of those pieces of technology, whether or not be the manufacturing technology or the systems and the software that allows to do that, and I think that’s the key take away for me, is I don’t think there’s ever been a better time to build a vertically integrated powerhouse that, on the surface, is a small startup, but when you peel back the onion, you realize it’s actually in a really, really good position for growth and to do well.

Chad Perry:

Yeah, and it sounds like your advice there is that vertical integration can be a great option if you’re on top of the business, and especially not down in it day to day getting lost in any one particular area, so it’s about systems. And, unfortunately, that’s where we’re going to have to wrap it up. So I want to end on two quick things. One is just if you had to leave everybody with one quick take away, what do you think the most important thing would be? And then the second is how to get in touch with you if people want to contact you and for what that might be.

Elliot Street:

The take away for me, when we’re talking about startups and scaleups and building things, take away for me is find someone that is the complete opposite to you and make them your co-founder, because it’s really hard and it’s a really lonely place, startup and the scaleup, and even as you grow beyond scaleup, it’s a lonely place, and regardless if you’re an engineer that knows loads about medicine or a medic that knows loads about selling and systems and manufacturing, there’s always going to be parts of your knowledge base that are going to be lacking. And if you can find someone that is willing to work as hard as you, and that is as committed and is almost as tied in as you are, and the only way to do that is have a co-founder. You need to find that person that fills in all those gaps and you need to hold onto them. And that’s the single biggest reason that we’ve got to where we are, because myself and Jordan are total opposites, but also think very, very alike. But we fill in each other’s gaps and we compliment each other hugely.

Elliot Street:

So, for me, every time I say to someone who’s saying, “I’m looking to start a business,” I say, “Tell me about your skill sets,” and they tell me about them. I say, “Tell me about the other skill sets you’re going to need to make this a success,” and I say, “Go and find someone that you trust, that you’re going to enjoy working with every day and make them your co-partner.”

Chad Perry:

Yeah, great point. And how to get in touch with you?

Elliot Street:

Yeah, so I’m on LinkedIn, so that’s Elliot Street, you’ll find me there. And then, of course, you can get me on my email, so that’s Elliot, and that’s spelled the usual way, with two Ls and one T, @inovus, I-N-O-V-U-S.org.

Chad Perry:

All right. Well, thank you so much, Elliot, really appreciate it.

Elliot Street:

My pleasure. Thanks for having us.

[General outro omitted.]