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Business pioneers are tearing down traditional business models and rebuilding with new strategies to remain sustainable today and in the future.
Chad Rogers grew up watching his father work long days at the bench.
"When you own your own laboratory, you only work half days, so pick which 12 hours of the day you want to work," Gene Rogers used to tell him. Eventually, even working 12-hour days was not enough. As the economy wilted and new technologies gave dentists more and less expensive restorative options when choosing laboratory partners, "we were getting beat up on price," the younger Rogers says.
Not one to stick with the status quo, Chad Rogers developed an innovative business model to help his laboratory do more business in less time.
"I wanted to rethink and reinvent," he says. "I was tired of being caught up in the monotony when everything around us was changing so rapidly. I feared that if we did not change our model, we would soon have no laboratory to operate."
Rogers developed one of the many new business models that are being implemented by industry entrepreneurs. These laboratory owners have embraced the disruptive nature of the current business environment and have set out to find new and profitable opportunities. While the number of laboratories are dwindling around the country, projections indicate that in the coming decades, as the US population continues its upward climb, the demand for dental care will increase; it is just a matter of who will be providing it and how.
Rogers, along with three business partners, wanted to tap into the growing patient demand for same-day concierge dental services. They started an imaging company called Smile Design. With cars outfitted specially to transport digital intraoral scanners, they visit dental offices and perform the impression scans themselves—without touching the patients. The digital data is then sent to the laboratory for design, milling, and finishing, and delivered back to the dental practices the same day for seating. Such personalized services are highly valued by both the dentist and patient, but are expensive.
The model is working for more than just Rogers, his partners, and their clients. Rogers’ family business, Professional Dental Laboratory Corp. in Elkhart, Indiana, has been around since 1968, and Rogers says, "June of this year was our laboratory’s best year ever in business."
The traditional dental laboratory business model that once flourished under Rogers’ father is becoming more difficult to sustain. However, the dental laboratory industry remains a financially healthy multibillion-dollar business, and that likely will not change in the near future as baby boomers enter their golden years and the US population increases exponentially. The question that forward-thinking industry experts are asking is what types of business models will be most successful for laboratories tomorrow and decades from now.
New concepts range from those as progressive as Rogers’ mobile imaging company to ones as simple as streamlining workflow to make laboratories more efficient. Some laboratory owners are finding new and different approaches that are extensions of their core business; others are expanding to increase their revenue. One thing is clear: This is a new era of opportunity.
Finding a Niche
The prevailing sentiment in the industry is that laboratory owners need to tear down, rethink, and rebuild—not necessarily the core of their businesses, but their business strategies.
"We have to realize that we need to start thinking differently than we have in the past on how to maintain and grow our businesses. The opportunities are out there; it’s just a matter of finding them and positioning our businesses to execute them," says Gary Iocco, President of the National Association of Dental Laboratories (NADL) and owner of Dimension Dental Design, CDL in Hastings, Minnesota.
Restructuring one’s business can be an ongoing process in a volatile business environment. Often, several adjustments are required before settling on a niche or a strategy that is sustainable. Just ask Felix Chung.
Chung never planned on making his career dental technology; his dream was to become a rocket scientist. After completing his studies in aerospace engineering at Georgia Institute of Technology, Chung took a hiatus and began working at his uncle Duckee Lee’s dental laboratory, Protech Dental Studio in Reston, Virginia.
The technological changes happening in the industry intrigued the young scientist. Realizing that technology was the wave of the future and wanting to stay on the cutting edge of industry change, Chung broke away from tradition and 6 years ago opened IMILLING, a digital production center for laboratories.
"Then we saw prices for milled copings and crowns drop to rock bottom and laboratories were making less profit," Chung explains. "I had to rethink my strategy and find a more profitable niche to grow my business. I decided to focus my milling services on implant prosthetics."
However, even that strategy was not foolproof. As technologies became more accessible and affordable, more laboratories began purchasing their own CAM milling equipment. So Chung again rethought and revamped his business, this time starting MIST, an equipment reseller that uses IMILLING’s expertise to provide support for laboratories that buy from them.
"About 2 years ago, a number of our laboratory customers began moving away from using outsourcing services to buying milling equipment and bringing production in-house. Rather than lose that business, I decided to shift my resources to tap into the game of selling equipment, consumable materials, and other CAD/CAM products," Chung says. "We found a high-quality line of milling machines that we thought were a good fit for laboratories."
As his milling center grew, he began stocking equipment and selling machines, as well. "This strategy gave us the upper edge compared to other companies selling CAD/CAM equipment because we are actually using the equipment, day in and day out, to produce all of the prosthetic products we make as a milling center," he said.
From the traditional dental laboratory, to milling center, to distributor, laboratory owners are reinventing their operations to explore new avenues of opportunity and redefine the structure of the industry.
Creative New Revenue Sources
Finding new avenues of opportunity doesn’t always require completely restructuring one’s business. Rather, it requires the ability to recognize and take advantage of an opportunity when it presents itself. That is exactly what Lindy Sikes did.
Sikes’ family has been in the dental laboratory business for more than six decades, starting with his grandfather, Adam Lee Sikes, and continuing with his son, Shelton. Even though Sikes embraced the transition to digital technologies early on, his business has not been immune to the industry’s struggles. It is not just because of outsourcing, offshoring, and price wars, he says. The economy has hurt dentists’ business, too, and that has led to them simply sending fewer cases to the laboratory.
So when the opportunity arose to use his knowledge of digital technologies to create an extension of the services he offers clients, Sikes didn’t hesitate. It was a creative and simple way to supplement the laboratory’s regular revenue. A group of four oral surgeons approached him about converting cone-beam computed technology scan data into stereolithography (STL) format. The time being spent on converting these files was cutting into the group’s profitability, and the dentists preferred to pay Sikes a nominal fee per file to do it for them. With each surgeon sending upward of 1,000 cases per year to Sikes, those nominal fees are adding up to tens of thousands of dollars in additional revenue.
Smaller laboratories aren’t the only ones continuing to explore new revenue-producing opportunities. Even industry giants are looking for ways to tap into new revenue sources. And no laboratory business does that better than Glidewell Laboratories. Blurring the lines between competitor, supplier, and manufacturer, Glidewell was very cognizant that as a dental laboratory, it owns only a small percentage of the $8 billion dental laboratory market. The fierce competitive advantage of localized personal service versus long-distance, mail-order selling means that Glidewell retains only 50% of its new clients, according to Jim Shuck, Vice President of Sales and Marketing for Glidewell. "We realized that if we created a product like BruxZir, spent millions marketing that product to dentists, that we would get much more mileage from our marketing dollars by partnering with dental laboratories to sell that product." Shuck estimates approximately 400 laboratories worldwide now promote the BruxZir brand to their customers. And as of recently, Glidewell has teamed up with Zahn Dental as a distributor of BruxZir and the Obsidian lithium silicate ceramic.
"Of course, we would rather sell that $99 crown to the dentist," Shuck says. "But when our laboratory partners buy the zirconia discs from us, our gross sales on the disc are about $8 a unit. It has been a fantastic business for us and for our partners."
Glidewell has expanded the partner program to its Inclusive custom abutments and bar business for implants, as well as to its Comfort Bite Splints. Shuck says most of the approximately $12 million Glidewell spent annually on marketing in 2014 was directed toward partner products.
"I see this as a very viable program going forward," Shuck says. "We’d like to continue to find new products and new services to offer smaller laboratories as well."
Implementing Effective Structure
The common thread that binds these laboratory owners’ searches for more viable business models is the ability to get away from the bench and develop plans while their employees execute that plan. Their success is founded on simply being astute at business management.
It is a management structure that Iocco put to the test during his tenure as NADL president. His position required that he travel extensively, representing the organizations at tradeshows around the country. He was able to do that in part because of a successful internal business structure that does not require him to be in the laboratory at all times.
"Cases such as Iocco’s are rare in this industry. Culturally, it’s not in the DNA of dental laboratory owners to delegate, to train, and get other people to manage your business," says Bob Yenkner, Principal of Practical Process Improvement (PPI).
It may sound simple, but Yenkner says a laboratory does not necessarily need a revolutionary business model in order to prosper in these times; it just needs an executable business model that meets the future needs of the owner. That model should be taking advantage of the extensive untapped knowledge that exists within the laboratories.
"You look at the waste that is inherent in any business in this industry. If you can identify those areas of waste and recognize that waste is not adding value to the company, but rather costing you money, and then be aggressive and go after the problems. This is what is going to set you apart," Yenkner says. "It is going to help you return to a more profitable enterprise and keep the business much more sustainable and viable for the long term. The major issue and barrier laboratory owners have and must overcome is breaking out of the traditional dental laboratory culture—which is, in this industry, a very top-down, single-point-of-management environment."
The old business model, Yenkner says, must have worked fairly well because many dental laboratory owners made excellent livings that way. But it is not the way of the future, as evidenced by the number of laboratories that have closed in recent years.
One step that can be taken is formal leadership training. Yenkner notes that most laboratory owners, if they delegate management responsibility at all, often entrust their most veteran or skilled technicians—not necessarily people with leadership or management skills. Typically, this engenders a lack of accountability for costly mistakes due to the lack of structure.
Laboratory owners seeking advice and guidance are facing a challenge, because most business experts have insufficient knowledge of the dental laboratory industry.
One solution for the future, says John Orfanidis, CDT, would be for laboratory owners to break down the competitive barriers and band together to help each other develop more effective businesses. Orfanidis is CTO of Evolve/Evolution Dental Science, a company he says is "dental technologists for dental technologists." While owners of small- and medium-sized laboratories traditionally have viewed each other as competitors, Orfanidis believes that in the current business environment, smaller organizations should look for areas of common need and ally themselves to compete with larger corporate business structures.
The industry will continue to shift and readjust as it moves down a new path of inevitable transformation and restructuring. Laboratory owners will need to assess and reassess the business environment and forces impacting change as the industry reshapes. The constant that never will change is the need for the core knowledge that is the foundation of the laboratory industry.
"What is going to drive sustainability for now and in the future is a cultural shift that is deeper than the DNA of this industry," Yenkner says." Laboratory owners at all levels need to drive toward delegation, drive toward sharing responsibility, drive toward building a true organization. My favorite saying is: Working on the bench and improving the productivity of the business are mutually exclusive. If you are going to sit at the bench, your ability to improve the business is limited at best."