Stratasys, Ltd. Investors: Don't Miss This Interview With MakerBot's CEO

In the following video, 3D printing specialist Steve Heller interviews MakerBot's current CEO, Jonathan Jaglom, during the Inside 3D Printing Conference held in New York City last month. During the segment, the pair discuss a variety of different topics about the Stratasys (SSYS 0.61%) -owned unit, including:

• How Jaglom's decade-long career history with Stratasys and Objet prepared him for his role at MakerBot
• Where MakerBot has an edge over the competition
• How Jaglom plans to improve MakerBot's operating performance in light of the recent writedowns
• How to drive long-term consumer adoption for MakerBot
• What currently isn't well articulated to the investment community about MakerBot

A full transcript follows the video.

Editor's note: This interview was taped prior to Stratasys releasing its first-quarter earnings, which contained a second MakerBot writedown for $194 million.

Steve Heller: Hey, Fools, Steve Heller here. I'm joined today with Jonathan Jaglom, CEO of MakerBot. MakerBot needs no introduction: They're the leader in the consumer 3D printing space, owned by Stratasys. Thank you so much for being here today, Jonathan. I really appreciate your time.

I want to jump right in here. I know you've got a lot of experience with MakerBot, Stratasys, Objet. You've worked the gamut here -- roles and hats you've worn throughout the different companies, and they've all come together. How does this prepare you for being CEO of MakerBot?

Jonathan Jaglom: I've been around for 10 years, so I've seen this industry grow from small to big, and really seen how the technology developed and how the needs of our professional users has evolved over time.

I think what I can tap into in that experience is bring that know-how into the MakerBot community.

We're seeing a lot of attraction from the professional platform to the desktop environment. It makes a lot of sense, because the MakerBot printers can be used for initial concept modeling and initial drawings, initial ideas that you may have. Then you roll it out to the higher-end printers, which is where Stratasys would kick in.

There's a very nice transition going on between Stratasys and MakerBot, and it all really makes sense. I'm very happy to be leading that, as its CEO.

Heller: You've worked in a lot of different roles. You've worked in sales, customer experience, so you have all the hats, the knowledge base and the experience to run the show here.

Let's get in here, in terms of philosophies and vision. What's your philosophy on strategy, leadership, innovation, and working with customers and how it all comes together?

Jaglom: Back to your previous comment, I think it's a very interesting point that I'd like to develop. Really, I have a lot of experience in other departments. As you mentioned, sales, marketing, customer support, applications, sales operations, and my last role as General Manager of Asia.

I'm tapping into that know-how, and I think it makes sense to implement a lot of that know-how into the MakerBot team. MakerBot grew very, very fast in a very short period of time, so creating that structure within MakerBot in some areas will make a lot of sense.

Heller: What is your future vision for MakerBot? Five years from now, where would you like to see this company? What would you like to see it doing?

Jaglom: I think the company will continue to improve on its [3D printing] platforms, and also on its ecosystem. We have to continually provide more tools in that toolbox, to facilitate the individual and make that individual be more empowered and be more creative as a consequence of that.

I definitely see movement in the technology, in the software and the hardware, and also in the verticals that we're addressing -- in the education market where we still have a long ways to go, in the professional user space where we can tap into there as well, and also the consumers at home, which definitely we're seeing traction in as well.

Heller: Very good. In terms of MakerBot's install base, we're talking about 80,000 printers sold since MakerBot's inception. That represents approximately 65% of Stratasys' total install base. How much of an advantage does this give MakerBot over the competitive landscape?

Jaglom: First of all, can we talk about Stratasys?

Heller: Sure, absolutely.

Jaglom: MakerBot is that first entrance into the Stratasys world. That's how we see it, and I think it makes a lot of sense. You start your experience with a MakerBot [3D printer], but that doesn't stop you from thinking to move into the next phase, which is the higher-end printers that are offered by Stratasys.

The fact that we have these 80,000 printers out there is really exciting for Stratasys because if we play our cards right and we tap into that install base and offer them different solutions on the higher end, then definitely we can leverage off our install base like never before, and that is a huge competitive advantage.

Heller: It's sort of a gateway -- a sales channel if you will, almost -- to higher-end products.

Jaglom: Absolutely it's a gateway. It's one of the reasons why I'm here. It's something we have to think about and play out carefully. I'm very, very excited about that, and so should everyone around Stratasys.

Heller: Very good. In terms of the ecosystem, how is MakerBot differentiated from the competition? I know that MakerBot's more than a hardware company. Can you elaborate on that?

Jaglom: Yes, MakerBot is more than just a hardware company. The ecosystem that we have around our printers is just amazing, and second to none. No other player in the desktop 3D printing space has anything close to what we have in terms of ecosystem.

Thingiverse is one example, where you can share files online. Thingiverse has 700,000 downloadable files that you can print, 700,000 is the number, over 1 million downloads per week.

That's tremendous content happening there, and also we have our mobile apps, and you can launch your printer from home or from work. You can even watch your print on camera. We launched our great Shape Maker [software offering] today. We give tools to kids, to be able to create content.

The ecosystem around MakerBot is really an important part of the MakerBot equation. Don't look at MakerBot just as a hardware company, at all. The ecosystem around that is so important to recognize. That is really where we are second to none in this industry. That really is our competitive advantage in this space.

Heller: Thank you. Let's switch gears here for a moment. Most recent fourth-quarter earnings result, Stratasys announced that MakerBot was taking a goodwill impairment charge, to the tune of $102 million.

MakerBot's revenue growth was up 7%-8% year over year, and the previous quarter it was up about 80%, so growth stalled. There was a little bit of execution issues there.

You're the CEO. You're at the helm now. What is the strategy, going forward, to driving and creating additional shareholder value from the investment that Stratasys initially made into MakerBot?

Jaglom: You raised a few of them. One of them is to think how we can do some synergy with Stratasys. Stratasys is a global company. It has presence all over the world, much more than MakerBot does.

I'll give you an example in Asia. We have 12 offices in Asia today. We have almost 300 staff in Asia today. MakerBot does not, so if we can tap into that infrastructure and enjoy that, we can definitely increase our numbers there, I believe.

Also, into our install base; if we can find ways to tap into the install base mutually, meaning into the Stratasys install base or MakerBot, and find intelligent ways to leverage off that install base and offer our customers better solutions or additional solutions -- I think all those things will tap in and generate the expectation set, and I'm very excited about that.

Heller: Are there any systems in place right now to improve execution around MakerBot?

Jaglom: Systems? What do you mean?

Heller: Systems around, "How do we improve execution?" Maybe quality assurance -- I know there were some issues with the Smart Extruder, and things of that nature. I was wondering if you could give me any insight into that.

Jaglom: Yes, that's another great element of the equation. We're working closely with Stratasys in different departments, and working hand-in-hand to improve or leverage knowledge in different areas so as to ultimately bring products to market faster and better. Definitely, that's happening as well.

All these things are now kicking in. I've been at Stratasys for 10 years. I know Stratasys really well, and I definitely will enjoy tapping into those different spaces within Stratasys for the benefit of MakerBot.

Having said that, MakerBot has something very unique in it, very special, that we want to preserve. MakerBot has done things that were never done before within the desktop space, and we must preserve that as well. We want to tap into the Stratasys ecosystem, but we also want to preserve the MakerBot DNA.

Heller: Looking at the industry in general here, what's the most important thing to drive the future of consumer adoption, where every person has a 3D printer in their home? Maybe you don't believe that, maybe you do; if you'd like to share with me your thoughts on mass adoption of 3D printing on a consumer level?

Jaglom: First of all, I do believe that. I believe that there will be a printer in every person's home, or there should be at least, in the future to come. I think we're not there yet, but we're definitely heading that way.

It's really a question of ease of use. As long as our printers are easier and easier to use, and as long as it's easier and easier to create content to then be printed, then that will facilitate that entry into the consumer market.

We're working very hard on creating that experience as easily as possible -- that's the ecosystem. Again, I recommend you go see the Shape Maker. It's a great tool because it's so intuitive to just create something out of nothing.

If we create those tools that allow regular people to just create something and then print it off our 3D printers, that will help us get to the consumer market, and we're heading in that direction. That's, again, when the ecosystem becomes so important.

Heller: In terms of creating awareness around the consumer market to educate people that maybe don't know too much about 3D printing, how do you convince them that this is a valuable technology for them?

Jaglom: I would use the education market as a source of reference. The education market today is roughly 5,000 schools use our printers, in this nation alone. Then it's a question of watching how these kids are using our printers and how much they're evolving in their innovation and their creativity.

Then it's really a question of, the world falls into three. Do you believe that 3D printing negatively impacts a child's creativeness and innovation skills? I'm sure no one would argue that. Is it indifferent? Are they indifferent to this technology? I believe the answer to that is no as well.

Then everything greater than zero has tremendous value to it, whether it's quantified as 1%, 3%, 5%, I really couldn't care. The moment it's bigger than 1%, that's a huge benefit. If you want to develop your future workforce to be more innovative and to be more creative, that's what you want to do.

Heller: Very good. Looking at the killer applications here, if someone doesn't know too much about 3D printing technology and you want to educate them and you want to get into the education market, how would you show them the technology? What kind of example would you use?

Jaglom: My advice to those people would be, seriously, embark on this journey. Just try it out. Get the equipment, get a 3D printer in-house, experiment on it. Experience the ecosystem.

The ecosystem facilitates life and makes it a lot easier for you to create things. I'm telling you, it's as easy as taking a photo, stretching an image and then launching it to print. That's the product we're launching today [called Shape Maker].

Start there, and just experiment. Slowly, slowly, through our ecosystem and through our experience you will understand this industry better and better as you move down the road. But you definitely should start today.

Heller: Thank you. If there's something else that you'd want to share with investors out there about what MakerBot is, and maybe isn't well articulated right now and you just wanted to share your thoughts on that?

Jaglom: I've been with Stratasys for 10 years. I've been extremely successful from role to role. Anyone within the Stratasys community is aware of that.

In the last two years in Asia, I led the fastest-growing region of all the subsidiaries within Stratasys. There is no place I would want to be at more today than at MakerBot. I am honored to be the CEO of this company. I'm a huge advocate of MakerBot. I believe wholeheartedly that this company will go incredible places in the future to come.

Again, this is someone that's coming from Stratasys, that's been very successful along the career path, and this is where I want to be. I'm absolutely confident that we can pull off great things within MakerBot.

Heller: Best of luck to you today. Thank you.