Just as it takes more than a butterfly in the Azores flapping its wings to launch a hurricane toward Houston, it takes more than one contrary CAD company to shake up an industry. Robert McNeel and Associates are tracking six indicators they believe will create the Perfect Storm in CAD. Originally published in CADCAMNET September 20, 2007.
By Randall S. Newton
[Editor’s Note, 2011: The other articles in this series are also available on GraphicSpeak:
CADCAMNET, September 20, 2007—Part 2 of this series (see “The Way of Rhino, Part 2: Behold the CAD Whisperer,”) ended with a question: Why are there so few 3D CAD users as a percentage of the total installed base of computer-aided design users?
The Way of Rhino says the answer to these questions lies in the perfect storm brewing on the CAD industry horizon. Just as there is no single cause for a storm in nature, there is no single reason for the storm that Robert McNeel and Associates (RMA) see coming. Instead, they see six indications the CAD industry is in for a big shake-up. And only two of those indications are connected to CAD technology.
Storm Indicator Number 1: The lack of a 3D standard
As described in the previous article in this series, (“Behold the CAD Whisperer,”) AutoCAD is far and away the standard for 2D CAD, so much so that the US Federal Trade Commission has found it necessary to keep an eye on the company in the past, lest it abuse its near-monopoly status. But in 3D, there is no standard. When selling Rhino into companies with existing CAD applications, it often sees SolidWorks and Pro/Engineer, but seldom Autodesk Inventor; Catia is “visible in certain market segments,” says Bob McNeel, “and Solid Edge is disappearing.”
“The marketplace likes standards,” says McNeel, strongly emphasizing those last two words when he met with four members of the CAD media earlier this year. “The market will deliver a 3D winner. When? Where? We can only be ready.”
The strength of existing MCAD applications is “mechanized widgetry,” McNeel says. Autodesk Inventor could win out, but SolidWorks is strong, too. These mid-market players are rising, but otherwise the industry is in flux. The top tier (Catia, NX, Pro/E) are selling slowly, and the low-cost MCAD packages (Alibre, TurboCAD, others) are not gaining market share. “Something is broken there right now that we don’t understand,” says McNeel of the market.
Mechanical CAD in more ways than one
“Mechanized widgetry” is more than the MCAD paradigm; it is a metaphor for the state of the industry. History-based MCAD is hierarchical and rigid—a mechanical artifact in a digital world. Manufacturing is quickly becoming a reflection of the Internet era: dispersed and flexible, going digital as fast as possible. The people who use personal CNC, contract engineers, 3D printing, Google’s 3D Warehouse, and outsourced and offshored manufacturing don’t want constraints in their business processes or their CAD models; they need infinite degrees of freedom from start to finish. A hierarchical CAD program doesn’t fit so well in a “world is flat” era.
In another CADCAMNet article [archived on GraphicSpeak at URL TO COME], software entrepreneur Deelip Menezes argues we are at the dawn of CAD 2.0, whereby interoperability is solved not by new formats or new translation software but by a change in modeling technique. As if on cue for this series of articles, this week McNeel and SpaceClaim jointly announced their new technical partnership: SpaceClaim now imports and exports Rhino files.
Bob McNeel is quoted in a press release: “Our clients use free-form modeling to create very precise surfaces that meet both aesthetic and functional requirements. One of their biggest challenges is ensuring that the fidelity of the design is maintained throughout the design and manufacturing processes. This can break down when the design is passed between product styling and product engineering. When SpaceClaim demonstrated the ability to open Rhino files, add and modify design elements that conform to the surfaces, and then return the model to Rhino, I was extremely impressed.”
Please note, Bob McNeel doesn’t say “extremely impressed” very often. He is an accountant by training, not a marketing flack.
Saying ‘Open Sesame’ to 3D
The market has not settled on one 3D format as its standard because it has been waiting for something better. Take a closer look at the SpaceClaim/Rhino partnership and you find the shape of things to come. In the paragraph above, Bob McNeel says SpaceClaim demonstrated its abilities to the Rhino team. This week I asked Bob McNeel to elaborate. He said there was very little interaction between the two companies. He sat down for a chat with SpaceClaim CEO Mike Payne at COFES in April, and then the SpaceClaim development team downloaded the OpenNURBS toolkit for working with Rhino. “They only asked a couple of questions, then they just went ahead and prototyped something.” Bob McNeel told me. “It only took them a few days.”
No lawyers, no negotiations, no large sums of money changing hands, no complex history-tree file formats to get lost in. The result is the ability for a SpaceClaim user to open a Rhino file, change it as needed, and return it to the Rhino user. No translation needed. Utter simplicity, especially when compared to typical cross-platform CAD usage in manufacturing today.
McNeel’s Scott Davidson elaborates: “OpenNURBS is probably the most radical of our development tools. There are not many companies supplying tools to both read and write their file format. We supply the tools, and allow them to be distributed for free. And, OpenNURBS is not just another library we have laying around, but the actual library we use to read and write within the core Rhino product. That makes it very well tested and very full functioning. We are not looking to hide our file format, just to make sure everyone can fully read and fully write it if they want.”
McNeel publishes both the OpenNURBS toolkit and the Rhino SDK and makes both freely available for downloading. Compare that with the expensive privilege of being a third-party developer for other 3D CAD packages—if you are allowed in the club. McNeel insists that Rhino must be as open and as transparent as a commercial product possibly can be. It is this openness and simplicity the market will embrace as the 3D standard, not a specific file format or product.
History-based parametric modelers are a reflection of a structured, mechanistic, hierarchical approach to design and manufacturing. The Way of Rhino turns this approach on its head.
Storm Indicator Number 2: Underserved markets
Autodesk CEO Carl Bass says he cannot think about a business opportunity smaller than $20 million. He has to think this big in order to keep delivering 15% annual growth, Bob McNeel says. “He is doing well and I expect he will continue to do well for a while longer.” But by focusing on large opportunities, many small opportunities that add up to something large are being overlooked. McNeel says 33% of Rhino users are in North America, 34% in Europe. He also says those numbers have nothing to do with market potential. Internet connections are a better leading indicator of where the market is growing, not past sales of CAD products.
Rhino is seeing strong growth in Latin America, and it doesn’t see the other CAD vendors giving the region much attention. One McNeel associate told me recently that the best “leading indicator” in Latin America is the “Top 10” bootleg software CDs for sale on the street; Rhino recently cracked the list.
By making it simple for third-party developers to extend Rhino functionality, the company can serve hundreds of niche markets that are otherwise too small for a general purpose CAD company to serve. The list of Rhino third-party products and servicesis huge. The CAM category alone has 45 entries. There are six add-ons for footwear design, 36 products and other resources for jewelry design, 19 for marine design, 37 for rapid prototyping. Next month there will be a conference on “Shape to Fabrication” for architecture in London that will have several of the world’s top architectural firms presenting. They all use Rhino, even though it was not created to be an architectural CAD product. They can’t find what they need elsewhere.
Underserved markets exist because the large vendors can’t spend enough time and money on them. McNeel doesn’t spend time and money on them either, but the company gets their attention by providing the open framework they need. The swelling demand from underserved markets for modern 3D design tools is contributing to the rise of the perfect storm McNeel foresees.
Storm Indicator Number 3: Design goes offshore
There’s nothing new about taking advantage of low-wage regions in manufacturing. What is news is how the move has progressed in recent years. First manual manufacturing went abroad, next automated manufacturing, then manufacturing R&D, then production design and engineering, then production R&D. Now styling and branding are moving to low-wage regions as well.
There are 6,000 design students in Mexico. Korea graduates 6,000 designers yearly. Bob McNeel notes that many third-world countries are focusing their educational resources on training new designers, not new accountants or lawyers or engineers. By comparison, McNeel says, “virtually no one has focused on this shift; industrial design education is weak and failing in the US.”
Designers in Vietnam, Mexico, Korea and the rest of the emerging world economies will never buy the big name brands in CAD. But they are already buying Rhino, and their numbers are increasing rapidly.
Storm Indicator Number 4: Disruptive influences
“The world is flat” has become a popular notion, one to which Bob McNeel takes exception. “The world is not flat; it is just stuff and old people being flattened. The world is bumpy.” Signs of bumpiness—cultural and business disruptive influences—are everywhere. Bob McNeel says the large CAD companies are cannibalizing their third-party developer communities, as they consolidate the most profitable market segments and leave the others behind. Access to capital is no longer an issue; there are too many venture capital dollars chasing developers who don’t need or want the money and all the strings attached.
One disruptive trend relates to shifts in the PC marketplace. Because of the switch to Intel chips, Macintosh is now the fastest growing PC line—a trend McNeel sees as “the PC becoming wardrobe.” The company is making sure it has a stake in this trend by developing a new Macintosh version of Rhino. Like much about Rhino, it was a case of taking advantage of an outside influence. A developer came to McNeel’s Seattle headquarters with a prototype of Rhino on the Mac, built from the freely available development tools. The company gave him three months salary to “prove the concept.” Now there’s an initial version “in ragged shape” available for free download, so users can test it. The product will remain free until ready for commercial release.
There are other technical and financial disruptions in the marketplace specific to the CAD industry. “With the release of Vista, Microsoft sent the CAD industry a pretty clear signal—CAD is not important,” Bob McNeel says. Wall Street is rewarding the “anti-PLM” companies, like Autodesk and Adobe. Google has 3D CAD. “We don’t know what it all means, but we are watching closely.”
Storm Indicator Number 5: Wiki business world
Proprietary intellectual property is under attack. The rise of the open source software, fueled by the profound impact of the Internet (which is all open source software), has changed how people work and what they expect. The generation that has always known PCs has voted, and collaborative work models win out. It is now a self-service, online-instead-of-in-line, world.
McNeel is not waiting to be told what to do in the Wiki Business World; it is writing the handbook. There are Rhino wikis and Rhino forums. Rhino users and resellers organize meetings and then invite McNeel to participate. The product is available for a 30-day trial as a free download (which in itself is no longer unique in the CAD industry). Programmers participate in technical support. The real contact information for every person in the company—including Bob McNeel—is posted on the company’s web site. The decision to make all Rhino-based development tools free and freely available stems from the company’s belief that it must operate as close to the open source model as possible, given that Rhino is a commercial product.
Storm Indicator Number 6: Obsolete business models
Robert McNeel and Associates is an employee-owned firm. That is uncommon for a software developer, but not uncommon for a professional services firm, which is how RMA started. The company has no outside capital and no debt. There are seven regional offices worldwide; some are staffed by employees, some are dealers who act as the local McNeel office. There are 80 employees worldwide; only 25 at Seattle headquarters. There are zero commissioned sales people and only 1.5 marketing positions. The work of sales and marketing is done by Rhino’s 750 dealers, distributors and OEMs, along with the nearly 3,000 third-party developers who have created nearly 300 applications.
Davidson comments: “I manage the sales force. For example, when HOK London became interested in Rhino, I put all existing HOK users in other offices onto it.” Some HOK personnel created a PowerPoint which they sent to London to explain the value of Rhino.
The McNeel philosophy is to focus only on what directly empowers users, who are (in the spirit of a professional services organization) the true stakeholders. Business goals are about long-term stability, profitability and market penetration. There are no quarterly targets or sales quotas.
The Rhino/SpaceClaim technology partnership is typical of how McNeel likes to operate. Complimentary is better than competitive, and giving others the freedom to extend the capabilities of Rhino is better than controlling the market. Every customer is a user, a developer, a tester, a support representative, a trainer, and a salesperson. McNeel says a new user is like a new employee—they need special attention until they can work on their own.
McNeel believes traditional business models are becoming obsolete, especially the typical public company who exists to serve the stockholder. Thus, Rhino business tactics often appear to be at odds with business as usual:
- Chaos is the best marketing environment; let users decide what is important about products, and let them tell others;
- Under-promise and over-deliver (the company acknowledges this can be hard when users are the sales force);
- Exceptional value must extend beyond product into every area of the company; the installation experience, technical support, the purchase process … even accounts payable must deliver beyond expectations;
- Support, support, support: students and holders of bootleg copies get the same service from tech support as paying customers;
- Remove waste: “Get rid of any expense that doesn’t delight users.”
Free from the responsibilities of being a public company reporting to shareholders, RMA has set a sales and marketing strategy a bit out of the ordinary:
- Focus on small and underserved markets;
- Remember that members of the market all know each other (but some don’t talk to protect competitive advantage); they do all talk about 3D to each other;
- Find clear leaders who are noticed by others;
- Reverse the ratio of spending by R&D vs. Sales/Marketing from 20-70 to 70-20;
- Remember that the sales person has the lowest initial credibility in the transaction;
- Separate buying decisions from order placement;
- “Overseas” is everywhere; the product must be available 24x7x365x360 and there are no exclusive sales territories;
- You can learn all about Rhino online but you have to buy it from a dealer (no online purchase) who must add value to the transaction;
- Users can filter out deadbeat inquiries better than sales people: for example, Davidson says the AEC market is targeting Rhino “and we are trying to run away from them” by having existing AEC users informally filter all inquiries.
Batten down the hatches
Combine the six storm indicators and you have a Category 5 CAD industry hurricane on the horizon. Is Rhino the product ready? We thought you’d never ask. We take a close look at Rhino version 4 in the next installment of “The Way of Rhino.”