The new DIY

Ponoko in Brief

• Company was started by Derek Elley and David ten Have in January 2007
• World's only place where you can shop for designer-crafted goods, made and sold online by professional and amateur designers.
• In September this year head office is shifting to San Francisco
• 85% of Ponoko's 10,000 designer members are in the Northern Hemisphere
• Through a relationship with the co-founder of CafePress.com, Ponoko could tap millions of new customers
• Franchising is also on the cards

"We've got to look after our first 1,000 customers and make sure they're very happy - just take small steps, get things really right and grow from there."

Derek Elley, Ponoko co-founder and strategy chief

Twenty-first century alchemy - converting bits and bytes into atoms - is how you might describe the unique business Ponoko is in. The start-up, which got off the ground in Wellington last January and launched in San Francisco in September, is a web-based service that lets people upload a digital design - of a piece of jewellery, say, or a lamp - which Ponoko then uses a laser cutter to bring into the material world. Your creative work is then packaged up and couriered to you.

Or it could be that your design catches the eye of a visitor to the Ponoko website, who decides they would like a copy, or a variation, of the item. They have one made, and delivered to wherever in the world they want, paying you the price you set.

The reality is Ponoko is in an industry at such an early stage of development that it's hard to anticipate what it will mature into. But Derek Elley, one of the company's two founders, and the chief strategist, naturally enough doesn't say they're in the alchemy business.

While the Ponoko production process almost has a magical air, Elley calls it by its proper name, "digital manufacturing", which is giving rise to the new phenomenon of "mass individualisation", the latest in a series of "mass" movements brought about by the internet.

The computer industry is credited with the first - mass customisation - by which a customer can order a PC over the internet and have it assembled to their specifications. Next came mass personalisation, pioneered by United States companies like CafePress.com, which lets customers have a message or image of their choosing printed on a t-shirt or coffee mug. Mass individualisation is the "third generation" of the same trend, Elley says.

"What this is about is enabling people to individualise the digital file itself to create a real product from the ground up." That eliminates the need to have stock on hand.

It's proving popular. Elley says about 10,000 people - a group he dubs "techno-crafters", since they tend to have both digital design and hands-on craft skills - have signed up with Ponoko to make things. About 80 percent are doing so for their own consumption and the rest are designing and making items for sale. Roughly half are making repeat use of the service. And most - about 85 percent - are on the other side of the world.

Therein lies a problem, and an opportunity. Elley, and Ponoko co-founder and chief executive David ten Have, have been travelling back and forth to the US over the past nine months, establishing a manufacturing node and a head office in San Francisco - and looking for backers.

It's not a wholesale shift, Elley says. "But to make it happen in the US you need to have very strong leadership. And considering we are a very young company, we need to lead from the front."

Rather than farm out the San Francisco operation, Elley says at this early stage they want to ensure the business is put together and run properly, with sound quality controls in place. "We've got to look after our first 1,000 customers and make sure they're very happy - just take small steps, get things really right and grow from there."

Further ahead, however, there's no telling what shape the business will take. An important recent development has been an investment in the company by CafePress.com co-founder and chief executive Fred Durham.

CafePress.com is in a related, but different, business. The Californian company was started in 1999 and successfully weathered the dot-com bust, doing on-demand printing and product personalisation. Its long history - in internet terms, at least - means Durham has a deep pool of experience for Ponoko to draw on.

Durham has taken a seat on Ponoko's advisory board, and has been having invaluable input, Elley says. "He's the number one person in the world in this area in terms of thinking about this stuff." The tie-up also raises the question of how Ponoko and CafePress.com, which gets 11 million unique site visitors a month, might work together.

Ponoko reckons it undercuts other digital manufacturers by as much as 60 percent through website features such as automated handling of a wide range of tasks that traditionally require human input - such as an automated online quoting system, says Elley.

From uploading a file to dispatching the average finished product takes just 45 minutes and, with further automation, that could be cut to half an hour. Some take much longer, some much shorter. Once it has its processes bedded in, the company might see about franchising the operation.

"For this business to scale means getting that process right; getting it implemented a couple of times with our people and, most importantly for the person purchasing the franchise, showing that it turns over money." Then it will be ready to be franchised.

When might that be?

"We're not making any claims yet," Elley says.

Key Business Insights

There are at least as many pitfalls as opportunities for a new company in a brand new industry. Ponoko, a pioneer of "mass individualisation" through digital manufacturing, is making the right moves to avoid the traps and capitalise on the new market's potential.

The year-old Wellington company is relocating its head office to the United States to be near its customers; it is putting its own people in charge of the US operation to maintain quality; it has formed a relationship with a US leader in web-based product personalisation to gain access to experience and, potentially, millions of new customers; and it is bedding in robust systems with a view to eventually franchising the business.

All of those steps are being taken even before the digital manufacturing industry shakes down into market segments catering for industrial, bureau and desktop users. A parallel to how the industry might develop, says Ponoko co-founder Derek Elley, could be the printing industry. "You've got an offset printer out in the industrial part of town, a digital printer in the high street and a desktop printer sitting next to you. We see that same sort of business being built around this."

By making the right moves now, Ponoko hopes to be positioned right when the market takes off - a smart plan for any start-up in a new industry.

Additional Resources

New Zealand businesses wanting to establish themselves in overseas markets should check out the help government agency New Zealand Trade and Enterprise can provide through its Beachheads programme:

www.nzte.govt.nz/section/14585.aspx

The world is edging towards digital manufacturing from a number of directions. One approach is rapid prototyping, or 3D printing. More information can be found here:

www.rapidprototypinghomepage.com

The RepRap project, whose collaborators span the UK, US and New Zealand, is building a machine that can replicate itself:

reprap.org/bin/view/Main/WebHome

And of course you can visit Ponoko by going here:

ponoko.com