“With a record result, 3Shape is ready to conquer the world with 3D scanners for dentists. We believe that we are facing a substantial growth curve,” says 3Shape's CFO, Kristian Krag.
Few people like to have an old-fashioned dental impression taken, using a large lump of silicone or alginate. Fortunately, this practice belongs to the past for thousands of dentists worldwide. When preparing a dental crown or an implant, they now use a modern, intra-oral 3D scanner. This type of scanner is the core product for Danish company 3Shape, which has experienced impressive international growth in recent years, according to the company’s CFO, Kristian Krag.
”3Shape is a company with strong ties to the Technical University of Denmark (DTU) and Copenhagen Business School (CBS). Here, our founders Tais Clausen and Nikolaj Deichmann began digitising the impressions that are used in the hearing aid industry. Since then, 3Shape has managed to identify two additional growth streams based on the same basic scanning technology. In 2005, the company entered the dental industry, using the same technology to digitise dental impressions to produce a crown or an implant in a laboratory. It turned out to be a wise move as it laid the foundation for the global success we know today,” says Kristian Krag.
The big revolution
Through the 2000s, 3Shape built a successful business. However, the “third growth curve and the big revolution”, as Kristian Krag puts it, did not occur until 2011 when the company launched Trios, a range of intra-oral scanners that are used directly in the mouth, eliminating the need for a physical impression.
“With Trios, we were able to digitise the entire process around a dental impression from the scanning of the mouth, through advanced software processing and then digital transfer to the laboratory. This was a significant improvement on the old physical impressions. For a dentist, working digitally leads to increased precision, increased efficiency and increased hygiene. We simply get a better result,” says Kristian Krag.
Today, the Trios scanners are the main driver of growth for 3Shape. According to Kristian Krag:
“Although we have seen significant growth over several years, four out of five dentists globally still work in the traditional way. Due to the benefits of working digitally, we believe that dentists around the world will invest in digital tools in the coming years. Our assumption is that we are still on the low part of an S-curve and that we are approaching a tipping point in the dental industry when it comes to the use of scanners and advanced software.”
Challenges along the way
3Shape has just announced record financial results for 2021: revenues of DKK 2.6 billion, operating profits of DKK 889 million and net income of DKK 705 million - a significant increase from the previous year. Additionally, the private equity fund EQT bought 20 per cent of the shares in 3Shape towards the end of 2021, adding further fuel to the company’s growth ambitions. Nevertheless, the road to success has not been without challenges. According to Kristian Krag:
“Part of the formula behind 3Shape’s success is that we are a relatively simple company with a simple production setup and a simple product portfolio. When we started developing a new portfolio of scanners a few years ago, we quickly realised that it caused a loss of focus throughout the value chain, which we did not like. Today, we are extremely focused when it comes to implementing our playbook, and going forward we will continue down that path.”
At the same time, 3Shape has been involved in a long legal battle with the competitor Align Technologies, which slowed down market growth in 2018 and 2019. The coronavirus crisis did the same – and now, 3Shape is having to deal with the war in Ukraine.
“There is no doubt that we have been affected by both the legal battles and the coronavirus crisis. Right now, we are focusing on the war in Ukraine where approximately 20 per cent of our employees are located. Their safety is of course our first priority and we are doing everything we can to help them. Ukraine is an important technology hub in Europe, and we are 100 per cent dedicated to supporting our Ukrainian employees in both the short and the long term,” says Kristian Krag.
Going after the world market
Despite the difficulties in Ukraine, Kristian Krag looks forward to the future and is ready to take on 3Shape’s competitors.
“Our clear focus right now is to get a fair share of the global market, which is around the corner. We believe that we can continue to differentiate ourselves in the market because we already have a strong brand, and because our products are considered the best in the industry. But we are well aware that we have to put in the hard work.”
In addition to focusing on sales, 3Shape has increased investments in research and development:
“In recent years, we have increased our investments in R&D by approximately 30 per cent. We have done this because we believe that our ability to differentiate ourselves is the key to future growth. At the same time, we are in the process of scaling up our company to become an even larger global player, which means that we must find future-proof solutions for master data and ERP. The last thing we want is a bottleneck for our ambitions,” says Kristian Krag.
A strong team
Becoming a bigger player not only requires a structural transformation; it also needs a strong team of financial specialists – some of whom should have had experience in larger companies. According to Kristian Krag:
“In my view, we need employees who can run the business right now, and employees who see the long, tough road that lies ahead. It is also important to have a mix of employees who combine deep internal knowledge with external knowledge and inspiration. As a result, we have hired people with experience in large companies. Of course, we should not copy everything from big corporates, because that would kill off the agility of our business. However, I want us to be a finance organisation that knows what ‘good’ looks like and how we scale. I want employees who can see the big picture and translate it into tangible initiatives.”
The CFO should have a seat at the table
How does Kristian Krag see his role as a CFO when it comes to driving growth? His answer: A mindset focused on making things happen.
“I do not want to present myself as a CFO who masters everything commercial to perfection, but I want to help identify challenges. Being a partner for the business is about trusting that we are all working towards the same goal. I try hard not only to ask critical questions but also to drive processes towards a decision and thus make things happen,” said Kristian Krag.
Having a seat at the table and playing an active role are some of the best things about being a CFO. Kristian Krag observes:
“Of course, I am driven by delivering on our financial goals and doing so in a structured way. But I also get up in the morning to use my role broadly and actively, to tie things together in the organisation, and make sure we allocate resources to where value is created. Whether I say yes or no, I want my colleagues to see that I help them and our business. This is where the role as CFO becomes fun and meaningful.”
Kristian Krag’s advice on how to drive organic growth
- Do not be afraid to get involved as CFO in the business and strategy process, so that you get your seat at the table when the important decisions are made.
- Understand your growth drivers and growth barriers, so you always have a realistic picture of both opportunities and challenges.
- Take responsibility for cross-organisational coordination, so that you become an active business partner who helps processes towards a decision.
- Add people with experience from large organisations to your team, so you constantly have an eye on how things should look five years from now.