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SOUTHERN IMPLANTS: DESIGNING AND MANUFACTURING DENTAL IMPLANTS TO THE WORLD
Amy Moore and Marianne Matthee wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to publishcases@ivey.ca.
Copyright © 2020, Ivey Business School Foundation Version: 2020-10-30
On November 23, 2019, Graham Blackbeard, the founder and managing director of Southern Implants, was driving to the company’s office in Pretoria, South Africa. The company had been successful and, over the last 30 years, had positioned itself globally as one of the preeminent specialty dental implant manufacturers. With growth came a variety of risks that the company had tried to diversify against. These risks relate to national, industrial, customer, and organizational considerations, as well as currency and political risks, regulations, customer diversification, upskilling, and quality manufacturing tools and processes, which Blackbeard has tried to mitigate since the founding of Southern Implants.
Blackbeard’s foremost concern within Southern Implants was packaging. While the company had four machine shops across South Africa, the final stages of production involved all items coming back to Southern Implants to be cleaned, sterilized, and packed. The danger at these final stages was that if the company had a non-compliant audit, the reputational risk and delay in production could render Southern Implants bankrupt. Another competitor had faced an import ban on one of its products over 10 years earlier, and the resultant 18-month delay in production had a direct impact on sales and overall organizational value. 1
To diversify this risk, Blackbeard was considering setting up another processing and cleaning plant abroad. However, he wondered where he could do this. The United States was quickly becoming the largest Southern implant market, but labor costs were high. Europe was another option, especially Portugal, which was considered to have an investor-friendly economic environment with no discrimination between domestic and foreign investors.2 What were the organizational and managerial risks that needed to be considered before making the decision?
THE GLOBAL DENTAL IMPLANT MARKET
Dental implants were classified as a medical device designed to act as an artificial root inserted into the jawbone, acting as a replacement for the root of the natural tooth. Through a surgical procedure, an
1 Sven Egenter, “UPDATE 1–Straumann Says US Lifts Ban on Biora Products,” Reuters, August 5, 2008, accessed February 4, 2020, www.reuters.com/article/straumann/update-1-straumann-says-us-lifts-ban-on-biora-products-idUSL573365320080805. 2 “Invest in Portugal,” Invest in EU, accessed February 16, 2020, www.investineu.com/content/invest-portugal. Do Not Copy or Post
This document is authorized for educator review use only by Rimi Zakaria, University of Wisconsin-Whitewater until June 2022. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860
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An artificial replacement tooth would then be attached to the implant.3 Different options were available to replace teeth that were missing, but dental implants were one of the most commonly used biomaterials.4
The global dental implant market was projected to grow from US$3 billion in 2018 to $5 billion in 2025.6
This increase was driven by a constantly growing aging population, the corresponding dental diseases, an increasing acceptance of dental cosmetic surgery, and a growing number of dentists trained to perform this procedure. In 2018, Europe dominated the market share of global implants, partially due to favorable reimbursement policies.8 Germany, the Netherlands, France, Spain, and Italy were among the top importers of dental fittings in the world. North America was projected to place first in the dental implant market share and become the top importer of dental fittings.10 The US Centers for Disease Control and Prevention (CDC) projected that one-quarter of Americans 65 years of age or older would lose a tooth. Further, two-thirds of patients would choose to treat tooth decay, possibly spurred by the scientifically established link between cardiovascular disease and poor dental health.11
The titanium implant segment represented the majority of dental implant materials. The material was known for its suitability, biocompatibility, and non-allergenic nature for the majority of procedures. That segment was expected to expand rapidly and achieve dominance by the end of 2026. Other materials used in dental implants included zirconium and a lower grade of titanium, such as alloys mixed with titanium.12
DEVELOPMENT OF SOUTHERN Impacts
Blackbeard studied engineering at the University of Cape Town (UCT); however, his first exposure to precision manufacturing came during his second year of military service, when he spent time in gun design, working on the development of a G6 artillery gun.13 Following the end of his military service in 1982, Blackbeard received a Rotary scholarship to study biomedical engineering at the University of Utah.14
During his time there, he was impressed with the department’s focus on translating biomedical technology into applications for biomedical science and the private sector.
In the United States, Blackbeard had the opportunity to work with Dr. Willem Johan Kolff, who was known as the “Father of Artificial Organs.” Kolff first invented dialysis and then the totally artificial heart in 1957.
3 “Dental Implants—Replacing Missing Teeth,” Canada Dental Association, accessed February 5, 2020, www.cda-adc.ca/en/oral_health/procedures/dental_implants/. 4 B. Guillaume, “Dental Implants: A Review,” Morphology 100, no. 331 (2016): 189–198, accessed February 5, 2020, www.sciencedirect.com/science/article/abs/pii/S1286011516000291?via%3Dihub. 5 All currency amounts are in US dollars unless otherwise specified. 6 “Dental Implants Market Size by Products (Tapered Implants, Parallel Walled Implants), By Material (Titanium, Zirconium), By End-Use (Hospitals, Dental Clinics), Industry Analysis Report, Regional Outlook, Application Potential, Competitive Market Share & Forecast, 2019–2025,” Market Research.com—Knowledge. Identified and Delivered, October 2019, accessed March 3, 2020, www.marketresearch.com/One-Off-Global-Market-Insights-v4130/Dental-Implants-Size-Products-Tapered-12746909. 7 Ibid. 8 “Dental Implants Market Size, Share, and Industry Analysis by Material (Titanium Implants, Zirconium Implants), By Type (Endosteal Implants, Sub periosteal Implants, Transosteal Implants), By Design (Tapered Implants, Parallel Implants), By End-User (Hospitals, Dental Clinics, Academic & Research Institutes) and Regional Forecast, 2019–2026,” Fortune Business Insights, June 2019, accessed February 2, 2020, www.fortunebusinessinsights.com/industry-reports/dental-implants-market-100443 9 “Trade Statistics for International Business Development,” ITC [International Trade Center] Trade Map, accessed February 25, 2020, www.trademap.org/. 10 Ibid. 11 “Dental Implants Market—Growth, Trends, and Forecast (2020–2025),” Mordor Intelligence, accessed February 16, 2020, www.mordorintelligence.com/industry-reports/dental-implants-market. 12 “Dental Implants Market Size, Share, and Industry Analysis,” op. cit. 13 The Denel D6 was a self-propelled artillery vehicle produced in South Africa. 14 “Recent News from the Department of Biomedical Engineering,” Department of Biomedical Engineering, College of Engineering, University of Utah, accessed February 2, 2020, www.bme.utah.edu Do Not Copy or Post
This document is authorized for educator review use only by Rimi Zakaria, University of Wisconsin-Whitewater until June 2022. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860
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He moved to the University of Utah in 1967 to direct the Division of Artificial Organs and the Institute for Biomedical Engineering.15 Blackbeard worked on a section of Kolff’s research involving the artificial heart, in particular the stabilizing titanium rings that were manufactured to support the heart valves. Blackbeard learned about the principles of precision engineering, and upon returning to South Africa in 1986, he knew he wanted to build a career in the field of biomedical engineering.
In 1987, Blackbeard registered his first company—Cardiac Devices of South Africa. At first, he wanted to specialize in heart valves, building on his studies at the University of Utah and using a technology called fluidized bed technology. However, a key resource decided to emigrate to Boston, Massachusetts, United States, and, with his departure, Blackbeard did not have the right partnership to move the project forward. At the same time, Blackbeard was approached separately by the heads of dentistry at both the University of Witwatersrand and the University of Pretoria. They had heard of Blackbeard’s exposure to precision manufacturing with titanium at the University of Utah, and each asked if he could make dental implants from titanium since South Africa had no existing dental implant manufacturers. Blackbeard partnered with his army sergeant major, whom he worked with on the G6 artillery gun, and through a process of trial and error, reverse-engineered the implant design in Pretoria. Realizing the local market opportunity, Blackbeard rented space in Pretoria and started manufacturing.
In 1992, Southern Implants was registered as a new company. Blackbeard told others that the company wanted to be proud of its South African heritage and reflect that in its name. Five years later, the company purchased the land and buildings associated with the former Irene Film Laboratory in Pretoria; initially, Southern Implants used only the space it needed and rented out unused buildings. Blackbeard firmly believed in the importance of company growth but in a steady, sustainable, and affordable way. On principle, he never took in external capital; profits were used to fund all physical expansion, machinery, marketing, and research and development (R&D). Despite several offers over the years from international companies to purchase Southern Implants, the company remained privately owned.
SOUTHERN IMPLANTS: DESIGNING AND MANUFACTURING DENTAL IMPLANTS TO THE WORLD
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