Guest post by Ted Konnerth, President/CEO of Egret Consulting Group
We spent two full days at LightFair; which was larger than in the past, very well-attended and brimming with energy. Several recurring issues really resonated with us as we compared notes on the flight back home. Here’s a summary of the state of the state for lighting and its future:
LED adoption. We’ve been touting the ‘arrival’ of LED for several years, but it’s finally ‘here’. Even the Bigs are endorsing the technology with Cooper actually bragging about a 12% adoption rate for them in 2011. One can only imagine how much larger the LED contribution would be if Cooper and their Bigs competitors had invested more attention to both the technology and channel restraints earlier. But, since that’s quibbling about the past, let’s all just admit that LED is now the dominant force in lighting for the foreseeable future.
Technology growth. We met with companies who have blown well past LED and grasped the emerging market dynamics of controls and the integration of lighting into building automation, security, communications and even behavioral and agricultural implications of lighting. The array of new technologies is astounding. The opportunities to apply lighting are now limitless.
Channel impacts. It was interesting to see the number of LED lamp manufacturers and the presence of several of the global electronics firms promoting LED lamp replacements. The days of the Big Three in lamps is so 1900’s. The potential for socket replacement of LED sources is over 30 billion sockets, just in the US alone. It will take a lot of manufacturers to cover 30B sockets. And the path to replacement will be far broader than traditional distribution channel strategies for legacy lamp sources.
Talent absorption. It’s very interesting to see the absorption of legacy industry people into the nascent LED companies. The recession started in 2008 and there was a notable diaspora of industry talent downsized by the traditional manufacturers who have now mostly landed in companies that barely have been in business for five years. We’ve seen some good people land in emerging companies and we’ve seen some marginal talent land in good companies that frankly don’t understand how to properly vet a candidate due to their lack of understanding the industry channel influences. Regardless, the industry has grown remarkably.
Excitement. The lighting industry is changing at a pace never experienced before. The ‘language’ of lighting has been re-written to include terms of epitaxy, MOCVD, die, chromaticity, binning, etc. The buying influences for LED have pushed into areas seldom explored in the past. With the close tie of ‘lighting’ to ‘energy’ the buyers are now financially savvy decision makers who weigh total cost of ownership and analyze ROI in a manner that has rarely been considered in lighting design or presentations. The age of commercial buildings in the US is at a tipping point where the business potential for remodeling or retrofitting literally swamps the potential of even a robust new construction market.
Lessons for the future of lighting
The summary of LightFair is that I believe Lighting has enabled a classic Blue Ocean theory. In the book Blue Ocean Strategy, Kim and Mauborgne; the authors posit the premise that you can create a successful and highly profitable company by adopting a marketing strategy of going where no one else competes. A Red Ocean strategy is one of competing with multiple competitors and commodity products and strategies. Red Ocean companies benchmark their competition and eventually mimic them rendering a business climate of competition based upon pricing and fewer and smaller differentiations. Blue Oceans are places where no one has played before. They cite examples such as Cirque du Solei, Amazon, Apple, Nintendo, etc, where traditional products or services were revised and applied in such a manner as to create a new market.
Lighting has become a Blue Ocean in so many ways; the integration of electronics with conventional electrical products will propel innovative companies into markets and products that have never been created before. The opportunity to enter markets through electronic lighting equipment hasn’t even begun to flourish, yet. The easy opportunities include: smart offices; smart homes; smart meters that control home or office lighting loads; security systems integrated into HVAC, occupancy, video and recognition software. And then there is color: behavioral control, plant and animal growth, theatrical and architectural applications, etc.
Lighting affects everything. The buying influences and applications of lighting are everywhere. Our traditional approach to lighting has largely been relegated and limited to the needs of construction projects: commercial, residential, industrial; with specialty applications for automotive, task lighting and portable lighting tangential to the general lighting industry. The current ability to create lighting equipment for specific applications without the Red Ocean limitation of labels (2 X 4, downlight, troffer, shoebox, wallpack, Type 2, etc.) is infinite.
The lighting industry has entered a period of creativity that will rival the Renaissance. While the Bigs may myopically be limited to modifying legacy construction-related equipment into LED-compatibility, there are hundreds of emerging companies who are creating products or solutions which are unique and adapted for specific applications. Many of these companies will become significant players in the new lighting industry; and most will develop their own unique channel solutions, bypassing the traditional pyramid of profits built into the legacy companies’ Red Ocean strategies. Lighting has always been a fragmented business, but the future growth will lead to more fragmentation than ever before.
This just may have been the last LightFair of largely similar products for similar applications, all swimming in a very large Red Ocean. This is the start of Lighting as we’ve never known it.
