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Ted Konnerth’s 2010 IES Street & Area Lighting Conference Presentation

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The Adoption of New Technology into an Old Culture. This presentation discussed the disruptive impacts of LED technology as it enters the traditional lighting industry. The presentation discuseds significant cultural differences between the traditional lighting community and the new technology community. It explored the major channel and behavioral differences the impacts LED technology will have on an industry that has remained relatively unchanged for decades.

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New Technology in an old Culture At 200 Lumens/Watt What Would Edison Do?
My Agenda Can’t we all just get along? My background Definitions Selling and buying LED is different than the past Review Traditional channels v New Approaches Cultural Chasm Old relationships are being challenged and changed Buying relationships LED challenges and strengths The field is crowded, but not for long Future trends for LED Advice
Background and definitions Who am I? Definitions LED guy Solid state, semi-conductor EE mindset Componentry model/OEM focused Lighting guy Finished goods model/contractor focused Mechanical mindset Overage is the litmus test
The Traditional Lighting Market 12 distinct vertical markets within ‘commercial lighting’ Each with unique buying influences Examples: Retail New construction Utility MRO OEM Sales channels, typically unique to each market Product features, often unique to markets
Cultural chasm Speed. Ltg Guys poster child is Edison: 100+ years of the same product LED Guys poster child is Dell: faster better cheaper IP. Ltg guys ‘like patents’ LED guys use patents as swords Manufacturing. Ltg guys make millions of SKU’s with long runs of 1-5,000 pieces LED guys make millions of the same SKU’s with ‘lights out’ processes
Cultural chasm Customers. Ltg guys assume the end customer is an electrician LED guys see the customer as a componentry distributor Lighting. Ltg guys see the applied effects and affects of lighting LED guys see brightness and lumens/watt Price. Ltg guys view prices as ever increasing LED guys view prices as ever decreasing
Buying influences of outdoor lighting Customer influences Utilities Marketing departments Standards organization Regulatory bodies Munis Political influences Tax oversight Consulting engineers DOT’s Developers
Selling influences of outdoor lighting Reps C&I reps Power/energy reps Direct manufacturer reps Distributors Emerging companies ESCO’s Energy consultants
Reps SWOT analysis C&I Lighting reps Strengths: specification relationship, technical expertise Weaknesses: $$$$$, and independence Energy reps Strengths: Customer relationships, technical expertise in T&D Weaknesses: lighting expertise, ‘blanket focused’
Reps SWOT analysis Factory direct reps Strengths: product knowledge Weaknesses: limitation to one manufacturer solution Emerging companies Strengths: varies broadly, but financial expertise is strong Weaknesses: understanding the customer needs and applied environment
LED and Outdoor lighting… Are we there yet? Challenges for LED L/W aren’t favorable vs HID currently ROI is questionable Utility leasing, the power number isn’t the major component of lease Reliability is confusing 50,000 hrs? 100,000 hrs? who’s counting? Componentry life span vs LED life span Maintenance life cycle Does dirt depreciation get factored into the ROI? Warranties 5 year warranty from a 2-yr old company What’s covered, what about IP liability?
LED outdoor lighting… just a little bit farther LED advantages Optical control is more precise Hemispheric optics render L/W moot Design form factor flexibility: Product weight EPA values “Reflector’ size Wire sizes Pole sizes, vibration issues Design materials Controls interface… the future belongs to controls
Who’s going to sell LED Sales channels are fragmenting Distributors => appliances, CEDIA, alternative energies, LED Specifiers, who ‘owns’ the relationship? Lighting reps? End-users? Manufacturers? Consultants? Contractors Training requirements DC Vs AC? Warranty Unions, low voltage CEDIA vs NECA
Sales influences of LED Flow of information Top down model has moved to end-user influenced Direct manufacturer/end-user is increasing Money Rush to soak up TARP funds Private equity firms are investing heavily in LED companies LED companies are hiring end-user focused sales talent Sales model is changing from ‘spec and overage’ to direct and ROI
Sales solutions of the future Multiple layers of ‘reps’ in the same geography More ‘house accounts’ for manufacturers with direct sales rep New alliances: Cree and Philips Molex and Bridgelux LED companies with national distributors New channel strategies WalMart signs a deal with an electronics company to relight their stores Orion licenses dealers to act as sales and installers Cree sells to an OEM and sells against them at the same time LED ‘distributors’ functioning as reps, brokers, esco’s LED module mfrs are creating retrofit ‘kits’ for their OEM partners’ products
New influences on LED Global electronics firms entering the US (Sharp, Toshiba, Mitsubishi, etc) IP ‘trolls’, including current major companies will use patent rights as competitive weapons Incentives: PACE, bay area, requires a plan for decreased connected load prior to offering incentives to install alternative energy power supply systems Demand side penalties are growing, including greater than$1/KWH for peak demand consumption
Future is bright Probably as bright as 250L/W Channel strategies will be reshuffled and flattened The days of multiple layers of margin gain will end Bidding and closing business will become far more ROI based Sales people will become more fluent in the financial merits of LED New competitors will emerge to promote energy efficient lighting The number of LED manufacturers will decline from >400+ to less 100 The survivors will enjoy a run of at least 5 years of very profitable growth
Advice for the next two years LED guys Learn the current channel, even if you don’t use it Pick a channel strategy and develop it Identify your customer BEFORE you develop the product Attract talent who holds the relationships with the channel customers you want to sell to. But understand the questions you have to ask to select that talent. Don’t poke fun at the Ltg guys
Advice for the lighting guys Lighting guys Embrace it. It’s here. Figure out the problems and fix them: heat, optics, power supplies, etc Fix your channel It’s anachronistic It’s inefficient It’s abdicating control and ultimately responsibility for your company Change your business model Warranties, Processes, channel partners Learn to sell ‘lighting’ Attract LED talent to teach you the business
Change is good “ LED is the most disruptive technology to affect the lighting industry since Edison” A White Paper examining the impacts of LED technology. Ted Konnerth, PhD 5/09 “ If you’re not changing faster than the world around you, you’re backing up” Author unknown
Contact information Ted Konnerth [email_address] 847-307-7125

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Ted Konnerth’s 2010 IES Street & Area Lighting Conference Presentation

  • 1. New Technology in an old Culture At 200 Lumens/Watt What Would Edison Do?
  • 2. My Agenda Can’t we all just get along? My background Definitions Selling and buying LED is different than the past Review Traditional channels v New Approaches Cultural Chasm Old relationships are being challenged and changed Buying relationships LED challenges and strengths The field is crowded, but not for long Future trends for LED Advice
  • 3. Background and definitions Who am I? Definitions LED guy Solid state, semi-conductor EE mindset Componentry model/OEM focused Lighting guy Finished goods model/contractor focused Mechanical mindset Overage is the litmus test
  • 4. The Traditional Lighting Market 12 distinct vertical markets within ‘commercial lighting’ Each with unique buying influences Examples: Retail New construction Utility MRO OEM Sales channels, typically unique to each market Product features, often unique to markets
  • 5. Cultural chasm Speed. Ltg Guys poster child is Edison: 100+ years of the same product LED Guys poster child is Dell: faster better cheaper IP. Ltg guys ‘like patents’ LED guys use patents as swords Manufacturing. Ltg guys make millions of SKU’s with long runs of 1-5,000 pieces LED guys make millions of the same SKU’s with ‘lights out’ processes
  • 6. Cultural chasm Customers. Ltg guys assume the end customer is an electrician LED guys see the customer as a componentry distributor Lighting. Ltg guys see the applied effects and affects of lighting LED guys see brightness and lumens/watt Price. Ltg guys view prices as ever increasing LED guys view prices as ever decreasing
  • 7. Buying influences of outdoor lighting Customer influences Utilities Marketing departments Standards organization Regulatory bodies Munis Political influences Tax oversight Consulting engineers DOT’s Developers
  • 8. Selling influences of outdoor lighting Reps C&I reps Power/energy reps Direct manufacturer reps Distributors Emerging companies ESCO’s Energy consultants
  • 9. Reps SWOT analysis C&I Lighting reps Strengths: specification relationship, technical expertise Weaknesses: $$$$$, and independence Energy reps Strengths: Customer relationships, technical expertise in T&D Weaknesses: lighting expertise, ‘blanket focused’
  • 10. Reps SWOT analysis Factory direct reps Strengths: product knowledge Weaknesses: limitation to one manufacturer solution Emerging companies Strengths: varies broadly, but financial expertise is strong Weaknesses: understanding the customer needs and applied environment
  • 11. LED and Outdoor lighting… Are we there yet? Challenges for LED L/W aren’t favorable vs HID currently ROI is questionable Utility leasing, the power number isn’t the major component of lease Reliability is confusing 50,000 hrs? 100,000 hrs? who’s counting? Componentry life span vs LED life span Maintenance life cycle Does dirt depreciation get factored into the ROI? Warranties 5 year warranty from a 2-yr old company What’s covered, what about IP liability?
  • 12. LED outdoor lighting… just a little bit farther LED advantages Optical control is more precise Hemispheric optics render L/W moot Design form factor flexibility: Product weight EPA values “Reflector’ size Wire sizes Pole sizes, vibration issues Design materials Controls interface… the future belongs to controls
  • 13. Who’s going to sell LED Sales channels are fragmenting Distributors => appliances, CEDIA, alternative energies, LED Specifiers, who ‘owns’ the relationship? Lighting reps? End-users? Manufacturers? Consultants? Contractors Training requirements DC Vs AC? Warranty Unions, low voltage CEDIA vs NECA
  • 14. Sales influences of LED Flow of information Top down model has moved to end-user influenced Direct manufacturer/end-user is increasing Money Rush to soak up TARP funds Private equity firms are investing heavily in LED companies LED companies are hiring end-user focused sales talent Sales model is changing from ‘spec and overage’ to direct and ROI
  • 15. Sales solutions of the future Multiple layers of ‘reps’ in the same geography More ‘house accounts’ for manufacturers with direct sales rep New alliances: Cree and Philips Molex and Bridgelux LED companies with national distributors New channel strategies WalMart signs a deal with an electronics company to relight their stores Orion licenses dealers to act as sales and installers Cree sells to an OEM and sells against them at the same time LED ‘distributors’ functioning as reps, brokers, esco’s LED module mfrs are creating retrofit ‘kits’ for their OEM partners’ products
  • 16. New influences on LED Global electronics firms entering the US (Sharp, Toshiba, Mitsubishi, etc) IP ‘trolls’, including current major companies will use patent rights as competitive weapons Incentives: PACE, bay area, requires a plan for decreased connected load prior to offering incentives to install alternative energy power supply systems Demand side penalties are growing, including greater than$1/KWH for peak demand consumption
  • 17. Future is bright Probably as bright as 250L/W Channel strategies will be reshuffled and flattened The days of multiple layers of margin gain will end Bidding and closing business will become far more ROI based Sales people will become more fluent in the financial merits of LED New competitors will emerge to promote energy efficient lighting The number of LED manufacturers will decline from >400+ to less 100 The survivors will enjoy a run of at least 5 years of very profitable growth
  • 18. Advice for the next two years LED guys Learn the current channel, even if you don’t use it Pick a channel strategy and develop it Identify your customer BEFORE you develop the product Attract talent who holds the relationships with the channel customers you want to sell to. But understand the questions you have to ask to select that talent. Don’t poke fun at the Ltg guys
  • 19. Advice for the lighting guys Lighting guys Embrace it. It’s here. Figure out the problems and fix them: heat, optics, power supplies, etc Fix your channel It’s anachronistic It’s inefficient It’s abdicating control and ultimately responsibility for your company Change your business model Warranties, Processes, channel partners Learn to sell ‘lighting’ Attract LED talent to teach you the business
  • 20. Change is good “ LED is the most disruptive technology to affect the lighting industry since Edison” A White Paper examining the impacts of LED technology. Ted Konnerth, PhD 5/09 “ If you’re not changing faster than the world around you, you’re backing up” Author unknown
  • 21. Contact information Ted Konnerth [email_address] 847-307-7125