Non-Compete Clauses in the Age of the IoT

An industry friend of mine forwarded me an article titled “The Tyranny of the Non-compete Clause”.  It’s an interesting read on the etiology of non-competes and the concomitant impacts the use of the contracts have had on the growth of innovation.

It’s a very worthwhile read for any business leader who’s contemplating adding non-compete clauses to their already onerous hiring practices. Non-compete clauses are illegal in most instances in CA, with several states reviewing legislation to eliminate or limit the effectiveness of these agreements.

While there are logical reasons for some measure of a non-compete; very detailed, technical expertise in a small specialized industry; extensive training regimens to become effective in their job, etc. But for bulk of the electrical industry; which has large numbers of competitors and little ‘secrecy’ to their business practices (channel partners, pricing structures, rep organizations, etc.) the use of non-competes tend to actually depress the availability of quality talent; not strengthen it.

We work with clients everyday who have non-compete clauses, and we advise our clients that requiring those documents limit the talent pool to those who are openly willing to limit their future career path. The Millennial generation will have a huge impact on non-competes as they don’t see the world as a single employer model. They want and thrive on innovation created by making moves. Signing a non-compete will thwart their ability to expand their skills; since they see their skills transcending a single employer.

We have actually seen an increase in non-competes that is likely linked to the expansion of technology. While a non-compete does not specifically address confidentiality, the growth in their usage is likely due to a conflation of the two concepts. Confidentiality clauses are proper in most applications; you should not be able to take a company’s secrets and use that as a weapon to command your next career move. Company secrets should be secret. It’s unethical and improper to aid and abet anybody who is blatantly stealing proprietary information.

The challenge is in definitions. We’ve seen employment contracts deem price sheets and customer lists as a company secret. Really? Maybe if you’re selling some deep technology to a handful of stealth OEMs; but in the electrical world, you can well identify any customer and almost any price you want to see; simply by asking the right people. This is a well-defined industry with decades of relationships…there are very few ‘secrets’ when it comes to channel practices. So, confidentiality should be controlled for true company secrets; strategic plans, technology, innovations, patentable designs, internal financial information, etc. Knowledge of those plans is certainly a risk should a key employee leave your employ; but that shouldn’t restrict that employee to continue his/her career in a new challenge. There are public records of events that have documented excesses of employees leaving and transferring secret information to their new employee; which is an ethical breach and should be legally prevented from occurring. But barring the few occasions of bad people doing bad things…  legally restraining your entire employee leadership or technical team from pursuing a career move within their industry is just wrong. It’s best described as indentured servitude…let ‘em go. They’re not happy, or they have a chance to better their lives, or they need a change to reinvent their passion…let ‘em go.

Ironically, the Bloomberg article references research that shows people with signed non-competes can actually diminish their contribution as a reaction to a self-perceived limitation of their future capabilities.  But the other issue is that the company actually limits their ability to hire new, motivated talent. Top talent doesn’t sign non-compete agreements unless there is significant incentive to do so.

The Bloomberg article also links the creation of Silicon Valley to the lack of non-competes. As CA had limited the clauses, Silicon Valley was able to attract talent that learned, grew, left and started their own companies and attracted more talent, etc. It created a rapidly growing community that shared practices and concepts and grew exponentially.

The electrical industry doesn’t have a geographic parallel to Silicon Valley; although many of the early companies emerged in the East; Wire/Cable manufacturers, especially. But our industry has generally supported movement across companies. Some have labeled that pejoratively as job hoppers or retreads; but I think the millennial generation would call that experiential growth.

We’re changing rapidly. Technology is exploding the very size of our industry. Millennials are changing our legacy perception of employment. The need for talent is rampant. And the availability of talent is limited. The time for reconsidering onerous barriers to entry and legacy labels of exclusion is long overdue. Our legacy way of hiring has to change. Let it go.

http://www.bloombergview.com/articles/2016-04-11/the-tyranny-of-the-noncompete-clause

 

Ted Konnerth, PhD

Ted Konnerth, Egret Consulting Group’s founder and CEO, recruits on a retained basis, helping leaders in the electrical and lighting industry identify their next C and V-level hire. He is also the executive director for the International Retained Search Associates, allowing him to liaise with skilled recruiters around the globe. To learn more about how Ted can help your company attract talent view his biography, check him out on LinkedIn or email him at tk@egretconsulting.com.

Commoditization

We’re all commodities. Granted some of us are fatter, thinner, older, younger, racially or ethnically different… but we’re just a commodity. The median age of a US citizen is 37 years. Men weigh 195 pounds and are 5’ 9” tall. Women weigh 165 pounds and are 5’ 4” tall. Average IQ is 100, median household income is $53,650.

We’re all basically just the ‘same’. Which is why the rush to consolidation benefits us… we’re just this large mix of sameness so our collective buying power improves. And we face the growth of sameness everywhere: hotels have consolidated into a handful of mega-properties that basically have commoditized whatever a hotel ‘experience’ is. Grocery stores have consolidated and rationalized their vendors so that we can buy the exact same bottle of ketchup in any of their same stores in every city.

Airlines have consolidated and now provide the same level of disservice to every commoditized citizen who wants to sit in seats designed for overweight 5’4” tall humans. Retail shopping has consolidated and commoditized to a point where the exact same dress or pair of shoes is available in every clothing retailer in every city so that we can all look the same in our median-sized bodies.

Distributors are similarly commoditized; selling the exact same 20 amp breaker and #12 wire to the identical 5’9” contractors. And the manufacturers of those breakers, controls, wiring devices and lighting fixtures are all the same; they just differ by the price du jour.

Health care assumes health services are commoditized, because the insurers tell the providers what their prices are by the code of service; i.e. standardized, commoditized service. And recruiters…. Let’s face it, they all do the exact same thing, just as a lawyer does or accountant, or dentist. The only real difference is price.

Our core industry foundation is infrastructure which makes the rest of the world run. Without reliable energy transmission and quality practices of design and installation, there would be no shopping malls, airplanes, hotels or grocery stores (as we know it anyway). And we live in an era when the core foundations of energy are going through evolutionary tumult.

I attended Distributech last week. The booth session had roughly 540 exhibitors, and I would estimate that approximately 300 were software companies. Software at a T&D conference? Oh my…. There were demand management, asset management, energy management, smart grid analytics, grid edge management, big data aggregation, GPS systems, security systems and control room systems. And 20+ companies for each of those categories. All commoditized, I’m sure.

I attended the Utility lighting program and found it to be interesting for the pure scope of the opportunity. Georgia Power is changing out 120,000 outdoor lights every year. Duke Power has 2.3 million lights on its system, FPL has over 850,000 lights. The utilities are exploring smart lighting devices that can provide information on each fixture’s status; eliminating night time patrols to find defective equipment and group re-lamping disruptions. In addition, smart lighting can add services; internet for parking garages, variable light levels for events or accidents, simple asset management by defining where every fixture is on their system, and the potential for new services; chemical detection, radiation detection, security enhancement systems, traffic alert systems, etc.

Just when I had figured out that energy generation and transmission is a true commodity… along comes an industry that is incredibly vibrant with new ideas to protect the very visible assets of power transmission, and new approaches to managing their business to ensure safe, reliable energy.

Our energy providers have been challenged to meet energy standards that will require the eventual elimination of fossil fuels as a source for our energy. That process will happen and must happen, but the challenges for meeting those goals are varied: rate structures, competing forces for ‘owning’ alternative energy generation (from a local residence to a commercial/industrial site), the movement to DC power and micro-grid generation and the sheer economics of scale to remove massive coal plants and replace in-kind with alternative energy. And then balance all of those changes with preserving revenues and profits for their shareholders.

Burning coal or gas is a pure commodity process; with extraordinary climate and pollution impacts. The CEO of Vantage Point has described power generation as “a 100 years of boiling water”. That’s a commodity. The key behind the transition away from coal or gas-powered generation is to handle the logistics of change. With hundreds of software providers that can enable gigs of gigabytes, it’s remarkable how sophisticated of an energy delivery system we have and the beauty of the solution processes that exist inside of our IOU’s, muni’s and co-ops. The eventual elimination of fossil fuels will require infinite solutions to structural logistics. They’re changing, but it’s a thoughtful process.

Yet commoditization exists everywhere. Take retailers who have had diminishing profits and marginal revenue growth who are somehow inclined to expand through acquisition of another retailer; generating an internal process of regression to the mean; all in search of ‘synergy’. (see: Sears, Kroger’s and Macy’s as examples). How long will it take for Acuity to rationalize Juno into the sameness of their other brands? How well did General Cable’s acquisition strategy work?

The mindset of comparison to a mean pervades our assessments of people and vendors and customers as well as movies and restaurants. Yet what we truly enjoy is ‘different’: a doctor that actually talks about healthcare and wellness, innovative menu items, a selection of choices in clothes or food or hotels; an airline that adds bigger seats and more comfort. We tend to label people much as we label utilities; i.e. sameness. Bigger doesn’t necessarily prove to be better. Apple has been an exception as they’re driven by innovation. GE has largely fumbled their Lighting market away.

Our industry has a tremendous breadth of opportunities; new technologies, old systems and standards, rapid adoption of new talent, rapid rise in new entrants with new ideas or solutions and the sureness of growth. Infrastructure endures and requires continual maintenance and attention. We’re relatively immune to economics; only somewhat reliant on governmental incentives and generally profitable. In a way, that makes us ‘different’ and that’s a good thing.

Ted Konnerth, PhD

Ted Konnerth, Egret Consulting Group’s founder and CEO, recruits on a retained basis, helping leaders in the electrical and lighting industry identify their next C and V-level hire. He is also the executive director for the International Retained Search Associates, allowing him to liaise with skilled recruiters around the globe. To learn more about how Ted can help your company attract talent view his biography, check him out on LinkedIn or email him at tk@egretconsulting.com.

By |February 18th, 2016|Industry Commentary, Industry Events, Industry News, Newsletter|0 Comments

Internet of Things

Strategies in Light held their first joint conference with the LEDShow during the last week of February. Attendance was solid and the technical conferences featured four different tracks of presentations covering arcane technical issues to overall market influences on the adoption of LED. On Tuesday, they held their Investor Forum; a mini-version of the popular Shark Tank TV show, Investor Forum features a panel of 8 investors and a rotating presentation of emerging companies.

The conference is by far the industry leader in covering all issues pertinent to LED technology. I came away from the presentations and private meetings with a long list of interesting concepts:

  • LED has had over $4B of investments over the past 10+ years and most investors have lost money in the technology. The reasons for the losses varied but one comment by the investor panel was particularly notable:
    • The Channel Matters. The investor explained that bringing new technology into a legacy market takes time and energy that was largely unanticipated by the newer entrants. As many of the newer companies were in a rush to revenue, they carved their own paths to market… and mostly failed. I’ve remarked several times over the past 7-8 years that selling light bulbs is a whole lot more complicated than most people believe; and relationships matter.
  • M&A valuations for LED have declined. This is a direct response to the loss history. Investors are far more wary of rosy predictions and novel solutions to selling those products.
  • Acquisitions have declined. The major strategic companies had a very quiet year of acquisitions in 2014 (Acuity, Eaton, Hubbell, Cree, Philips, GE). They felt that M&A may pick up steam in 2015 and as evidenced by Acuity’s eye-popping valuation for Distech this week… we may be back in acquisition mode.
  • IPO’s are expected to rise; primarily fed by the much heralded spin-off of LumiLeds by Philips.
  • The available market is still huge; with the replacement lamp market estimated as 45 billion sockets with only 5% filled by LED currently. Ironically, as LED replacement lamps rise, the expected peak is a forecast decline by 2022 as the LED fulfillment and long-life shrinks the market.
  • The global fixture market is estimate currently at $59B with $19B being LED. The market is projected to rise to $66B by 2022.
  • Low voltage distribution is rising and is seen by many companies as a large movement in the near future; with estimates of construction cost savings of $75/sq ft or more. With LED enabling the low voltage movement, I think this will become the primary mode of power distribution in homes in the near future.
  • Lighting is moving quickly into bio-genetics with new bulbs that can affect circadian rhythms, or promote plant growth or farm animal growth and integrate into newer smart devices like Nest.

 

And then there’s the real future; the Internet of Things (IoT). It was notable that one of the keynote speakers was a senior VP of Cisco. Cisco? At a Lighting show? Really?

Really… Cisco is heavily invested in the technology of IoT; including security and mass-adoption practices. There are currently 12B devices that connect to the internet; globally. By 2020 that number will be over 50B devices.

There are companies already developing data collection and management solutions through lighting that will feed into the Big Data movement. A ‘simple light bulb’ integrated with sensors and communication capabilities can do a lot more than light up your closet.

And one final note… the transition to LED seems to be working despite years of naysayers and skeptics. DOE reported that last year the US saved $1.8B in utility bills. And that number will grow significantly; spurring a rise in the investor-owned utility community to create new revenue streams via promoting solutions that in essence sells less of their product.

The pace of technology growth is the highest of any time in any currently living person’s life. It is exciting, confusing, bewildering and amazing. Enjoy the ride.

Those who cannot change their minds cannot change anything.”
George Bernard Shaw

Ted Konnerth, PhD

Ted Konnerth, Egret Consulting Group’s founder and CEO, recruits on a retained basis, helping leaders in the electrical and lighting industry identify their next C and V-level hire. He is also the executive director for the International Retained Search Associates, allowing him to liaise with skilled recruiters around the globe. To learn more about how Ted can help your company attract talent view his biography, check him out on LinkedIn or email him at tk@egretconsulting.com.

By |March 20th, 2015|Industry Commentary, Industry Events, Newsletter|0 Comments

LightFair and Tech

I attended my 24th LFI conference earlier this month and found the conference to be one of the best in their history. Attendance was very strong, the overall quality of the booth displays was excellent and the diversity of products and solutions was visually staggering. In short, Lighting is no longer about delivering footcandles to a task. The intersection of lighting and tech has begun in earnest. The integration of control systems and the sheer definition of what controls what is in flux. In the past several weeks, I’ve had the extraordinary opportunity to discuss the technology changes in the retail market and how the interaction between tech and product is changing rapidly.

I had the chance to start my retail experience with an excellent discussion with Sensity (formerly Xeralux) and learn about the integration of outdoor lighting with security and informatics. We are at the threshold of offering site lighting that can integrate cameras and sophisticated control systems that will enable retail shopping information down to the specific consumer; where he/she is in space and whether they are trying to find a parking space or simply looking at a sweater. And if they’re in a dressing room equipped with the capabilities of simulating that same sweater in differing colors or suggesting a complementary belt, pants or handbag, then the opportunity for increasing the sales value rises. The tech part is impressive.

Retail can now combine visual merchandising with direct sales; there are virtual interactive concierges who can guide you to specific products or stores within a mall. You can now purchase products in a brick/mortar store through a cell app that allows you to ‘check-out’ by simply taking your product away. Malls are adding visual kiosks to take up unused space that enables consumers to see visual merchandise and buy it from their cell and ship it for free. Fast food restaurants have digital menu boards that allow you to order your hamburger exactly the way you like it and hit ‘buy’ with no interface with a human… pay for it at the counter or through your cell app. Drive-through restaurants can allow you to order your food before you get there and pick it up at the window. The key to the explosion of tech has been the new operating systems for cell phones; both Android and Apple’s new IOS upgrade have the capability of enabling cell phones to provide an extraordinary breadth of information. And then there’s the other enabler… lighting.

Solid State Lighting (SSL) is now a smart chip; placed pervasively throughout our lives that can enable communications across a variety of technology.  Legacy lighting systems were largely dumb systems; the better ones could enable dimming and off/on control systems. SSL systems can now be integrated into systems that may contain: dimmers, cameras, security detection systems, face recognition software, license plate recognition, temperature, occupancy levels, motion, speed, personal recognition (phone identification or app account information), credit-worthiness and buying habits. And that’s just a small sampling that involves retail operations. And how does retail lighting shape the general commercial lighting market? A lot… since every homeowner, business owner and governmental leader is also a consumer and is impacted by the look and feel of how ‘retail’ functions. We observe retail environments through the eyes of what’s trendy or fashionable and take those concepts into our offices, homes and even warehouses.

SSL will explode the applications for informatics. Informatics lead to Big Data and Big Data leads to Big New Ideas. And Big New Ideas lead to the simple question… who do we have in our company who can do this? Technology has largely existed outside of the legacy lighting industry, we sold legacy products to legacy channel partners and sold legacy solutions that always ended up with… how much light do you need and how much does it cost? The new frontier will likely minimize the attention to the former and displace the discussion of the latter… ‘price’ will be offset by bundling together solutions that have fewer opportunities for competitive comparisons.

The leadership and tactical employees of the very near future will be dramatically different than the traditional employees of the legacy lighting era. The ability to sell lighting based upon the sophistication of the control and sensor environment will alter the sales process and change the buying influences. A traditional contractor will be largely mitigated from the discussion of lighting; value-engineering reps will be valued less; full-line distributors will struggle to identify what a lighting ‘line’ will look like, since lighting will be sold more through the controls features than the emitter capabilities.

And then there’s the human capital investment. Legacy lighting executives may not have the skills to identify the type of selling skills and technical aptitude their sales organization will require. (as well as their product development, marketing, engineering talent). Legacy salespeople are rarely capable of getting out of their comfort zone and calling on customers or buying influences outside of their traditional base of business. The scope of technology is changing so fast that training is obsolete before you can complete the manual for it.

The lighting industry is in a renaissance. It is the most exciting time in the history of lighting, but companies and individuals will be tasked to make dramatic changes in their view of the lighting industry to change from selling tangible products to environmental technology solutions. Planning for a renaissance is tricky.

Ted Konnerth, PhD

Ted Konnerth, Egret Consulting Group’s founder and CEO, recruits on a retained basis, helping leaders in the electrical and lighting industry identify their next C and V-level hire. He is also the executive director for the International Retained Search Associates, allowing him to liaise with skilled recruiters around the globe. To learn more about how Ted can help your company attract talent view his biography, check him out on LinkedIn or email him at tk@egretconsulting.com.