Insights into the forces shaping our industry.
Blog, Industry Commentary
The news arrives daily; the Fed is hesitant to raise rates due to softness in the global economy or Greece or Japan or China’s currency devaluation. The Dow-Jones has dropped 10% from the first of the year and is languishing around 16,000 points; representing a ‘soft’ or uncertain market right now. The Republican political debates accentuate how horrible the economy is. There just seems no logical way of aggressively growing business in the electrical industry, other than waiting for things to improve. Or is there? A few facts:
- 2/3’s of all commercial buildings in the US were built before 1990 (http://www.eia.gov/consumption/commercial/reports/2012/buildstock/)
- HVDC Transmission Market worth $13.54 Billion by 2020, growing at an annual rate of 17%/yr (http://www.marketsandmarkets.com/PressReleases/hvdc-grid.asp)
- US PV Market on pace to grow 24% over 2014 (http://www.seia.org/research-resources/us-solar-market-insight)
- The LED lighting market is anticipated to grow 45% per year through 2020 (http://electronicspurchasingstrategies.com/2015/04/07/strong-growth-forecast-for-led-lighting-market/)
- Nonresidential Construction in Full Recovery Mode http://www.aia.org/practicing/AIAB106916)
- The 11 biggest trends in lighting technology right now (http://luxreview.com/article/2015/07/the-11-biggest-trends-in-lighting-technology-right-now)
Our view into the industry is pretty unique; we specialize solely in this industry so our daily conversations are with industry executives from companies as varied as Fortune 500 to pre-revenue startups. We cover manufacturers, distributors, specifying firms, investment firms and consultants. For the most part our discussions reflect a level of increased business across the board, revenues are up, profits are up and opportunities exist everywhere. At the same time, we also are involved in Blue Ocean companies that are at the forefront of new technology that will change the industry forever. Blue Ocean strategies include: Light color therapies, IoT connectivity, Biomass energy with CO-2 off-loading to agriculture, Tesla’s energy storage system, DC-powered home construction, solar lighting for off-grid communities, etc.
When I read of companies that are reporting declines in margins or sales I am reminded of the old age that ‘all politics are local’. The electrical industry has changed so much and so fast that many of its tenured participants haven’t adjusted to the new ‘electrical industry’. If I owned a small distributor in a small market, I would largely feel immune from many of the new trends shaping the industry; LED adoption, Controls technologies, IoT, Solar integration with DC power distribution, etc. Even very large manufacturers have slow adoption of new technologies due to their legacy cost investment (and mindset) of doing things the same way. Change is difficult; not necessarily to enact, but to recognize the difference between real change and minor fluctuations. And yet, as a CEO of a business you owe it to your employees to be cognizant of the world around you. Frankly, most business owners work way too much IN their business and very little ON their business.
Let’s take the example of a small market distributor; where do you get new business? Well, knowing that 2/3’s of EVERY commercial building in your market is more than 25 years old; the opportunities for energy saving solutions are immense. You drive by those very opportunities every day, as you wonder how to grow your business. The products you can sell to a commercial building for energy savings are largely the same category of products you’ve sold for 50 years: lighting, controls, sensors, drives, energy storage, UPS systems, switchgear, etc. But the challenge is to identify the strategy and invest in accomplishing it.
There are 6 million commercial and industrial buildings in the US. 40% of all energy in the US is consumed by commercial buildings and we have the technologies available today, to reduce that energy load by more than 50%. The financial impacts to the customers would pay for themselves in as little as 2 years; with some utility incentives… possibly in under a year. The financial opportunity for the small distributor is excellent and requires a plan and an honest assessment of your current staff to identify who in your organization can effectively present a financial based energy story to every commercial building owner in the territory. More often than not, it will require hiring a new salesperson to do that since salespeople tend to become self-limited to a customer base where they’re comfortable. And the biggest challenge is the expectation of performance; financial business models take time to close; months and possibly a year or more before it’s approved in a new Capex budget, or justified in the owner’s mind that it makes sense. Carrying a salesperson for 6-12 months before he/she can break even can be pricey and fraught with uncertainty, but it only takes one success story to build the model and reap the rewards.
The moral of this story is, the market isn’t ‘bad’, the economy isn’t ‘bad’. The potentials are huge. To address the media… the stock market tripled in 7 years and now it’s corrected by 10%. That’s not a bad economy. The GDP of Greece is roughly the equivalent of Wisconsin; a decline in WI doesn’t rise to the level of global fears; neither should Greece. The financial market attracts a lot of media attention, but the vast of majority of people don’t rise to the level of hysteria every time Wall Street sneezes. There is plenty of very good business out there.
Our industry is attracting global players in electronics, energy, technology and consumer goods. Those players aren’t wallowing in fear of a modest stock correction. When Amazon announces it wants to enter our industry… there’s a reason for it; it’s profitable and available. Your market is only as vulnerable as you choose it to be… create your own Blue Ocean.
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 email@example.com.