Insights into the forces shaping our industry.

For most of the electrical industry’s history, growth was easy to understand. More buildings meant more lighting, wire, cable and distribution equipment. More factories meant more motors, controls and automation. Utility expansion created demand for transformers, switchgear and related products. Manufacturers made products, representatives created demand, distributors stocked and delivered them, contractors installed them, and end users operated them. Obviously, the industry has never been quite that simple, but the basic commercial structure remained remarkably consistent for decades.

We don’t believe that structure will remain unchanged over the next decade. Something much larger is happening underneath the tremendous investment we are seeing in data centers, artificial intelligence, grid modernization, electrification, renewable generation and energy storage. Electrical products that were historically passive are becoming connected, measurable and increasingly intelligent. Power and data are beginning to overlap in places where they were once separate, while software is becoming part of products that we would never have described as technology products twenty years ago. That changes considerably more than the product itself. It changes who sells it, how it is specified, what the customer expects after the sale and, ultimately, where manufacturers, distributors and rep agencies will make money.

Data Centers

Data centers are probably the most visible example today. The amount of power required for AI computing has made electrical infrastructure one of the central issues surrounding data center development. We hear enormous numbers associated with projected power demand, but we believe the more interesting story is what these facilities are forcing the electrical industry to learn. A data center cannot tolerate unreliable power. The loads are large, dense and increasingly difficult to predict. Cooling requirements are substantial. Power quality matters. Redundancy matters. Monitoring matters. Cybersecurity matters. And speed of construction matters enormously because the financial consequences of delaying a facility can be staggering.

The result is an environment where nearly every weakness in the traditional electrical supply chain becomes magnified. Long transformer lead times are no longer an inconvenience. They become a strategic problem. A delayed piece of switchgear can affect the economics of an entire project. Poor inventory visibility becomes expensive. A cybersecurity weakness in connected equipment becomes more than an IT problem. Even something as basic as staging material incorrectly can create significant delays when thousands of components must arrive in a precise sequence.

This is why we believe data centers should be viewed as much more than another attractive vertical market. They are forcing manufacturers, distributors, contractors and engineering firms to solve problems that will eventually appear in many other markets. The technologies and operating practices being developed around these projects will migrate into factories, hospitals, commercial buildings, warehouses, campuses and other critical facilities. We have seen this happen before. Technologies begin in applications where economics justify the investment, costs decline, knowledge spreads and adoption expands. The immediate opportunity surrounding data centers is obviously substantial, but the longer-term opportunity may be even larger because of what the market is teaching the rest of the electrical industry.

Lighting

Lighting provides a good example of how quickly the definition of a familiar electrical product can change. For generations, the purpose of a light fixture was obvious. It provided light. The LED revolution changed the economics of lighting through lower energy consumption and longer product life, and controls added another layer of sophistication. Now the fixture itself can become a source of information. Power over Ethernet lighting is particularly interesting because it combines power and communications within the same infrastructure. A fixture can include sensors capable of measuring occupancy, temperature, air quality, movement and space utilization. Suddenly the ceiling becomes valuable for reasons that have very little to do with illumination.

Consider the commercial implications of that for a moment. A lighting manufacturer may still compete on appearance, efficiency, light quality and price, but it may also compete on software, sensors, interoperability, information and security. The people influencing the purchase expand beyond the electrical contractor, distributor and consulting engineer. Facilities executives, IT departments, building automation companies, architects and corporate real estate teams may all have a reason to participate. The product has changed, but more importantly, the buying process has changed with it. A manufacturer that continues selling the product exactly the way it sold fixtures fifteen years ago could have an excellent product and still find itself losing ground.

At the same time, something very different is happening outdoors. Dark sky requirements, the cost of trenching and persistent copper theft are creating stronger arguments for independent solar powered exterior lighting. Historically, solar lighting was often viewed as a specialty solution for remote locations where conventional electrical service was impractical. Better batteries, better optics, better controls and improved solar technology are changing that calculation. In some applications, running conventional power to an exterior fixture may eventually look unnecessarily expensive compared with installing a completely independent system. Lighting, therefore, is moving in two directions at once. Inside buildings it is becoming more connected and information rich, while outside buildings certain applications may become less dependent on traditional electrical infrastructure altogether. Both changes create opportunities, but not necessarily for companies that continue thinking about lighting strictly as illumination.

Wire and Cable

Wire and cable is going through its own transformation. It is easy to look at cable as one of the more traditional products in the electrical industry, but the convergence of power and communications could make this category considerably more technical. Class 4 fault managed power is worth watching closely. Rather than relying only on traditional methods of circuit protection, these systems continuously communicate and monitor operating conditions, allowing meaningful amounts of power to be transmitted while shutting down extremely quickly when a fault is detected. The important point for the broader industry is not simply the technology itself. It is what becomes possible when power delivery can be managed differently.

We should expect growing interest in specialized cable designs capable of supporting significant power requirements and high bandwidth communications. Cable construction, heat management, connectors, installation practices, communications performance and safety requirements all become part of the discussion. What once looked like a relatively straightforward cable sale starts requiring knowledge of the entire application. We believe that distinction is important because it applies to many product categories. The individual product is not becoming irrelevant. Quite the opposite. But understanding how that product interacts with everything around it becomes much more valuable.

Power Distribution

Power distribution may be where this becomes most apparent. The traditional model was largely one directional. Utility power entered a facility and moved through transformers, switchgear, panels and other distribution equipment until it reached the load. Today a facility can have utility power, solar generation, battery storage, generators and other local sources. Electric vehicles may eventually become part of the power equation as well. Energy prices can vary. Utilities may offer demand response programs. Batteries can be charged when economics are favorable and discharged when they are not. Critical loads may need to be prioritized differently from noncritical loads, while equipment throughout the facility is producing increasing amounts of operating information.

Someone, or something, has to make sense of all of it. That is where software becomes increasingly important to electrical infrastructure. Digital models can help operators understand what is happening inside a facility before making physical changes. Intelligent breakers and monitoring equipment can identify unusual behavior. Sensors can recognize deteriorating conditions before they become failures. Faster electronic switching can isolate certain problems more quickly than traditional equipment. Over time, more decisions that once required human intervention will happen automatically. A battery can discharge when demand reaches a certain level. A nonessential load can be reduced. A fault can be isolated. Backup generation can start. A facility can change where it gets its power based on availability, reliability or cost. We have spent more than a century becoming very good at distributing electricity. The next stage is becoming much better at deciding how, when and where that electricity should be used.

Cybersecurity

That leads directly to another issue the electrical industry can no longer leave entirely to the IT department. Cybersecurity is becoming an electrical issue because connected electrical equipment controls physical assets. When a breaker, inverter, transformer, EV charger, lighting control or building automation device is connected to a network, it becomes another potential point of entry. The consequences are very different from someone gaining access to an office computer. A compromised electrical device can potentially affect a building, production process or power system.

Manufacturers will have to think about authentication, software updates, communications security and access control during product development rather than treating them as features added later. Engineers will increasingly see cybersecurity requirements appearing in specifications. Contractors will need to understand how connected electrical equipment should be installed and configured, while distributors and representatives will need enough knowledge to ask the right questions. We expect security requirements to become increasingly common in codes, standards and purchasing specifications. Eventually, asking how securely an electrical device communicates may become as normal as asking whether it carries the proper electrical certification.

Manufacturers

All of this creates an interesting question for manufacturers. What business are you really in? For many companies, the historical answer was very clear. They manufactured electrical equipment. But consider what happens when that equipment contains sensors, processors and communications capabilities. A transformer can provide information about its condition. A breaker can identify unusual load patterns. A lighting system can provide occupancy information. An inverter can communicate with other energy resources. A controller can continuously adjust how a facility uses electricity. The manufacturer now has a relationship with the customer that can continue long after the physical product has been shipped.

That creates opportunities for remote diagnostics, predictive maintenance, software subscriptions, equipment health monitoring, firmware updates and energy management services. Instead of receiving revenue only when a piece of equipment is purchased or replaced, manufacturers may be able to provide services throughout the useful life of the product. That sounds attractive, and it is, but it also requires a very different organization. A manufacturer accustomed to selling equipment through distribution may suddenly need software developers, cybersecurity specialists, customer support capabilities and new technical resources. Sales compensation may need to change. Product management may need to change. The relationship between the manufacturer, representative and distributor may need to change. There will also be difficult questions about who owns the customer relationship, who supports the connected product and who owns the information generated by it. Those conversations are just beginning.

Supply Chain

The supply chain adds another layer to this. The last several years taught the electrical industry a painful lesson about what happens when critical products have extraordinary lead times. Now add data center construction, grid modernization, electrification and continued infrastructure investment to the equation. Manufacturing capacity matters. Where products are manufactured matters. Where copper, aluminum, electronic components and other critical materials originate matters. Lead times matter. We should expect continued investment in domestic production, nearshoring and regional supply chains, particularly around strategically important electrical products. But simply moving manufacturing closer to the customer will not solve every problem. Better forecasting, inventory visibility and communication throughout the channel will become just as important.

Distribution

Distribution will change as well, although we believe some people underestimate how valuable the distributor can become in this environment. Inventory will always matter. Having the right product in the right place at the right time is fundamental to distribution. But on enormous projects, particularly data centers and other complex facilities, simply having inventory is not enough. The customer needs execution. Material must arrive in the correct sequence. Products may need to be packaged by construction phase or installation area. Equipment needs to be labeled and tracked. Inventory needs to be visible. Documentation must be accurate. Last-minute changes have to be handled quickly. A truckload of products delivered at the wrong time can be almost as problematic as not having the products at all.

This creates a real opportunity for distributors that can become part of the customer’s operating process rather than simply the place where the customer buys material. Price pressure will continue, particularly with very large customers that understand exactly how much purchasing leverage they have. Competing solely on price becomes increasingly difficult. The better defense is to provide services that remove cost and complexity somewhere else in the project. Kitting can do that. Asset tagging can do that. Inventory forecasting can do that. Engineering support can do that. Sophisticated project staging can do that. The distributor’s value increasingly becomes measured not only by what it sells, but by how much easier it makes the customer’s job.

This is particularly important for regional distributors because consolidation is not going away. Large national companies have enormous advantages in purchasing power, technology and geographic coverage, but regional companies do not have to imitate them. They can specialize. They can know a local market better than anyone else. They can build technical expertise in particular applications. They can maintain inventory specifically around the needs of their customers and make decisions quickly. Scale is certainly an advantage, but it is not the only advantage.

Rep Agencies

Manufacturer’s representative firms face a similar decision. The traditional rep model has always depended heavily on relationships, and those relationships remain important and always will. But relying on relationships and routine distributor business alone is becoming increasingly risky. As distributors consolidate, rep agencies need to create demand earlier. That means working with consulting engineers, calling on end users, understanding specifications, educating contractors and becoming involved before the purchase order appears. Increasingly, it also means understanding several technologies at the same time.

Consider a facility looking at solar generation, battery storage, controls and power distribution. The customer does not particularly care that four different manufacturers may be involved. The customer cares whether the complete solution works. The rep who can intelligently participate in that conversation becomes valuable in a completely different way. A salesperson does not need to become an electrical engineer, but the days of surviving on a catalog, a price sheet and a strong relationship are becoming limited in the more technical portions of this market. Reps need people who understand applications, codes, controls, communications and how products work together. They also need better CRM discipline, stronger digital marketing and more measurable demand generation.

At the same time, rep firms are becoming larger and their line cards are expanding, which creates its own challenges. Line conflicts become harder to manage. Manufacturers will expect clearer market strategies, better reporting, stronger technical capabilities and greater transparency from their agencies. The strongest rep firms will not simply represent manufacturers. They will help manufacturers develop markets. We believe that distinction is going to become increasingly important.

Talent

Underneath nearly every change discussed here is another issue that may ultimately become the largest constraint on growth, and that is talent. Every new technology requires people who understand it. Someone has to design intelligent electrical equipment. Someone has to sell it. Someone has to specify it, install it, secure it and service it. The problem is that the technology is moving faster than the industry’s talent base, and companies increasingly need people who understand more than one discipline.

Electrical engineering and software. Power distribution and cybersecurity. Lighting and controls. Energy storage and utility markets. Technical products and commercial strategy. Those combinations are difficult to find because our industry has historically developed people within relatively defined product categories. The future is going to be less accommodating of those boundaries.

At Egret Consulting, we have a unique view into this issue because of the conversations we have every day with manufacturers, distributors, rep firms and professionals throughout the electrical industry. The hiring conversation is changing. Companies are still interested in people who know their market and have strong industry relationships. They should be. Experience matters tremendously. But increasingly, companies are also asking a much more difficult question: can this person help take us somewhere we haven’t been before?

That is a very different search. The executive who built a successful business around yesterday’s market may not automatically be the right executive to build the next one. Companies entering data centers, energy storage, connected products, digital power or other adjacent markets need leaders who are comfortable learning while they lead. They need people with enough industry experience to understand how business actually gets done, but enough curiosity to question whether it should continue to be done exactly the same way. Technical understanding matters. Commercial judgment matters. Relationships matter. So does the willingness to recognize that a successful business model may eventually need to change and evolve.

We believe some of the best growth opportunities in the electrical industry will emerge precisely where our traditional product categories begin to overlap. Lighting and data. Cable and digital power. Power distribution and software. Solar and storage. Electrical equipment and cybersecurity. Buildings and information. Vehicles and power generation. Our industry likes categories because categories make businesses easier to understand. They make sales territories easier to organize, trade shows easier to navigate, line cards easier to construct and acquisition targets easier to identify. Customers, however, do not always think in categories.

Customers

Customers have problems. They need more power. They need greater reliability. They need lower operating costs. They need equipment faster. They need better information. They need to reduce risk. They need to finish projects on time. They need someone who understands how the pieces fit together. The company that solves the problem has a better chance of winning than the company that insists the solution must fit neatly inside an existing product category.

That is why every leadership team in this industry should be asking where its growth will come from over the next five or ten years. Not simply where did we grow last year, or what does the current backlog look like, but where are we going next? What capabilities will customers expect from us that they do not expect today? What technologies are moving toward our existing products? What products are moving toward ours? What expertise should we be hiring before everyone else needs the same people? What should we build internally? What should we acquire? Where should we partner? And perhaps the hardest question, what part of our current business might matter less ten years from now than it does today?

Those are difficult questions because there is no spreadsheet that gives you the answer. They require judgment, experience and enough familiarity with the industry to recognize when something that looks like a small change is the beginning of a much larger one.

That is where we spend a great deal of our time at Egret Consulting. We have worked exclusively within the electrical industry for decades, and our conversations cross manufacturers, distributors, rep agencies and many of the markets they serve. That perspective matters because the boundaries between those businesses and technologies are changing. We see where companies are investing, where they are struggling to find talent, which skills are becoming more valuable, where manufacturers are entering new markets and where established companies are trying to defend positions they have held for years. We also see executives making career decisions based on where they believe the industry is heading next.

Nobody can predict exactly what the electrical market will look like ten years from now, but we can see enough to know that electricity is becoming more important, not less. Demand for power is increasing. The consequences of downtime are increasing. Electrical products are becoming more sophisticated. Power and communications are moving closer together. Security is becoming part of the product conversation. Customers expect more information, more technical knowledge and faster execution.

That creates enormous opportunity for our industry, but it also means the next decade will reward companies willing to change before they are forced to. The electrical industry has always been a product business and a relationship business, and it still is. Increasingly, though, it is also a knowledge business. Companies with the right people, the right technical understanding and the willingness to look beyond the markets that made them successful in the first place will have a much better chance of finding the next generation of growth.

That is the part we find most interesting. We are not looking at the end of the traditional electrical industry. The fundamentals remain strong, and the products that have powered this industry for generations will continue to matter. What is changing is what customers expect those products to do, how quickly they expect companies to deliver them, how much information they expect to receive from them and how much expertise they expect from the people selling them.

The opportunity is not to abandon what made this industry successful. It is to understand what comes next.