We defined Cash Cows in our last blog as follows: Cash Cows represent business units having superior market share in a mature, slow growing, fading industry. Cash cows require little investment and generate cash that can be utilized for investment in Star and Problem Child business units. As stated, cash cows make money and should be “milked” to provide as much cash as possible. But time will run out, it always runs out, and before you know it, you are heading into the DOGS quadrant (no market / no share). Yes, DOGS, but as comedian Dom DeLuise always said: Sava fa da enda!
Stars – Stars represent business units having superior market share in a fast-growing industry, like the current Smart/Connected Lighting industry. I’m making a point here: the lighting industry is going thru a metamorphosis……the traditional/legendary, incandescent / fluorescent / HID lighting industry is in the Cash Cow cell, heading for the DOGS. The Smart/Connected Lighting industry is heading into the Intelligent/Programmed Lighting industry and the successful players here are STARS! They are dominant leaders NOW! They generate cash as a result of their leading market share but because of this fast-growing market rate, Stars require ongoing and significant investments to maintain their market share lead. Strategic Business Units (SBUs) located in this cell are innovators, highly competitive, attractive to investors and are positioned to take advantage of the changes they envision, maybe a select few who see what no one else sees and act accordingly. Vision without action is a daydream; action without vision is a nightmare. As the lighting industry transitions, I really need your help because at this stage, I really do not know who should be in this quadrant. I have my suspicions and I’m sure some will claim to belong here but what do you think? Who do you think are the dominant market share leaders in the Smart/Connected Lighting industry NOW?
Problem Children (Question Marks) – Now we get to the Problem Child that keeps me up at night. Some call it Question Marks, either way, they are SBUs with low market share in a fast-growing market. They require substantial amounts of cash to keep up, to grow and to gain market share. They require special attention and innovative business actions to determine if the venture can be competitive and viable. A Problem Child has two options: (1) become a Star or (2) dominate a niche market. You want to be a Star, then you have many specific strategies which can be adopted…… expansion, retrenchment, repositioning, acquisitions, joint ventures, mergers, whatever? You know the game….the key is growing your market share. The niche marketing strategy speaks to being a Big Fish in a Small Pond: http://energywatchnews.com/big-fish-in-small-pond-strategy-by-bill-attardi/ This strategy seems to work with high-tech companies who choose to dominate small niche markets. We have lived through the many lighting product evolutions before and the same players still dominated. What’s changed? Well, lighting is not just about illumination any more as the phone is not only a phone. SSL will replace every lighting system commercially available. Frost & Sullivan projects: LEDs 98 Percent of Lighting Market by 2025: http://energywatchnews.com/leds-98-percent-lighting-market-2025/ Lighting is everywhere and Small Ponds are getting big, very big, and they have special needs, needs they don’t even know they need. Segmenting the segments makes a lot of sense because dominating heretofore smaller high potential ponds in the technological age leads to much greater opportunities than ever before. Inaction is not an option. One thing I know for certain is these decisions are hard and why top executives make the big bucks. Opinion: most of the new entrants are all Problem Children at this point during the transition process as well as the high-tech companies who are searching for a reason to be in the lighting business at all. You cannot tell the players without a score card and you certainly cannot predict who will gain market share or dominate a niche market…… or maybe you can.
Dogs – My friend and cohort Chris Brown likes to say, “Some lighting businesses are out of business already, just don’t know it yet”. He’s talking about Dogs, businesses that can’t or won’t evolve themselves, innovate into true 21st Century businesses. They represent businesses having weak market shares in low-growth markets: the Traditional/Legendary Lighting market. They neither generate much cash nor require huge amounts of cash but due to their low market share and weak marketing practices, they will be the first to go. It’s never good to be mediocre in any business but in a mature traditional lighting industry, you could get away with it and survive and you did. In the Smart/Connected Lighting industry and certainly in the Intelligent/Programmed Lighting industry, you really cannot and must not be mediocre. For those who did survive, you have a choice, a second chance to be great: shape up, understand what’s happening and make the necessary changes in your business to compete at a high level this time, or look for work in some other industry. Stay traditional and the future in the lighting business is over for you. Not being harsh, just trying to make the choices as simple as possible.
We still teach the principles of the BCG Matrix and it applies here. It’s getting clearer that those in the Cash Cow or Dog quadrants are facing Illumigeddon. Thank you, Chris Brown, for the wake-up call. It’s not too early to know who the players are, even who the new high-tech new entrants are. As we move from Traditional/Legendary Lighting to Smart/Connected Lighting to Intelligent/Programmed Lighting, who will emerge as the innovators, who will make the necessary investments, who will reposition their business to adopt, who will expand and gain market share, who will dominate niche markets, who will become the future captains of our industry? Maybe you know……
If you know, then tell us. Your comments are requested. We are where we are……….who do you think, right now, are the STARS and who are the PROBLEM CHILDREN? Don’t just sit there, ANSWER ME! Really, you know who all the players are, put them in either of these two BCG quadrants…….your participation and wisdom is much appreciated.