They all want OUT!….or do they? What keeps you up at night? I woke up in the middle of the night thinking I figured out where the Strategic Business Units (SBUs) of our friends in the lighting industry think they are and why they are making the decisions they are. If anyone out there has taken a marketing class, I’m sure you remember the Boston Consulting Group (BCG) matrix. It’s all about market share and market growth and the strategic decisions one must make to continue to be viable. Over the next two (2) blogs, I offer a refresher course and how it affects the lighting industry, in my opinion:

Cash Cows – let me start with Cash Cows as I believe that’s where the three (3) major traditional light bulb companies are……GE, PHILIPS AND OSRAM. I specifically say “light bulb” companies because until recently all three were primarily in the aftermarket, the back-end, the replacement, MRO light bulb business. All three now are dabbling in the front-end, luminaire, fixture, new construction, what system goes into a building lighting business. That’s the business Acuity, Eaton and Hubbell dominate and never the twain shall meet, except when Philips decided to acquire Genlyte / Thomas. Cash Cows represent business units having superior market share in a mature, slow growing, fading industry. The Big Three in the legendary or traditional lighting industry comes to mind, ya think? Cash cows require little investment and generate cash that can be utilized for investment in Star business units. These SBU’s are the corporation’s key source of cash, and are specifically the base of an organization and their core business. Here’s what woke me up in a sweat: it dawned on me that when you feel your SBU is a cash cow, you want a financial executive to run that business, right? 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 DOG quadrant (no market / no share). So maybe that’s why the Big Three want OUT? I’m just sayin………….

• Let’s look at GE first: remember Jack Welch and his vision statement to all of GE’s SBUs: GE to be the most competitive enterprise in the world by being Number 1 or Number 2 in every business in which we compete………OR WE WILL GET OUT! Most forget about the consequences. That my friends, is what General Electric is still all about. GE has been milking the traditional light bulb cash cow for the last 30 years. It’s time to sell it off before it becomes a DOG. Enter Bill Lacey, former CFO of GE Lighting, promoted early last year to run the traditional GE Lighting in Nela Park as its CEO. Who better than a seasoned financial executive to continue the milking and negotiate the divestiture. Oh, where’s Maryrose Sylvester, former CEO of GE Lighting, you ask……well, she moved to Boston to run the new GE digital lighting business, Current, Powered by GE and I quote: “the smart, connected, commercial space for lighting.” Current is not for sale so that tells me that GE does not want to get out of the lighting business, and since lighting is going thru a metamorphosis, GE wants to lead the way in the new Intelligent Lighting business. They just moved this new SBU into the Problem Child cell for now but the direction is to move it to a Star (remember #1 or #2)……..more on that later.

• LEDvance has emerged from the general lighting business of Osram / Sylvania. It had extended its product line from standardized and traditional light sources to advanced LED lamps and intelligent lighting products. Then in March 2016, LEDvance sold to a Chinese investment consortium consisting of IDG Capital, MLS Co, Ltd and Yiwu State-owned Assets Operation Center. They are OUT! MLS, Forest Lighting in the USA, is a formidable global lighting company worth watching. Lawrence Lin, Executive General Manager at MLS Co., told ChinaDaily that “LEDvance is set to become one of the top three lighting corporations within three years.” However, to be fair, Osram Opto Semiconductors is betting big on expanding its manufacturing of the LED chips that go into lamps and systems for general lighting, spending a billion euros to build a new plant in Malaysia for that purpose.

• Philips: when my ole company acquired Gentlyte / Thomas for $2.7 billion back in 2007 to make it the top lighting company in North America, I really thought they would dominate both the front-end luminaire market as well as the back-end MRO aftermarket in North America. No one, not even GE was positioned that way. Then acquisitions of Color Kinetics, Lumileds, other acquisitions and many cooperative partners added to a really dominant position. Right? Well, I guess, it just did not work out. Philips announced that it planned to spin off its iconic lighting division so it can focus on its future as a health technology provider. In May 2016, Philips sold 25 percent of their lighting business in an I.P.O. offering. If an overallotment of shares is fully exercised, Philips would still own 71.25 percent of the lighting business but said it plans to fully sell down its ownership over the next several years. Recently, Apollo and Philips agreed to a transaction where Philips would sell 80.1% interest in Lumileds, their core technology lighting company, to certain funds managed by Apollo and retain the remaining 19.9% interest in the company. Why do they want OUT? My opinion: too many challenges posed by diminishing market share, sales and profits, and the long life and steadily dropping prices of LEDs. Health technologies (Star) offer more upside potential…..and as long as they keep sending my pension check, A Salute, Buona Fortuna!

How about this Folks? Are you up for a summer assignment? Well, I’ll start it if you finish it…
Three blogs:
1) This blog by me: What Do GE, Philips and Osram Have in Common?
2) Next blog by me: Stars / Problem Children / Dogs Defined
3) Your assignment: fill in the Boston Consulting Group (BCG) matrix with the names of the current major players in the lighting industry….instructions to follow.

Who wants to play? I will then post the consensus BCG matrix with the names of the major lighting companies in their respective quadrant. Should be fun……

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  1. David Gordon says:

    Bill – agree with you and, with the increased presence of “new / sourced” brands, the Big 3’s share has eroded faster.
    Three years ago I wrote a posting entitled “Could the Future of the Big 3 Lamp Lines Be on a Dimmer?” (http://www.electricaltrends.com/2014/03/could-the-future-of-the-big-3-lamp-lines-be-on-a-dimmer.html) and almost exactly 1 year ago I wrote “Goodbye to the Big 3 Lamp Lines, Hello New Owners” (http://www.electricaltrends.com/2016/07/goodbye-big-3-lamp-companies-hello-new-owners.html) after the Sylvania sale.
    And, as you know, the rapid growth of the LED fixture market further reduces the lamp replacement market (especially in the commercial space). The continued reduced cost inhibits the ability for product reinvestment as well as being a cash cow (less profits to extract from the business.
    Major players in lighting? Recent discussions with distributors have them grouping companies into a Big 6 of Acuity, Eaton Lighting, Hubbell, Rab, Rab and Cree. Then there are others such as Satco, TCP, Maxlite, etc and what about the newcomers such as Leviton and Legrand with their acquisitions … and then the myriad of LED-driven sourced companies. Placing them in the BCG matrix depends upon your perception of their product development, channel strategy, sales organization, culture, vision and ability to execute.

  2. BillAttardi says:

    Thanks David, we have been on the same page for years. Fun to watch and comment on all that’s happening. Keep your thinking hat on and after I write my second blog on Stars, Problem Children and Dogs, let’s talk about your last sentence and where the major participants belong now. Where they belong in the future Intelligent Lighting industry is anyone’s guess.
    Again, thanks, Salute,

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