» Bigger Fish
If you look beyond professional entertainment lighting, the last 20 years have been a cauldron of M&A activity, one that Architectural Lighting magazine during the height of the activity in 2007, noted had consolidated the 13 largest companies’ 34-percent share of the North American market into about a 62-percent share held by the largest four manufacturers. That’s a ratio that’s likely only continued to follow the same trend, though perhaps at a somewhat slower pace due to the recession.
Now that the dining is, for the most part, done, Philips has restructured its executive management infrastructure around a tighter set of brands, most of which have the Philips imprimatur prominently featured — Philips Vari-Lite, Philips Strand Lighting, Philips Selecon, and LEC luminaire maker Showline.
» Philips’ Realignment
The realignment of Philips’ North Americas commercial group includes changes in the management, sales, and support teams within Philips Entertainment, with a renewed focus on continuing technology innovations while creating a streamlined customer experience.
The initiative has Julie Smith, most recently head of customer service for Philips Entertainment as well as head of the Selecon and Strand businesses in North America, as overall commercial general manager of the Americas. It also includes the appointments of Leonard Miller as North American sales manager, Jaime Friedstadt as Latin American sales manager and Pete Borchetta as marketing director.
I caught up with Borchetta in between trade shows in March, and he characterized the most recent moves as an expansion of Philips’ reach, perhaps a natural outcome of a period of acquisitions that saw the lighting landscape consolidate around a smaller number of larger players.
Borchetta noted that the individual brands had long had their own sales forces. That will continue, and those staffs would stay largely intact. But sales teams can now also sell more readily across brand lines, with more specialization around specific product types.
“There’ll be less day-to-day territorial sales calling and more time spent working directly with designers,” Borchetta said. “We had been saying for years that we needed to pull all of this together, but now is when it makes sense to do it, because we have the people in place to create more cohesion and more collaboration between the brands.”
» Preserving Brand Equity
Maintaining the individual brand images is a foundational aspect of Philips Entertainment’s strategy moving forward. Borchetta pointed to how Philips has done that in other industrial sectors, such as the Norelco and Magnavox brands. “When Philips buys a company, they’re purposely buying the brand, as well,” said Borchetta. Philips attaches its name to it, when appropriate, to create what he calls a “master brand,” such as Philips Vari-Lite.
When I mentioned another notable acquisition in the lighting industry, that of Martin by the Harman consortium, we talked about the corporate cultural convulsions as outside companies are acquired and put into service for the acquiring company’s behalf, speculating that what Martin and Harman are facing now might be akin to what Philips’ entertainment lighting brands went through in this millennium’s first decade.
» The Next Chapter
The reorganization that Harman announced in March — with Christian Engsted leaving the company and Martin veterans Lars Dige Knudsen and Villads Thomsen promoted to key posts in Harman’s Lighting Strategic Business Unit (SBU) — appears to signal a big step toward the completion of that process. The path forward in North America won’t be uncomplicated, however, given the complex network of dealers, reps and value-added resellers that have traditionally made up the sales landscape; an emphasis on personal relationships is likely to be critical to success.
Philips’ spate of acquisitions also neatly spans the period that saw LED technology become rooted, and the increased influence of Asian lighting manufacturers, many of which transformed themselves from anonymous OEM suppliers to direct, and increasingly competitive, sellers of lighting products. It’s that phenomenon that perhaps best underscores Philips’ own policy of keeping acquired brands intact, especially since very few of the Asian upstarts have been able to establish anything remotely akin to the brand equity established by companies in North America and Europe. (That seems to have been a stumbling point for Asian companies in general, as they seek to reproduce what Japanese carmakers and electronics companies managed to accomplish in the 1970s and 1980s. To date, only Samsung and LG have created truly recognizable brands; others, like Apple OEM Foxconn, have experienced more notoriety than fame.) The new leadership configuration is also a way to further streamline and add enhanced coherence to Philips’ massive inventory of products; the company’s lamps portfolio alone had approximately 33,000 product codes as of the end of 2012, according to LEDs Magazine.
» A Look Ahead
A consolidating lighting industry is likely to present plenty of opportunities for creating new efficiencies and for boosting productivity. Acquired companies can sometimes lose their momentum for innovation, but they can just as likely retain it, or even increase it, if integration is handled adroitly enough, keeping new-product development on pace. And there are categories left, such as console and control systems, that some of the larger entities can look at as M&A continues to be part of a business strategy.
Finally, there remain industry-wide challenges that a more compact array of bigger corporate entities might be better suited to address, such as the three-year-old Zhaga consortium populated by Philips, Osram, Infineon Technologies, Trilux and other large lighting concerns, to develop specifications for the standardization of LED light engines. Looked at from that perspective, Philips’ recent executive reorganization appears to be readying itself for the next big chapter in the larger lighting industry.
