Navigant Research Blog

Challenges of Partnerships and Acquisitions in the IoT Lighting Market

— April 10, 2018

The commercial lighting market has new and expanded technology solution offerings that are helping to address customer pain points through new use cases. Lighting manufacturers and technology companies providing Internet of Things (IoT) solutions are focusing on optimizing space utilization, enhancing retail customers’ shopping experience, asset tracking to improve operational efficiencies, and providing energy management and visualization features to analyze building system data. Vendors have expanded their offerings through internal growth and acquisitions. As the industry is undergoing continual change and advancement, it is expected there will be challenges to overcome for vendors competing in this shifting landscape.

Interoperability and Partnership and Acquisition Integration

Interoperability is a leading challenge faced by the lighting industry. Many systems are proprietary or are a modified version of standards, which creates the same issues as a proprietary system. There are groups working to address this issue, which can provide customers with more options and eliminate the need to select all components from the same vendor.

The IoT lighting market has seen an increased number of acquisitions and partnerships as companies look to expand their solution portfolios and provide a customized solution to the customer. Partnerships and acquisitions require integrating different systems and components, which can be complicated when devices aren’t interoperable. And while the growing number of partnerships within this market have helped alleviate issues surrounding interoperability, problems remain when some components of a system use open communication standards but some devices are not interoperable at the communication level.

Partnerships and Acquisitions That Provide Value

With the growing number of partnerships and acquisitions, it can seem like companies make these moves for the sake of publicity. Partnerships must be strategic to expand the capabilities of a company’s offering. For a company to provide a complete IoT lighting solution portfolio without partnerships is difficult—likely impossible. It is best to allow each company to focus on its own area of expertise, not only to provide an improved offering to its clients, but also to increase business for the companies involved in the partnership. The IoT lighting market is in its infancy, and partnerships are still forming  as companies realize areas within their offerings may need complementing and expanding. There is even more potential to provide customers with customized solutions to address their pain points when partnerships form between multiple companies, as opposed to a siloed system where a company has multiple individual partnerships.

In some cases, a vendor may choose to expand its offerings through an acquisition rather than a partnership or internal growth. Again, there can be challenges with interoperability of new products and solutions. Caution is needed in acquisition integration, and acquiring a company and not integrating them fully can also prove a challenge. If an acquired company remains segregated from the new parent company, it begs the question of why that company was acquired instead of partnered with. Is there a benefit in one method of expansion over another? Currently, companies are showing success in both forms of go-to-market strategies, and it isn’t clear which provides greater success. As the market matures, one avenue of increased solution offerings may become preferred. In the current state of the market, it is apparent that both partnerships and acquisitions provide substantial value—but must be entered upon with caution.


What Amazon’s Acquisition of Ring Means

— April 5, 2018

At the beginning of 2018, I wrote a blog covering Amazon’s Key delivery service, which was introduced to enhance package delivery by allowing couriers access to customer’s homes to ensure safe package delivery regardless of customer availability. Amazon’s latest innovation raised concerns about how far the boundaries of technology can be pushed to make consumers lives more convenient by letting strangers through their front door. Despite this scrutiny, Amazon is pushing ahead with this service through its latest acquisition of Ring, the camera-enabled smart doorbell startup.

Enhancing the Key Service with Ring

Before Amazon’s acquisition of Ring, it relied on the Amazon Cloud Cam, which it developed to release the Key delivery service, and partnerships with existing lock makers. Ring’s doorbells extend this service’s existing capabilities through an additional camera, and through audio equipment that allows customers to chat with delivery people and answer the doorbell remotely. This deal was reportedly worth more than $1 billion, making it the company’s second-largest acquisition behind its $13.7 billion purchase of Whole Foods Market in 2017, which bolstered Amazon’s Fresh food delivery service.

A Message to the Competition

This move—and its acquisition of Whole Foods—not only strengthens the company’s Internet of Things offerings by extending its selection of connected devices, but also sends a message about Amazon’s commitment to business-to-consumer (B2C) services. By enhancing its Key service with Ring, it is more competitive with other tech incumbents engaged in the smart home like Google (which acquired Nest in 2014 and now owns a range of energy and security products), Apple, and Samsung. B2C services are quickly becoming the business model of choice across a variety of industries, and Amazon is one company that is taking it seriously and executing it well.

In the energy industry, Navigant Research has seen a transformation toward this model, as is highlighted in the Energy Cloud 4.0 white paper. Several utilities are already taking steps toward offering B2C services, including Dutch utility Eneco, which offers monthly energy monitoring services to its customers through Quby’s Toon platform. In the security sector, Comcast is increasingly diversifying and shifting toward offering security and automation services in the home to increase revenue (as US consumers drop traditional cable television packages) and customer satisfaction. Not to mention the variety of other service-based businesses that have skyrocketed in popularity, like Uber, Netflix, and Spotify. Once an online retailer, Amazon has become a diverse service-based business, and the company’s acquisition of Ring to support its Key service is a signal to other retailers that it intends to push forward and innovate in the home services space.


Cannabis and Cryptocurrency: The American (Green) Dream

— March 6, 2018

Legal ambiguity surrounding the cannabis industry has slowed the marijuana business in the US. Stakeholders are uncertain of the potential legal ramifications that currently threaten the business environment. Despite ongoing setbacks, the legalized marijuana industry remains valued at over $7 billion in the US, which means high value transactions are occurring. Yet, for profits to continue, the industry must find a way to overcome hurdles at the federal level. Possible solutions for navigating the shifting legal landscape involve methods that provide greater transparency and assured accountability. With the explosion of millennial-led investments in cannabis stocks and cryptocurrencies, it comes as no surprise why stakeholders are looking to blockchain technology to help settle these legal debates.

The Latest

In November 2017, IBM proposed a blockchain solution to Canada as a way to regulate and authenticate transactions of legalized marijuana. Further fueling this movement toward a blockchain-backed cannabis industry, California-based analytics company, Budbo, recently made headlines after selling out its token presale 10 days before its official release date. The sale represents a common fundraising strategy in the world of blockchain, where companies sell virtual coins that represent hard currency. Selling a whopping 20 million tokens at presale is a big deal, especially for a startup involved in such a nascent industry. This instance shows that regulators are not the only ones calling for greater transparency for the cannabis industry, consumers want it too.

From Seed to Sale

Coined the Tinder of weed, Budbo’s software utilizes a GPS-enabled tracking system. The app provides real-time data by tracking the total lifecycle of the product from seed to sale. Yet the real value lies in the technology’s cooperative-like design, which requires inputs from stakeholders along the entire value chain. In this way, users can stay up to date with the latest information concerning the marijuana marketplace, an important feature that would prove useful for cannabis traceability.

Insert Blockchain

My colleague, Johnathon de Villier, explains that blockchain technology does not operate under a central authority, which makes transactions arguably more secure and easier to validate. In addition to its decentralized architecture, blockchain provides full and permanent disclosure of all data entries, meaning market participants are equally informed. This would allow for government officials to track the supply and demand side of things, creating an appropriate regulatory space for a market plagued with inconsistencies. Cannabis businesses and consumers both stand to gain from a more defined policy space. Setting standards would push for higher value products and encourage companies to compete on a quality basis rather than quantity alone. However, the worth of any information system lies in the quality of its data. Cryptocurrency for the cannabis industry is particularly susceptible to the pitfalls of poor data as the network effect relies heavily on input from the cannabis community—blockchain in and of itself does not ensure reliability. While blockchain’s immutable ledger could provide some much-needed clarity for the businesses’ grayer areas, the novelty of blockchain continues to represent significant barriers to technological and institutional change.


Los Angeles Uses Data to Transform Streets

— March 1, 2018

Cities are using data to make informed decisions to deliver city services; however, data alone is not enough. Successful data-driven initiatives require clear vision backed by coordinated processes, and smart technologies that can provide city managers with new insights into operational performance. On January 25, Bloomberg Philanthropies announced nine cities earned the What Works Cities Certification for their excellence in data-driven governance to improve quality of life. The nine cities—Boston, Kansas City, Los Angeles, Louisville, New Orleans, San Diego, San Francisco, Seattle, and Washington, DC—will each receive expert assistance to accelerate progress. What Works Cities Certification evaluates factors including cities having a dedicated staff responsible for helping departments use data to track progress, contracts being awarded based on past performance, and having key datasets open to the public.

Data-Driven Initiative Starts with a Clear Vision and Realistic Process

Among the nine cities, Los Angeles holds the highest honor with gold-level certification. The other eight cities won silver. One of many data-driven initiatives in Los Angeles is the Clean Streets LA (CSLA) initiative. In 2015, Mayor Eric Garcetti launched the CSLA initiative to replenish funding for city cleanliness services, aiming to have the dirtiest streets cleaned up by 2018.

Los Angeles Sanitation (LASAN) crew members assessed the cleanliness of 42,000 street segments using video and geographic information system tools every quarter. They assign a score based on four criteria: loose litter, bulky items, weeds, and illegal dumping. A street is rated 1 if it is clean, 2 if it requires some cleaning, and 3 if it requires immediate attention.

CSLA Interactive Map

(Source: City of Los Angeles)

After assigning a score, LASAN uses the data to identify where to allocate new garbage bins and where to target the deployment of cleanup crews. Since launching the initiative, the city has deployed over 1,500 garbage bins around the city. In just 1 year, these efforts led to an 82% reduction in streets previously rated as “Not Clean.” To make this data accessible to residents, the open data generated from the CSLA initiative is translated into an interactive map on the GeoHub, the city’s map-based open data portal.

Next Step: Smart Technologies

Cities can take another step forward to improve operational efficiency by leveraging smart technologies to automate data collection and analysis. For example, having achieved the goals of the CSLA, Los Angeles is now exploring avenues to incorporate forecasting and predictive analytics that can predict future deployment of garbage bins.

The City of Baltimore recently announced its move forward with a $15 million project to deploy 4,000 smart garbage bins across the city in an effort to increase the city’s waste collection efficiency. Ecube Labs will provide solar-powered bins equipped with sensors that monitor fill level, and a software suite to plan optimized collection routes and provide daily route information for each truck based on real-time data. Navigant Research expects the global market revenue for this type of smart waste collection technology will reach $223.6 million in 2025.

There is an opportunity for smart technologies to enhance the delivery of municipal waste collection services. And as Los Angeles demonstrated, it is necessary to have a clear vision and coordinated process in place to achieve successful outcomes. Once the goals and resources are defined, technology can accelerate the progress by improving efficiency and opening the door to other integrated solutions.


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