Modern-day conglomerates that have stuck with this business model may be poised to capitalize as the Internet of Things (IoT) broadens its penetration into commercial and residential building-related markets. In western countries, conglomerates had their heyday between the 1960s and 1980s, when large corporations used their profitable cash cow businesses to finance the acquisition of diverse companies in tight capital markets. Japanese horizontal and vertical keiretsus are similar to western conglomerates, although current keiretsu relationships have not been as tightly bound or integrated as they were prior to the 1990s. In the buildings sector today, several conglomerate- and keiretsu-type company structures are beginning to show a distinct market advantage in the fast growing IoT realm.
The Conglomerate Advantage: Meeting Evolving Consumer Needs
What gives these conglomerates an advantage? Simply, these companies control a portfolio of technologies that can be connected in novel ways, forming use cases to solve a host of real world problems. They are also poised to meet evolving consumer needs and expectations about what technology will do for them. Let’s look at a few examples.
Johnson Controls’ merger with Tyco expanded the companies’ technology portfolios to include fire and workplace safety, security, and closed-circuit TV systems, along with the more well-known HVAC and building controls offerings. The use case of obtaining occupancy data from the building security system and linking that with other building management systems allows for a more efficient and intelligent operational program for the entire building.
Honeywell’s Vector Occupant app includes wayfinding capabilities and a location-based feature to rate spaces, allowing those within a building to highlight comfort issues to the building staff for quick resolution. Japanese company Panasonic, which is part of the Matsushita keiretsu, offers a host of products ripe for IoT applications. From HVAC and smart home sensors to appliances, cameras, and communications technologies, Panasonic is well-positioned to offer consumers unique connected residential applications that add convenience and efficiency to their daily lives.
Communications and Integration Are Key
One issue that these conglomerates have with engaging the IoT market is communications between devices and coordination between the companies, which historically have been accustomed to independent operation. Many times, individual technologies were developed in a silo within one of the conglomerate’s vertical companies. At the time, this approach was perfectly acceptable and made fiscal sense. Today, these technologies need to communicate with each other to solve a use case, but they each have different communications protocols. This is causing development challenges as well as internal coordination challenges within the conglomerate.
Partnering Offers Opportunities to Non-Conglomerates
Non-conglomerate companies can use a partnering strategy to compete with conglomerates. In fact, partnering may offer more opportunities to be flexible in the market. Companies can offer multiple unique solutions with different technologies by partnering with a diverse set of companies. Conglomerates that use their own technology exclusively may be limiting themselves to a smaller solution set, and end-use customers may feel boxed in to using only one supplier brand.
The bottom line with either type of company, conglomerate or non-conglomerate, is to build or work with systems or solutions that are open to integration with other systems. Open systems expand the market for all participants and significantly increase the number of use case solutions that can be devised.