Enlighted Inc: Nest but better
Enlighted has broken down the barriers for companies to adopt new sensor technology through a new business model.
The story of Nest is the go-to example of how the internet of things (IoT) can disrupt a traditional business model. In a recent HBR article, the author describes how Honeywell never saw Google as a competitor in the home thermostat space until Google bought Nest in 2014, which gave a “clear indication that the digital transformation and connection are reaching critical mass, spreading across even the most traditional industry segments .” Enlighted Inc. aims to do the same (and more) for commercial real estate as Nest has done for homes, and I would argue that this could have an even greater impact, both for businesses and society at large.
According to Enlighted’s website, “Enlighted’s Advanced Lighting Control System with LED fixtures can save organizations up to 90% of their lighting energy costs .” Combined with Enlighted’s additional offerings of temperature management, this technology can provide serious savings on the variable costs associated with building maintenance through advanced sensors placed throughout the space. This all sounds awesome, but when you think about the commercial real estate industry, you don’t typically think innovation. William Robinson, CEO of Skyline Exchange- a company trying to cater to office space needs, noted that commercial real estate is “has lagged behind other industries in terms of innovation, particularly when it comes to adopting and advancing technology .” And while the cost savings are dramatic and enticing, the up-front capital required to install this technology can be steep. Enlighted has addressed this too by completing revolutionizing their operating model- offering “lightning-as-a-service” (a cute play on SaaS) in which Enlighted leases the lighting and payments are structured as operating expenses netted against the energy savings, providing a net positive benefit to the bottom line . A Wired article summarized the impact perfectly in noting that this innovative business model “provides extra incentive for Enlighted to make sure its products deliver on its promises” . As we discuss frequently here at HBS, aligning incentives of all stakeholders in an organization is a key element of any successful operating model. In this way, I believe that Enlighted is “growing the pie,” especially when you consider the pie not only as direct cost/benefits but the externalities surrounding energy consumption.
The company started out as providing savings on lighting costs for companies by sensing when someone enters and exits a room and turning on/off the lights automatically. It’s easy to see the value proposition of this to businesses, just as it was easy to see the value proposition of Nest in the B2C chain in terms of comfort. Catering to a business’s core concern of cost savings, and a consumer’s core concern of comfort- aka putting the customer first, is probably the number one lesson in every marketing class. Thus, the key to addressing some of these negative externalities and providing more value to more stakeholders is to find a way to achieve that outcome by reeling them in with the core concern. This is the fundamental idea behind a successful for-profit social enterprise. I think that a lot of people wouldn’t consider Enlighted a for-profit social enterprise, but in reality this a prime example of how for-profit entities have the resources and ability to scale in ways that can greatly address key issues such as United States energy consumption and our dependence on fossil fuels.
Moving forward, I think that they way Enlighted can continue to innovate its business model is to partner with companies like Skyline to increase their exposure to businesses that are looking for new space. Furthermore, there is so much potential in data analysis with all of the data that the company is accumulating through tracking metrics like occupancy movement. As Enlighted puts it, they are moving beyond smart buildings to “brilliant buildings .”
Student comments on Enlighted Inc: Nest but better
Haley, thanks for the excellent article on Enlightened. The business model makes a lot of sense and the innovative operating model (specifically the SaaS structure) is a creative way to make the large up-front investment work for businesses from a financial perspective.
To me, the service Enlightened provides is great for companies in the private sector, but could also be an excellent option for governmental agencies as they update their lighting and HVAC equipment. I looked on the company’s website, and wasn’t able to find any mention of a focus on public-sector clients. I wonder if the company is targeting government agencies as well, and if so, whether it would need to consider any tweaks to its current operating model to make its platform as attractive as possible.
You touched on this briefly in your post, but what I love about Enlighted is how its business model plays so much into sustainability efforts as well as the traditional pitch of energy cost savings for businesses. More and more, commercial real estate office spaces have energy-code requirements to meet. Most firms might think of just installing energy-efficient light bulbs, but Enlighted takes it one step further and offers a suite of services that are complementary. Even better, the pitch to utilize the services is made easier because the technology overhead is minimal outside of the lights themselves. Therefore, when a firm is already looking to make a change, there is only upside to working with Enlighted’s controls system. Hopefully as they penetrate the market further, they can figure out how best to use the data they collect.
Really cool article. I completely agree when you say commercial real estate “has lagged behind other industries in terms of innovation”. So while reading the article I though no would like to pay additional money upfront to gain value in the future, given that real estate is such a cash flow intensive business. But as I read further, I really liked that Enlightened is providing the lighting on lease basis. I think this is ideal for a real estate developer who wants to spend as little as possible initially.
Great and interesting article, Haley! Although having worked on a project in the digitization of energy products, I haven’t heard of Enlighted before. I think their business model sounds great in theory, I was just wondering if you would happen to have some insights on how they are actually doing in practice? Looking at Nest and all other SmartHome providers out there, none of them have been really successful in reaching a strong market adoption (not to speak about their profitability). In B2C it seems almost impossible to educate customers (how are not very tech-savvy), but also in B2B or with commercial/industrial customers market adoption seems to be very difficult. I could imagine for instance for Enlighted to struggle in the market due to differing incentives between the parties involved in real estate (e.g. construction vs. actual tenants) as many of the expensive smart electricity systems need to be built into the actual ‘hardware’ of the building and are hard to adopt after the electrical systems have been fully installed . Thus, it will be interesting to see if Enlighted will be able to overcome these hurdles.