{"id":17876,"date":"2016-11-18T14:23:48","date_gmt":"2016-11-18T19:23:48","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/industry-luminary\/"},"modified":"2016-11-18T14:23:48","modified_gmt":"2016-11-18T19:23:48","slug":"industry-luminary","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/industry-luminary\/","title":{"rendered":"Industry Luminary"},"content":{"rendered":"

Lighting the Way<\/u><\/strong><\/p>\n

Acuity Brands, Inc. (\u201cAcuity\u201d) provides a variety of indoor and outdoor lighting solutions for commercial, institutional, industrial, infrastructure and residential applications. The company\u2019s primary product segments include: fluorescent and LED bulbs\/sockets, fixtures, lighting controls, power supplies and prismatic skylights. Acuity (NYSE: AYI) serves the new construction, renovation, and maintenance and repair end-markets in North America and several international markets. Customers include electrical distributors, system integrators, retail home improvement centers, electric utilities, lighting showrooms, national accounts and energy service companies.[i]<\/a>\u00a0The business currently generates $3.3 billion of revenue and trades at an equity market capitalization of $11.2 billion (as of 11\/14\/16).[ii]<\/a><\/p>\n

Electrifying the Business & Operating Models<\/u><\/strong><\/p>\n

While the company has historically manufactured discrete standalone products, the Acuity management team is now addressing the mounting market need for energy efficient solutions. To do so, the company has proactively transitioned from selling lighting fixtures to selling \u201csmart\u201d networked lighting solutions. This next generation of products relies on motion sensors and occupancy sensors that can immediately respond to the demand for lighting, or lack thereof. Said differently, the products automatically provide artificial light when and where required, thereby saving energy. Perhaps most importantly, these systems of devices\u00a0can be actively monitored and controlled remotely.<\/p>\n

To execute on this plan to move down the value chain, the company has rolled out the following tiered product strategy[iii]<\/a>:<\/p>\n

\"Source:<\/a>
Source: Company presentation.<\/figcaption><\/figure>\n

Tier 1 and Tier 2 represent the company\u2019s core lighting fixtures (or luminaires), including those with embedded controls. Tier 3 represents the new system-based solutions. These networked devices are a mixture of hardware, software and connectivity that can collect and transmit data, thereby enabling ongoing monitoring. Tier 3 only makes up ~10% of the company\u2019s sales today, but management and research analysts agree that these new offerings have the potential to bolster future profitable growth.[iv]<\/a> In fact, the Department of Energy (DOE) recently published a report stating that networked lighting solutions are expected to grow from 1% of total market share in 2015 to 15% in 2020.[v]<\/a>\u00a0In addition to\u00a0consumer sentiment and cost savings, updated building codes in the U.S. will drive demand for these types of solutions in new construction, renovation and retrofitting.[vi]<\/a><\/p>\n

Going one-step further, Acuity has further extended its product roadmap to Tier 4, or platform services. These services will essentially run analytics on the mountains of data being pulled off the Tier 3 products. To jump-start the aggressive strategy, this former lighting fixture manufacturer has recently acquired a handful of pioneering software companies[vii]<\/a>:<\/p>\n