Cree CEO Tells Illuminating Tale of LED Bulbs, Innovation
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for winning over consumers, who would expect a new bulb to look like the bulbs they had purchased for years, and for a reasonable price.
With the bulb ready, Cree sought a retail partner. Swoboda concedes that Cree had little market research to support the product. But Robert Tillman, the former chairman and CEO of home improvement retailer Lowe’s and a Cree board member, was impressed with the new bulbs. He told Swoboda he would stock them in Lowe’s stores if they were available. With that sliver of information, Swoboda says Cree was able to “negotiate with confidence,” convincing The Home Depot (NYSE: HD) to sell Cree’s LED bulb in its more than 2,000 stores across the country.
Established and well-financed companies such as General Electric (NYSE: GE) and German firm Osram (XETRA: OSR) now compete against Cree in the consumer LED bulb market. Swoboda concedes Cree won’t beat them by spending more or marketing more. But he says Cree can win by innovating more.
Like many executives, Swoboda believes big companies don’t really innovate. Instead, they manage risk. Cree can distinguish itself through innovation, Swoboda says, pointing to Hunter’s work on the stealth LED bulb project as an example of fostering startup spirit in an established company.
“He was able to create what we had in the early days of Cree,” Swoboda says.
Some details about the Cree LED bulb remain secret. When the company reports financial results, it does not break out LED bulb sales figures. The bulbs are lumped in with the rest of Cree’s lighting products unit. At $9.97 each, the consumer LED bulb is not expected to be a huge contributor to a lighting products business unit whose $706.4 million in fiscal 2014 sales was driven by products used to illuminate streets, retail spaces, and parking decks, among other applications.
But Swoboda says the LED bulb is the answer to the company’s branding problem. Even though Cree has grown from a startup into a company with 7,000 employees and $1.6 billion in annual revenue, Swoboda says Cree remains relatively unknown. Rather than pay for expensive marketing, Swoboda says, Cree can build awareness of the company through sales of its consumer-facing LED bulbs.
Awareness could help Cree grow in a number of different areas. Swoboda points to new opportunities, such as “smart homes.” LED lighting could become integrated into emerging smart home technologies, where managing lighting would be part of an energy-saving strategy. Here, Cree already faces potential competition. San Jose, CA-based company Xicato, among others, is developing “smart lighting” technology employing a Bluetooth wireless communications chip that could be used to adjust the light.
Swoboda says Cree could also get in the business of leasing light to customers. In this “lighting-as-a-service” model, a company owns and operates the lighting fixtures. Customers, such as businesses or cities, lease light as needed from the fixture operator. Swoboda says these capabilities come from the fact that what people think of as a light bulb now actually represents very sophisticated technology.
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