The following article was written and provided by Matthew Ma from Aleddra LED.
After two recalls of its ballast-compatible LED tubes, a LED lighting manufacturer called it quits not long ago and exited out of the LED tube segment. Its sales people were told that the decision was made because the segment was too crowded and the company had decided to focus on the fixture business instead. While there is nothing wrong for any company to set its own direction, the reason for the departure is intriguing, and merits a deeper investigation. Jack Ma, CEO of Alibaba, once said, “It is very hard to replicate a business success for it hinges on so many factors beyond one’s control. However, we are all capable of making the same mistakes.” Perhaps, we may learn more from a failure than from a success. Let’s dive in to this failed LED tube product story.
A Superficial Reason: The LED tube market segment is too crowded. A market segment only becomes crowded because there is money to be made. The same argument may well be applied to the LED fixture segment. Without a doubt there are less crowded segments when it comes to lighting. For example, LED grow lighting comes to mind as an emerging segment as legislation across the country works to approve or disprove of certain restricted plants for medicinal and recreational use. But why single out LED tube segment? Other manufacturers are still very active in the segment and will certainly be eager to greet the departure of a major competitor. Leaving the LED tube segment because the fixture segment is less competitive is not a very convincing argument.
A Not So Superficial Reason: The manufacturer did not know how to fix the technical problems of its ballast-compatible LED tube. Given three tries and two recalls of its tube, this explanation seems plausible, but questionable. It is unthinkable a leading LED technology company is unable to fix the arcing-led burn hazard of its ballast-compatible LED tube, given its technical depth and the fact that one of its main competitors claimed a fixed after a recall of its own ballast-compatible tube, and another competitor had no recall. Couldn’t this manufacturer simply copy the design and call it a day? It chose not to do that for perhaps two reasons. One of them is that it has never copied designs from others. Hats off! The other reason may be that they didn’t believe the ballast-compatible LED tube it had developed can be completely safe. The redesign of its tube after the first recall may have addressed the internal arcing of the tube. The external arcing at the contact point of the lamp holder and the bi-pin of the LED tube is beyond its control. In good conscience, they chose not to sell a product that had an inherent liability issue, which is a smart move and noble. Hats off again!
A Deeper Reason: The ballast-compatible tube is incompatible with company’s technology core, or its “DNA”. Because of the ballast incompatibility issue, it is not uncommon for utility companies to mandate the removal of existing ballasts and replace them with new, compatible ballasts when retrofitting a fixture from fluorescent T8/T12 tubes to operate LED Tubes. Secondly, the LED tube outlasts the existing ballast, and therefore to save the costly spot replacement of dead ballast down the road, the end user is also encouraged to use new ballast when retrofitting LED tube. Finally, to avoid the dispute as to why a ballast failed (or LED Tube) shortly after the retrofit with ballast-compatible LED tube (it may simply be due to the expiration of the ballast, but the end user disagreed), it is beneficial for the contractors to put in a new ballast, at the cost of the end user of course. This means the sales of a ballast-compatible tube has a 2-to-1 (or 3-to-1 or 4-to-1, depending on the number of lamps a new ballast can support) pull-through sales ratio for the ballast. Mind you, this once ballast-compatible tube manufacture is the only of the top LED lighting companies that does not make or sell ballasts. In other words, for every single ballast-compatible LED tube it is selling, it contributes to the sales of 25%, 30%, or 50% of the ballast sales of its competitors. This is hardly a winning product strategy, isn’t it? The bottom line is that the “DNA” of this company is ballast-incompatible, period. If it has a huge ballast product line, the story could be dramatically different and its marketing message would be noticeably ballast-compatible friendly, just like their competitors.
A Reason At The Core: The “not invented here” mindset. This may be the hardest to prove and yet would be the most detrimental of all for it prevents other issues from being properly fixed. For linear fluorescent T8/T12 retrofit, ballast-compatible tube is not the only option or the best option; In fact far from it (refer author’s article on “The Untold Story of LED Tube” published on Edison Report). There are ballast-bypass LED tubes (Type B) that are field proven to be fool-proof and fail-safe. When presented with such an example, the R&D director of the company commented, “Interesting. We don’t license any third party technology.” This not invented here mentality has brought down so many once-great companies. It seems the lighting industry is hardly immune from it. When contracted with it long enough, a leading lighting company may be bought by a third party (from overseas perhaps), become irrelevant or unsellable. The great Spanish painter Pablo Picasso was known for stating “a good artist copies and a great artist steals.” If you can’t copy nor steal from your competitor, then it won’t hurt to acquire it. Then it can be claimed that the technology of the acquired company is now the technology of the acquiring company, thus saving the pride of not-invented-here.
The reasons listed above are purely speculation, and of course a business decision is hardly made on one single factor. Multiple forces are often at play in shaping the final outcome. However, looking it through different lens does illustrate various plausible reasoning behind the scene, thus making it a good reference case on the decision making of an LED (or any) product strategy.
Sharing of this article is welcome and appreciated. - Matthew Maa, PhD, Aleddra LED Lighting, [email protected].