Comment, IoT/Smart Lighting, Lighting Industry

Self-driving cars! Smart watches! Game consoles! It must be Osram

Now listen up: New Osram CEO Olaf Berlien tells the company's board (to his left) and shareholders that things need to change even more and faster than they have been if the Munich company is going to stay in the digital lighting race.

A few weeks after former industry outsider Olaf Berlien took the CEO helm at Osram, the German lighting giant made a big and sensible move. It decided to stop labeling halogen bulbs as ‘eco’.

It’s unclear whether Berlien himself made the decision, but the symbolism was striking. The change was long overdue – by today’s standards halogens are far from ‘eco’ – and perhaps one that only a new boss with no previous direct ties to the lighting industry could easily exercise.

Big organisations – Osram is the world’s second largest lighting company – can struggle to change their ways. Fresh, non-indigenous leadership like Berlien’s can help. By comparison, industry leader Philips, led by CEO Frans van Houten – essentially a Philips lifer (van Houten has spent most of his 29-year-career within or near Philips and is the son and brother of Philips’ former and current head of research, respectively) – is dubiously sticking with the ‘eco’ tag.

That’s not to say that van Houten hasn’t led innovations.

Change gonna come

But so it is that we should expect more changes at Osram from Berlien, whose CV includes executive stints at construction firm M+W Group, steelmaker ThyssenKrupp, optics company Carl Zeiss, heating company Buderus Heiztechnik Gmbh, and computing stalwart IBM, but where the word ‘lighting’ does not appear until about six weeks ago, when Berlien took the reins at Osram.

Not that Berlien will necessarily be a radical transformer. He may be a lighting industry outsider, but he’s also from the club of executives that seem to circulate around the top German companies like managers of American baseball teams (M+W, Thyssen and Zeiss all hail from his homeland), a coterie that by definition can imply ‘staid’.

But Berlien is certainly talking up the change game and sounding all the right new notes in an era in which venerable lighting companies like Osram, Philips and General Electric must find ways to innovate as they shift to modern digital (LED) lighting and compete against nimble digital-only startups, while still encumbered by legacy technologies like incandescent lamps.

That was evident at Osram’s annual general meeting in Munich last week, when Berlien revealed that he has freed an extra €10 million ‘from the managing board’s budget’ to fund innovative digital lighting development in the spirit of the company’s Lightify system. Lightify is Osram’s smart lighting scheme that allows residential and office users to remotely control LED lamps from smartphone and tablet apps.

While €10 million is a modest sum that won’t guarantee any great technological leaps, it marks a fresh infusion from a new leader who is trying to reset an innovative tone and push the company onto a faster development pace.

Smart Cities

Berlien suggested that the next big breakthrough could come in the ‘smart cities’ arena, in which urban areas will control lighting both remotely and via sensors, and in which digital lighting will help form the backbone of metropolitan information networks.

To help whip up enthusiasm for such an inventive spirit, Berlien pointed out at the AGM that Osram is already fostering development of flashy digital products and concepts such as self-driving cars, video games, and smart watches. In his prepared remarks, he noted:

‘In order to master the challenge of fast-growing cities, researchers at our company are working on ways to use light in so-called “smart city projects.” While this may be a long way off, it is not as far from the present day as some people think.

‘For example, games consoles that respond directly to your child’s movements have long been a reality. My son also uses one. Not many people think of Osram here. But they should, because this technology uses our infrared LEDs.

‘Or do you think of Osram when you hear about “self- driving cars”? You should! When a potentially dangerous situation occurs on the road, optical systems will identify it straight away by using our LEDs and laser diodes…

‘A final example: So-called smart watches. Do you think of Osram here? You probably know what’s coming now! It’s Osram sensors that enable smart fitness watches to measure the wearer’s pulse or blood oxygen levels simply and conveniently. I’m always wearing one – as you can see – and can review my data at the end of the day. We are working with renowned producers on several projects to implement this technology and are close to market launch. As you can probably tell from my enthusiasm, I could talk about this for much longer because these are business opportunities! Opportunities that we have to and that we will exploit!’

Industry dramatics

It may be rah rah, but Berlien is pushing the right buttons. He has to, because in his own words:

‘The global lighting market is in the middle of a historic transformation due to the move towards LED technology. Almost no other industry is changing as rapidly as ours: dramatically shorter innovation cycles, new competition from Asia and a constant price decline are putting the entire lighting industry under pressure and established business models into question. Our business in classic lamps and ballasts alone has shrunk by about 15 percent in the last fiscal year. And, if I may remind you, this part of our business still stood for almost 40 percent of our revenue in fiscal 2014…

‘I think it’s clear that there’s no way around the changes that have already been initiated. If anything, we have to put even more energy and focus on the ongoing corporate transformation.’

The new CEO also hinted at an upcoming corporate restructuring that would speed up innovation. ‘Our principle should be: “As much decentralization as possible, and as much centralization as necessary,” ‘ Berlien said. ‘The management team and I will define the pillars for a new strategy for Osram as quickly as possible. We will let you know in spring what this will look like.’

Berlien clearly has change on his mind. He also talked up the need for greater speed and agility a month ago, when Osram reported a surprise rise in earnings.

Barely over a month into his new job, outsider Berlien’s imprimatur evokes change. It all kicked off symbolically by dropping the eco label from halogen lamps.

Sticking around

Of course nobody yet knows if his changes will guide the company to the promised land of lighting and the ‘Internet of Things.’ For starters, he’ll need to stick around long enough to implement them. Berlien lasted a little less than a year on his last CEO job, at M+W.

But he comes with a natural asset that should help – his outsider status. The Osram board would have been even bolder to annoint a CEO from well beyond the German industrial clique. An internet maven, for instance, to help drive Osram further into the brave new world of internet-connected and controlled lighting.

But let’s not get too carried away.  The closest example we have yet to this is GE, whose relatively new lighting boss, Beth Comstock, comes from the world of digital media.

Expect more changes at Osram from Berlien. We don’t exactly when or what. But we’ll set our smart watches to help us find out.

Photo is from Osram