Signify’s new UK CEO Stephen Rouatt is getting stuck into a bulging in-tray which includes major supply disruption, a challenging K-shaped recovery and a £2 million Brexit bill. Interview by Ray Molony.
TAKING OVER the reins of the UK and Ireland’s largest lighting company in the middle of a pandemic, a month before the Brexit rubber meets the road and in the midst of unprecedented shipping and component supply disruption would seem, on the face of it, a daunting prospect.
But you get the impression that fresh-faced Canadian Stephen Rouatt is relishing it.
Rouatt was appointed CEO last November but, lockdowned in Holland (’it’s a little bit inconvenient’) he has had to put his stamp on things via Microsoft Teams.
He’s not your average lighting company managing director: He speaks four languages, has a nose-bleeding high-achieving CV – ticking off senior roles in ING Bank, McKinsey & Company, Accenture and Pilsbury – and lists Bill Gates as an influencer.
Hell, he has even chaired infrastructure and industry strategy communities at the World Economic Forum.
Yet, despite this stellar resumé, he’s been a popular (virtual) arrival at Signify towers in Guildford, thanks to an ability to grasp the challenges facing the company quickly and a disarming manner.
He’s been with Signify – formerly Philips Lighting – for almost five years, and in the mergers and acquisitions team was heavily involved in the purchases of US luminaire behemoth Cooper Lighting, French-Chinese smart lightbulb maker WiZ, and livestock lighting specialists Once/iLOX.
He replaces Joao Pola, who becomes the head of the 3D printing division, a glamour posting in the Signify world.
The in-tray that Rouatt inherited from Pola isn’t pretty – Brexit, supply issues, price increases, component shortages and er, a pandemic – but he’s generous with credit.
‘My predecessor started focusing on Brexit early which is really helpful,’ said Rouatt. ‘So when I came on board we had good plans in place, both for the requirements around energy labels, rules of origin, UKCA marking and [we] had plans in place to immediately address that from 1 January.
‘We also made a very clear decision to increase our inventories prior to January just in case’.
Signify UK & I increased stock levels by over £1 million during the autumn and is spending a further £1 million for labelling, administration and paperwork associated with the departure from the EU.
The stockpile should taper down over time when shipping lanes and container prices – sometimes breaking the £10,000 barrier for a 40-foot box from China – begin to ease.
He blames pressure from tech and automotive companies in driving up demand and the price of electronic components.
The bill of materials for some light fittings has gone up by 20 per cent; ’too much to pass on’, says Rouatt.
This pain, of course, is shared right across the industry and Rouatt foresees continued consolidation in the sector.
‘I expect we’ll see some of the smaller players struggle,’ says Rouatt. ‘In my previous role, we saw a lot of smaller struggling companies that were being offered up for sale.’
A particularly egregious effect from Rouatt’s point of view is that many luminaire makers won’t be able to make the necessary investments in smart and connected lighting.
‘In the last five to seven years we’ve had a large number of entrants coming into the market with a different set of economics, different business models, going for cheap and cheerful, and being willing to accept a different set of profitability numbers than most major western players.
‘They’ve adjusted the economics. In line with costs going down, the minimum scale needed to be cost effective is much lower, so a smaller scale LED player could come in and very cost effectively offer very cheap lighting products, and, to be fair, the lower end stuff got ‘good enough’ .
‘We in the lighting industry could have done a better job earlier of highlighting the value of higher quality lighting, being able to show the real benefits’.
He believes the key to getting realistic prices for lighting is ‘educating the consumer’ and ‘delivering value that they’ll notice’ such as CRI levels, human comfort and connectivity.
But didn’t Philips used to do much of the heavy lifting of educating customers and hasn’t it largely relinquished the role in recent years?
‘Potentially we can be more informative,’ says Rouatt, who points out the company still has its two impressive lighting application centres and runs webinars on key topics.
Surveying the market, Rouatt agrees with the consensus that we’re facing a K-shaped recovery.
He believes that non-food retail, one of lighting’s best markets in recent decades, is firmly on the descending leg of the ‘K’.
‘The Sainsbury’s and Waitroses of this world continue to remain important as they’ve done well during the pandemic. There, the emphasis is on renewal [of lighting equipment].’
‘If you take the high street and the shift to online shopping, that’s a really tough one.
‘The UK in particular has a much higher attachment to online shopping, It’s one of the highest in the world.
‘How the high street recovers from that is going to be a really big challenge. Nobody really knows if we’ll continue to buy online or will we happy to walk on over to the local shop to pick up some stuff or make that trip over to Westfield.
‘Will going to the local Westfield to go shopping for a day become an activity again? That’s a great question that I have no idea about.’
He’s more upbeat on the commercial sector.
‘I think there’ll definitely be a higher quality of what’s in the office. So when you think about ‘building back better’ we expect to see more investment in the office space that is around. The question of how much, I don’t know.
‘There’s a divergence. For instance Twitter said [to its employees] “hey don’t come back into the office” while Facebook and Amazon are actually picking up more and more office space.’
Some will opt for a ‘hub and spoke’ model with smaller locations at tier two cities and regional towns, but the focus on the office will remain.
‘We still see the office as a very strong component of what we do.
‘The discussions that I have with some of our big customers and their partners is around healthy buildings.
‘There’s more interest in disinfection, healthy air, human centric lighting, a great environment…that’s what everyone asks for now.
‘Circadian lighting, biodynamic lighting, everyone uses slighting different words. Yesterday a major landowner was talking about “the lights that make you feel good”.
And, as you’d expect from the chief of one of the industry’s biggest players in ‘smart lighting’, he’s keeping the faith that connected lighting will become a big market.
He says connected lighting that’s tuned with external lighting, adjusted ambient levels for individuals will be the ‘basics’.
‘There’s tonnes of applications that are out there – space management, indoor navigation, all the humidity and temperature gauges and so on, being able to book a hot desk, being able to track employees for health and safety reasons…it’s all there; it’s just a question of the uptake.
‘I think you’re seeing it more and more. I thought it was going to be quicker a couple of years back but we’re still definitely seeing the continued interest.
‘The lighting infrastructure for me is still one of the best hosts in the building environment and even in the external environment.
‘So if you have luminaires with plug-in sensors – which we do – then you can add in the sensors and services that you want.
‘The use cases prove themselves’.
He predicts the first successful applications will be smart work spaces and space management.
‘It has a payback. Real estate agencies actually pay people to go around a building, keep track of people and do measurements and everything. If you talk to them, they’ll tell you that they pay someone £25/£50,000 a year just to do this.
‘When you layer into that hot desking – which will still exist – booking meeting rooms and so forth, cleaning schedules, it all helps optimise usage of the facility.’
In parallel, he’s sees continued growth in virus- and germ-killing ultraviolet lighting systems as the healthy workplace trend accelerates.
The company is predicted that UV-C eventually become a €2 billion industry that won’t disappear when everyone’s vaccinated.
‘We’d already been seeing disinfection lighting as a growth area. People were already investing in it for general disinfection before Covid, especially in the US.
‘If I can put these in a hospital and it lowers the infection rate of superbugs, which are resistant to antibiotics, this can only be a good thing.
‘When I think of the discussions I’m having with globally large companies, they are looking at putting this stuff in all their large warehousing sites’.
He cites the aviation and shipping industry as particularly buoyant markets for UV-C.
Across all sectors, he sees the emphasis on sustainability intensifying.
‘The whole circularity piece? That will be the future.’
Signify has signed up to Prince Charles’s Terra Carta programme, and committed itself to doubling its ‘circular revenues’ to a third of all takings by 2025. It cut out plastic packaging last year.
He predicts that it will be driven by a combination of legislation and market demand. For instance, he predicts that public tenders will begin to demand compliance with circular economy metrics.
‘It’s just the right thing to do, and it takes time to do it, so the sooner you start the better.’
- Stephen Rouatt was in conversation with Ray Molony