Inteluma sells smart systems that turn energy-efficient LED lights on and off as needed. But how can CEO Rob Ziola persuade commercial customers to give his small business a chance?Ben Nelms/The Globe and Mail
Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
After more than 25 years as a Lower Mainland parking baron, Rob Ziola decided to switch industries.
He took the helm last year of Inteluma Energy Systems, an intelligent-lighting startup that, at the time, was more science project than business. Inteluma doesn't sell lighting – it sells energy savings. Efficient LED bulbs are the company's backbone, but its soul is in systems – networks of sensors and fixtures designed to expend energy for lighting only when necessary.
The Vancouver-based company, which has taken on two dozen projects since opening its doors this year, purports to save commercial clients up to 93 per cent on lighting costs. Inteluma is on track to bring in $8-million in revenue by the end of the year, says Mr. Ziola, who is chief executive officer.
LED technology has improved vastly, creating a wide-open market for energy savings. But it has also created an arms race. Mr. Ziola must figure out how to get ahead of legacy lighting vendors, including Sylvania and Philips.
The idea for the company is simple enough. "We've been turning off the lights in our refrigerators for years," he says. "Why haven't we been doing that for all our buildings and parking and everything else that we do?"
Inteluma's systems rely on sensors that can detect when a person or vehicle arrives, turning on energy-efficient LED lights before they get there. Lights remain off or dimmed otherwise. While many new buildings are incorporating these ideas, the market to refurbish existing properties is a big one. While legacy lighting companies have started to push their own intelligent lighting systems, they're only a small part of their larger business model.
"We send proposals [that say], 'Here's your cost of doing nothing every day," Mr. Ziola says. "'So if you want to sit for three weeks before you make a decision, that's fine. But just know, every day you wait in this one facility, here's how much is just being thrown away.'"
Mr. Ziola began his first parking business as a teenager in the eighties, employing hundreds of people before he turned 20. He'd go on to launch seven parking companies, including U-Park, which in the nineties brought a wave of paid parking to Vancouver's public parks. People sometimes refer to him as the "tyrant" who made visitors pay to play, but he's quick to remind them that much of the parking revenue goes back into park beautification and improvement.
Inteluma was born among a handful of engineers from Simon Fraser University, the University of Victoria and a downsized B.C. Nokia office two years ago. Veteran Vancouver businessman Mark Godsy funded the startup in its early days and remains a partner.
The company has an exclusive partnership with U.S.-based Xeleum Lighting to manufacture its fixtures and sensors. Inteluma, in turn, provides the glue – the wireless network, backed by secure Amazon data centres.
Inteluma is in its infancy, and many prospective clients are "kicking the tires," Mr. Ziola says. Still, there's enough interest to keep the company's 27 employees busy across four provinces. And its engineers are already scoping out another vertical: customizable lighting for urban plant-growing and the medical marijuana industry.
The executive is convinced he's got the right business model. But he's concerned that potential clients will keep looking to the market's existing suppliers, who in turn will start offering their own solutions.
"These companies made billions and billions of dollars in the past changing basic lightbulbs that were designed to burn out every year," he says. He likens the coming days to a land rush: "How fast can you get out there to stick your stakes in?"
The Challenge: How can a lighting startup whose product builds on legacy technology beat legacy companies for market share?
THE EXPERTS WEIGH IN
Nathan Furr, co-author of The Innovator's Method: Bringing the Lean Start-up into Your Organization and professor of innovation and entrepreneurship at Brigham Young University, Provo, Utah
The truth is that customers will keep buying legacy technologies from traditional companies like Sylvania and Philips for some time. That's the way technology change happens, and legacy technologies live on for a long time. Consider the slow phase-out of incandescent lighting when LEDs first arrived on the scene.
New technologies compete by offering either cheaper or simpler solutions to existing problems, by solving a different problem altogether, or by applying a different business model. But you can't win the entire market at once.
In The Innovator's Method, we highlight the danger of starting with solutions first, instead of starting with what really matters to customers. To help win the legacy market share, Inteluma should explore what jobs it does for key customers (e.g., feeling responsible, sustainable, etc.) and leverage this to convince the sub-segment of customers who want or need it most, like socially conscious businesses. Start small and focused, then roll out successive customer groups to conquer the world.
Elizabeth A. McDonald, president and chief executive, Canadian Energy Efficiency Alliance, Ottawa
Energy efficiency products are gaining strength. A recent International Energy Agency report cited the global energy efficiency market is worth at least $310-billion (U.S.). The key thing for Inteluma is to promote the savings that clients can make. That message always sells, even over being good for the environment. Do case studies to showcase successful projects; they become calling cards for the rest of the country.
CEEA did a study that showed 73 per cent of Canadian businesses believed energy efficiency was a high priority, and 69 per cent said cost saving would be the greatest benefit. Lighting is always the first consideration. Of the 79 per cent of businesses that have invested in energy savings, 42 per cent invested in lighting.
Lighting is big business, and yes, there's competition. Canada is about to fully transition to energy-efficient lighting, it's a global concern. Think outside Canada. Look at something like Nest, the smart thermostat company purchased by Google. If you have a great product, think big.
David Balaban, president and CEO, Canadian Energy Savings Corp., an intelligent boiler-efficiency company, Toronto
It has been our experience that regardless of the size of an organization, the financial pressures to save money and reduce operating expenses are at the forefront.
We had four primary goals. A: Get an appointment with the customer by creating a compelling outbound telemarketing initiative geared toward the decision maker of large commercial organizations. B: Conduct an onsite evaluation or audit. C: Present an immediate savings initiative (return on investment). D: Present a payment option that affects only the operating budget, as opposed to capital expenditures.
Capital budgets are firm, and any outside purchases usually require approvals; operating budgets typically do not. By creating a low-cost monthly payment option that could be billed directly on the customer's utility bill, we found a niche that was a win-win scenario for both our organization and the client. Saving money is only part of the sales process – identifying an easy way to pay for the product is another. If Inteluma offered a guaranteed savings with the customer, coupled with an operational-expense payment, it would give them a head start over legacy organizations.
THREE THINGS THE COMPANY COULD DO NOW
Target certain clients first
Aim for customers who want or need your service most, such as socially conscious businesses. Then roll out successive customer groups.
Emphasize cost savings
Promote the savings clients can make – that message always sells, even over being good for the environment.
Think billing
Offering a monthly billing option can help clients find an easier way to pay.
Facing a challenge? If your company could use expert help, please contact us at smallbusiness@globeandmail.com.
Follow us @GlobeSmallBiz, on Pinterest and Instagram
Join our Small Business LinkedIn group
Add us to your circles
Sign up for our weekly newsletter
Interviews have been edited and condensed.