The Bright Future of LEDs
The bright idea came to Laura Peach in the backseat of a car in January, 2005. The marketing executive with lighting giant Osram Sylvania was riding around Boulder, Colo., with a family she was observing as part of her research. Peach heard the father complain he couldn't see the road when his wife turned on the overhead light. She heard the kids say they didn't have enough light in the backseat. "They wanted portability, flexibility," Peach recalls. "I said: 'They're talking LEDs.'"
Osram happens to be the world's second-largest maker of LEDs (after Japan's Nichia), but Peach's inspiration helped create a hot new and entirely unexpected consumer product—the DOT-it line of small, portable lights. It also sparked what Peach and her company hope will be a string of new products tied to light-emitting diodes (LEDs). These semiconductors, which use a fraction of the energy that conventional lighting does, should get a big boost from the energy bill passed in the U.S. this week, which will phase out incandescent bulbs by 2012. "We didn't really expect [DOT-it] to do nearly as well as it did," says Charlie Jerabek, North American chief executive of Osram. "You'll see a lot more applications of that technology."
Connecting the Dots
Peach didn't start out with the idea of creating a general-purpose lighting device. She was an automotive marketing manager for Osram, the $7 billion-a-year lighting division of German industrial giant Siemens and the world's second-largest lighting company, after Royal Philips Electronics. Her group had a huge hit in 2002 with blue halogen headlights that help drivers see better at night. Peach had been charged with finding another, similar automotive innovation. She hired Radar Communications, a consulting firm in Boulder, which hooked her up with some local families to do customer research. "The consumer never tells you what the potential product is," Peach says. "They say things, and you connect the dots."
Back at her home in New Boston, N.H., Peach spent time in the ladies room at a local outdoor gear store trying on camping headlamps. LEDs have been around since the 1960s, but only recently have their costs come down and the technology improved enough to allow them to compete with conventional flashlights. Peach figured her device needed three LEDs to generate enough light to read and perform other tasks. She asked a company engineer to come up with some simple designs she could present to focus groups. He came up with a chunky wooden device about the size of a hockey puck that could run on three AAA batteries.
Watching from behind a two-way mirror, Peach saw delighted would-be consumers try to slip the battery-powered lights into their pockets and take them home. She rushed the product samples to the head of her division, only to hear his disappointment that it wasn't directly automotive-related. "He said, 'This wasn't what I expected,'" she recalls. Still, the overwhelmingly positive responses from the customer research convinced him to change his mind, and in August, 2005, just seven months after Peach conceived the idea, the company launched DOT-it. The two-inch-wide, portable lights with adhesive tape on the back are positioned as supplemental lighting consumers can use in closets, garages, under kitchen cabinets, and in cars. They sell for about $10 apiece.
Phasing Out Incandescents
Osram now sells tens of millions of DOT-its a year, according to the company. Brazilians use them to decorate their costumes during Carnival. Soldiers use them to light their tents in Iraq. And while it wasn't the company's first LED product (Osram supplies them to Disney World in Orlando, and they light the Jefferson Memorial in Washington), this was its first LED-based consumer product. It expanded the company's distribution from lighting stores, home improvement chains, and automotive shops into retailers such as Linens 'n Things and Amazon.com (AMZN). And it's a hot growth area: Archrivals Philips and General Electric (GE) have snagged other high-profile lighting jobs (BusinessWeek, 12/13/07) in the U.S., including the national Christmas tree in Washington and the ball that drops in Times Square, both of which are being lit by LEDs.
Ironically, the market presented another challenge: Since energy-efficient LED lights tend to last longer than incandescent ones (or run on replaceable batteries in the case of DOT-its), the market for replacement bulbs doesn't offer as many opportunities for frequent sales as incandescent bulbs did. But the eco-friendliness of LEDs—and the new government mandate to steer clear of incandescent bulbs—certainly offers potential for increased sales, at least in the near future.
Peach is now chief marketer of a six-person, new ventures group at the company, an incubator for consumer-product ideas. New products her team dreamed up and launched in 2007 include the $15 Golden Dragon, a larger DOT-it 30 times brighter than the original, and the five-for-$5 Light Bugs, whose sales pitch is "bright as a flashlight, small as a nickel." The Checker Light, meanwhile, is waterproof and has a magnet on the back.
Her team has a bunch of even newer products in the works, including waterproof floating DOT-its for swimming pools and a solar-powered version. Also on the drawing board are decorative lighting tiles and a water-powered light for use in the shower. Eventually Peach figures the economics will be such that Osram will offer consumers larger LED lamps that can cost-effectively replace incandescent ones in the home. "The price of LEDs is cut in half every 18 months," she says. "In two years, we'll be there."