This study is a strategic examination and planning document of the European Intelligent Building Controls Industry (IBC). Its objective is to assist all those involved in the manufacture and supply of building controls and allied industries to develop strategic plans for their business. This detailed examination has attempted to bring into debate all the issues that have a direct influence upon the structure and future direction of the industry. In characterising and describing them it is hoped that the debate over its long term future is better informed. The study takes the reader through a series of progressive stages gradually building up appreciation of the business so that finally he/she can develop together with colleagues appropriate and meaningful strategic plans for the company. We believe that this study will help all who read it to understand the complexities of both the market place and the planning procedure. Implementation will improve the chance of the company succeeding and will also have an important spin-off in that it will instil confidence in management that they know what's what which will then be reflected in their day to day dealings with both staff and customers.
PART 1 - Strategic Examination of the European Industry
MARKET REVIEW
This section draws upon Proplan's extensive data base of the industry to provide a quantitative and qualititative review of the IBC(e) market. It shows through a series of carefully prepared illustrations the market size and growth rates in each major country from 1985 to1991 and forcasts the future market size to 1996. It discusses ownership patterns and competitor profiles showing the performance of the major suppliers over the last five years. It shows that in the space of fifteen years computer/microprocessor devices have progressed through four generations, each successively more reliable, "user friendly", capable and less expensive. As a result the IBC(e) industry has become the linch-pin and technological mainstay of the building services controls industry. Technology is at present a major agent of change and is encouraging the development of new structures and commercial relations. An extended transitional period is already underway and it will be some years before this global industry achieves maturity and stability. Despite the fact that the key factors for success will change, we can be sure that the future will demand product capability, uniformity and standardisation. It explains why a limiting vision of ‘the controls industry’ is dangerous. For the IBC market is bounded by imprecise lines and the technological environment is changing rapidly; Those that do bind themselves to ideas of ‘our industry’ may find that the market subsequently leaves them behind.
INDUSTRY STRUCTURE
This section analyses the IBC industry and the rules of competition that determine its attractiveness and profitability by assessing the importance of 5 key factors:
It shows that in the U.K. the IBC(e) market is fiercely competitive but that the average margin on product sales is "acceptable" whilst in other European countries products sell at higher prices as brand image and the penalty of switching create a more difficult barrier for new entrants. It explains why product convergence is becoming a feature of the market and that standardisation when it occurs will be further erode differentiation. Convergence, standardisation and compatibility pose difficult and awkward questions amongst manufacturers! What may be good for an industry in the long term may be potentially ruinous for an individual supplier in the short term. It explains why there is no point in promoting options other than growth in this industry for all variables stress size and as the market becomes more global this will intensify.
DYNAMICS OF THE IBC BUSINESS - KEY ISSUES AND THEIR IMPACT
The previous section analyses the present status of the industry but as the structure is changing rapidly it is necessary here to examine the dynamics of the industry to determine their likely future impact. It concludes that the old model of companies growing to be all things to all people with a total capability across all products and service areas is being threatened as the twin pressures of technology and profit make it likely that companies will have to become more specialised. Some to manufacture, some to install and possibly even others to only maintain. It illustrates how both product cost and its share of the total installed system has fallen and as a result the economic balance has tipped away from manufacturers to SI's and OEM installers.
It explains why the consolidation of the EU controls industry is now inevitable. The industry having faced a turbulent period over the last ten years is not especially profitable. Market growth rates are however impressive and have acted as a spur to the industry to realign and the move towards Consolidation Alliance and Specialisation is now underway.
STRATEGIC OPTIONS
This reviews the broad strategic options facing suppliers to the IBC industry. It analyses separately the options open to existing suppliers, manufacturers of Fire and Security equipment and finally suppliers from the Process and Industrial controls sector. It examines the relationships between the three businesses, identifying common ground and the rationale for involvement and collaboration.
PART 2 - The Strategic Business Planning Process
This section details what we believe to be an appropriate strategic business planning process for the IBC industry. Having read Part One we hope that readers will be stimulated into reviewing their strategic planning procedure and will consider implementing the one recommended here. Strategic Planning/Marketing Planning is a highly complex task but this procedure provides a relatively simple and comprehensive set of guidelines but never-the-less requires dedication and a lot of effort and time to complete. It forces the company to take a market orientated stance when developing their long term plans, based on the analysis and interpretation of the relationships between the company its customers and competitors. Such plans must be rewarded, but the implementation of the procedure will in any case install positive attitudes in all those involved giving confidence that they know what's what and this will be reflected in their day to day contact with customers. The procedure is based on a model having six distinct stages:
It is presented as a set of blank worksheets to be filled in by the reader whilst the accompanying text provides some guidance. The IBC industry currently offers low or no profitability for many, rapid growth for some and constant change for all. In Europe it has all the makings of a "high risk-high reward" environment and it is therefore absolutely vital that long-term strategies have to be clear, unambiguous, agreed and justifiable. Whatever your interest as an employee, manager, director, shareholder, customer of, or investor in this industry we think that your future decisions will be improved by this report.
Our definition of Intelligent Building Controls (IBC(e)) is computerised microprocessor products and systems that control/monitor environmental plant such as heating, ventilation, air-conditioning and lighting where it is integrated, in non-domestic buildings and comprises a central user interface, communications network and data acquisition requisition/ddc controllers
For more information please contact us at proplan@iandi.ltd.uk