6 Harsh Takes on Commoditization of AV That You Should Admit Are True
An intervention of sorts has custom integrators taking stock of damage from commoditization of the market and their and manufacturers’ culpability.
Put a bunch of AV integration industry folks in a room.
Ask them about the commoditization of their industry.
Then stand back.
That’s basically what I did while moderating a panel discussion, “Combating Commoditization of the Industry,” during a recent NSCA Integration Business Survival Conference & Technology Showcase in Annapolis, Md.
We talked about the marketing of simplified solutions to B2B customers and its effect on how customers’ perception of how long a system should take to design, how easy it should be to install and how much it should cost.
We dove into the devastating impact it has had on system sales margins.
And of course we talked about Microsoft Surface Hub.
Here are some of the more impassioned points made during and after the discussion:
Manufacturers Need to Step Up Support of Integrators.
Pointing to a slide indicating what integrators say their typical hardware margin on projects was in 2014—nearly a quarter report between 1 and 10 percent and another 50 percent between 11 and 20 percent is – NSCA executive director Chuck Wilson said, “This kind of stuff drives me nuts.”
Seeing the results of the survey conducted jointly by CI and NSCA a year ago put Wilson on “a mission” to show NSCA members the impact that low margins have on their profitability and their companies’ viability. “I went through this with 87 different companies and what I’ve discovered is that people really didn’t know the impact of reduced margins.”
Knowing is only half the battle. Some manufacturers, he said, “intend good things when they say stuff like, ‘This product is simple. Anybody can install it. You can put up 10 of these in a half a day.’ That kind of thing.
“What’s happening is the race to simplicity and plug-and-play is actually doing a disservice to the integrators who focus on custom and complex system solutions.”
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End users (read: prospective integration customers) read all about simplicity and ease of installation online and cling to the marketing spins on how inexpensive the systems ought to be to install and promises of lower costs. The marketing, however, doesn’t tell the entire story of how well these systems can address the customer’s unique challenges without the benefit of consultation and custom integration.
“As an industry we have to be mindful of how we say things, how we position things and to realize that integrators need margins,” Wilson said.
Manufacturers ought to be concerned about their integration partners’ profitability, he added. Without profitability on projects firms can’t put money into developing their long-term strategies and therefore can’t be effective evangelists for their brands. “Profitability is the key to everything as we move forward.”
It’s Not about Fighting Back. It’s about Picking Battles.
There’s an undeniable “we’ve got to fight this” vibe among integration firms when it comes to commoditization. The solution, however, is more nuanced, according to panelist Bruce Kaufmann of Human Circuit.
“It’s not fighting,” he said.
Kaufmann was quick to realize that commoditization would impact his integration firm. In 2011 he completely rebranded his company, which for 46 years prior had been called Professional Products, Inc.
Kaufmann knew it was no longer appropriate to position his company as a products seller. Commoditization of product was well underway in 2011 and made the bold decision to reposition highlighting the firm’s ability to consult and custom design solutions that solve people’s challenges. “It was about staying relevant,” he said.
And as 2016 approaches the industry is still relevant, according to Kaufmann. He challenged attendees to think differently about the markets they’re serving and about their customers. “Where you commoditize yourself is by trying to serve too many people. You have to pick a very narrow market at this point.”
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