The first step in planning entry into the broad and encompassing voice/data/video (V/D/V) market is to identify and define your market niche. No one electrical contracting firm can specialize in all of V/D/V's numerous systems and technologies, especially when starting out. This article will help you identify an area of specialization or niche in the V/D/V market and focus on it.
Find your focus
Your firm's success in the V/D/V market will be greatly enhanced when you have established your market focus. This is a critical success factor for entering and prospering in the V/D/V market.
Tom Peters' and Bob Waterman's 1982 business classic, In Search of Excellence, defined market focus as "sticking to the knitting." The authors saw this as an important success factor for any firm, as any given electrical contractor could be easily tempted by the wealth of opportunity in the V/D/V market to try to do it all. However, successful electrical contracting firms recommend restraint and focus. Electrical contracting firms that try to take on the entire V/D/V market at the outset instead of focusing on providing quality services in specific market segments have a high probability of failure. Your firm must find its market niche.
Segment the V/D/V market
Market segmentation is the process of subdividing a large diverse market, such as the emerging V/D/V market, into more manageable segments that can be effectively served by the electrical contracting firm.
Parameters used to divide a large diverse market are typically referred to as segmentation variables. These segmentation variables are used to identify matches between the V/D/V market's needs and the electrical contracting firm's existing or planned V/D/V capabilities. Market segmentation is the first step in establishing your firm's market niche.
In the case of the V/D/V market, these segmentation variables could include any or all of the following:
· Customer Need
· System Type
· System Operation
· Technologies Involved
· System Size and Complexity
Each of these segmentation parameters can be used by the electrical contracting firm to establish its target market and will be discussed in the paragraphs that follow.
Assess your customers' needs
Customers' needs are the first and foremost segmentation variable for the electrical contracting firm entering the V/D/V market. If the V/D/V services offered by the electrical contracting firm do not match existing and potential customer needs, then all of the marketing effort and technical expertise will be for nothing. Typically, customers' V/D/V needs are very broad and encompass a number of V/D/V system categories. The remaining segmentation variables can be used to further narrow the electrical contracting firm's focus.
System type is the second segmentation variable to consider. Using this parameter, the electrical contracting firm can select a customer's V/D/V systems it wants to focus on. Factors such as the electrical contracting firm's expertise and experience with particular V/D/V systems as well as projected market growth in particular systems and competition for the work should be considered, among other things.
Consider your customers' system operation
Consider how your existing and potential customers operate their systems. If they tend to combine their fire and life safety systems with their security and access control systems, then you should consider structuring your V/D/V services similarly. On the other hand, if your customers require a higher level of security with more complex stand-alone security systems, then you should probably specialize in security and access control systems and leave the fire and life safety systems to others initially.
Determine the technologies involved
Another consideration in segmenting your V/D/V market is to pinpoint the technologies are involved in the system segments you have identified so far. Again, if your firm has experience or expertise with a particular technology or you see this technology emerging as a growth you may choose to focus on that technology or those systems that will use that technology. For example, electrical contracting firms that saw optical fiber cable as an expanding market just a few years ago positioned themselves to take advantage of the trend toward higher bandwidth systems and are profiting from it today.
Similarly, electrical contracting firms that believe wireless intramural communications systems will become more important to their customers may choose to specialize in wireless system installation or specific V/D/V systems that will benefit from its use.
Assess system size and complexity
The above segmentation variables assume that the electrical contracting firm is working for customers that have diverse and expanding V/D/V needs. Not all electrical contracting firms serve such urban markets or large corporate customers. System size and complexity needs to be considered as well. An electrical contracting firm working in suburban or rural areas or serving smaller customers in large metropolitan areas may lack sufficient customer demand for one or two specialized V/D/V systems or technologies.
Further, system size and complexity needed by the customer may not warrant this level of specialization either. Instead, the electrical contracting firm may decide to focus on these smaller systems and customers, offering them a full range of V/D/V services. Providing one-stop shopping for smaller firms with less sophisticated V/D/V needs could be a very lucrative and profitable market niche itself.
Bundling possible market segments
A number of similarities between different V/D/V systems allow the electrical contracting firm to profitably offer services that bundle multiple V/D/V systems together to meet customer needs. V/D/V systems sharing common purposes and technologies are often bundled together to form a market segment include the following:
Life safety and security segment
· Fire and Life Safety Systems
· Security, Access Control, and Parking Control Systems
Energy and demand management segment
· Energy and Demand Management Systems
· HVAC Control Systems
· Lighting Control Systems
· Power System Control and Data Acquisition Systems
· Voice, Data, and Image Telecommunications Systems
· Local Area Networks (LAN) and Wide Area Networks (WAN)
· Electroacoustics (Public Address, Sound Masking, Others)
The above V/D/V system clusters are just some of the common combinations offered by electrical contracting firms to meet their customers' needs; they are intended as examples of what your firm's market niche might include. In the end, it is your anticipated existing and future customers' needs that should determine your market focus.
Safely enter market via existing clients
The best and safest entry into the V/D/V market is through your existing customer base. This is the way most firms have successfully entered the V/D/V market. This is true whether the firm was brought into the V/D/V market by a good customer "kicking and screaming" or the electrical contracting firm saw the emerging V/D/V market as an opportunity and market entry was planned and deliberate.
There are advantages to entering the V/D/V market through your existing customer base. Your clientele knows your work and your firm, resulting in minimal marketing. However, you may have to educate this customer about your V/D/V capabilities because he or she may still think of your firm as strictly specializing in power distribution.
In addition, you know the customer's operations, personnel, expectations, and needs. You also know your way around the customer's facility and all the special requirements associated with working in that facility. This knowledge and familiarity is worth a lot to the customer because a successful V/D/V project is a team effort.
As you select your market focus, first look at your existing customers' V/D/V needs. Most electrical contracting firms' customer bases tend to reside in a particular industry or building type, which means any one customer's needs most likely match those of other existing and potential customers in the same industry or within the same building type.
Balance growth with quality
In addition to market focus, disciplined growth in a market segment is also critical to the long-term survival of the electrical contracting firm in the V/D/V market. As the electrical contracting firm's reputation grows in its market niche, so does its workload. This workload in any given V/D/V market segment can usurp the electrical contracting firm's supply of qualified electricians and technicians, capable foremen and project managers, necessary test and installation equipment, and working capital. Eventually these shortages can compromise the quality of services, killing an otherwise successful and expanding V/D/V business.
It is very important that the electrical contracting firm diversifying into the V/D/V market have a good business plan that addresses both market focus and managed growth. As with construction, the key to success when diversifying into the V/D/V market is to plan your work and work your plan. Once your firm has found its market focus, the next step in preparing an effective business plan is to develop a diversification strategy for entering the V/D/V market. This will be the subject of the next article in this series.
This article is the result of ongoing research into the impact of information technology on the electrical contracting industry that is sponsored by the Electrical Contracting Foundation, Inc. The author would like to thank the Foundation for its continuing support.
Dr. Glavinich is Chair and Associate Professor of Architectural Engineering at the University of Kansas. He can be reached at (785) 864-3435 or firstname.lastname@example.org.
V/D/V systems for commercial, industrial, and institutional (CII) facilities include the following:
· Fire and Life Safety
· Security, Access Control, and Parking Control
· Energy and Demand Management
· Heating, Ventilating, and Air Conditioning (HVAC) Control
· Lighting Control
· Power Systems Control and Data Acquisition (SCADA)
· Telecommunications (Voice, Data, and Video)
· Nurse Call
· Data Networks (LAN and WAN)
· Wireless Communications and Control Systems
· Distributed Manufacturing and Process Control
· Robotics & Automated Manufacturing and Warehousing
As noted previously, no electrical contracting firm can specialize in all of these different systems. In order to develop market focus, the electrical contracting firm must segment the V/D/V market.
Customers' needs are the first and foremost segmentation variable for the electrical contracting firm entering the V/D/V market. If the V/D/V services offered by the electrical contracting firm do not match existing and potential customer needs, then all of the marketing effort and technical expertise will be for nothing.
You know your way around the customer's facility and all the special requirements associated with working in that facility. This knowledge and familiarity is worth a lot to the customer because a successful V/D/V project is a team effort.
As with construction, the key to success when diversifying into the V/D/V market is to plan your work and work your plan. Once your firm has found its market focus, the next step in preparing an effective business plan is to develop a diversification strategy for entering the V/D/V market.