Final Report COMM 210 example on Nanoleaf PDF

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The final team report I did on Nanoleaf
"Nanoleaf’s Success Amidst their High Prices"
We had to use the concepts we learned in class to describe a company's success...

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Nanoleaf’s Success Amidst their High Prices Liam Bossinakis-Clark, Sandra Grecoff, Virginie Letourneau, Emily Porter, Tiffany Tran December 1st, 2021 __________________________________________________________________________________________

A common goal that companies set themselves is developing the next best thing, and that is no exception to Nanoleaf, a start-up company specializing in LED lighting.

https://www.google.com/url?sa=i&url=https%3A%2F%2Fhueblog.com%2F2020%2F10%2F15%2Fsmart-lighting-nanoleaf-shapes-hexagons-are-getting-triangular-siblings%2F&psig=A OvVaw0heL2l5SJRDfpB_OzsBhRB&ust=1638410640376000&source=images&cd=vfe&ved=0CAsQjRxqFwoTCOj7gLTBwfQCFQAAAAAdAAAAABAD

In 2012, Nanoleaf launched their first product, the Smart Light Bulb, which was the most energy efficient LED light bulb on the market at the time. In 2016, the company continued to thrive with the release of the Smart Light panels. With its fresh and artistic appeal, these smart light panels accounted for roughly 75% of the company’s revenue stated CEO Gimmy Chu in 2018 (Crist, 2018). Ever since, Nanoleaf has been praised by its customers and business journals, but has recuringly been faced with the complaint of their high pricing of $279.99 CAD for seven panels (Nanoleaf, 2021). Nanoleaf however still made $25M-$50M of revenues in 2019 (The Globe and Mail, 2020). In this article, three business theories, VRIO Framework by Barney, Scorecard by Kaplan and Norton, and Sigmoid Curve by Handy, will be applied to Nanoleaf and its smart light panels to prove that due to the company’s sustained competitive advantage, success in organizational

and financial perspectives, and continuous innovation, people will still buy the Nanoleaf Smart Light Panels despite their high prices.

Nanoleaf’s Sustained Competitive Advantage A compelling reason why customers still purchase Nanoleaf’s smart light panels is because the product is valuable, rare, hard to imitate, and organized. This then creates a sustained competitive advantage, according to Barney’s VRIO Framework, which helps Nanoleaf stay successful.

With its multiple technological and design features, the smart light panels add value to Nanoleaf by intriguing the consumers who enjoy a touch of modern innovation in their homes. Indeed, these LED smart light panels are not only made with a triangular or hexagonal shape that makes it easy to create “any desired layout, abstract forms or [the customer’s] favourite shapes”, but also comes with a set of technological features intended for creative lighting and facilitating the use(Nanoleaf, 2021). Of the many technological features is the Rhythm Module, a feature that displays more than 16 millions colours pulsing to the music that the customer is listening to, and Match Mode, a feature that reflects the customer’s computer activity through colours and lights. Nanoleaf also makes sure that the product is customer-friendly. It includes, for instance, a drill-free installation with double-sided mounting tape, an internal connection where the panel can still be functional without connection to WiFi, as well as an app capable of being connected to any smartphone and smart speakers (Nanoleaf). By integrating interesting and easy-to-use features, the Smart Light Panels add value to its company by enabling it to tap into the market of home design and smart lighting. The LED Smart Light panels also cater to the sustainable consumer that are intrigued by its environmental advantages. Indeed, LED lights are highly energy efficient. In fact, these lights use at least 75% less energy and last twenty five times more than incandescent lights, stated the Energy Department of the U.S. on their website. Customers can then benefit from the panels as well as save money on electricity bills and reduce carbon emissions (Elemental Green, 2021). These LED panels further add value to the company by exploiting consumers’ increasingly important need for sustainability.

Nanoleaf also shows proof of a rare product. When looking into the companies that compete with the company in the smart light panels industry, only a handful come out. Of the companies that compete with Nanoleaf is LIFX. While it does offer the same concept of LED panels to the market, this company is lacking many of Nanoleaf’s interesting features. Indeed, it does not have extension sets and individual tiles to customize the shape of the lights. It also does not offer colour changes compatible with computer activity like Nanoleaf. While the LIFX’ panels does have the unique feature of having multiple colours in one panel instead of only one like Nanoleaf, Nanoleaf makes up for it by having better controls for creating unique and user-created animations that can be accessible to everyone on their app (Crist, 2018). Another competitor’s product is the Philips Hue panels. Both products are very similar in their features like their music interaction and their support for all home assistance and devices. However, Nanoleaf has an edge with their unique shape and design features. Indeed, with their “linkers”, a small part that connects panels together, and panel form, customers are able to create unique shapes to their likings (Moon, 2017). Even with the small presence of competitors with similar products, Nanoleaf’s Smart Light panels are still rare in the market as it has particular features that their competition does not have.

When considering imitability, Nanoleaf’s products are difficult to imitate because of the way their light panels are produced. What first makes Nanoleaf hard to imitate is the amount of research the company invests in to create their products. Nanoleaf is said to be considered ahead of their game due to their novelty products (Foster, 2021). Indeed, Nanoleaf invests a lot of money into doing research to create the best possible product. This research is said to be surveys, beta testing and studies conducted using the public. As these tests are paid by the company, they sell their product more expensively to be able to regain the loss from their research. (Foster, 2021). The smart light panels are also made from improved technology. Indeed, each new product is made with upgrades and added features from earlier versions (Foster, 2021). So, competitors do not have access to Nanoleaf’s past knowledge to imitate them. It will also be costly for competitors to imitate this product because of Nanoleaf's expensive resources. Indeed, the smart light panels are made with automated and patented technology that “enables their product to be energy efficient” as well as with expensive material like folded circuit boards and ultrasonic machines (Foster, 2021). Because of the company’s research and costly production for a quality and sustainable product, it is hard to imitate Nanoleaf’s smart light panels.

As Nanoleaf sustains competitive advantage, the company stays organized by the team’s constant strive for innovation, customer/company trust, and their willingness to collaborate with other companies in hopes of expanding their company. Nanoleaf specializes in smart lighting compared to one of its competitors, Philips Hue, who has many other generic lighting products. Specializing in this specific product allows Nanoleaf to be a lot more innovative with their products and making their products more fit their customers' wants and needs. In addition, unlike competitors, Nanoleaf’s products can be found in many different locations to facilitate their customers' buying preferences. For customers who prefer in-store shopping, their products are available at common stores like Best Buy, and Home Depot, and for those who prefer online shopping they can choose from Nanoleaf online, Amazon, and Wayfair (Nanoleaf, 2021). Nanoleaf is also organized in the sense that it has a plan on how it wants to retain competitive advantage. In other words, Nanoleaf wants to collaborate with companies to allow them to expand further globally (Nanoleaf, 2021). For example, they collaborated with Apple to create the HomeKit, which allows them to get their brand promoted by Apple (Apple, n.d.). Unlike competitors, Nanoleaf has expanded their products outside of their own online store allowing them to maintain their competitive advantage. The organization of the company allows Nanoleaf to have complete sustained competitive advantage over their competitors, creating a favourable situation for Nanoleaf as their customers are encouraged to continue buying from them.

Nanoleaf’s Performance From Four Perspectives Nanoleaf’s operational and financial measures are also another reason why customers still purchase the smart light panels despite their high prices. When applying the Balanced Scorecard Theory from Robert S. Kaplan and David P. Norton to see how well a company is performing, Nanoleaf’s customer, internal, innovation and learning, and financial perspectives all increase the company’s efficiency and competitiveness. When Nanoleaf performs from its customers' perspective, their customers develop a great image of the company because their needs are catered for. In the presence of big companies such as Philips and Samsung that possess market shares, the company must focus on innovation to stand out from competitors. This is what many customers enjoy. Indeed, Nanoleaf customers can benefit from the constant launch of new products or improvements of previous ones. In fact, it takes Nanoleaf one to two years to develop new products or

alternatives. For example, they launched their modular smart lighting Connect+ technology in 2020, and they recently, in October 2021 launched the Shape Line lighting product (Nanoleaf, 2021). Customers also have access to a variety of smart light panels and to the Plan Your Project division on the Nanoleaf website to allow themselves to be creative. Indeed, the smart light panels come in different shapes such as triangle, square and hexagon, and can have a texture of wood. The purchasing process of these smart light panels is also fast and flexible. For the delivery, it takes, according to the website, “3-5 days to Ontario, Quebec, and the Maritimes. Shipments to Western Canada generally arrive in 7-10 days” (Nanoleaf, 2021). Customers are also given a three-year warranty, a 30-days exchange time-period and 14-days return policy (Nanoleaf, 2021). Nanoleaf also succeeds because it operates, from its internal perspective, on a strong core mission of making an impact on the environment and the lightning industry. (Chu, 2021). When the company started, the founders had a goal of “creating products that could help sustainability all around the world”, stated CEO Chu in a podcast (U of T, n.d.). Today, they made sure to communicate their eco-friendly values to their employees as well as portraying them on their website and social media. As for the smart light panels, their first target audience was the sustainable consumer, but as they envisioned a much bigger impact, they enlarged their audience by bringing a design aspect to their panels. This is why the smart light panels are both sustainable and creative (Chu, 2017). In fact, in 2012, Nanoleaf reduced the release of 4 millions tons of carbon dioxide with their sustainable products. (Elemental Green, 2021). Nanoleaf is also focused on changing the lightning industry. They launch new products every year, and these ideas are never taken from a competitor. Indeed, they want to challenge other competitors in a healthy way, and push the boundaries of technology (Nanoleaf, 2021). Their next objective today is smart lighting, and they want to push even more the boundaries of technology (Chu, 2021). Nanoleaf also thrives on the innovation perspective. The company has been innovating since 2013, when it created one of their first products, the Nanoleaf One, claiming to be the world’s most efficient light bulb at the time. Almost every year since then, Nanoleaf has created a new product line every year until 2021. From the Nanoleaf One to the Nanoleaf Lines, the company has continued their mission to create innovative products and drive our earth towards full sustainability (Nanoleaf, 2021). Their innovations have allowed them to stay relevant in a few different categories, like environmental and lighting sectors. Although they

are well-known for their creative décor in the form of their light panels, they have also been creating more efficient light bulbs which are more of a necessity in most homes. Their panels have also evolved immensely. They have gone from simple lighting, to allowing music to manipulate the lighting patterns. This innovation leaves customers with the idea that they will always have new products available in due time. This allows customers who share Nanoleaf’s values to keep coming back and supporting the company. As for the financial perspective, Nanoleaf has had four investors throughout their 9-year lifespan. These four investors include; Sustainable Development Technology Canada, Burch Creative Capital, Horizons Ventures, and Kleiner Perkins. The company has received $5.6 million in funding over 5 rounds (Nanoleaf - Crunchbase, 2021). Their latest funding came on March 8th, 2016 from Grant, a sub-division of Sustainable Development Technology Canada. Since Nanoleaf has not required any funding since 2016 as well as making the top 100 grossing Canadian companies, we can assume the company is thriving without the reliance of funding at this point in their success (Nanoleaf - Crunchbase, 2021). Because Nanoleaf excels in all four perspectives, customer, internal, innovation and learning, and financial, customers are inclined to continue purchasing and supporting this company.

Nanoleaf’s Continuous Innovation A final reason why customers still purchase the smart light panels despite their high prices is because the company is continuously innovating. Indeed, CEO Gimmy Chu took Nanoleaf’s initial values of environmentally friendly lighting to creating various new and never seen products. This can be related to Charles Handy, who is a philosopher in organizational behavior and management, who stated that to keep having success you must create new curves, i.e. new innovations, before even reaching the peak of success, or else your company will inevitably fail. Handy calls it the Sigmoid Curve. This relates to Nanoleaf because they have a history of constantly creating new curves through their product innovation. While Nanoleaf are faced with complaints that their products are on the pricier side of decorative lighting (their Aurora Light panels range from $250 CAD to $350 CAD), customers are always subject to new products. In 2013, Nanoleaf started a Kickstarter, a website for funding new projects, for their first light bulbs. They were successful as, within 3 days, they had reached their goal of $20,000 CAD. Then, in 2014, the company started another Kickstarter for another one of their light bulbs called “Nanoleaf

Bloom” and got just as much success, and soon after started selling through BestBuy (Nanoleaf, 2021). Logically, continuing with the same ideas would bring the same amount of success, however Handy described in his theory that keeping the same techniques will only bring you to your downfall (Fisher, n.d.). Nanoleaf follows the theory as, in 2016, the company released a new kind of product: the Aurora Light Panels. Chu explained that as much as their sustainable light bulbs are great, with LED technology advancements, you can start doing so much more. The CEO did a live interview on BNN Bloomberg explaining his new release and even then, he was already thinking of integrating a new music syncing feature to his products. The company is constantly thinking of new changes they could include to improve their lights. Furthermore, Nanoleaf hasn’t stopped amidst their success regarding new products, in 2019, they released their “Nanoleaf Canvas Square’s” which are different shapes (offering a new range of possibilities of placement) and have the new feature of touch sensitivity. Nanoleaf also created a new curve by partnering up with gaming companies like Twitch and Razer, to further create exposure for the company (Nanoleaf, 2021). Even though Nanoleaf has higher prices for their smart light panels, their customers will still purchase them because the product is valuable, rare, hard to imitate, organized, has an appeal to their customers by excelling in organizational and financial perspectives, and stems from a company that constantly strives for innovation. Based on these points, Nanoleaf then continues to succeed while keeping a stable and growing number of customers with their high-priced sustainable and quality products.

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Nanoleaf. (n.d.). Smart Lighting: Nanoleaf " Canada " Smart Home LED Lighting Products. Retrieved November 17, 2021, from https://nanoleaf.me/en-CA/ Nanoleaf (Director). (2021). Nanoleaf Elements: Design Your Personal Oasis [Motion Picture]. Moon, B. (2017, Dec 18). Gift This, Not That: Nanoleaf Aurora vs, Philips Hue. Retrieved November 30, 2021, from https://www.forbes.com/sites/bradmoon/2017/12/18/gift-this-not-that-nanoleaf-aurora -vs-philips-hue/?sh=5ee370566014 Robles, S. (Host). (2020, March 22). Exclusive: Interview with Nanoleaf CEO Gimmy Chu? [Audio podcast episode]. In HomeKit Insider, https://podcasts.apple.com/us/podcast/appleinsider-daily/id1532419028”?fbclid=IwA R0mTPZq-3BYPQIx0Xg6-hpDJcb-lNV7qHiyyeDSeLExIM4vc0YvCEsLJ-k Szucs, S. (Host). (2017, August 17). 2084 EP 8. Nanoleaf: Gimmy Chu, CEO (Live) [Audio podcast episode]. In 2084 Building A Better Future, https://www.sustainablejoes.com/?fbclid=IwAR1jf6PSgaPUHWVp39Xr6ZAy5z4Ahh l-IkAl2Zq8cakJNiWKSblh6goS8w4 TechTO. (2015, October 21). Gimmy Chu of NanoLeaf presents Fighting the Good Startup Fight [Video]. YouTube. https://www.youtube.com/watch?v=GZ3WItd32_w This is the place to rethink lighting for the smart home. University of Toronto News. (n.d.). Retrieved December 1, 2021, from https://www.utoronto.ca/entrepreneurs/nanoleaf...