While HNN has looked at the effect of the move to cordless tools in the consumer market, we have yet to cover what is happening in the industrial and construction markets.
Cordless tools have brought many changes to industry and construction. They've made many work sites more efficient and effective at their tasks, improved safety - and, of course, been something of a boon to tool sellers.
What they've also done, however, is to change some of the dynamics of the tool market itself. While builders, construction contractors and factories have all tended towards adopting a single brand of tool for reasons that include per-unit cost, maintenance and training, the coming of cordless has seen this further emphasised.
Buying a cordless tool also means buying into a battery system, and, where possible, everyone wants to have as few of those on a worksite as possible.
The most important aspect of this transformation in terms of marketing is that brand has become, once again, very important. Brand is starting to re-assert itself now because businesses are aware that they are effectively "marrying" themselves to a single brand due to their choice of battery systems.
As in the consumer market, when using corded tools businesses have been free to choose from a range of brands, matching individual tools from different brands to their needs. They might buy a Hitachi circular saw, for example, and use that alongside a Makita drill. Buying into a battery system means they would be better off buying both the drill and the saw from the same brand.
Similar to the consumer market, this leads towards "brand spread". As the importance of brand begins to reassert itself in new ways, brands will steadily increase their range and possible applications.
Milwaukee, for example, has expanded into cordless metal drilling saws for construction, and cable cutters and crimpers for electricians and linesmen. Every such extension makes a single brand more suitable for multiple applications, and more attractive to building, construction and industrial companies looking for simple solutions.
Cordless is, however, just a start. Another way for power tool brands to increase their market share is through introducing connected computer technologies. Providing management systems is more than just a "value-add".
Like cordless battery tools, management systems provided through software form bonds with clients that are difficult to break, and make changing brands just that little bit more difficult.
This is a technique that has long been used by Liechtenstein-based power tool provider Hilti. Hilti discovered long ago that the real profit in the construction industry came not from selling tools to businesses, but providing tools as a form of service.
It has consequently been very successful for a number of years. However, Hilti has not really kept up with the latest technologies, and now faces new challenges which it seems not really ready to face.
Before we look further into Hilti's market situation, let's look at some of the exciting new developments from Techtronic Industries' Milwaukee Tool and Stanley Black & Decker's DeWalt.
For example, Milwaukee is rolling out its "One-Key" system over the next four months. In its early release, it consists of a "cloud based" inventory system that extends to both Milwaukee and non-Milwaukee brands. In its later releases, it will grow to provide tool-by-tool monitoring, enabling managers to change the basic settings on each tool, to monitor its usage patterns and its location constantly.
Currently, Milwaukee has its inventory system available for anyone to try out. You can access this system at the link below:One-Key login
One-Key asks for some very basic information, then opens up to a screen that gives you three choices: account management, inventory and reporting. This is the basic account screen:
The inventory management screen looks like this:
As this page indicates, One-Key will permit you to provide details of any brand of power tool. However, it is much easier to enter Milwaukee brand power tools, as all you need to do is to supply the model number, and the other details are filled in for you. This includes kits with multiple elements, where every element of the kit will be added to the inventory.
Each tool can be added to a category. A number of these are pre-loaded, but more can be added by the user. The same applies to locations, where, as with categories, once a new location has been added, it remains available for future re-use. For non-Milwaukee tools, a descriptive photograph can be uploaded (the picture appears automatically for Milwaukee tools).
Purchase information can also be added, including purchase location, purchase date and value. Scanned images of order information and itemisation can also be uploaded.
Milwaukee also offers deeper integration of One-Key with some tools. The company plans to extend this integration throughout most of its range, but the first tools to feature it are the Force-Logic crimpers.
One-Key has a screen dedicated to the monitoring and control of these Force-Logic devices:
The same monitoring and control is also available through the Milwaukee One-Key iPhone (and Android) App:
All this is just a prelude to a much more comprehensive tool management system. As new tools are produced by Milwaukee, they will feature closer integration into the One-Key system, including reporting on usage, settings which can be adjusted from a central location for an entire range of tools, and tools that can report back on their locations.
For companies facing heavy compliance requirements, and operating a large fleet of tools, these technological developments at Milwaukee will help to revolutionise the way they use their tools.
DeWalt Tool Connect
DeWalt has cleverly cut its way to the heart of the matter. Rather than waiting to roll out a complex system such as Milwaukee's, DeWalt already has available a system that concentrates on the batteries for the cordless tools, Tool Connect.
The batteries can be monitored through mobile apps for their charge state and location.
(The 20-volt DeWalt Bluetooth batteries are listing at US$236, but selling for US$129.)
There are six basic functions provided by the app to control the battery: charging, "fencing", enable/disable, identification, lending and alerting.
The DeWalt app enables the manager to check on the charge status and general condition of any battery at any time.
The DeWalt app enables the manager to set up a "virtual fence" around the worksite. Typically, this means that if a battery leaves that worksite, it will be automatically shut down completely, rendered unusable, until it is returned to the site.
Managers can choose to disable a battery at any time, and re-enable a battery at any time. This can be applied to individual batteries, or to all the batteries on the worksite.
The DeWalt app enables the manager to identify a battery by causing its built-in identity light to flash on and off.
The DeWalt app enables managers to set up a battery to function for a pre-determined amount of time. Thus the battery can be loaned out for a day or two days safely, as at the end of that time it will shut itself down, and be useless until its owner re-activates it through the app.
The DeWalt can be set to issue alerts whenever a battery needs to be charged, or when it leaves the Bluetooth range of its paired mobile device. There is also an alert for charge completion.
It seems likely that, overtly for Milwaukee, and less so for DeWalt, the company that will end up considering itself targeted by these moves is Hilti.
Through its leasing/fleet service system, Hilti has gained a firm grip on the large construction and industrial market.
As explained by bcg.perspectives:
Hilti, whose core business is tool manufacturing, picked up on these unaddressed pain points. In response, it shifted from selling tools to selling a tool management service aimed at alleviating the burden on contractors so they could focus on getting the job done. Hilti now leases tools to contractors, guarantees availability of the right tool at the right time, and automatically upgrades customer fleets with the latest equipment. It also provides theft insurance. Its service is accompanied by a new revenue and operating model. Many contractors, who in the past had purchased a small share of their tools from each competitor, dramatically increased their share of business with Hilti in order to obtain the full benefits of the company's tool-management service.
Hilti's success depended on possessing a deep understanding of how the customer uses tools and what causes them frustration. Based on this understanding, the company expanded its view of the role it could play in delivering value to customers. This was a shift from a purely product-based mind-set to one that also included supporting services and solutions.Hilti's business model - bcg.perspectives
A fully inter-connected, "Internet of Things" (IoT) power tool would make the business model of Hilti less valuable. It would, effectively, be self-reporting and self-tracking.
Given that, what should Hilti's current response be? As you might have guessed, with Milwaukee and DeWalt entering its area of expertise, it is now entering into their area of the market, and selling through retailers to consumers.
At HNN we first became aware of this potential in late 2014, when we came across a promotional competition offer from an Australian home design magazine that featured Hilti drills as a prize. This seemed very odd, but we could find out no further information. We had to presume Hilti was considering the possibility of direct sales.
In September 2015 that was finally confirmed. While Masters Home Improvement had previously sold a few Hilti tools, including a gas-powered nailgun and a corded circular saw, in September Masters began to sell other Hilti power tools as well, such as a 14-volt compact drill and a 14-volt impact screwdriver (each priced at around $500).
One way to get a clear idea of what is going on around Hilti, DeWalt and Milwaukee Tool is to draw up a market map for each brand, and trace the target of its actions.
When we do this for these three brands, a very clear picture emerges.
DeWalt has long had one of the more clever market strategies of any power tool maker. It has consistently managed to brand itself as the tool of the "craftsman" - a customer description that easily crosses a range of usages, including builders, tradespeople and some in the prosumer market.
The Tool Connect battery system is equally clever, because it directly extends the existing market for DeWalt tools. Some builders, for example, will sign up for the new batteries with a real sense of relief, finding a persistent, nagging set of problems finally solved, for the most part.
Tradesmen and smaller builders may find that the new battery system enables them to expand their activities more easily, and they will begin to buy more DeWalt tools, or convert entirely to the DeWalt tool system.
The Tool Connect batteries also make a good argument for the deployment of DeWalt tools on construction sites with larger fleets of tools. This is a move that would be backed up by DeWalt's constant expansion in recent years into more industrial tools.
It is likely - especially given the product's name - that this tool system will expand over coming years to include some of the promised features of the Milwaukee Tool product.
Where the DeWalt brand has chosen to go deep into a particular sector of the market, Milwaukee has taken a much broader approach, and pursued technological advantage wherever it could.
What One-Key directly offers Milwaukee is a pure sideways-step in the market, an opportunity to scale what it has already worked so hard to develop.
Additionally, the added capabilities of One-Key will help the brand reach slightly upwards as well, encompassing more of the industrial sector.
Like DeWalt, this is very much a move into contiguous - "touching" - areas of the market map. Unlike DeWalt, however, it is also very much a "stretch" goal.
There are going to be some bumps in developing this technology, but the CEO of TTI, Joe Galli, has proved himself more than capable of handling rapid technological development.
Looking at the market maps for DeWalt and Milwaukee Tool, one thing is quite clear: both brands are, for the first time, beginning to really impinge on the Hilti area of the market, and they are doing so through technology.
Hilti has traditionally had two major strengths in its market. The first, and perhaps surprisingly probably the most important, is the people who make up Hilti. The company has an outstanding reputation as an employer, and is well-known for its careful, thoughtful development of its personnel, and close attention to overall company culture.
The result is a company that for the most part provides near faultless service to its clients, and is consequently able to charge a premium for its services.
The second strength of the company is the quality of the tools it produces. As it provides tools for the most part as a part of a service, either through lease agreements, or which substantial after-sales service, the goal of Hilti tool design is to bring total cost of ownership down as low as possible. That means tools that are very well constructed, and made in such a way that they can be easily and effectively repaired.
Looking at the Hilti market map, however, gives some idea of the kinds of challenges the company will face over the next decade.
If Hilti in Australia is going to seek to sell its tools directly through retailers such as Masters Home Improvement, it introduces a big discontinuity - break - in its market focus. It is worth noting just how contained much of the Hilti business is. For example, when establishing an account on the Hilti website to order products directly, there is this curious checkbox:
The Blackberry of power tools?
The unfortunate thing is that we've actually seen this kind of market map before. In the years leading up to its collapse, the Canadian smartphone maker Blackberry (formerly known as Research in Motion) ended up with a very similar market map, and for many of the same reasons that Hilti does today.
Like Hilti, Blackberry for many years sold its products only to business users, who bought an entire IT system to enable features such as Blackberry messaging. Eventually, somewhat reluctantly, it opened out its services to include consumers as well.
Two years after Apple's iPhone was launched, Blackberry found itself confronted by a terrible dilemma. Its physical keyboard devices continued to sell well, but market growth was all but ended, and there were the beginning signs of decline.
The dilemma was that if the company began to produce smartphones like Apple's it would effectively be destroying its own market. In the end, the company couldn't bring itself to take that step. It ended up trying to produce a series of "hybrid" devices, none of which really worked.
Just as you would have expected major smartphone developments to emerge from the one-time market leader in smartphones, Blackberry, so one might expect a company like Hilti to be at the forefront of developments such as those launched by DeWalt and Milwaukee.
That is, however, almost never the way things work. Instead companies that have once held a dominant position in a market simply cannot adapt to the new technologies when they emerge, and end up instead entering a period of decline.
Whether that will end up being Hilti's fate it is too early to tell. For the moment, however, things do not look good. It's hard, in looking at the outline of Hilti's tool management programme, not to find it a little behind the times.
Given this market situation, what is likely to happen next? What, for example, do you do if you are a company like Makita?
One possibility we could see develop by calendar 2017 is that some of the other power tool makers - Makita, Hitachi, Panasonic, perhaps even Hilti itself as well - could get together and establish something like, say, a cordless battery communication standard.
This could be somewhat similar to the standard that Apple has for its HomeKit "connected home" software available in iOS9 that links IoT devices in the home. Batteries could enable communication over wireless networks that followed specific protocols. The development of the software that made use of these protocols could then be left up to third-party vendors.
It is likely that, with this kind of system, the software development would happen very rapidly, and likely end up with systems superior to that developed by Milwaukee and DeWalt.
Customers could then safely buy one of the certified compliant brands of tools and be sure that it would work with tool management software they had bought elsewhere. This would lead to less restricted use of software, and also more interoperability between brands, bringing a greater range of choice to the customer.
Another area to pay attention to in the coming years is a likely pressure to some further change and consolidation of brands in the power tool area. The pressure of cordless systems/battery systems coupled with the pressure of advanced software management will likely see some smaller, specialist companies get together, either in merger/acquisition, or through specialist joint ventures aimed at developing shared cordless technologies.
What this means for power tool vendors
If the power tool market continues to develop down this pathway, it could lead to a return of the specialist power tool vendor. Vendors might choose to limit the lines they sell even more, so as to better manage the complexity of the software management systems, helping their customers in a more deeply integrated manner to adopt whole tool systems.
Certainly, though, these developments should point to further market development. As the capacities of tool systems increase, so does expenditure on their implementation, and many tool vendors would be ideally situated to add expand the service/training portion of their business.
Until next time,
You can contact me directly via email email@example.com or Twitter @HNN_Australia
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