Think back three years. Had you—or anyone you knew—heard of Cree, the North Carolina lighting company? Since its founding in 1987, the company had staked out a successful but obscure business building chips and high-tech components that go inside other companies’ LED products, the superefficient, long-lasting bulbs that have sparked a revolution in the lighting business. But a few years ago Cree decided it could make a better bulb itself. So it did. In secret. The company handpicked an internal team and put them in a secure and private location. And that team in turn created an LED design that quickly won over Home Depot, which decided to showcase the brand to customers. Two years and 20 million bulbs later, Cree is the best-selling LED light in the U.S.
It’s exceedingly rare for a company to jump from an enterprise to a consumer business so fast—and with such spectacular results. One reason for Cree’s rapid ascent is its technical control over every aspect of an LED bulb, a product that demands tremendous expertise in material science, global-scale manufacturing, and electronics. By quickly tweaking various components, Cree could achieve breakthroughs on the bulbs’ cost and performance that its competitors could not. Also, the company could be sure it would not be distracted by other marketing pursuits: Cree has staked its entire research and development efforts on the ascent of the LED. “We have no other technologies,” explains Mike Watson, VP of product strategy. “We now have full vertical capabilities of changing anything and everything in a lightbulb, and no one else has that capability.”
Nor is Cree wholly dependent on the good graces of Home Depot, which accounts for 11% of Cree’s 2014 revenue of $1.65 billion. In the coming decade, as the consumer market—along with the much larger industrial and commercial lighting markets—transitions from fluorescent and incandescent lights to LEDs, Cree sees vast potential for growth. “There are 5 billion A-type bulbs in the U.S.,” says Watson, referring to the most common bulb in a lamp or fixture. “And the market is now at about 2% penetration. So there’s a long way to go.”
When Cree’s founders were building the company’s first consumer bulb, they worked in total secrecy, waiting until nightfall to move all the broken glass from the bulbs out of the warehouse they were working in so no one caught on.
[Photo: Zoltan Major via Shutterstock]