Above: The Ario Lamp parallels the sun’s schedule. (Courtesy Ario)

Ario is a smart lighting company in the Bay Area whose lamp changes light direction and color dynamically throughout the day, promoting better health. The shifts in lighting mirror the patterns and schedule of the sun—which stimulates the body’s circadian rhythms, cuing the production of cortisol during the day to keep you alert and melatonin at night to ready your body for rest. “It’s based on about 15 years of scientific research from NASA, the NIH, and Harvard,” says Ario CEO Brian Hoskins (MBA 2003). “There are a number of health benefits—it helps the body store less fat, helps build the immune system, and reduces stress.”

Hoskins cofounded the company in 2014, launching a Kickstarter campaign in November 2015 that netted Ario more than $200,000 in 30 days. Ario was originally focused on the consumer market, but when a large hotel chain reached out to express interest, Hoskins began to see the promise of B2B sales in the hospitality market. “They got the value right away,” says Hoskins. “It’s automatic: Your customers are healthier and getting better sleep, and there’s cost savings through greater efficiency too.” Soon, Ario was installing its lights in Stanford’s student housing. The retail market, in comparison, was capital-intensive, requiring big ad pushes for consumer education about the benefits of Ario’s technology.

Now completing a fundraising round, Ario is seeing the opportunities beyond hospitality. Offices and health care facilities could both offer the company access to huge sectors of the $80 billion lighting market.

The Question:

Hoskins describes the competitive landscape as “a land grab.” He’d love to do some pilot projects in hospitals and medical facilities, for instance, but he worries about losing focus on the hospitality business. The other side of that: If those pilots prove successful, they could open up a new core business. And with the market getting crowded—with heavies like Samsung and Philips making smart lighting pushes—it feels like a now-or-never move. “We might be leaving money on the table not just in the short term but permanently,” he says. Should Ario stick to hospitality and own the market, or shine its light on new ground?

The Answers:

If a land grab is expected, then owning a segment or niche with strong attachment will help differentiate the Ario brand as it marches into other segments. I recommend that Ario delay entry into other markets. It should first define a segment, build strong enthusiasts, and then branch out. Just as Under Armour has coined or leveraged the term “connected fitness,” Ario should also try to own and coin a term like “connected wellness,” with the lamp as the starting point and shown as a sleep aid rather than smart lighting.

Ario can assess co-branding the device with players that have established a value proposition around sleep or wellness (e.g., mattress companies or hotels) similar to the Under Armour and HTC partnership for connected fitness devices. With clear ownership of a segment and market, Ario should be attractive to players like Samsung.
—Ngassam Ngnoumen (MBA 2002)

I would think inclusive rather than exclusive. Driving the hospitality market, due to experience, is clear to me. To add some business development in the medical field, which is much more complicated, does not mean that Brian should take his focus away from hospitality. One should make use of the opportunities one is getting and consider every possibility—especially in the mass product markets.
—Flooris van der Walt (AMP 173, 2007)

Go big or go home. Instead of competing against the “heavies” in a “land grab,” Ario should position itself as a target for acquisition or as a partner. The heavies and the IPO market value innovative tech and business models much more highly than a sales channel to a single segment. Ario should not only jump into health care, it should seek out other markets to prove and improve itself, and continue to innovate so it can widen the moat.
—Yen-Ping Shan (TGMP 10, 2002)

Disrupters rest at their own peril! Ario is what Mr. Wonderful of Shark Tank would call a “cockroach” relative to the behemoths of Samsung and Philips. If you remain focused on one market segment, they will figure out a way to squish you (most probably by lowering prices and your margins). Ario needs to continue innovating and penetrating new markets even as it seeks to protect its new home turf. Besides, running a couple of experiments should not be that much of a bandwidth killer.
—Jacob Navon (MBA 1984)

It’s critical to choose one and “own” it. Which one to choose is largely a function of the exit strategy. Owning one specific market will virtually guarantee that the company will be worth something to someone. On the other hand, a strategy that calls for broad but shallow market penetration is likely to produce an inconsequential valuation. If the intention is to hold the company for a long time, and the tolerance for risk is high, then one might test other market opportunities simultaneously.
—John Grabski (OPM 29, 2000)

When you look at the life of successful startups, there is a distinct pattern: At the early stages, they focus and allocate most of their resources for the activities where the growth comes from. When you have a great product or service, it could be very tempting to target a larger market (multiple segments) than a relatively smaller one. However, large markets require large resources to penetrate. Brian should keep in mind that knowing what not to do is as important as knowing what to do.
—Ilhan Demiriz (GMP 16, 2014)

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