May 24, 2010

Empowering homeowners key to Residential Solutions’ success

DAVIDSON, NC (INGERSOLL RAND NEWS SERVICE) -- Connecting and partnering with homeowners across North America in innovative ways is the mission of the Residential Solutions Sector. By combining Ingersoll Rand’s residential heating, ventilation and air conditioning (HVAC) business and residential security business to form the new sector, our leadership team and employees have the “freedom and opportunity to think about how to set ourselves up as the consumers’ partner, the homeowners’ partner, and deliver safety, comfort and efficiency,” said Residential Solutions President Steve Hochhauser.

“It’s been an incredible journey,” he continued. “We’re excited about the opportunity and the future. It’s just been wonderful to see more and more of our engineers and our people spending more and more of their time with consumers, homeowners, customers and partners to create this winning opportunity together.”

Residential Solutions is resonating with consumers because it is focusing on understanding the way they want to manage their lives:

- Working moms want to know when their kids are home from school - Mobile professionals want the ability to control their homes’ locks, temperature and lighting while on the road - Homeowners want new technology to monitor second homes and for elder care

Building a successful business goes beyond strong distribution, brands and products for every price point. ”Our mission isn’t simply about HVAC and locks, it’s about providing a superior experience for consumers,” said Hochhauser.

Market drivers
In residential HVAC, the replacement market is rebounding faster than new construction. “We expect to see the market come back,” said Hochhauser, “and once again approach double-digit growth.”

He also noted a trend toward higher efficiency ratings: In 2000, only two percent of products were 14 SEER (Seasonal Energy Efficiency Rate) and above. By 2009, the percentage soared to 26 percent, and it is projected to be 35 percent by 2012.

Residential Solutions is working to promote energy efficiency with energy advocacy groups and influencing legislation, such as U.S. Senator Jeff Bingaman’s proposal to create the first-ever National Renewable Energy Standard.

Similarly, the residential security market is tied to housing dynamics and is trending up, with two times more spending in existing home sales than renovations. “This is a nice dynamic,” said Hochhauser. “The retail segment is strengthening, and we’ll see a good bump as the year progresses.”

Innovation, productivity and cash generation
Discussing innovation, Hochhauser noted how the Residential Solutions team took a fresh look at its HVAC product line, even tearing down the opening price point 13 SEER unit to learn how to build it simpler while still maintaining the reliability for which Trane is known. The result is a unit that’s 50-percent smaller, easier to manufacture and less expensive. “This exercise helps us deliver the Trane value proposition at every step,” said Hochhauser. “It helps us keep the Trane customer for life.”

Another exciting area of innovation for the business is entering the emerging $5-billion home automation market. “Consumers have an increasing desire to manage their homes and the things that are important to them,” said Hochhauser. “And we’re creating the capability to do that with our Schlage LiNK.” This award-winning product line enables users to remotely control their home’s locks, thermostat, lighting and security video cameras.

Funding innovation requires managing prices, productivity and working capital, however.

Value analysis/value engineering is driving improvements to the bottom line and improving the margin base of the business. “The copper to aluminum transformation is one that we’ve been at for a while on the residential HVAC side of this business,” said Hochhauser. “We just completed another piece of it that’ll save us $2 million this year.” The switch provides a double benefit: weight and material cost reductions. “It’s two great savings,” said Hochhauser. “It’s two nice ways to win.”

In the area of cash management, he reported that, “we’ve tripled inventory turns in this business and we took our gap from receivables to payables from 12 days to two.”

Residential Solutions strategies
Hochhauser cited numerous anecdotes that illustrate channel leadership and expansion, innovation and emotional connection with the consumer:

- The Richmond team leveraged a strong relationship Schlage had with a builder to convert 1,200 houses to Trane air conditioning units. - Apple iPhone commercials highlight the wireless technology that lets homeowners lock doors and check lights in their homes, all made possible by Schlage LiNK.
- On a recent visit to China, a sales and marketing team put aside PowerPoint slides and instead visited with local consumers, to live their lives for a day.
- Dealer partners are given more than 350,000 leads a year, “which is an incredible differentiator between us and any of our competitors” said Hochhauser. “We turn business over to our dealers each and every day.”

The best is yet to come
“When we put this division together,” said Hochhauser, “we had two great businesses: Schlage residential on the lock side and Trane on the HVAC side. But putting these businesses together really wasn’t about locks and HVAC, it was about connecting with the consumer in the things they care about most, safety, comfort and efficiency – and finding ways to provide that to them in the ways they want it provided to them. And we’re taking that to a new level when they are home and when they are away. We want to create the opportunity for our customers to stay with us as lifelong customers and partners. And that’s why we are completing our product line to offer our products at every major point in every segment.

“It’s been an exciting first year in this business,” concluded Hochhauser. “But the best is really yet to come. We’ve got some great innovation. We’ve got a strong business model, trusted brands and improving market dynamics with some wind behind our back for a change. We are winning with channel partnership, leadership and innovation and making it happen through productivity and cash generation.”



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