UL Solutions: A sneaky strong b2b2b2b brand moat in electrical components certification.

Usually I think that brand is one of the weaker types of moats (looking at you nike). But UL Solutions has one of the more uniquely powerful brands I’ve ever seen. Let me explain.

I work at some industrial manufacturing company. I learned through this job that every potentially dangerous product or component is required to be tested and certified to a set of standards. This includes pretty much everything that uses electricity. UL solutions is the largest testing and certification company in the US, and they have the most recognizable ‘mark of conformity’.

Consumers don’t care about the mark of conformity, but when Bob the lazy engineer is selecting a component for his new/updated product design, he knows that if the component is ‘UL certified’ it is a safe component, and the compliance department won’t give him any troubles.

Since the industry is highly fragmented (ULS is the market leader with only 7% market share) no other company has a certification marking that is widely recognizable. I see this first hand. Engineers are biased to pick ‘UL certified’ parts.

It goes deeper though. Not only do we select certified components, but we ourselves get our products certified. We have certified our products with various companies and we always get a certification report. This report lists all of the critical components in our product, and the requirements for those components. These certification companies make our lives so much easier when we use UL certified components. If we need to update a design, or qualify an alternative for a component, it is cheap and easy if the components are UL Certified because we can find a near-direct replacement. If not, we are often forced to jump through time-consuming and expensive hoops such as sending the updated product to the testing company for re-certification.

In conclusion:
Electrical components that are UL Certified are immediately respected and favored by engineers, compliance departments, and even ULs competitors.

Electrical component manufacturers are incentivized to test with UL because product engineers prefer selecting UL certified components because the other certification company that tests the end product respects UL and will make it easy for the product engineer to make changes to the product without requiring re-testing.

That was harder to explain than I thought

I’m building a ULS position.