The September issue of SSI features my cover story on Bosch Security Systems’ 2013 resurgence and centers around the extensive discussion I had with President of Sales for Bosch Security Systems Americas business Jeremy Hockham. While that article is detailed, there was much more from the conversation we had. So here is some more of it, including how security business differs abroad, the new trend of partnerships among competitors, engineering insights and integrator opportunities.
What are the main differences doing business in the security industry in the United States as compared to the U.K. or Europe? You’ve had a lot of global experience with that.
Jeremy Hockham: Interesting question you should ask. I was in the U.K. a few weeks ago and my ex-colleagues over there were asking me the same question in reverse. In many ways the U.K. has quite a lot of similarities to the U.S. But if I reflect on some of the differences, from the sort of U.K./European end, if you will; one of the surprises I found here was how diverse and spread out the influencers were. If you look in this country you have AHJs by state, sometimes by city, that are influencing the industry and shaping what the standards are and what are the acceptable practices. Similarly speaking, you’ve got industry groups like SIA and CSAA, CAA and so forth, and there’s many of them. Whereas if you look in the U.K. and Europe, typically by country you have those groups much more consolidated. In the U.K., for instance, you have a single security industry association that represents the whole industry. You have ACPO, the Association for Chief Police Officers that represents the first responders. As such, those influencer groups are much more consolidated and that leads to some changes happening faster and easier in the U.K. and Europe than it is maybe here.
Let me give you a specific example. A few years ago, there were changes brought about by both the installation practices and equipment specifications in the intrusion business to address false alarms. Basically the industry came together over a very short period of six months or so and introduced new hardware and installation practices that help significantly reduce false alarm incidents. Those sorts of changes are much more difficult to influence here in the U.S. Some of the other things—I used to travel to the U.S. a lot prior to coming to live here. When you travel from Europe to the U.S. you come to a particular location, do a bit of business, travel around a bit, and then fly home. When you live here you suddenly realize how big this country is. By contrast, where a lot of things are done face-to-face within the countries in Europe, you use the phone an awful lot more here in the U.S. and, of course, also travel much more. I’m probably on 140-150 planes a year. That makes the way in which you do business quite different. It’s much more challenging to get people face-to-face and those face-to-face interactions.
Another aspect of the U.S. is the unparalleled scale of many of the customers here. I don’t think there’s any country in the world that yet matches the scale of buying power of many of the customers and some of the travel partners here. Again, that changes the shape, in many ways, of how business is done. Thinking about my interactions with customers here, everybody’s been incredibly open and friendly. They’re pretty straightforward in terms of what they need and want. Time is important, money is important. If you don’t meet what they need or satisfy their requirements, in either the product or service offer, they’re quick to tell you so. If you don’t match their requirements they’re quick to move on.
You probably wouldn’t see that behavior quite as much elsewhere, but I think generally what the U.S. is known for and certainly has been my experience here, is a very positive attitude, irrespective of circumstances people are facing. And always looking forward to the opportunities there rather than looking backwards and reminiscing on the way it was. It’s a country and a nation of people that always look forward, which is great in our industry. There’s plenty of opportunities and challenges, but as a country we’re always looking for those opportunities here.
Continuing with the international angle, with Bosch being a German company, I would think there would be both some advantages and disadvantages to that. Could you speak to how that affects coming into the U.S. and North American markets?
Hockham: I really only see positives. One of the advantages we have being a big German company is that German engineering is generally respected across whatever product you interface with for quality and reliability. We live up to that reputation through our actions and words. Those things are pretty key to success in this business. People want reliable products, want products that meet their needs. The reliability sort of manifests itself in terms of controllable and predictable costs, which is key to success in this business. And also to tie in customer satisfaction, another very important criteria here. Bouncing back to the previous question, if you toured around U.K. and Europe and say I work for Bosch, you’d get virtually 100% who are English and then you’d get virtually always a positive response about the company and its products. Whereas here in the U.S., despite the fact that Bosch has been here in the U.S. for over 100 years, Bosch is well known but clearly not as well known as in Europe. Where it is known, people have a positive reaction to the company and its products. And it’s perceived very much as a trusted brand.
In the past, we used a tagline, “Reliable solutions from the company you can trust.” And that is very much the sentiment that embodies what Bosch is about. Bosch has been here in the U.S. for more than 100 years now and has something like 16,000 associate employees here and more than $10 billion dollars of revenue. Clearly, our heritage is recognized as a strength for many customers here in the U.S.
The rapid pace of technology we’ve seen in this industry has been head-spinning to say the least. It’s fun but also very challenging. We’ve seen a great embracing of partnerships in the industry among technology providers. Some haven’t adapted that well to it. Some have really embraced it. Some of the European countries have been more progressive on the partnering side for technology. Where do you see that going and what is Bosch’s philosophy in terms of partnering with what on the surface might look like a competitor but maybe brings some competencies that helps both parties?
Hockham: It’s very interesting because when I first came into this industry in 2001, we always used to talk about CCTV and CCTV—explained the heritage, in other words that it was closed-circuit TV and everybody virtually operated in a closed world. Now we talk about video and that transition from CCTV to talking about video is no accident because the world has become very open. If you operated very successfully in the CCTV world, in a closed world, of course you have to make a very conscious transition to this more open world. We recognized this in Bosch some years ago. It was one of the reasons why we initiated the formation of ONVIF because we recognized we were moving into an open world. With an open world, if we’re not careful, it’s also going to bring lots of barriers and challenges to the open connectivity between systems.
So that was one of the reasons we initiated that, but I think if you look at our activities and what we launched at ISC West, we’re becoming very much more proactive with developing integration with partners. So we now have a new integration partner program that we launched at ISC West. We have strategic partnership with Genetec, Milestone, OnSSI, and a very broad range of others in an ever-growing list. It amazes me how many different VMS systems are out there. It’s very evident in the video world but I think it’s also evident in the intrusion world too, where we are being asked for our system solutions to integrate with more and more partners. That brings with it some challenges but I think if you embrace it and work proactively with your partners it leads everyone to a better place. It leads us as Bosch to a better place, our partners to a better place, and most importantly our end customers.
By most accounts we’re pretty much heading out of the recession, which is awesome news of course. But how did that affect Bosch in the U.S. and abroad and are we seeing any continuing ramifications of that?
Hockham: The past year’s been a very interesting period in all of our careers. It’s sort of laid new ground in many respect. Bosch sales last year reached 52.5 billion Euros, which is a pretty sizeable organization. I guess that translates to about $70 billion U.S., so a pretty good-sized corporation, and just over 300,000 associates worldwide. Last year, the organization spent 4.8 billion Euros in R&D, and just under 5,000 patents. But your point to what’s going on with growth, 2011 was a good year for Bosch. Bosch grew about 9% in 2011, which is pretty impressive on an organization of that size. Last year, it was about 2% and this year it’s pretty modest the first quarter or so of 2013.
That slightly slower growth rate we’ve seen in the past few years is largely because of slowdown in western Europe. Also although there are some pretty impressive growth rates in China, they’re lower than they have been in the past, but it’s a good engine for growth in the whole in the whole of the Bosch organization. We’re also dealing with that reality. If we look a bit closer to home, it’s interesting to see how strongly the U.S. automotive sector is growing with about 60% of Bosch revenues in automotive. That’s clearly a good driver for the business here in the U.S. I think also a good sign for the economy as a whole. It might be slightly staggering to believe the light-duty vehicle sales in 2013 are likely to hit just under 16 billion units. In 2009, it was about half that. So it’s quite amazing how much the automotive sector has bounced back and that’s a good indicator for the economy as a whole.
If we look at the security division, we’re actually seeing very strong growth in our intrusion business or close to double digits. Being that we’re offering predominantly in the commercial segment that is not really experiencing that sort of growth, we clearly are taking share and enjoying the benefits from our new products. Both our investment and the high end of building the platform there with our new B Series panels are getting us good growth there.
Video is a very complex story as I am sure you’re aware. The marketplace is moving in multiple directions at the same time, so price points are falling, shifting from analog to IP. We’re seeing a strong growth in our IP business, but at the moment that’s clearly offsetting declines we’re seeing in the analog space, which is not surprising. I think we’re very excited about the benefits we’ll see from our new products as they really drive both growth in the IP segment, both growth in the higher price points, mid-price points, and the lower price points, which were the things we launched ISC West. And alongside that, we obviously have strong distribution partners in Tri-Ed, ADI and Anixter. In recent weeks we’ve expanded that to include Ingram Micro and ScanSource, so it gives us a stronger distribution space to exploit the potential of our products there.
How does Bosch close the loop to get feedback or communication going between its vast group of engineers and meeting the needs of the resellers? This would be not only in terms of the technology but also the sales part, ease of installation for the guys in the field, the training?
Hockham: One of the things I’ve been doing for the past five years or so is meeting with groups of dealers every few months or so in different cities and just talking about the needs and challenges of their business, what’s important to them, what keeps them up at night, what are the ways in which we could help improve their business. My goal in these discussions is very much to really understand their drivers, and if we can do things to help them be more successful, then they’ll be more successful and that will drive our business as well. At those meetings is always my head of sales operations who’s responsible for customer service and tech support and training, and also my marketing guy. Through those interactions we have a whole wealth of anecdotal input into the way in which we could improve our offer. Many of the things we’ve incorporated have come out of those interactions with our customers. Clearly, training and tech support are key parts of those discussions, one of the priorities.
On top of that, we also do structured feedback that we solicit from our customers to understand what’s important to them as a way of measuring both their satisfaction and also things like their promoter score and so on. You get some very clear indicators from that as to the things that we should work on. As far as product development is concerned, we use a structured voice-of-customer approach where we’re really not asking customers about the bits and bytes, but really understanding they are trying to do with their business, what their customers trying to do, how we match those needs and wants with our product offer. Those are the range of approaches we use to get that input.
If you look at specific vertical markets, and applications within them, which ones are most promising today? Which ones might do well very soon?
Hockham: There are three vertical markets we see at a national level that are good at the moment. One is retail. The retail market here in the U.S. has unparalleled, unrivaled scale with any country anywhere else. And with our Radionics history and legacy intrusion footprint we’re well positioned to expand our penetration into that market segment. We see that as an attractive segment, particularly in terms of scale. The other two segments we see good growth in are energy and utilities, and transportation markets. Our Extreme CCTV acquisition puts us in a very good position to do some things there and take advantage of the growth potential. You’ll see some PR in due course that is very relevant to those segments. At a more local level, the education market is an attractive space for intrusion and video as well.
You talked about expanding Bosch’s distribution footprint to include more of the IT side of the equation. Based on that, and also considering how the telcos and cable companies coming into security, does Bosch do anything to preserve dealer/integrator territories? How do you keep the confidence and faith of those dealers and integrators while still expanding the business to those newcomers?
Hockham: Many of the newcomers you’ve touched on are playing in the residential space, which is not really a focus of ours. Our focus is in the commercial space. But really to the core of your question; we proactively manage the number of dealers that we have by territory. We endeavor not to oversaturate a territory to make sure there’s growth opportunity for both us and the dealer. And that he’s not being swamped with competitors at every corner. For the most part, it’s about managing your distribution footprint and making sure that you’re not oversaturating the market with dealers. We proactively manage the number of Bosch-certified security dealers in a given region to make sure we achieve that.
What argument would you make to an independent security dealer or integrator to make Bosch their main equipment supplier? I would imagine that would include telling them what some of the value-adds are. What would be your case to make there?
Hockham: If you look at our portfolio in video specifically, no other company really offers the choice of a best-in-breed solution. We see a marketplace segmented into those people that want to integrate best-of-breed, and those that are looking for a one-stop-shop solution. We uniquely play sensibly in both spaces. We have a best-of-breed solution with cameras with the best imaging quality that integrate into a very wide range of VMSs. For those that want a one-stop-shop solution, we have a very powerful one. From the product perspective that’s what you can see.
Our continued innovation and investment in R&D means they can be assured that over time their competitive edge will be maintained. Through our ease in solution, the reliability of our equipment, that makes their cost predictable and enables them to run their business effectively and efficiently, and also underlines the satisfaction with their end customer. But the end customer has the maximum amount of time to focus on their core businesses. And to support the product portfolio, we have extensive training programs, highly technically competent people here that are able to support their installations and their work in the field. As I say, that gets recognized by customers in the marketplace.