As point out in my August issue editorial, “Diebold Has Fire in Its Belly,” I recently hung out with Diebold executives Michael Dowling and Larry Black to talk about the company pushing into the fire market.
Below is the rest of the discussion, which lends more detail about how the national integrator is approaching this niche and thoughts about the segment in general.
Why is Diebold expanding into the fire market, and why now in particular?
Mike Dowling: You know, with 150 years of culture, we know we have the right people and we know that we have the right talent and the capability. It’s just making sure that the culture is changed. So that’s where we are. We piloted it here in western Pennsylvania and our early results were exactly where we thought they would be because our customers trust us. They know us; they have relationships with us for years and years. It’s just a simple fact for them to take what was fire with another provider and move it over to Diebold, and put it under that Diebold umbrella of services. So, you know, having the monitoring center is key. We’re focusing on a lot of monitoring accounts that are doing fire right now and we moved them right into Diebold, and then we provide those inspection services, etc. It was all about putting together the total package for our company from A to Z. So we have enough and we can provide all of the necessary services that any one of our customers is looking for.
Larry Black: What I would add too, Scott, is financials have always been our strength. We have a good base of customers that we’ve been doing business with for a long time that we’ve been doing the service and the monitoring. Retail is another strong segment. In order to be effective in retail, you have to be in the fire business, and we have not been able to be part of that business as much as we would like to because we haven’t been able to do fire.
If you could put a number on it, what percentage of this business is sort of converting existing customers on the security side versus cultivating new customers just on the fire side of it?
Dowling: That number is unknown right now because the landscape is so that it’s controlled by AHJs, and so it varies from state to state and city to city. So that is a good question in that we don’t know what that percentage is out there. The fact is we see some of the regulatory bodies in upstate New York, for instance, require fire systems and significant detection systems more than you would find in maybe a western state. I can’t put a number on the percentage, but we feel like it’s pretty significant.
But you’re aggressively going after new business on the fire side as well as existing?
Black: Oh, absolutely. In fact, fire has helped us open up opportunities where we haven’t done business with that customer in the past. It’s been a little bit of a surprise for Mike and me because we felt pretty comfortable with those loyal, long-term, highly satisfied customers. At the other end of the spectrum, it has been a pleasant surprise. And I’m not saying it’s happening all over the place, but what we’re finding is there is not a competitor that does things so well that we can’t at least have a conversation with the account. They are very open to talking to us about fire and then that leads to other discussions.
So, if I am a commercial customer and I have Simplex, Siemens or somebody, what would you say that you could bring to convince me to make a change?
Dowling: Again, it’s the work force, our service organization. We’ve got several thousand folks nationwide. We’re a highly competent service organization. Our Diebold education center trains on the various products of our service technicians. So bringing a consistent deliverable is what Diebold provides; and the monitoring element as well. Our monitoring is highly regarded; it’s Five Diamond, one of the highest certification’s in the industry. But it’s all about consistent, deliverable service/services. The landscape of fire today is very fragmented. There are thousands of implementers out there. We’re one provider across the board, and that’s really where our strength lies. For those clients and customers that are looking for a one-stop shop, one solution, we feel like we can be that for them.
Are you sort of standardizing in any way on particular vendors?
Dowling: I would say yeah. It’s always good to keep a very laser focus on the product set, so we have several that are kind of carved out that we focus on. And we’ve got some on the side that a lot of times you’ll have something that’s specified or preexisting, and you have to go with that. But we want to keep the menu kind of tight.
Black: We want to keep it real tight in terms of the ones we sell and the ones we service.
Dowling: It can be very broad.
Black: It’s broader. The different sections can be very broad, and then the services are broad, but the ones we sell, right now we probably have it narrowed down to three or four.
What are some of the hotter areas in the market right now? Do you ever go a little bit above and beyond what might be required and earn more from jobs?
Dowling: Right now, I think that the biggest focus that customers have is monitoring and the inspection assessment piece of the business. The fact that they are getting varying levels of service and they want to standardize and they want to specialize on a provider. That brings a whole lot of things: consistency in service, dealing with one vendor, pricing. So those two areas, really, are what we’re seeing right now. New products and new construction is still very flat. It’s primarily service.
Black: And then the other thing that we’re seeing too, Scott, is we started in the east and we worked our way out west. Those we have trained for a longer period of time, you’re seeing their confidence level increase. So there’s more engagement in the sales service teams; it is a little bit of a wave. We see it in the East and then it’s heading West from a geography perspective.
Do you monitor other companies’ accounts as well?
Dowling: Oh yeah! Our dealer program.
Black: That’s a new initiative, and fire is a key part to that initiative. Fire, access control, video surveillance, and a little bit more down the road. As the dealer program’s kicking off advanced solutions is where we are trying to go. A lot of people can do basic monitoring, but the higher solutions, I think, is perfect for today’s market.
Any other trends that you see in the industry that you see are challenging or exciting?
Dowling: Now, really, the trend is being able to provide our customers with a whole list of security, and that includes fire, video surveillance, but it also includes the IT security, digital security; all those things. And then being able to package that in such a way that will continue to grow the monitoring and take this service model. It’s all about the one-stop shop for all your services. That’s what’s exciting for us; that’s what we see as a challenge, but also a huge opportunity.
Black: Let’s just take financial and retail. Typically, in both segments, you have higher expectations to do a lot more with a lot less people and sometimes try to figure out how to do it more cost effectively. And so, ‘client services’ is the term I am going to use, but our customers are coming to us. You know, for example, PNC has about 3,000 branches. If you look at their staff, it is really, really small. It’s one of those things when they say, ‘Diebold, we need you to start thinking about how you’re going to do this, this and this to help us.’ Maybe 10 years ago, our reaction would have been, ‘We don’t do that.’ Our response now is maybe we need to figure out how to do that and learn alongside our financial institutions and do, maybe what is considered nontraditional, but now with client services continue to partner in more effective ways. It’s more embedded; it’s learning their business more, and it’s fascinating. In Europe somewhere — I’ve read some of this — the security beast in electronic security, the convergence we’ve talked about it for five years, and maybe you guys have talked about it for 10, but the reality of that has really come home. So you’ve got to be able to incorporate those kinds of things. We’re not a Cisco, but it’s one of those things where we have to develop those skill sets and bring the kinds of solutions together very tightly, or else we’re not bringing the security that our financial institutions are expecting of us.
So you’ve had to stretch farther to meet the needs of your end users. But also, you mentioned two particular verticals that were hit especially hard during the recession. In what ways did that affect Diebold in terms of branching the business out in other ways to try to create new revenue strain and to make up for the shortfalls, maybe, in those areas?
Black: I don’t know if we talked about it, but sometimes the bigger challenges are internal. So for us to develop the skill sets when you’re going through the tough times, you become more teachable and you’re willing to challenge yourself in some new ways. Our team has been outstanding, and Mike and I are in 35 conference calls a month with various teams across the whole country as we’ve been rolling out the new fire solution. It’s easy for them to say, ‘Oh no, we don’t want to do it,’ or, ‘This is too hard.’ But we haven’t gotten that reception. It’s been a very positive reception. Some of them have said, ‘Hey, this is hard and I don’t know how to do this,’ but that’s OK. When you go through the tough times it creates a desire to maybe do some things you didn’t consider before. The tough times can make you better, and I think that’s a fairly accurate picture.
Dowling: Over 1,000 people were trained. Our folks — most of the vast majority of them — always wanted to be in fire. They always thought it would be a great part of our solutions. You had people who were willing to accept that and embrace it and they’ve learned. Our company is very, very open to change. At this point, I think the timing of this thing is probably perfect. You never get a better time to enter a business such as fire in a big way that we did.
LP: And they way we did it, too, because it was all organically. We bought a few companies in Virginia and North Carolina, but really we just took our existing sales and service and implementation view and said, ‘We were going to learn some new skills.’
Is that training mostly internal or outsourced?
Dowling: It’s all internal. We did do some online training that we collaborated with the AFAA [Automatic Fire Alarm Association] on, so we had all our service and sales folks go through this Fire 101 online training before we actually came out to do business training. The entire organization went through that. Then, of course, our technicians went through NFPA 72 training and technical product training. And it’s all a requirement; these are our triggers. Our teams had to meet all these requirements. In addition to that, every state has different requirements. The state of Texas has its own requirements in order for you to become licensed, so those techs and sales reps have to take the Texas test or Florida or California or any of the states that have their own requirements. So everyone is trained — over 1,000 associates. Some had to become New Jersey or Montana, NICET Level 2 and you had to take a guy with no NICET training whatsoever and get him to Level 1 or Level 2. It was a very methodical deployment. We turned on as quickly as we could, based on meeting those requirements.
Black: It’s going to continue, too, because we did the training and then it takes a little while to meet all the triggers. Then you’ve got to do refresh training. I don’t know if it stops.
There must have been some new people you recruited for this effort?
Dowling: As Larry indicated, we have bought a few companies, and we really tapped into them for the knowledge and learning it. I, myself, came up out of a technical background at Diebold, but I tapped into the technical aspects of that. We took what we had learned and tried to apply it to our Diebold business model. Internally, we hired some folks from a technical support perspective. And when you’ve got an organization as large as our service organization, there are a lot of people out there who have certifications. We’ve got a lot of NICET Level 4s that we didn’t realize we had. But we had a few guys that we had hired over time and you get from the industry out there, whether they worked for ADT or whomever, they had the certification. So we tapped into key individuals for technical support. The bigger issue was making the acquisition, get some people involved and really learn that business. It was a good three years before we really got this thing off the ground. At the end of 2007 was when we said, ‘All right, next.’ That’s when we really started banging away on this thing. Here we are and we’re seeing results out the gate.
How are the margins comparing in fire/life-safety compared to more traditional security?
Black: When a financial institution does both burglary and fire, we have a lower price for our customers, but we’re not doing that much more extra work. The monitoring margins are a little higher. There are very few national providers for fire, and so it puts us in a position that we bring to the table that not everybody else does.
Dowling: There is definitely value there and we’re seeing that. Because we didn’t do fire, we actually used to have to walk our customers to the competition, and we did that for a long time. It was very frustrating and painful. It took a long time for us to get here, but we’ve always known that this was going to be the missing link that people needed to put on the menu for our customers.
As Always, Thanks for Reading ...