SSI’s April issue features my exclusive interview with Jim Henry, who serves as executive vice president of Kratos Public Safety & Security (PSS), the systems integration division of San Diego-based Kratos Defense & Security Solutions. The article delves extensively into Henry’s unique perspective of the security industry, the Kratos business, market trends and challenges, and much more. What I’d like to share with you below are personal insights that he discussed about his family’s business, Henry Brothers, and the trajectory of his own career path. (You can view a bit more historical perspective about Henry Brothers, which was acquired by Kratos in 2010, here as well.)
How has the transition been for you personally since Kratos acquired Henry Brothers a few years ago?
It was not as traumatic, just to phrase it that way, as you might expect because the original Henry Brothers was formed by my dad and his two brothers in 1950. Then it was truly a family-owned business, growing from nothing in 1950 to a fairly decent business in the middle 1980s.
My dad and his brothers had all grown up in the Depression, so they didn’t have two nickels to rub together. They formed the business with an idea and maybe a few hundred dollars of seed capital. They built it up to a fairly substantial business in the middle ‘80s and were contacted by a company in the telephone software management business that coveted their RF [radio frequency] literacy. At the time the business was largely a conventional two-way radio, land/mobile communications business. It was in the infancy of cellular.
They still had a retail TV repair business, which is how it all was founded in the 1950s during the infancy of television. They had a third division, which is what I joined after getting [an electrical engineering] degree in 1978, which was the systems business. And the systems group basically did anything that the other two divisions didn’t do. That was mainly security during the infancy of CCTV, the infancy of access control, and alarms, and perimeter protection, and master-antenna television systems.
My dad was approached [about selling the company] after I had been out of school only a few years. He asked me, “What do you think?” I said, “You and Uncle Ray and Uncle Hartford have built a good business. You really didn’t have any help.” My dad’s father had passed away when he was only eight years old. “This is a great accomplishment and I think that you should be able to relax a little, instead of going down there every time you’re growing the business, putting your house on the line with the bank.” I said, “Go ahead, sell it. I’m fine. I like what I’m doing in the systems engineering.”
So that’s what happened in 1985, ‘86. I already had an appreciation for a smaller piece of a bigger pie. If selling Henry Brothers was the right thing to do for the company, for the people, for the customers, to take us to the next level, I had already become accustomed to that.
In what ways did that initial acquisition experience prove to be an education for you?
It ushered in a whole series of events that were a great education for me, because my schooling was in electrical engineering, not in business. I got my fill of the business education, through the M&A process of being acquired, and then only a year or two later reacquiring the company back from that telephone-software management group, and building it up through the 1980s, and the ‘90s to the point where we went public. Where again, when we went public in 2001, what are you doing? You’re taking on more partners. So again it was a smaller piece of a bigger pie, but with a vision to really being able to scale the business going forward.
I had a sense that even before 9/11 that it was going to take a larger organization to be able to keep up with the kinds of resources, talent, technology, financing that would be needed to be a leader in the vertical markets that we found ourselves drawn to: the transportation market and the large Fortune 10, Fortune 100 customers. We weren’t in residential; not that there’s anything wrong with residential security. It’s just a completely different culture. It’s a completely different business.
I felt we were very good at those larger verticals. We attracted people that were incentivized by those challenges that exist in what is now DHS or Homeland Security-type applications, critical infrastructure, transportation and what have you. It’s where you’re more apt to see the leading edge of technology deployed before it becomes institutionalized, and is pushed further down into the food chain. When you get into questions that you want to talk about, of how do you incentivize your people, how do you keep your people. It’s about challenges.
Do fundamental business values and the culture common to family-owned businesses inform you as an executive of a national integration provider?
There are a lot of ways to make more money in this world than being in the security integration business. It’s a tough business. And if it’s all about the money, you’re not going to get the best people, and you’re not going to keep the best people. People generally leave a business not because of money. It’s because of quality of life, it’s because you’re not feeling fulfilled, and you’re not challenged. Yes, you need to make a living wage. You need to be paid fairly and at the higher end of the scale for the particular skillset that you have in a vertical market. But an awful lot of it is feeling as if you are contributing something to society, that you’re doing something constructive, that you are advancing your career, that you’re working with people that you like and that you trust. And that’s really the driver.
The challenge is, because so few companies have really accomplished this, is to be able to take that culture which often exists within entrepreneurial, sometimes family-owned businesses, and then as you scale try to institutionalize some processes to hold onto that entrepreneurial culture, and get the benefit of what you need from a business perspective of those systems, but yet not lose the intimacy of the family-owned business culture.
You’ve been in the industry several decades now. In what principal ways has doing business changed over the years?
In some ways it has changed dramatically and in some ways it hasn’t changed at all. To the latter, it’s a people business. People do business with people and if you earn a position as a trusted advisor with people who have needs, they’re going to come back to you. It doesn’t matter whether it’s the TV service work of the 1950s or the early two-way radio communications systems of the 1960s, or the analog CCTV systems of the ‘70s and ‘80s, or the access control and then convergence. The technologies are always changing and the solution sets are changing.
The skillsets that you need are always changing, and it’s very dynamic. But one thing never changes: understanding a customer’s need, understanding what are the tool sets out there to enable you to satisfy those needs, to protect them from the risk of going down a dirt road on a product or a technology that’s going to leave them orphaned. Where we have a good track record is making the customer aware of advancing technology, but always putting ourselves in their shoes and not recommending something unless we have a very clear understanding. Set the expectations properly and make sure we’re able to meet or exceed those expectations. It’s not about the latest widget.
In fact, the realization of the new normal came after the collapse of the financial markets in 2008. There was a period of time post-9/11 and before ‘08 where companies just bought the latest shiny object. They wanted to be perceived as thought leaders. They were putting in the first generation of facial recognition and all this stuff. But at the end of the day, it’s about compliance or return on investment. And that is exactly what 2008 reminded everybody. You have to be delivering on one — or best case, both — and that’s a business driver.
What is the most difficult aspect of your job and how do you contend with it?
One thing I liked to do — and used to be able to do — is really know everything that was going on with every major project and have a hand in guiding them. It’s frustrating for me but I can no longer do that. We have over 600 people now in the Kratos Public Safety division. I have to recognize I have a talented team around me and not try to do things that others can do very well. I have to focus on leveraging the decades of experience I have, both from the business perspective and the technology perspective. I have to have a sense of where the industry is going, where some of these advances and changes on the business side are going to be taking us so we understand how to position the company to be a leader going forward.
How has the era of convergence and competition from IT integrators challenged you to be better at what you do?
Convergence is that overused word. We heard convergence back in the ‘70s and ‘80s, but it was different technologies that were converging back then. Then you had IT convergence with physical security, and now we’re getting Big Data and Software as a Service [SaaS], all the clichés. But they are creating opportunities, challenges, and the only thing that really is an impediment to being successful going forward is not taking the time to understand them and to be able to look into the future as to the way business is going to be conducted, the types of systems that are going to be deployed. How are they going to be serviced?
The concept of RMR is a real catchy one that’s been around our industry now for three decades, but it’s a much different meaning of what RMR is now than the old days of just monitoring alarms. Even those companies that had built their foundations in conventional alarm monitoring, I think, are looking to more integrated systems — professional services type of RMR going forward, where again you are fulfilling a legitimate need the end user has for the operations of their system. At the same time, you’re leveraging your domain knowledge of all of these platforms to be able to be a trusted advisor, along with their consultants and internal people, to be part of their organization. The more you establish yourself, again as that trusted advisor, the more secure the business relationship is and certainly the greater value we can bring to them.
The IT industry learned very early on it’s not about being a source to just sell a customer products. They moved away from the product-centric model very quickly in the 1990s. It’s about those managed services. It’s not just about the margin that you make on the equipment. I think the control of the equipment and the reselling of the equipment is still a valuable activity to stay with the integrator, because then you can help mitigate end users running around just buying stuff, thinking they’re buying a lot of good things. And then bringing in an integrator and saying, “What do I do with all this?” That’s not a very holistic way to approach a project or to make it sustainable.
I think lessons learned from how the IT industry matured, IT integrators matured through the ‘90s and the early part of the first decade of this century, makes those of us who are electronic security systems integrators better at our craft.