Turning to technology, how does Bosch continue to innovate but at the same time support legacy products? How do you strike that balance?
Hockham: That’s a very good question and indeed a challenge. If you’re a new entrant into the marketplace you don’t have to worry about that. With our legacy of the companies we’ve acquired to build the footprint we have today, we have a lot of legacy out there. It clearly adds a degree of complexity. But it also adds something to the amount of money we need to spend on R&D. As a security business, we spend in the order of 10%-11% of our revenues on R&D. And some of that is clearly to support the legacy systems.
In particular parts of our business, particularly intrusion, backwards compatibility is an absolute must in the commercial space we operate in. But some of that, frankly, is about being smart, and if you understand the needs of the customer then you can come up with smart solutions. Let me give you a specific example.
As we were developing the new hardware platform for our GV4 commercial intrusion, with the way in which technology had moved on, we actually only needed a circuit board probably about a third the size of the one we had in the predecessor product. So we could easily have developed a new product in a smaller packaging and launched it. However, because of the backward compatibility issue, we actually placed these components on a circuit board exactly the same size as its predecessor, with all the terminal connection points in exactly the same place. So if a customer needs a historical installation, he can quickly undo the connections, put the new board in the wall, and connect up the existing system. That doesn’t cost you anything. It just requires you to be smart and think about how the marketplace operates and what’s important to our customers.
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There must be tough decisions that have to be made, whether you obsolesce something or upgrade and keep it going.
Hockham: Sure, and every one of those requires detailed analysis and consideration of what is the transition path for the customer. There isn’t a single rule for that. I think one has to look at it product by product and solution by solution. You have to ask if there is a viable transition path for the customers or otherwise how do we deal with that? It’s really about being very closely in touch with your customers’ needs and understanding what’s required of them.
Bosch Security formed following the acquisition of Detection Systems and Radionics, then Philips CSI and more recently Extreme CCTV were acquired. DS and Radionics are two of the all-time most lauded intrusion detection manufacturers; how do these acquired companies and brands translate into marketplace advantages for Bosch?
Hockham: It’s very interesting because over the past five years or so, every few months I do dealer focus group meetings, meet dealers in one city and then go to another city and talk to other dealers. What’s always fascinating to me is how passionate and how affectionately people refer to Radionics. That gives us a very strong heritage. A lot of the key dealers and users are standardized on our products from very much the Radionics days. From recent discussions, those customers are very thrilled with what we’re doing now with the commercial intrusion detection space and how we’re strengthening our offer there.
Bosch has brought a safe home for that legacy and then also the platform to take the business forward. We have added user experiences to that as well. If you open up a Bosch sensor, all the electronics are closed. We experimented with the product to make sure it could be easily mounted on the wall. We brought what appear on the face of it very simple enhancements to the legacy, which really strengthened the user experience. We’ve invested in our control panels and intelligent detectors. We show that legacy is in safe hands. We’re launching a new range of wireless detectors and it’s no
accident they’re called Radion as it is a play on the Radionics name. We recognize the strength of our history there.
That same story I think applies to Philips CSI, which really enabled us to enter the video market and get a strong, loyal customer base there. The acquisition of VCS [Video Communication Systems] we did after that really brought the IP expertise that is really the core of our IP capability spread throughout all of our products. Extreme helped to expand the adjacent spaces where we as Bosch weren’t active, particularly into the infrastructure sectors that are key verticals for us today.
If you look back over a relatively short period of time, we’ve seamlessly combined all those things together and hopefully leveraged the strengths and loyalties of our customer base to build a much more joined-up offering to the marketplace
A few years back, and I don’t think I’m alone in this perception, Bosch Security pulled back on its marketing push and profile to take a more measured approach to the marketplace. What happened? What transpired within the organization?
Hockham: It wasn’t a perception, it was a reality. It wasn’t that we cut back our marketing spend; we redirected and shifted it. What became obvious to us when talking to our dealers was that we very much needed to shift where we were concentrating our spend and how we were focusing our activities. While tradeshows like ISC West were clearly very important, we also realized we needed to take much more of our offer, what our products have to offer and what our solutions have to offer, directly to our customers.
So we invested heavily in the Bosch big-rig demo truck many have seen around the country and at various events. It looks impressive and it cost us about $2 million to build, and half-a-million a year to run. We find this a much more effective vehicle, if you excuse the pun, of getting out in front of our customers. When we’ve got that parked in front of consultants or major customers, we get far more people who are able to spend a certain amount of time going through the truck and getting exposed to our products than would ever possibly go to a tradeshow.
Alongside that we’ve also done some higher profile channel partner events, customer events. We did a large event at the Dallas Cowboys’ stadium recently. We’ve done a number of events to launch our new B Series products, where we find those effective forums to get more personal and captive time with our customers. We haven’t reduced spending; we’ve just shifted and reallocated it. From what we see that’s really been appreciated and had the desired effect on our business.
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