Ask most Americans how to spell security and they will say, “ADT.” It’s no wonder considering the security systems installation giant has been around more than 100 years, dwarfs the market share of its closest competitor and continues to spend millions marketing its brand name. And yet, within its industry and among its competitors, ADT Security Services Inc. remains an enigma.
Much like its parent company, Tyco Int’l Ltd., ADT has focused its energies on building up its business rather than yakking it up or explaining itself. Sure, there has been a steady stream of official press releases detailing its multitude of sponsorships, products, partnerships and installations, but little in the way of defining ADT’s perspective and identity.
Perhaps the company believed its success and extensive human and financial resources it devoted to solving the false alarm problem and other industry ills was enough. Even so, in the face of Tyco’s corporate scandals, mainstream media exposés about flawed installations, changes to its maligned authorized dealer program, and criticism of its selling practices and customer service, ADT has remained surprisingly mum. Until now.
After more than two years of hot pursuit, Security Sales & Integration has finally persuaded ADT President Mike Snyder to answer all the questions everyone has been dying to know. Snyder, whose roots with ADT extend back more than 28 years when he was first hired as a salesman, has led the company since its acquisition by Tyco in 1997.
Under Snyder’s leadership, ADT has grown as a provider of intrusion, CCTV, access control, fire protection, alarm monitoring, electronic article surveillance and integrated systems and services to more than 10 million residential, commercial and government customers throughout the United States, including 90 percent of Fortune 500 companies.
ADT — a unit of Tyco’s Fire & Security division — reportedly sells about 100 residential security systems every hour. The Fire & Security segment includes more than 60 brands, such as Digital Security Controls (DSC), Sensormatic, American Dynamics, Software House and SimplexGrinnell, and accounts for more than $90 billion in annual sales. Snyder reports directly to the division’s president, David Robinson.
For a guy in charge of a company whose closest competitor is about one-eighth its size, Snyder’s demeanor is more that of an affable, average Joe rather than a corporate platitude-spinning figurehead. However, he is ADT through and through — flashing evangelistic-like fervor when discussing the company or the industry.
SSI recently spent several hours probing the mind of ADT’s wizard behind the curtain to uncover the organization’s approach to business, customer service, controversy, false alarms, technology and much more. You will discover Snyder is a straight shooter who truly believes ADT is doing everything it can to best serve itself, its customers and the industry at large.
ADT Makes Addressing the Media a More Urgent Priority
Considering ADT’s reticence to speak out in the media the past several years, why have you decided to participate in this interview?
Snyder: Personally, I have not been media-shy; I have just been busy. When you look at competing priorities, speaking to the press just has not risen to the top. Also, I am not a person who looks for a lot of attention. I feel like I am bragging when I talk to the press!
Historically, it’s true that ADT has been press-shy in general. The old Tyco did not like us talking to the financial press, and I understand that. They have to be very careful in terms of balanced information.
As far as I am concerned, however, I have no problems talking to the press because I want to be considered an important voice in the industry. I need to be heard to make that happen, so I will make it more of a priority in the future.
New Marketing Strategies, Tyco Acquisition Boost ADT’s Growth
Looking back some 28 years, how did you first get involved with ADT?
Snyder: A friend of my wife asked me to interview as a salesperson for ADT. It really clicked and it felt so right that I jumped at the opportunity. I have never been disappointed since. It is a great company with great people. I also like the industry as well.
How has ADT changed during your nearly three-decade-long tenure?
Snyder: When I began with ADT in 1977, they had just introduced LEDs as the next big thing in control panels. It was a huge deal even though it was old technology. I was looking around, wondering what I had gotten myself into; it was like being stuck in the 1950s!
At that time, ADT was still held under the antitrust decree and the company had more of a public utility approach. In other words, sales and marketing were not emphasized. When the antitrust was vacated in the mid-1980s, it allowed us to be more flexible in how we ran our business.
We then began to see serious technology really entering our business — Aritech, ITI, ADEMCO and many others brought better quality manufactured goods with more features and functions. We then developed a world-class marketing and sales team and I saw much more professional marketing support.
Then Tyco purchased and almost quintupled ADT, greatly increasing our growth and beginning a dealer program. Tens of millions of dollars were invested to develop world-class monitoring centers and other critical areas of the business. The company really rode the wave of opportunity and good leadership.
Tyco Build-Up, Family Spirit, False Alarms Top Accomplishments
What initiatives undertaken during your presidency do you take the most pride in?
Snyder: First, when Tyco purchased ADT in 1997, we had to grow as quickly as we could — building distribution, residential accounts and acquiring a lot of companies. I am very proud of that. A lot of the best people we gained from those efforts are still with the company, as are many of the customers.
Second, ADT is really a tight-knit company and I am proud of the family atmosphere and spirit of community we have retained. We have an amazing internal communications department, which helps.
Third, I don’t think we get enough credit for the false alarm efforts and time we put into industry concerns. We contributed heavily when no one else would. We dedicated money and manpower, as well as developing our own programs.
We kept the industry informed and also supported the communities we live in, making the alarm industry and ADT known for giving back to the community. We have been involved in helping abused and battered women, among many other charities. We also give to the National Crime Council.
What initiatives are you currently pursuing?
Snyder: We’re currently extending our umbrella outside of the home with GPS/tracking technology for emergency services. I was on that bandwagon in 1992 and thought everyone would soon have it. But technology has improved along with the price and customers are ready for it now. Another area is using digital video and intelligent software as an alternative for manned guarding, reducing or eliminating those costs.
Having been the king of mass marketing for 20 years, we are also now looking at the custom home market. The technology alarm systems are based on is dead and we need more intelligent products that can cure our problems with police departments, provide true value and, more importantly, comfort to customers. We are working as hard as we can on that; it may be a year or two away.
‘Largest Mom and Pop’ Strives to Minimize Internal Bureaucracy
What is ADT’s philosophy regarding customer service? How does the company handle it?
Snyder: When it comes to customer service, you have to constantly poll them and never be satisfied with what you are doing. We spend millions of dollars in this area each year. You cannot get complacent, even if you are doing a great job. We have to impress our customers every year.
For quality customer service, an organization has to workshop it, train it, Six Sigma it. A live person must always answer phones, calls must be returned within two hours and disputes can never place the customer in the middle. We have a manager-training program called The ADT Way that covers these and other mandatory principles.
We take care of problems immediately without pointing fingers. Not torturing customers separates good companies from bad ones. Our customer surveys show we are doing a great job. Also, we have the resources to keep customers up to date with the latest, state-of-the-art equipment.
But isn’t it a danger when a company gets as big as ADT that it becomes too bureaucratic and customer service slips as a result?
Snyder: I am sure some bureaucracy exists, but that can happen in small companies as well. We try to be the largest mom and pop in the industry. We don’t have a lot of forms, requests for approval, committees or anything like that. Of course, we do make sure to keep careful records of anything related the customer.
Typically, only three layers of the organization separate me from the customer; I challenge anyone to have a simpler structure than that in this or any other industry. I probably interact with my line workers more than my managers. I speak to 50-100 employee groups per year to make sure things are as streamlined and efficient as possible.
I am not a really structured guy and I don’t like to be bound that way. There are very few things that go on in this company that I don’t hear about. I like it that way.
Plagued by Negative Media, Positive Acts Go Unheralded
What about all the negative coverage of ADT-installed systems in the mainstream media the past few years, many of them associated with your Authorized Dealer program? How do you contend with exposes on Fox News, for instance?
Snyder: The pain lasts about an hour after the newscast, but it stays with me a long time. I can’t stand it.
When a media report takes place, we first must find out if the problem is real. If so, we fix it with the customer and then deal with whoever is doing the story to make sure the facts are right. We always assume there is some grain of truth and the top priority is to get it fixed, and then worry about the media spin later.
I see all these negative articles, but no one reports about the fact that the vast majority of customers in our dealer program are fully satisfied. They never cover the fact we were terminating dealerships at a rate of about two per month five years ago because they did not meet our quality standards.
If there is a problem with one of our systems, the edict is to get it fixed and we will find out the details later. I take it real, real serious. Do we have our problems? Absolutely. But if we know about it, we fix it. If it is part of the routine behavior of a given dealer, we throw them out immediately.
I always ask myself, if I run into an ADT customer in a grocery store, am I going to be happy to meet them or looking to avoid them? I am in the fix-it mode and I believe we have done a pretty good job of that.
In 2002, ADT made some fairly radical reductions concerning its Authorized Dealer program. What were the reasons for that and where does it stand presently?
Snyder: There we so many things going on between the old and new Tyco administration and they needed to make some quick determinations what was working and what wasn’t. They looked at the economics and ended some of the dealer programs in other countries.
In the United States, due to economic reasons, the dealer program was cut back to give Tyco time to get comfortable with it. Some of it had very poor returns at that time. A year-and-a-half later, they are very confident with it; consequently, we are building it back up. We tightened down some of the credit scoring for customers and changed the compensation model.
In the old days, we made the mistake of just ramping up dealers and letting it fall where it fell. When we first got into the dealer program, it needed some real policing, and we got much better at it. Those dealers did not understand marketing or marketing law, or good customer creation. We have done an excellent job of teaching them through the course of seven years.
Free System Tactic Abandoned, Big Ticket Marketing Embraced
What is your opinion of the low- or zero-down approach to mass marketing of alarm systems? Why did ADT use that strategy?
Snyder: In the 1980s, when we first looked at the marketplace, it was a no-brainer to reduce the installation price. That provided us with big-time growth and we were really happy with that. As we started to become bigger, we found some people felt the industry was too gimmicky and also there were too many competitors taking the same approach, which caused many potential customers to stay out of the market.
About a year ago, we changed our pricing model and we are no longer the zero- or no-money-down guys. We have made the pricing more logical, intuitive and user-friendly. Changing in this way does cause you to experience a dip in volume at first, but eventually there is great satisfaction from consumers. We are beginning to see that now. I would hope the entire industry moves away from the no- and zero-money-down mentality.
Speaking of how you go to market, can you explain ADT’s marketing philosophy? What does the company get out of spending so much money sponsoring major sporting events, for example?
Snyder: We look carefully at the consumer and business sides to gain some sense of intimacy with that particular customer type. You’ll notice all the ADT ads speak a little differently to reach those audiences in a tailored approach.
As for our sporting event involvement, customers like to do business with the sponsor of a high-profile event that is synonymous with winning or competitiveness. It is a way of conditioning the market in demonstrating that ADT is only associated with the best of the best.
In addition, for our business customers, there is a fair amount of hospitality involved. Top customers can meet sports stars and get to enjoy the event on behalf of ADT. This creates a more casual atmosphere conducive to getting to know them better.
The amount of goodwill generated is tremendous. We would have to spend five to six times the money to match it through more conventional means. We are also increasingly partnering to advertise in the venues themselves, such as the new Home Depot Center in Carson, Calif. (see “In Brief” on page 20 of September issue of SSI).
Responsibility as Industry Leader Is Taken Very Seriously
How important is it to you that ADT be perceived as an industry leader in terms of key issues and professionalism?
Snyder: ADT cannot sit back in its own foxhole and only do what it wants without thought to doing things that benefit the industry. We can’t live there. We have to be a company that develops the industry’s opportunities and helps solve its problems. Even if we are a voice in the wilderness, we have to do it. As the biggest company, if we don’t do it and enlist the help of others, who will?
I attend meetings that boggle my mind because we are the only ones contributing people, time and money. I have donated $150,000 for research in false alarm prevention when the entire budget was $160,000 and it was impossible to get the rest of the industry to do anything.
This is a good industry, but it can be a great one. We have to get out of the mentality that I am just going to hunker down and protect my own area. On one hand, I love that this industry is the birthplace of so many entrepreneurs. On the other hand, it would be very beneficial for it to develop into more of a national marketplace. We are seeing it on the manufacturer side and I believe it is necessary and good.
It is going to be interesting to see what Brink’s, United Technologies, Johnson Controls, Siemens and others are going to do. I believe they need to get more involved and I hope they do.
What can other installing security companies learn from ADT?
Snyder: I believe they can learn a lot from the approaches we apply to pricing, industry affairs and false alarm efforts. They can learn how they can actually improve by operating more like a larger company, while still maintaining their local element and uniqueness.
We act local when it provides the best opportunities for our customers and national when it provides the best opportunities for our customers. I believe others could benefit from the same approach and it would move their businesses and the industry ahead.
Focus Is on Retail, Financial, Government, Residential Markets
Regarding false alarms, does the heightened interest in verified response bother you?
Snyder: I am not troubled by it. If the industry provides a viable solution to law enforcement, they are not going to implement such Draconian measures. We need to get a handle on helping them satisfy their issues.
Video verification seems like the best solution. With the right kind of unification of the industry, we can make that option affordable. We have the service available in our central stations now. Guard patrols are not the solution. I believe people would accept, even welcome, video into their homes.
In which markets do you see the greatest opportunities?
Snyder: There are three main areas of opportunity. I believe retail is probably the No. 1 interest group now.
Through the years, retailers have looked at the industry in a limited, tunnel-vision sort of way. Now, they are turning to us for all sorts of stuff. For example, RFID is a hot idea right now. Merchandisers are coming to us to manage their risk and liability as they are constantly preyed upon in these areas.
The second group is financial institutions, which are looking for ways to lessen costs and monitor their branches as they consolidate.
The third group is government. There is a big opportunity as ports, airports, military bases and others articulate their issues and look to us to solve them.
Meanwhile, I don’t believe we have come close to reaching saturation of the residential market. It can continue to grow at double digits for years to come. But we need more reliability and affordability, and better feature sets. Once we do that, we will really grow.
Impact of Tyco’s Woes, Influence on Morale, Products Is Minor
How have Tyco’s highly publicized corporate scandals affected ADT?
Snyder: We experienced no customer backlash from Tyco’s corporate issues. There was some shock and uncertainty across the workforce, but Tyco moved very quickly to appoint Ed Breen as chairman and CEO and get things in order. He has great experience in handling large corporations and stabilized things very fast.
We did not lose customers or employees. Other than some white-knuckle time, we were OK.
Why did Tyco recently sell off its very successful Sonitrol business?
Snyder: Tyco was being called upon by Wall Street to restore faith in its operations, as far as governance and transparency are concerned. Sonitrol is a franchise-based organization that cannot be told how to operate in certain markets.
We made a decision that it would be in the best interest of the 150 or so Sonitrol franchises to sell them off. We realized it just was not going to work; it was too big of a conflict. They did not want to be integrated or folded into ADT operations.
How does your relationship with Tyco affect the brands and products installed by ADT? Is there a tendency or pressure to use other Tyco-owned brands such as DSC or Software House?
Snyder: We manufactured all our own products in-house until 1992 before deciding it was not a good strategy. There has been a process in place for a long time in which we undergo constant product reviews.
We had been buying from American Dynamics, Robot, Software House and others before Tyco acquired them and we have continued to do so afterward. We use what makes the most sense for our customers, regardless of who owns them. I am free to buy what I want to buy. We are very open and very objective.
For example, we use Honeywell for residential control panels, Tyco for small business panels, Pelco for the bulk of our CCTV, and some Casi-Rusco [GE] and Northern Computers [Honeywell] for access control, depending on the application. As far as what brand name appears on the products, sometimes we believe there is an advantage going to market with an ADT brand, otherwise we use the manufacturer’s brand.
Industry Giant Wants to Get Bigger, Give Customers Best Value
How large can ADT get and how will it achieve that size?
Snyder: ADT wants to get as big as it can, while still preserving what has made it successful in the past. We give really good value to our customers and I believe, with the amount of potential dollars to flow into this industry, we can get much, much larger.
We are and will be for a while focused on organic growth, which is determined by Tyco. They want to ease back from all the acquisitions they had been making and have suspended them for a while. ADT has turned back the clock to do it organically.
Where do you see the overall industry heading during the next few years?
Snyder: With the interest in homeland security and increased spending, I expect the industry will start to attract a lot of players we have not seen before. The industry will become more national and more global.
The composite of the industry will change to have large companies serving specialized niches, or a couple of companies at the very top of the industry. Home controls and technology will revolutionize the way people interact with alarms. Convergence of digital and information technology will change the commercial side.
Alarm regulation will change the industry as well. Five to six years from now, agencies will only respond based on a set of strict rules. Why should police pay for the inability of the alarm industry to make its systems more error-free? We have to step up and face that or be minimized in the minds of the consumer and overrun by nonindustry people that can market better.
There are a lot of very professional people in this industry who are light years ahead of where I was when I started, but there is still a long way to go. I believe there is a sense of pride and spirit in this industry that is unique, and it would be a shame if we do not respond to the issues and lose that.