EXECUTIVE MANAGEMENT – Behind Boardroom Doors With Industry’s Mightiest Manufacturers

Today’s leading electronic security equipment manufacturers are achieving grade-A success despite operating in an era dominated by C’s — competition, commoditization and consolidation. In fact, those are among the market realities that are forcing global powerhouse conglomerates ASSA ABLOY, Bosch, GE, Honeywell and Tyco to become as efficient, innovative and customer-focused as possible.

Beginning in the late 1990s, increasing competitive pressures hastened by commoditization — greater market demand/penetration and falling equipment prices — forced many independent manufacturers to sell. They found it especially enticing because most of the buyers were giant, well-known corporate entities that had suddenly decided security was an attractive growth market. So launched the consolidation craze, which gained even more momentum following the tragic events of 9/11.

Since the turn of the century, the absorption of familiar security brand names into the aforementioned companies has occurred at a breakneck pace and shows no signs of slowing down. It has gotten to the point where even seasoned professionals have had a difficult time keeping up with all the changes — let alone how those changes could directly or indirectly impact them.

While it is often hotly debated whether this trend is beneficial or not to the industry’s overall health, these suppliers undeniably bring a lot to the table that has been, for the most part, absent from the electronic security industry. They offer almost limitless resources to research and develop new products; global reach; diversification, which means security solutions can be introduced into other industries and vice versa; solvency and fiscal stability; brand-name recognition with consumers; and much more sophisticated business and marketing abilities.

To get a better handle on the philosophies, strategies and objectives of the industry’s largest, best-known manufacturers, Security Sales & Integration recently conducted extensive interviews of the top executives from each of the five most substantial operations.

This exclusive, historic undertaking includes Joe Grillo of ASSA ABLOY; Peter Ribinski of Bosch; GE’s Louis Parker; Honeywell’s Ben Cornett; and Ron Krisanda of Tyco.

Their combined interests account for an estimated three-quarters of the electronic security products sold today. Find out what they have in store for installing systems contractors and their customers, and where they see the industry heading.

Also, see Web exclusive questions and answers exclusive to www.securitysales.com.

ASSA ABLOY’s Grillo Counting on Contactless Smart Cards

Name: Joseph Grillo
Company: ASSA ABLOY
Division: Global Technologies
Title: President and CEO

How’s business?
Grillo:
The access control business is up and doing very well; there is not any part of it that is down. Overall, RFID and smart card business is up. It is all good news in general. We are exhibiting double-digit growth and are forecasting that for this year as well.

What are you primarily focused on accomplishing at the moment?
Grillo:
I am focusing on the movement toward more sophisticated, next-generation contactless smart card technology. I am also focusing more in general with the entire Identification Technology Group in identity management, which includes more public sector markets and specific types of projects like the government’s ID initiative and electronic passports. This means more product and market development as well as business efforts.

Which technologies are you concentrating on and why?
Grillo:
We are seeing pretty good movement for contactless smart card acceptance. We are striving to better educate and train people to help get them rolling.
Although the technology is prevalent in Europe, we are seeing movement in the U.S. toward adoption, particularly from many forward-looking companies. Although they may not know how to exploit the technology today, they are getting it as an investment in the future so as not to remain technologically static.
That said, in the U.S. market, RFID-based access control will continue to offer the biggest opportunity, and our proximity business continues to grow as well. In particular, we are seeing healthy growth in industrial markets and animal markets, in which pets and livestock are monitored.

How do you build loyalty among your customers?
Grillo:
It is all about support. During recent years, we have significantly reduced the time it takes for products to be delivered. We also offer better training, technical support and, of course, regularly come out with the best new products.

What do you do to make sure acquisitions are smoothly integrated into your corporate structure, and that the transition is easy on your customers?
Grillo:
I believe it starts with good communications upfront. We start out with open communications to make new companies feel welcome and understand expectations early on. Back-office and support functions are integrated quickly so we have common IT, HR and logistics.
At the same time, you have to balance your corporate culture with acquired companies so they retain enough independence in terms of marketing and whatever else made them successful with their customers. When you come in as a larger player, you bring the customers many benefits with a greater level of resources.

How acquisitive do you expect to be in the future?

Grillo: We will continue to do so, but in a very strategic way. We did six transactions in 2003, but only a couple in 2004. I believe you will see us back on a forward track in terms of finding the right acquisition at the right price — and that we will have the support from ASSA ABLOY to grow the ITG business via acquisition as well as organically.

What are your major marketing initiatives?
Grillo:
We are going to add resources focused on end users, specifiers and distribution partners. Also, we will continue to add more people so we can be as helpful as possible to our customers. Everyone needs to adapt to the changes in technology, newer applications and standards. This requires a serious investment in people.

How much performance pressure is there from the board of directors and stockholders?
Grillo:
We are a bit fortunate in that ASSA ABLOY is public on the Swedish stock exchange. Sure, there is always pressure, but because we are not the biggest part of the operation and we are not public in the United States, we are able to be a bit under the radar screen.
The Swedish culture is very people-oriented and takes a more long-term view of business success. It tends to be one more of managing business than answering to shareholders.

Which technologies, applications and markets do you believe offer the greatest opportunities and why?
Grillo:
Smart cards, RFID, identity management and foreign areas like Asia. Industrial applications of RFID, such as laundry, waste management, and pets and animals, are growing very quickly.
Clearly, video is another area that’s growing quickly. As communications standards move toward TCP/IP, there will be opportunities to combine video and access control as they use the same corporate networks.

What do you believe have been the most significant changes in the industry the past five years?
Grillo
: Consolidation, the movement to digital and the trend toward interoperability regarding components and systems.

What do you believe will be the most significant changes in the industry during the next five years?

Grillo: Standards and consolidation will continue, as will the impact of technological advances in communications and TCP/IP in video as well as RFID. The whole privacy thing will be a challenge, with a lot of it being people not understanding what the technology and intent is about.

Do you believe the dealer/integrators population is keeping up with advancing technology? What can they do to make sure they do not get left behind?

Grillo: Some are, some are not. Consolidation is happening at the systems integrator level as well as with manufacturers and some understand the need and have the wherewithal. Those that do not will suffer from lack of growth or have to focus on other issues where you do not need it. They have to accept the world is changing and be willing to invest in more education and hiring different types of people with different skill sets.

Can there ever be too much consolidation? What are the advantages and disadvantages?

Grillo: There cannot be too much because there are limits, either regulatory or market forces. The pros include economies of scale and greater resources, while the cons include a lack of nimbleness in taking risks on new technology. There is always room for smaller niche players, especially when customer service is not maintained.

What do you believe are the three greatest challenges the industry faces today?

Grillo: 1) Technology and unrealistic end-user expectations of it; 2) Resistance in moving toward standards and interoperable systems; and 3) Training and education issues.

About the Author

Contact:

Scott Goldfine is Editor-in-Chief and Associate Publisher of Security Sales & Integration. Well-versed in the technical and business aspects of electronic security (video surveillance, access control, systems integration, intrusion detection, fire/life safety), Goldfine is nationally recognized as an industry expert and speaker. Goldfine is involved in several security events and organizations, including the Electronic Security Association (ESA), Security Industry Association (SIA), Security Industry Alarm Coalition (SIAC), False Alarm Reduction Association (FARA), ASIS Int'l and more. Goldfine also serves on several boards, including the SIA Marketing Committee, CSAA Marketing and Communications Committee, PSA Cybersecurity Advisory Council and Robolliance. He is a certified alarm technician, former cable-TV tech, audio company entrepreneur, and lifelong electronics and computers enthusiast. Goldfine joined Security Sales & Integration in 1998.

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