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2015 Northeast Security Systems Contractors Expo roundup

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Friday, May 22, 2015

Yesterday, May 21, I headed down to this year’s Northeast Security Systems Contractors Expo, in Marlborough, Mass. It was great to catch up with some of the companies I met at ISC West, and meet some new ones. In central stations, the biggest theme I heard about was that regional shows help monitoring centers get to know their dealers, in person and face-to-face.

Just as I was starting my first lap of the show floor, I briefly met Russ Ryan, organizer for the show.

After that, I ran into Jessica DaCosta, director of sales for ESA, and chatted about the upcoming ESX show.

I also met with Worthington Distribution’s Nolan Male, director of training. Worthington is a security disitributor based in Tafton, Penn., in the northeast part of the state.  

I met with a few members of the Affiliated Monitoring team out in Vegas last month, but at this show I got to meet Jesse Rivest, company territory manager. He mentioned that the Northeast Security Systems Contractors Expo is a good way to stay in touch with current dealers, and get to know prospective ones.

At Alarm Central’s booth, I got to meet the company’s vice president, Kerry-Anne McStravick. She told me about the benefits of being a smaller central station—Alarm Central monitors around 40,000 accounts, she said—like getting to know dealers on a more personal basis. Alarm Central is based in Quincy, Mass.

When I spoke with All American Monitoring at ISC West, I heard about its new offering: cameras under the company’s MeyeView brand. Lisa French, national sales representative, and Laura Hutchinson, national dealer support, told me that there had been a great response to the cameras since their announcement last month at ISC West and during demos at this expo.

Rapid Response is another company I got to meet at ISC West, but it was great to see Danial Gelinas, Bryan Bardenett, company senior account manager, and Ron Crotty, in charge of new business development/corporate training. Bryan told me that a big benefit to regional shows is getting to know dealers in their area, and hearing about the issues and concerns affecting that area.

I got the chance to briefly catch up with COPS Monitoring. Bart Weiner, COPS’ senior account executive, also mentioned the benefit of regional shows to connect on a more personal level with dealers and “put names to faces.”

I stopped by Centra-Larm’s booth. Scott Mailhot, company VP of operations, and I talked about the eye-catching booth design, which I could recognize from the sidewalk—before even entering the show. This booth design is the same one that made its premier at ISC West last month.

Daniel Shaw is the assistant central station manager for NEXgeneration Central, based in Providence, R.I. He told me a bit more about the company, defining the footprint for its 35,000 accounts as predominantly on the east coast.

Keith Jentoft, president of RSI Video Technologies, walked me through the company’s various camera models and the variety of places they can be applied.

Tom Camarda, national sales executive for U.S.A. Central Station Alarm Corp., gave me a demo of the monitoring center’s recent integration with SmartTek, putting a GPS tracking and monitoring service into an app.

My day in Marlborough ended by talking with Keith Jentoft again. This time we spoke a bit about PPVAR, and the importance of finding common definitions—like the Texas Police Chiefs Association did in early April.

Got design in mind?

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Wednesday, May 20, 2015

You’ve heard the old real estate sales mantra: “Location, location, location.” For many in the residential security industry today, the new mantra is “Design, design, design.” 

At ISC West this year I met with a long list of security pros, from manufacturers to dealers to providers, most of whom proclaimed that on top of tech advancements their equipment was made “to look good.” 

They’re right. Their designs are looking good.

Panels, switches, sensors and more are sleek with a European-design feel. They will be less than obtrusive when mounted on a wall. No more huge black or brown boxes in the front foyer—these blend in. 

The equipment, mostly white and thin, reminded me of the first, very early, iBook I owned. So pretty and neat, small and clean. That was a number of years ago, and my iBook eventually met its demise, but I still remember it fondly, mostly for how it looked in comparison to other bulky laptops of the day. 

“This is the year of industrial design,” Avi Rosenthal, board member of the Z-Wave Alliance and VP of security and control for Nortek, told me early on at the Las Vegas show.  His comments resonated as I visited other booths after that. 

For homeowners, form is equally as important as function for all products, he and others said.

“It’s the ‘wife-acceptance’ factor. She’s the one who decorates, so the devices must look cool on the wall,” Rosenthal said.

Who wants something big, dark and ugly hitched to the wall just inside their front door? Not me. Neither did former ADT exec Christopher Carney when deciding on the look of his new Abode home resi system.

The pursuit of aesthecially pleasing design extended into the ISC West booths themselves this year. Honeywell, for example, had all of its products—from fire to resi—on interactive display in one big, nicely appointed space—think of an Apple store. 

Nortek had a new, interactive booth, too, with each of its sister companies representing myriad slick-looking products. 

How big a deal is this whole aesthetics thing to you and your companies? Are you feeling the need to adapt to the latest trends in home décor? Are you hearing this from your customers? 

If your products are less than pretty, you might want to consider how good design might add to your bottom line.

Perimeter security provider comments on projected market growth

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Wednesday, May 20, 2015

I couple weeks back, I wrote an article on the perimeter security market—primarily Technavio's projection that it will rise between 2015 and 2019. Jack DeMao, the CEO for Electric Guard Dog, called me today to talk about the report, how it matches up with his company, and trends from his side of the industry.

Electric Guard Dog offers solar-powered electric security fences, designed to “deter people at the fence line.” His interest was piqued when he saw exactly that style of perimeter security mentioned by Technavio as a trend in perimeter security.

DeMao has seen a rise in perimeter security first hand, he told me, citing between a consistent growth at his company, year after year. “I would say that people have greater interest to keep the bad guys out at the fence line,” he told me.

A new trend for his business, he said, is more IoT-type requests; “Like most security solutions, [customers] want to be able to turn their fence [and] their security systems on and off with their smartphones, and get information as to what’s going on at their site.”

Electric Guard Dog started offering smartphone abilities two or three years ago, DeMao estimated. At first, between 10 and 20 percent took this option. By 2015, that percentage has jumped to around 90 percent, he said. 

Apollo lands Protection 1, ASG

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Wednesday, May 20, 2015

Apollo Global Management is about to take one giant leap into security with its May 19 agreement to acquire Protection 1 and ASG Security.

Under the agreement, the combined companies will operate under the Protection 1 brand, with Protection 1 CEO Tim Whall at the helm.

Security Systems News reported on the proposed deal last week. Here's that story.

I had a chance to interview Protection 1 CEO Tim Whall, CMO Jamie Haenggi and ASG's CEO Joe Nuccio last night. I was looking for details about how the new management might be structured, but that will have to wait until the deal is closed. The earliest possible closing date would be July, Whall said.

The May 19 announcement did not include proposed terms of the agreement, though $2 billion has been reported by Rueters.

Whall said that the “combination of Protection 1 and ASG instantly gives both companies a wider footprint where they each did not have one and a greater density in the markets where we overlap. There is a definite benefit for the customers as well as the employees. And given our like-minded approach to the operations, the combination will be a force in the marketplace."

Haenggi added that “the combination of the two companies creates a $40 million recurring revenue and over $600 million entity, with more organic growth and acquisitions on the horizon. It has never been Protection 1’s or ASG’s goal to be the biggest—it has always been both companies aim to be the best both for our customers and our employees.”

Whall, Haenggi and Nuccio all spoke about the benefits of having a private equity group the size of Apollo (this group manages $163 billion) involved in the security industry. When Apollo gets involved, other funds take notice, Whall said.

That means more resources for Protection 1 and potentially for other security industry companies.

I spoke with Michael Barnes, a partner in the consulting and advisory firm Barnes Associates, who is advising Apollo. I asked him about the people at Apollo who are behind the deal. Barnes said while Apollo is a huge fund with many employees, "the team that has been focused on the security alarm industry and driving these deals is relatively small. They are very smart and they cycle through tough decisions quickly. They should make a great partner for P1 and ASG."

How might the group from Apollo work with managment? Barnes said, "From what we can tell, their philosophy seems to be to pick the best horse and jockey and then let them run. To extend the analogy, I am sure they will influence things like what races they enter, but as long as they are winning they will likely just focus on making sure they have the needed resources and otherwise stay out of their way."

I posed the same question to the folks at Apollo in a couple of calls last night, but they declined comment.

Whall, Haenggi and Nuccio also spoke about how the new Protection 1—with the staff, expertise and client base and geographic coverage that ASG brings—will be uniquely positioned in the industry.

Haenggi said that Apollo has been studying the industry for some time. They liked that Protection 1 has "not only has the national footprint, but also the breadth of services and markets serving residential, commercial and national accounts," she said.  "Back in the day, there was ADT that had the size and breadth. Today, there is no one serving across all of these segments with the size of Protection 1. We are in a position to take that lead but do it with a decidedly ‘Protection 1 approach’ to business."

Barnes concurred with Haenggi, saying P1, especially with ASG added, is the largest industry player with "a business model on which most of the industry was built. That is, having a large commitment to specific geographic markets and a broad range of product and services aimed at virtually the entire spectrum of customer types—everything from low-cost, entry-level residential systems, including a DIY offering, all the way up to large-scale systems for the commercial and institutional segments.

Both companies also know how to acquire and consolidate smaller companies, Barnes noted. "This robust approach is in contrast to virtually all of the other large, national players, who are more narrowly focused, such as Tyco, Stanley and Diebold on commercial markets, and ADT, Vivint, and Monitronics primarily on the residential market."

What does Tim Whall say about Protection 1's expansion plans? Will it expand beyond the U.S. market? “I think it's safe to say that Protection 1 will hold not just a U.S. footprint, but a North American footprint," he said.

Asked about possible aspirations for a global presence, Whall laughed and said: “Well, before we talk international, let’s get this deal signed first and over the line—we’ll see how international we get, but I certainly would not rule out lots of growth from Protection 1 over the next several years.”

Private equity is no stranger to security, especially in the past two years. Recent deals include: Vivint to Blackstone, SAFE to ICV Partners, ACA to Norwest Capital, and most recently, Ackerman to Imperial Capital, Barnes noted. However, this deal stands out, he said.  "I can’t remember an investor like Apollo making a first step into the industry, on this scale, doing two transactions at the same time, and particularly with such a good fit between the two."

To attract private equity investors, Barnes said you "have to have all of the requisite pieces of the puzzle…size, capability, management, and growth. In addition, you generally have to have a strong overall industry opportunity, since one is effectively competing against all other possible investment opportunities." 

The long list of dealmakers involved in this transaction include: Financing is provided by Credit Suisse, Barclays, Deutsche Bank, Jefferies and RBC. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal adviser to Apollo; Latham & Watkins LLP is acting as legal adviser to Protection 1; and Kirkland & Ellis LLP is acting as legal adviser to ASG Security. Morgan Stanley and Raymond James are acting as financial advisors to Protection 1 and Goldman Sachs is acting as financial advisor to ASG Security. Barnes Associates is advising Apollo.

Z-Wave Alliance offers its own brand of ‘Shark Tank’

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Wednesday, May 13, 2015

The Z-Wave Alliance, the consortium of companies deploying Z-Wave’s wireless control products and services, has launched Z-Wave Labs, a competition to support and provide incentive for IofT innovation on the Z-Wave platform.

Winners—one chosen each month for 12 months—will receive alliance membership and IofT development kits.

“We’ve all watched ‘Shark Tank,’ ” Avi Rosenthal, an alliance board member and VP of security and control for Nortek, said in an interview with Security Systems News. The logical question was “how do we do a Shark Tank for Z-Wave,” Rosenthal said.

The group wants to hear from “passionate” start-ups and entrepreneurs who want to bring Z-Wave products to market, he said.

“The beauty of this is that there are no bounds. People have wonderful imaginations,” Rosenthal said.

The alliance will provide no financial help, but “we will assist them, we will mentor them. It’s a great opportunity for them within the alliance. We will recognize them and give them guidance. It’s like when your little brother starts college,” Rosenthal said.

According to the alliance, the competition is open to private companies of any size and to individuals 18 and older as of March 1 of this year who submit their Z-Wave product innovation through an online application. Each entrant must submit an application before the 15th of each month in order be considered for that month's contest. Applications can be for products in any IoT related industry, including residential, commercial, automotive, healthcare, energy, security and aging-in-place.

Judges will choose winners based on innovation, functionality, engineering and design style, ingenuity, breadth of applicability marketability and ease of use. Winners will be notified and announced at the end of every month and featured on the Z-Wave Labs  website and on social media. 

Each winner will receive access to the Z-Wave IoT 500 series development kits from Sigma Designs and a year of alliance membership, which provides the opportunity to

participate in alliance trade shows, working groups, PR and marketing opportunities and other related activities. Winners will be paired with mentors from the Z-Wave community in their related industry to provide technical and marketing and business development support.

Go here to learn more about Z-Wave Labs, apply for the competition and read frequently asked questions.

 

 

 

Allegion talks on recent acquisitions

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Wednesday, May 13, 2015

I saw that Allegion had some interesting news, recently finalizing its acquisition of sliding- and folding-door company Brio, based in Syndey, Australia. I got the chance to hear a bit more about it from Franklin McClelland, Allegion’s VP of business development.

“Brio and Allegion have a strong relationship in New Zealand as well as in Australia, where [the companies] have worked on projects together,” McClelland told me in an email interview. “As we started having more strategic dialogues with Brio’s parent, we came to realize that Brio is very complementary to Allegion: They are involved in specifications for door hardware, and there are synergies in terms of channel.”

Brio’s current GM will still manage the company in its Australia location, McClelland said. “We are working with a great management team [at Allegion], who will continue to grow Brio while creating a complementary platform for the other Allegion lines.”

Brio has an office in Rochester, New York, and has a “growing US presence,” according to McClelland.

Terms of the finalized deal, announced May 4, were not released.

Allegion’s announced the finalized acquisition of Zero International, a little over a month before, on April 1. Zero is a New York based provider of commercial door and window products.

“The Zero International acquisition allowed Allegion to expand its presence in the door and hardware accessories market, and there are synergies in terms of specification and channel,” McClelland said. “The new Zero suite of products gives Allegion an increased emphasis on green building applications that support heating and cooling efficiency, as well as delivering the sound dampening and fire and smoke sealing solutions that commercial customers are seeking.”

“Zero, [like Brio], has a global footprint we can leverage and strengthen for our customers,” McClelland noted.

Figures of the Zero acquisition were also not released.

Thoughts on a potential ASG-Protection 1 merger

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Wednesday, May 13, 2015

How about the news this week of a purchase of and merger of ASG and Protection 1?

I'm eager to see how this all shakes out. Taking a look at the potential 50.4x RMR mulitiple if the purchase price is $2 billion, Imperial Capital's Jeff Kessler repeated his oft-emphasized mantra that the multiple of RMR is not the be-all end-all of deal valuations. You need to look at EBITDA and Steady State Cash Flow, neither of which publicly available for these companies right now.

It's a hefty multiple though, something that Protection 1's Tim Whall has seen before, notably when HSM was sold to Stanley in 2007 for 60x Remember that? Whall ushered in the era where every alarm company owner and his brother thought they'd get 60x.

Kessler did take a gander at the per-subscriber numbers for the potential ASG/Protection 1 deal, and said that at $2 billion, the value-per-subscriber for these two companies would be $1,164. That is not a high number and it is lower that the current value of ADT subscribers and Ascent (Monitronics) subscribers, he said. BUT, then again, the mix of subscribers is not comparable, he added. For example, Protection 1 has residential, multi-family, wholesale customers—from cable companies and other entities—as well as national and large commercial accounts. ASG has a mix of resi, small commercial, large commercial and government. So, the "per subscriber" metric could also be thrown off by one of the specific groups of subscribers.

Kessler noted that the Protection 1 has "not been growing that fast" and said that cash generated has gone into it national accounts and small business divisions. He called the technology investments the company has made in this area "exceptional" and complimented its residential platform as well which uses "Alarm.com and internally generated software." He is a big fan of Protection 1's Don Young who he called a "tech guru in this industry."

Every time I speak to ASG, CFO Ralph Masino makes a point of talking about how most of the company's growth is organically generated. I have many examples, but here's a story from February 2014 where Joe Nuccio was talking about ASG's goal of reaching $10 million in RMR.

From that story:

Why is $10 million an important benchmark?
“It’s not the $10 million number that’s important, it’s [ASG’s] percent of growth year over year. [We’re able to continue to grow at that rate] even at our size,” Nuccio explained.
ASG likes to enter a new region every year. Those new regions generally start with an acquisition, but when ASG moves into that region it concentrates on internal growth, he said.
“We grow at 12 to 14 percent a year because we continue to develop our internal growth engine,” Nuccio said.
He pointed out that 76 percent of the $900,000 of RMR that ASG added in 2013 was generated by organic sales.
 

What will happen to the management teams of the two companies should Apollo's deal come to fruition? Protection 1 is clearly the larger of the two companies, but both companies have strong and highly regarded management teams. Maybe some of them want out ... for a little while anyway? We'll see. Kessler surmised that "Apollo would line them up and see who does the best job."

UL talks about cybersecurity in UL827

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Wednesday, May 6, 2015

When I asked UL’s engineering manager, Steve Schmit, how the ISC West show was going, he said he spent a fair bit of the show discussing the recent updates to UL827, now including requirements for cybersecurity.

“Now with [cybersecurity] in the standard, we’re going to have conversations about [central station’s] network security, how they keep their customers safe,” Schmit told Security Systems News. Cybersecurity is something previous standards hadn’t formally  required, he said.

These cybersecurity measures include firewalls, intrusion detection systems, “risk assessment, developing a mitigation plan, to deal with those risks, and putting that all into practical application,” Schmit said.

UL spent five years developing the latest standard, released in October, Schmit said. It currently has a future effective date of late 2016.

Cybersecurity is a topic that is coming up more in the physical security industry. SSN readers earlier this year pointed toward this trend. CSAA’s annual meeting will even start with a keynote on the subject

Is now the time cybersecurity will start concerning central stations? Has it always been a priority?

I’ve heard from some in the industry that this could really impact monitoring centers looking to get—or—keep UL certification. If you have any insight or opinion on the changes, reach out to me and let me know. My direct line is 207-846-0600 ext. 254, email: sives@securitysystemsnews.com.

Mission 500 breaks record at ISC West; seeks aid for young Nepal victims

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Wednesday, May 6, 2015

MIAMI—Mission 500, the non-profit initiative focusing on the security industry and dedicated to serving the needs of children and communities in crisis, broke its record and raised more than $120,000 at ISC West this year through its sixth annual Security 5K/2K Run/Walk and other events.

Meanwhile, the group is seeking new donations to help children displaced as a result of the devastating April 25 earthquake in Nepal. Go here for information. So far, with help from the security industry, it has raised $7,578 for the children of Nepal, well on its way to its goal of $10,000.  

At ISC West 2015, volunteer participation and fundraising efforts for Mission 500 “were stronger than ever,” George Fletcher, Mission 500 executive director, said in a prepared statement. “We are truly grateful to each and every corporate and individual sponsor that continues to help Mission 500 provide food, supplies, clothing, medical attention and education to children here in the U.S. and around the globe.”

Proceeds from ISC West events will support U.S. children through the Rebuilding Hope at Home program, which helps provide academic scholarships, school supplies and essential items like clothing, personal hygiene supplies and building materials, as well as disaster response and training for community organizations to empower young people. A portion of the proceeds will also support children in Tanzania and India by providing access to clean water, food, education and health care, Mission 500 said.

More than 30 5K/2K participants in April became members of the 500 Club, which recognizes volunteers who raise $500 or more for Mission 500.

Pelco was the lead team in fundraising, donating a total of $10,420 in individual and company-matched donations, Mission 500 reported. Max Burgess of BCD Video was the top individual fundraiser with $1,780, followed by Heather Miller with $1,725 to be matched by her employer, Anixter. Jesse Foglio, Mary Jensby, Stephanie Mayes and Ronnie Pennington each donated more than $1,000, according to the statement.

In addition, HID Global sponsored its second school-kit build at ISC West and put together $10,000 worth of school supplies for children in a Title One School in the Las Vegas Area, Rex Bell Elementary School. Meanwhile, Altronix and ISC West organizers Reed Exhibitions made a joint $10,000 contribution to Mission 500’s #ShowOrange campaign, which benefits children in poverty in the United States. 

PSA-TEC: Integrators on how to adapt and thrive

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Wednesday, May 6, 2015

The subtitle for this year’s “State of the Integrator” panel discussion at PSA-TEC was “Adapt or Die.”

Despite the foreboding subtitle, the panelists' outlook was decidedly optimistic ... for some integrators anyway.

Panelists agreed that independent integrators who do not embrace changing technology and update to service-centric business models will not survive, but Jorge Lozano, president of systems integration firm Condortech, pointed out why independent integrators are ideally suited to adapt and thrive.

“We’re nimble … and this is the time for nimble companies,” he said. If you look at government regulations, the threat of cyberhacks and new technology as opportunities, Lozano said, “the horizon looks good.”

The panel discussion was moderated by Bill Bozeman, PSA Security CEO, and included Lozano, Brent Franklin, president of Unlimited Technology, Ron Oetjen, SVP of Securadyne, and Christine Lanning, president of IST. It took place May 5 here in Westminster, Colo., where PSA-TEC is ongoing this week. The event is attended by independent integrators of all sizes, and includes more than 100 classes and panel discussions.

Other speakers agreed with Lozano. Ron Oetjen said Securadyne’s growth strategy involved acquisitions, organic growth and this year the company has invested in a consulting division. However, the company’s growth strategy is not etched in stone: “Leadership is willing to talk about it [the best ways to grow and overcome obstacles] and re-write the book if we need to," Oetjen said.

Christine Lanning said it’s important to realize that top company executives “don’t know it all.” Lanning uses “the collective knowledge base” of information she gathers from a number of sources such as PSA Security, ASIS as well as from groups outside the security industry. She also seeks mentors “who I want to mimic or emulate … that has been extremely helpful to us.”

Bozeman asked the panelists which vertical markets the companies work in and which are the most profitable.  

Subject matter experts are important said Brent Franklin, especially when you’re working in regulated industries. Unlimited Technology “takes a team approach in attacking new business opportunities,” sending out staff members who best understand the particular vertical. Those staff members need to know more than the applicable regulations, he said. “They need to understand who [the customers] are, how the business works, what the challenges are.”

Oetjen said Securadyne “encourages sales teams to become experts in one of the six vertical markets we’ve identified.” In terms of profit margins, Oetjen said the “data center market is the strongest margin-wise” and they have to follow a number of regulations. “Number two is easily power and utility companies. Number three is the oil and gas guys … but that market is the most volatile,” he said. “Everything is tied to the gas price,” he said.

IST works in a lot of verticals including local, county and state government; DOD work; and, top commercial companies in Hawaii.

As a small company, IST relies heavily on manufacturers for required training and certifications, she said. The company has also started to do “lunch-and-learns and user-group meetings [for customers and potential customers]…. where we bring the technology to them.” This gives IST an opportunity to talk to end users and the end users in turn “get invested in the technology and nine times out of ten, they stick with you,” she said.

The most profitable vertical for IST tends to be the large commercial businesses IST works with because they tend to chose an integrator based on expertise rather than price.

Lozano said Condortech’s is really only in one major vertical, government, but that also involves hospitals, education and border security.

Bozeman asked Franklin and Oetjen to talk about the key to delivering novel and unique technology?

Franklin said his team is constantly scouting technology, but it’s important to stay connected to the customer so you “realize what the next steps are with that customer.” Also, “getting the manufacturer involved with the customer is not a bad thing,” he said.

Confronting novel technology is something to think about Oetjen said. “What are we going to do when there’s only one smart camera out there [instead of many]? When one smart camera replaces fire systems because the camera [can detect fire]?” In order to get a customer to “rely on you to deliver a novel solution and trust you to deploy and execute the solution, [the relationship] starts way back … you educate and consult with the customer over time,” he said.

“You prove your thought-leadership,” Oetjen said. “You need to talk to and educate your customer at the same time, not just send invoices and ask, ‘What other camera or door can I do?’”

What about developing a culture of innovation in a company? How should systems integrators go about doing that?

A culture of innovation starts with company leadership, Lanning said.  “Are you showing passion, curiosity, adaptability?”  It’s important to “evaluate yourself and how you come across to your employees.”

Lanning said IST has an all-company meeting every Monday and every third Monday they do a team building or other educational exercise. She also send weekly emails focused on innovation and inspiration to all employees.

Lozano concurred with Lanning saying that we’re on the cusp of a new industrial revolution. Company leaders need to be doers. “Leadership is an action, not a position,” he said.

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