Live from ESX in Nashville

Friday, June 22

Started the last day of ESX sitting in on an excellent session, “Smart Home Market Becoming a Brilliant Opportunity?” featuring Dina Abdelrazik, research analyst, Parks Associates; Bruce Mungiguerra, senior vice president of sales & business development, Nortek Security & Control; Thomas Nakatani, IT VP - customer monitoring technology & product, ADT Security; and Shuvankar Roy, vice president, Xfinity Home Comcast.

Abdelrazik started the session by giving an overview of some recent Parks research on the smart home. Looking at the use cases that consumers are interested in for the smart home, she noted, “Security and safety rose to the top and are the key value propositions that consumers understood, followed by access control and energy monitoring and management.”

In terms of smart home device ownership, she noted that 56 percent are security systems owners, with 37 percent saying the main purchase driver was to “keep your home safe.” Safety and security were also the main drivers for purchasing a security system, she said.

Overall, Parks forecasts shows “the market is shifting away from the traditional offering, and more and more consumers are adopting interactive services and home control systems,” said Abdelrazik. “So the competitive landscape is changing and if the dealer isn't offering home security with interactive services and smart home products, they are really going to fall behind.”

She then looked at the type of security system desired by those who do not currently own one. Based on 2017 data, Parks found that 52 percent would choose “a system that could be monitored or controlled from my phone” while 36 percent would choose “a system that works with other smart devices that are not part of the security system," followed by at 36 percent, “a low cost, no frills solution.”

The top device added after installation included “cameras” at 30 percent, followed closely by motion sensors, door/window sensors and door locks, Abdelrazik noted.

She also shared Parks research on the average upfront price consumers paid for a security system that included smart home devices, which was $1,405, around double what they paid for a basic security system that included a control panel, system sensors and a keypad.

When dealers were asked why they offer smart home services, Parks found the top answer at 76 percent was “based on customer requests,” while the other top responses included “RMR oportunities” and “because our competitors offer it.”

And when dealers were asked what their biggest business challenge is, the No. 1 answer was inability to find qualified personnel. All on the panel agreed that with technology advancing so quickly, especially in the smart home space, hiring will continue to be a challenge. They also see great opportunities for dealers that are embracing this smart home movement and offering smart home options as part of their overall selling approach. Having a “good, better and best” option for customers will help simplify the process for homeowners, they said.

Each of the panelists pointed out that smart home services are driving greater interaction with their systems, which increases the perceived value of a system that prior to the smart home was not there. Customers who are more engaged with their systems spend more money and are easier to retain, the panelists all agreed.

Later that morning I had the pleasure of moderating the last session of the day, “Proven Customer Care Programs: Tips For Getting Started” featuring an excellent panel of John Bazyk, vice president of sales, Command Corporation, and Philip Pearson, president, Smart Home Consulting Group, who each provided great insight into how to engage with and know your customers, including best ways to collect and use data to lower attrition.

Bazyk has been perfecting his company's customer retention program for several years and shared some of the key tenets of his program, which has helped his company achieve a 99 percent customer satisfaction rate, he pointed out.

The two also looked at best ways for dealers to communicate with their customers, including the importance of having a dedicated mobile app, as well as the potential for creating an e-commerce website and offering DIY products and services.

Next, I attended the Closing Keynote Luncheon, entitled Stronger Security, Safer Schools, which featured a panel that included H "Butch" Browning, state fire marshal, Louisiana Office of State Fire Marshal; Guy Grace, director of security and emergency planning, Littleton Public Schools (LPS); and Ryan Petty, senior vice president, business solutions, Cable & Wireless Communications Inc.

Browning started by telling attendees, “You are part of the solution, giving us the equipment and services to help keep everyone safe,” noting that “the security technology piece” should be an integral part of every school's strategy.

Petty, who lost his daughter Alaina in the tragic school shooting at Marjory Stoneman Douglas High School on Valentine's Day 2018, said that it is vitally important that parents understand their school district's security strategy and procedures, most important of which is having a “dedicated person overseeing security,” including overseeing emergency preparedness planning, preparation and training.

Grace agreed, noting that a school must unify and integrate the different systems—fire, access control, video, mass communication, etc.—so the key information—such as red flags that are often raised prior to these tragic events occurring—are received by the right people in the school, as well as law enforcement, so they can possibly prevent these incidents from happening.

Grace pointed to his school's anonymous messaging system that allows students to share info about other students without fear of being labeled a snitch, which many times prevents students from coming forward with vital info that could have prevented a violent act from occurring.

Thursday, June 21

A key theme for the second full day of ESX was meaningful and interactive education, as the morning and late afternoon educational sessions had something for everyone.

I had the good fortune to start my day moderating a session—“Top 5 Disruptive Technologies Impacting The Commercial Market”—featuring a stellar panel of Steve Butkovich, chief technology officer, CPI Security and Rodger Reiswig, VP, Industry Relations, Johnson Controls Inc., who really played well off each other, presenting their perspective and expertise on each of the five disruptive technologies we decided were most impactful today.

The Top 5 Disruptive Technologies Impacting The Commercial Market that we collectively decided on are:

1.��� Cloud-based Solutions
2.��� Cybersecurity (IoT, Adaptive Risk, etc.)
3.��� Mobile/5G Connectivity
4.��� AI/Machine Learning
5.��� Biometric Identity Solutions
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As a group we came up with a definition for what disruptive technology is: "Technology that displaces, replaces or improves on an existing technology or business process and protocol in the marketplace, producing something new and more efficient."

Reiswig and Butkovich looked at how each of these technologies are changing and disrupting what is currently in place, the benefits and potential for each within security, as well as some excellent use cases and examples to illustrate their points.

I also sat in on highly informative session, “Industry Outlook - What You Need to Know,” featuring Jeff Kessler, managing director, Institutional Research, Imperial Capital and Blake Kozak, principal analyst, Smart Home and Security Technology, IHS Markit.

Kozak presented first looking at IHS research on the total equipment market (by technology type) for 2017, pointing out that IHS estimated the total security market in 2017 is worth about $31 billion. By 2021, Kozak said the market is estimated to reach $42 billion globally. Not surprisingly, video surveillance equipment was the leading technology at more than $18 billion.

What was surprising is how much video surveillance dwarfed others on the list, including access control as the next closest at $4 billion, followed by entrance control, intruder alarms, enterprise storage, consumer video surveillance and mobile video and body worn cameras. The two fastest growing areas over the next five years will be enterprise storage and consumer video, like Nest, Kosak said.

Kozak also presented a global forecast for the electronic access control equipment market that showed a CAGR of 6.2 percent from 2016-2021. The global market was worth $4 billion in 2017 and will grow to over $5 billion by 2021. Of this amount the U.S. represents about $1.2 billion or about 33-35 percent. The U.S. market will not decline.

Kozak also got into cybersecurity, noting that recent data suggests that more than 420 million companies were hacked, including data breaches, in 2011, which increased to 4 billion breaches in 2016, “more than a 200 percent increase in a short time,” he pointed out.

Kessler looked at monitoring trends and how they are affecting the residential and commercial markets and the convergence of physical and logical security.

Kessler presented some interesting findings from a recent survey that Imperial did with 400 police agencies looking at “who gets the first response from a verified call” when given a choice between a professionally monitored security system versus a self monitored DIY system. Interestingly, 331 out of 400 agencies said they give priority to professionally monitored systems over a DIY system, which Kessler astutely pointed out is good news for monitoring companies as it shows the value of professional monitoring today.

Wednesday, June 20

Great to be here in Nashville for ESX 2018, which is off to a great start, from the opening celebration on Tuesday, June 19, at the Country Music Hall of Fame, to a packed first full day on June 20 that featured a stellar—and hilariously funny—keynote presentationfrom from Scott Stratten, president, Unmarketing, entitled “The Age of Disruption: Everything Has Changed and Nothing is Different.” at the Opening Keynote Luncheon (more on this later).

At the OpenXchange breakfast on Wednesday, ESX chairman George De Marco led a diverse panel that included Michael Simmons, CEO, Driveway, Mike Soucie, senior product marketing manager, Google, and Jeremy Warren, chief technology officer, Vivint Smart Home. The group looked at how disruptive technologies are changing the security landscape.

The panel also looked at how the world we live in is becoming more connected and more automated, from our home to our car to our place of work. The group discussed the relevance of integration services, how to adopt IoT offerings and how to provide more value to customers by taking the complexity out of making a wide variety of devices work together for a truly intelligent home. They also tackled topics such as data privacy and the role of the integrator and dealer in an ever-increasing DIY industry.

Looking at the future of the smart home, Warren said it is “not about the devices, but about the platform that ties it all together.” As the home becomes more of a “thoughtful home,” Warren asked, “What services will homeowners be willing to pay for in the future?”

Soucie added, “Devices should fade into the background,” noting that there are opportunities to “monetize solution bundles.”

The group also got into a good discussion on privacy. With the increase in video and data being produced today, homeowners are becoming more comfortable “trading privacy for convenience,” De Marco pointed out.

De Marco also moderated the counterpoint session of the day, “How will MAGA affect You and the Industry?” featuring Robert Few, managing partner, The Connection Xchange and Kirk MacDowell, president, MacGuard Security Advisors Inc., who looked at how MAGA—MSO's, Apple, Google and Amazon—is impacting and reshaping the security industry and challenging security dealers today.

Both panelists agreed that MAGA is good for the industry, as they are raising greater awareness for a residential market that has been stuck around the 20 percent penetration rate for as long as anyone can remember. Few said that he believes that these entrants are already helping to drive this penetration rate up into the high 20s.

“I am excited they are here,” Few said. “They make our businesses better.”

Few also pointed out dealers really need to focus on connecting with their customers. “Engagement is key,” he said. “The more, the better.”

This counterpoint session provided some valuable opportunities for the audience to participate and guide the discussion. There was some good discourse around questions about competing with MAGA on pricing and creation costs, as well as installation, support and maintenance, which are key areas where dealers and integrators can differentiate themselves, the panelists pointed out.

Moving to the opening keynote luncheon, Stratton started out looking at the importance of brand, but from a slightly different perspective. He gave a great example of the great extent Ritz-Carlton's employees went to get a lost teddy bear, Joshie, back to a family that had stayed at the hotel. Hotel staff went above and beyond, overnighting Joshie back to the family, along with sending pictures of Joshie enjoying his extended stay at the pool, Joshie working at the hotel, etc., as well as a Joshie employee badge—the ultimate customer service response that started with the laundry room staff member who found the bear all the way to the front desk person who made sure this issue was resolved.

“We all want word of mouth,” said Stratton, noting that many times companies aren't doing things that are worthy of it. His example also illustrates the need for great leadership that is willing to empower and trust their employees to do the right thing. For example, the Ritz-Carlton, he said, allows an employee $2,000 to make things right with a guest who has any issue or needs special attention.

“The frontline changes the bottom line,” said Stratton, for better and for worse, depending on the tone and direction from leadership, which is something that is often mistaken for management. “From 30,000 feet up you can't see the cracks on the ground,” said Stratton, noting that leadership requires that you listen to your employees.

What made this presentation so great was the way Stratton weaved in funny stories and witticisms that resonated with everyone in attendance, from millennials to Gen Xers to baby boomers.

Following the keynote, and the expo hall ribbon cutting, the winner of the ESX 2018 TECHVISION Challenge Best-of-Show competition was announced. DMP's Virtual Keypad and Dealer Admin took home the top prize.

In addition to the Innovation Awards, attendees honored the recipient of ESA's 2017 Morris F. Weinstock Person of the Year Award, Tom Donaldson, during the Opening Celebration. “I'm honored that anyone would take a moment to think that I could stand with these gentlemen,” said Donaldson as he received the award.

The Monitoring Association's 2018 Excellence Awards were also announced and congratulated, including: Patricia Fody, Vector Security, Operator of the Year; Carmelo Mosca, Affiliated Monitoring, Manager of the Year; and Beth Bailey, ADT LLC, Support Person of the Year. Affiliated Monitoring took home the association's coveted Monitoring Center of the Year award.

In other notable news, Chris Mosley, president of Complete Security Systems in New Jersey, was sworn in as ESA president, taking the reins from Angela White, who will now serve as Immediate Past President for the next two years.

Don Childers, chief operating officer of Security Central in North Carolina will serve as the one-year term Vice President.

Two open positions for two-year term vice president were filled by Tim Creenan of Amherst Alarm in New York and Jamie Vos of Security Solutions NW of Washington. Steve Firestone of Select Security in Pennsylvania was installed for another two-year term as Secretary. Steve Paley and Dee Ann Harn will continue to serve in their positions as treasurer and vice president respectively.