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Here are my unmoored musings bouncing around my mind in Slack and conversations with some of you: Are we the cable industry? I'm finding a compelling analogy between access control and cable industries. Let me know if this resonates with you. Initially, Physical Access Control Systems (PACS) were—and still are—where the value lies when bringing any product to market. They're akin to cable companies that laid buried cable and fiber optics in communities worldwide. The economy's value and strength were mainly in those companies' hands. Those who owned the buried cable (the installed PACS in this analogy) controlled the content distribution and, ultimately, the lion's revenue share. Cable companies bundled content and distributed it over their wires, to their boxes, and onto your television sets. Those bundles grew bloated, and their value decreased. You'd hear, "I'm paying $100 for a bunch of channels and programming I never watch." Then came the internet and many apps that attempted to unbundle cable packages with bespoke offerings providing on-demand movies or sports. The majority of people shifted to these unbundled apps. What's interesting is that now, all those apps are doing what they set out to disrupt and change—they're bundling. This reminds me of all these new disrupter apps and software companies in our space, just in reverse. They seem to all resemble the companies they set out to disrupt. They all want to be bundlers—a single pane of glass—but ultimately, they become access control companies. All the tenant experience apps or RTO (return to office) apps that do desk booking, data aggregation, etc., ultimately become PACS. The ultimate app feature? The boring access control functionality they set out to kill. Sure, they may do it with a better user experience and grand visions of a connected world, but ultimately, they are access control systems. Why? Because our "boring" industry is what ultimately gets traction and adoption (and let's face it... we all need revenue). How will it end up? I have some thoughts, but I'll summarize it like this: "very different than it looks now." Why? More to come on that below and in a future, more thought-out Brief. I'm still digesting it myself.
We are not a high-growth industry, and that's okay. I've been pondering this extensively and have discussed it with a handful of you to get your perspective. I'm not convinced we're a high-growth industry. But I'm not before the industry veterans pull a hamstring celebrating and think I'm now in the 5-8% growth camp. We're a 20-30% growth industry (for those at scale) and even higher for those just starting. I think the investment community wants our industry to be something it's not, and some PACS looking to sell believe they can get the multipliers of a high-growth business—but they can't. We're a steady-growth industry with great returns. It might take 10 years versus 2, and for the modern era of electronic access control, it's not 5%. From what I can gather from speaking to companies pursuing the $100B market opportunity, 15-25% growth is achievable and expected. I'm also hearing a lot about how many of you looking to sell are hallucinating about the multiples you're expecting. Sometimes, some is better than none.
We already have one troll; we don't need more. Regarding known cyber and security vulnerabilities in our systems, we've entered a space where "what is old is going to be new again" as people dig into our industry for the first time. There's a strong desire for many in our industry to "shit post" about the failings of our past 30 years and the known vulnerabilities in our systems. Whether it's our industry blogger waking up to the fact we are an industry or the long list of folks red in the face about a competitor, when any well-known "bad news" comes to light, there's a great desire to be the first to "break it" or, even worse, support their narrative to prove they're right. The problem? It's disingenuous, lacks purpose and progress, and gives you the same scrutiny you just applied to others. Almost all systems in our industry have flaws. Most of them are known. And counting the number of inbounds, "Hey, did you see this vulnerability?" messages I get that end up being something known for the past four years, I can only hope we unite and channel our energy towards critical thinking and progress over shit-posting and gotchas. I think our industry troll farm should stick to one. I have no faith in him, but I do in the collective industry.
An opportunity for someone—the "also nevers." Calling on Paxton Access and Software! Here's a fun one for you: There's an opportunity for a global PACS brand to be loud and proud about being 100% on-site, no mobile (also no Wallet), no AI, channel-only, and 100% old school. I am not kidding. It plays to some of our industry's strengths, and there's a 3-5% growth market of built-in customers who will never move off what they've known. They'll likely appreciate this, feel heard, and buy it. I'm not sure it's a long-term strategy, but I can argue it's a 10-15-year strategy that would yield good results. Not great, but good. I also don't think it's where I or others would want to work, but I'm sure plenty would. To be fair, some companies are already there, so this would be more about embracing who they are and being honest. They might find themselves relieved at having a clear view of who they are, allowing them to become the best "also never" the market needs.
A prediction? Yonder will increase security spending at schools in the US. I believe it's a good thing. My kids just started school last week, and in week two, the school handed out Yonder pouches as they went phone and smart watch-free during school hours. As a parent of two middle school students, I couldn't be happier. There was a lively debate on Slack about this (and in the news media). I believe the downside of having phones in schools outweighs the upside of being able to communicate with my kids if an emergency happens. The statistics support this as well. Why do I think Yonder will increase security spending in the US? Because of this change, schools must respond with measures that increase notification and communication. And it's not going to be only a manual process. First up in technology to increase? Visitor management. Biggest opportunity? Hardware companies embed more sensors and technology into their mechanical products. There's no bigger opportunity to do so than now. But will they do it? Smaller companies will. The large lock manufacturers? They won't until they have to, which is extremely unfortunate. See my story above for why.
I am bullish on two parts of our industry: (1) Distribution and (2) Anyone who shows me an invested effort locally in a market. Why? Every day, I'm reminded of this when I run in my neighborhood or any neighborhood worldwide and see signs posted on street corners—the importance of getting local in our business with great branding and marketing tactics. When in doubt, get hyper-relevant and effective as large brands rely more on digital tools and resources that can be exponential. Large organizations will continue to need to become more efficient, and they'll lean on digital tools to do so. Who benefits? Smaller brands, distribution, and integration companies. This is also why I think there's a massive need for PACS to get local. I'm not just saying you should hire outside sales reps. You should: (1) take a hard look at local professional services and acquire them, (2) invest 100% more with hard cash into the local integrators you need. Yes, take actual money, large sums of it, and invest it by giving it to the channel you need. (3) invest heavily in omnichannel marketing with a good blend of online and offline. Treat online as a neighborhood and also get into the physical neighborhood.
The talent business of recruiting and hiring in our industry is broken globally. Tell me it isn't. It needs to change.
Standards in our industry will come from Europe, not North America. Although everyone wants to talk about North American standards, the homogeneous makeup of North America versus the fragmentation and necessity to work together in Europe makes it a no-brainer that standards will be adopted at scale first in Europe and then brought to North America. Which ones? That's a great question and one of the topics we'll discuss at InterOpCon (our interoperability and standards conference we're co-hosting with ASSA ABLOY in Krakow this coming March).
Small PACS need to focus on a vertical and stop this horizontal approach. Here is why: You don't have the resources to build "everything" PACS. The world doesn't need another "me too" with a slightly different access control system. It just doesn't. The larger incumbents can't get vertical and will be looking for companies to buy that have dominated a vertical. Given the market feel and investment thesis of those with cash to invest, you aren't big enough, nor is the opportunity big enough to get an investment that matters enough to win. So what to do? Get vertical. Pick one and go deep with features, vertical expertise, and the ability to be agile. You'll find a significant market opportunity in almost any vertical you pick. So be the best restaurant or car dealership access control system. The world needs it. It doesn't need another generic access control system.
Being opportunistic is killing many companies and confusing the market. From an outside-in view, here's what end users are being bombarded with in the market: Lock companies can't do software, so end users must bring in someone who can offer the services. Take Apple Wallet, for instance. Small companies want revenue and can do software, so even if what they're being asked is not part of their core, they'll do it to bring in revenue or advertise a feature as a product because they know the larger companies can't and won't do it. End users see the "yes, we will do it" as a good thing and are tired of being told "no," so they force the smaller company onto the project. Apple and Google are kingmakers by telling the market who can and will have access to certain functionality and products. This forces the market to work with companies it may or may not have ever worked with. It also introduces unsustainable pricing models, where everyone wants their margins and is seeing who will flinch first. A lot of hardware is already installed in the market, and there is a lack of desire to rip and replace it (understandably). End-user demand is increasing. In certain verticals and markets, customers want our industry's products and services to be cloud, mobile, and AI-first at a higher rate than the traditional market is willing to produce or prioritize. This will continue to increase, so we're seeing legacy companies bolt on cloud and mobile features to their systems.
In the end, you get many things. One of them I want to highlight is the smaller companies being too opportunistic and forgetting their core differentiated long-term value. Well, to be fair, they aren't forgetting about it. It's in every one of their pitch decks and on their website. They just don't talk about it as much as "putting a card in the wallet" because they're in the unfortunate position of needing revenue today to fund their visions of the future. It's a classic story, though; realistically, we know how this ends. Some will survive, some will die, some will be acquired, and some will become lifestyle businesses. We need a better way of helping these important small disruptors with funding and access because if we left it to the legacy side of our business, we'd be doing the same thing as yesterday until forced.
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