ADT Reveals 2017 Plans, Protection 1 Integration, Connected Home Opportunities
One year after ADT was acquired by Apollo Global Management in $7 billion deal, executives discuss ambitious business plans, how ADT will integrate with Protection 1 and what the security industry is facing in 2017.
Scott Goldfine · March 14, 2017
When Apollo Global Management, parent company of Protection 1, acquired ADT last year it was a $7 billion deal for the electronic security industry’s largest company and most iconic brand.
As shockwaves rippled through the industry, Apollo Global Management appointed Protection 1 CEO Tim Whall as CEO of the new combined security installation and monitored services behemoth.
Whall was celebrated for aggressively growing P1 the past several years by targeting customer service with ferocity and spirit, expanding into national accounts and integrated systems. The upshot is an entity serving more than 7 million customers through 20,000 employees in nearly 300 locations throughout the United States and Canada.
Although many operational changes will not begin until after the companies are legally merged on April 1 (and since the Protection 1 brand is expected to endure for some time on the large commercial and national accounts side of the business), we are nevertheless on the brink of experiencing the full magnitude of the new ADT.
What will that look like and mean for the industry and marketplace? CE Pro sister site Security Sales & Integration spoke with ADT chief marketing officer Jamie Haenggi and senior vice president of Emerging Markets Jay Darfler to find out, and gain new insights about the firm’s Pulse, Canopy and other offerings.
What were your takeaways after CES, the show that sets the technology tone for the year?
JAY DARFLER: This CES was the first time a real acknowledgement came from the folks on the home automation side that security is pulling this industry through. There’s been a long desire for the home automation side to be the lead but the practical reality is security is driving the industry.
While I think traditional alarm companies like ADT are a big part of that, when you look at some of the startups that are succeeding in comparison to those that aren’t, they’re all coming at home automation with a security story or security use case.
So, for me, the headline is that security as a theme is what’s driving home automation.
With security moving to the forefront, which is great for all of us, a number of announcements came from ADT. Can you summarize them and why they’re noteworthy?
DARFLER: There are a number of things happening for us on the monitoring-on-demand space integrations with our Canopy platform.
One is the LG Smart Security all-in-one device, which for ADT is our first attempt to deploy monitoring-on-demand services into a secure all-in-one that can operate as a full home automation hub as well. There were a number of other partnerships, Samsung on the smartwatch side.
That’s our first step down a wearable’s path that we think will be pretty robust for us and the industry. We also had announcements with Netgear on the Arlo camera line and Glympse as well on personal tracking and location.
Those also relate to integrating with the Canopy platform to deliver a monitoring-on-demand-type security service. We also announced integration of Amazon Alexa with ADT’s Pulse system.
It’s the first integration of Alexa with a security provider that allows customers to not only control smart home features but also take advantage of security features — sensitive security features like a disarm function via a secure four-digit PIN verbally communicated.
It’s something our customers have been asking about for a while. Our last announcement at CES was ADT Anywhere, which is a personal and family safety service package.
It’s our first offering designed to be consumed and provide that peace of mind entirely outside of the home. And frankly, it can be purchased by a consumer whether or not they have a traditional security system from us.
You’ll hear a lot more about this as we get closer to the launch this summer. But on a high level, think of an OnStar in your pocket, that kind of a business model.
Let’s talk about last year’s big acquisition, which is effectively a merger of Protection 1 and ADT. How is that integration going? What’s different about ADT today than it was a year ago?
JAMIE HAENGGI: We’re really just coming into the full integration. Obviously, there’s been a lot of work, and what I would call more groundwork done, in this space.
Getting the leadership team in place, aligning on understanding practices across both companies, laying out our IT integration plan, and there’s a tremendous amount of heavy lifting that [ADT CIO] Don Young and his team have been laying out.
We’ve still been operating as different companies and we won’t legally be one entity until April 1. That’s really where we’ll start to bring more of the channels together. We’ll be converting all of our employees into the ADT HR system.
We kind of call it HR Day 1, and then we’ll be integrating our sales channels. We’ll be operating with the commercial and national account team still under the Protection 1 brand as we migrate ADT commercial and ADT residential under the ADT brand.
What value does each brand bring to the other? How is ADT making those from P1 better? How is P1 enhancing ADT?
HAENGGI: We have this internal campaign called “Better Together” and we just brought all of our leaders together at our leadership meeting in Dallas last week. We talked about how it’s not just a slogan; it is iron sharpening iron.
What you’ll see is [ADT CEO] Tim Whall’s historic leadership style, with maniacal focus on operational excellence and customer experience. You’re going to see that brought to an organization that has a great reputation in the marketplace.
You’ll see a tremendous attention to detail that will really crisp and sharpen up that customer experience. You’ve got that coupled with the ADT brand. I think we’re going to transform what a big brand in the security space means as you think about customer experience.
Here’s something you probably never thought you’d hear ADT saying: Yesterday, we answered 99-point-something percent of calls within 60 seconds. There were about 80 calls among more than 50,000 we took that waited longer than one minute.
That has been such a drumbeat of Protection 1: one ring, a live person answers the phone. Another thing that’s different, you go back to May 1, when we first got here. There were about 42,000 installation service calls or service calls waiting to be serviced. That’s about a seven-day backlog.
Today that’s down to 10,000, so we’re almost delivering same-day service, and we’ll continue to beat on that and organize operations such that we can deliver on the promise of same-day service.
I’m here to tell you without a doubt you can deliver operational excellence at a company the size of ADT. We’re starting to do it, and see it, and the employees are excited by it.
Is the P1 brand going to continue on the national commercial accounts or is it all going to become ADT?
HAENGGI: Eventually we will likely get to one brand, but we will probably continue for the foreseeable future as Protection 1, with ADT next to it. You’ll see us in the marketplace as Protection 1 ADT in the national account space.
There are a lot of customers out there that think they have ADT that aren’t experiencing such a high level of quality service in the national account space, because they're actually owned by a different company starting with a “T” and ending with a “co.” We want to establish the footprint as this is ADT Protection 1, and then migrate to an ADT brand.
How will ADT’s Authorized Dealer program be affected by these changes?
HAENGGI: ADT has a powerful brand and there’s opportunity to continue to leverage dealers across the country to give us that broader footprint.
There’s still the same vetting process. It’s not about saturation; it’s about making sure we have gaps filled with high-quality dealers in the marketplace.
Another thing we’ll be looking at is acquisition opportunities. There’s a lot of commercial companies that may be smaller, regional in size, that present an opportunity for us to broaden our commercial footprint.
On the P1 side, we made a lot of strategic acquisitions that brought skillsets and leaders to the organization that helped us grow in integrated systems, national accounts and high-end commercial.
That’s one of the reasons why we brought [senior vice president, business development] Joe Nuccio on, to help uncover growth opportunities.
Let’s turn to the connected home and security mix. How many customers are looking for sexy home automation types of services or offerings compared to customary security-style offerings?
HAENGGI: More and more when consumers think of home automation, they still see it as remote arm/disarm and video.
Those seem to be the highest appeal items for customers. I think you’re also seeing more bring-your-own-device customers, where they may have a security system from ADT and maybe a Nest thermostat, maybe a Netgear Arlo camera.
They’re saying, “I’ve already bought these devices, how can I bring it into my security system?” We continue to see security as the core with these elements around video and remote arming and disarming being the two most popular features.
In sales interactions I have listened to, almost 80 percent of what customers ask for upfront is a camera. Almost before the rep could get to anything, the customer is asking for the camera. I would say 80 percent or 90 percent of those requests are for an outdoor camera.
They’re looking for front or back door coverage. We do an offering where it’s a wireless camera that’s an indoor camera in addition to an outdoor camera.
Everyone loves the idea of getting one inside when you pitch it as you can turn it off when you’re home if you don’t feel comfortable and turn it on when you’re not home.
Another thing I heard on several of those calls is customers’ interest in being able to remotely monitor a parent or mother-in-law to get signals if there hasn’t been activity after 10 a.m., or if the alarm isn’t set at 9 p.m. you can actually arm the system yourself.
You heard this wave of relief of being able to help protect my mom without her feeling I’m encroaching on her. I can do it remotely. I can check in. I kind of know what’s going on without hovering, so to speak. That was an interesting aspect of seeing how people are realizing the value of home automation.
DARFLER: If you look at the top 20 to 25 percent of the market that’s going to go traditional, two or three times that size of customers are households that have a desire for security but may not be ready for a traditional system.
We think over time and as life stages change, the customers that sit in those blocks will eventually find their way into the traditional system. It might also be a person who only has a Netgear Arlo camera and then wants to add professional monitoring to that.
Or life stages change, there’s kids in the house, maybe they moved to a bigger home, moved out of an apartment and into their first home; it’s in those scenarios where that customer becomes a traditional security customer.
Can you give me an example or two of a typical sale today in terms of different service offerings, what might they be and at what price range?
HAENGGI: It ranges anywhere from what I would call interactive services, which is going to be in the mid-$40 range, into interactive with home automation/video, which is going to be in your $55 to $60 range from a monitoring perspective.
What is ADT’s view of the DIY market, and how big do you see it becoming? How will it coexist with professionally installed systems?
DARFLER: It’s tough to size the DIY market because the definitions of what that encompasses vary wildly. We like to look at it is as maybe a 20 to 80 percent split.
The traditional security market addresses the top 20%-25% and everyone else is an opportunity to enter the security space in a DIY scenario or capacity. It’s why we did the Canopy platform.
It’s why we’re trying to deliver best-in-class professional monitoring into as many third-party devices as possible, so we can corner and acquire the professional monitoring piece of that DIY market.
Demographically, we think it opens up things like renters, millennials who tend to index a bit less against a traditional security system. Students, first-time home buyers, all those demographics that traditionally have not gone with that traditional security system out of the gate.
HAENGGI: Don’t forget Protection 1 ventured several years ago into the DIY space and found it to be successful, notwithstanding any advertising against it, just taking the opportunity that comes in.
We’ve parlayed that into ADT as well, where we’re taking a population of customers that fit more of a DIY profile, but ADT didn’t have a DIY offering and are now offering what I would call a traditional system via DIY.
We’ve seen research and seen it to be true in some cases; it’s not a DIY market, it’s a do-it-for-me market. I may go buy the thing but then life gets busy and I don’t feel like dealing with it. So I still want someone to come out and do it for me.
DARFLER: Or they get stuck trying to set it up, and they need help configuring and maximizing their usage and getting the most out of the product. It’s to folks like ADT that we expect those consumers to turn, back to that people protecting people philosophy.
HAENGGI: It’s that idea that as we continue to advance with our technician force, to really own the IoT [Internet of Things] in the home; that it may not just be about your security system but how all the interconnected devices work and helping make them work seamlessly.
Are there any other offerings customers seem to want?
HAENGGI: We’ve had several focus groups and one of the things that keeps coming to the forefront is cybersecurity. As more and more IoT devices enter the home, you’re creating what I call new doors and windows for a different type of intruder to come into the home.
Consumers are becoming more aware of that vulnerability. ADT is the brand that resonates as being able to really own that space in the consumer’s mind as delivering peace of mind and that’s one of the areas Jay is exploring to see how we ultimately bring that to market.
We [Protection 1] started several years ago protecting the networks of big, large, national banks for their security infrastructure. Why? Because Target was hacked through an HVAC system. So having a secure network became a critical component of the security system.
We offer that. We have a NOC [network operations center] that we maintain that does just this. So it’s about taking that offering and bringing it to the core commercial, small business, and ultimately the residential customer.
Realizing what a huge name and influencer ADT is in the industry, what’s important to the company in terms of presenting a positive face on security as a whole?
HAENGGI: I think one, it’s how we take care of the customer. That portrays creating a reputation in the industry of superior customer service.
You see a multitude of other industries, large industries, telco, cableco, that are just riddled with low expectations on customer experience. So it’s about ensuring that as a brand we show professionalism, great customer service and integrity.
Integrity means things like vetting products before we sell them. We don’t look at this space as an add-on to something else we’re doing; we see this as the life-safety business. First and foremost we think about that when we go to market.
DARFLER: At the end of the day we set the standard for what it means to protect lives and protect families.
It’s so easy to get caught up in the cool new product or cool new app, but when ADT decides that’s going to become a part of what we do and what we sell, it now becomes about protecting lives and protecting families. We look at our role in the industry as to set the standards for what that means.
Scott Goldfine is editor-in-chief and associate publisher of CE Pro sister publication Security Sales & Integration. 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. Have a suggestion or a topic you want to read more about? Email Scott at [email protected]
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