Death Knell Ringing for Manufacturers, Integrators Who Still ‘Don’t Get It’

3 disturbing conversations with leading manufacturers and a top custom installation company that still do not perceive how the industry must shift from an equipment markup business model to one based on providing valued services.

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Following up on my opinion piece declaring how the IT industry is taking over the A/V industry, in the past several months I’ve had three momentous interactions that tell me we still have a long way to go. My conclusion is that if we don’t change, we’ll be eviscerated like the taxi industry already has been by Uber and like the big car manufacturers soon may be.

Here are synopses of those conversations: Two were with hardware manufacturers, the third was with an integration company that is stuck in its old ways.

1. The hardware manufacturer that thinks it still sells “boxes”

Last year I had dinner with a regional sales rep of a big brand we all know in this industry. Here’s a snippet of the conversation with John, regional director of sales for [Brand X]:

Me: “You guys really need to own the experience in the home. Your hardware is good, but your brand invokes fits of anger from the homeowners who think that you’re the reason their smart home system is so unreliable.”

John: “But we all know that our hardware is ultra reliable. It’s usually the integrator who’s not setting up our systems correctly.”

Me: “I totally agree. But it’s your name on the product and it’s your name that’s actively being sold. So that means it’s your company the client holds responsible when the system fails. When their friend asks about their smart home system, they say, ‘Call this integrator, but don’t use Brand X.’ You guys need to become an experience company and have more control over that outcome.”

John: “But we sell boxes. We’re not an experience or service company. That part is up to the integrator to deliver to the client.”

Me: “If only you could count on that. Look at Apple and imagine if they left their retail sales up to third-party retailers. They wouldn’t be the highest revenue-per-square-foot retail operation in the U.S. They, too, ‘sell hardware,’ but they own the entire experience and go to great lengths to do so. It’s why they’re so highly regarded. To the extent possible, they own every aspect of the Apple brand. You guys need to make the installation simpler and minimize the need for custom setup.”

John: “But our integrators want to customize the technology for their clients. They like ‘custom.’”

Me: “But the integrators aren’t your real customers, the end users are. They’re the ones who’ll make or break a brand by word of mouth. And the integrators don’t always know what’s best for the consumer. Nor does their pricing model—with all the profits in the upfront install—align them with the customer’s long-term satisfaction, which has less to do with how cool and interesting the tech is and more with how simple, reliable, and well maintained it is. By letting integrators control so much of the experience you have no control over the final product, which is the overall home experience. Most of the problems that make you look bad have to do with integration, not hardware failure. So it seems inevitable that you guys have to move toward facilitating a better experience in the home.”

John: “We’re just a hardware company and will facilitate a better experience by creating better tech. It’s a good thought, but I don’t really see us changing our approach anytime soon.”

So that was a year ago. At the time I simply thought, “Man, this industry is going to experience some serious growing pains if this is how everyone thinks.” Fortunately over the last year, I’ve gotten to know some other industry leaders who appreciate the challenges and opportunities before us, which gives me faith that things will change for the better, even if slowly and with bumps along the road.

2. The manufacturer who still doesn’t get it

Last week I had disturbing call from another top brand in the industry. We’ve been working on building a relationship with them for two years to start distributing their technology. Along the way, industry leaders and architects had called this brand on our behalf to say that we would be excellent dealers for them. Here’s how the call went:

Me: “Hi, Jason. How’s the new dealer application coming along? The team’s excited to start specifying your technology.”

Jason: “I’m not sure we’re going to accept your application. Your business model is different. You have a lot of families and homes under your purview, but we find it awkward you’re committed to the client experience instead of committing to our brand. We want you to be committed to our brand first and foremost, selling us no matter what the the situation calls for.”

Related: Caution: IT Could Eat A/V for Lunch

Me: “We believe you have the best product in the market and are a perfect fit in most situations. If we’re able to validate that through our research and development process, then we’ll specify your product on most, if not all, of our client projects. But we don’t want to install your product in a situation where it may not be the best fit. That wouldn’t be a good outcome for anyone—you, us, the client, or the industry’s reputation as a whole. It goes against the values of our company, which are fully aligned with our clients’ best interests. That’s why we’re data driven, which means we need to test the technology before recommending it. It keeps everyone honest.”

Jason: “I’m irritated that you even have an R&D process. It’s clear our product is the best, so why should you need to test or research us? Just believe the industry. You’re going to have to commit to our brand before you test it.”

Me: “Can you allow me to test the product, and if after one month I’m not fully committed to your brand, you can let me go?”

Jason: “No. You need to commit on faith. [This is a direct quote—I’m not kidding!] I need to consider the risk on my end that you’re going to cannibalize the sales of my other dealers in the area. For example, a recent project on Cape Cod was specified by a competitor with my brand, but you came in and specified a different brand. My other dealer was furious that they lost the job.”

Me: “That’s the point I’m trying to make. If you don’t bring us on as dealers, that will continue to happen and your hardware won’t make it into our clients’ homes. Our clients aren’t choosing their integrator based on the technology they sell, they’re choosing us because of the experience we deliver. That trumps any one brand of technology that anyone can sell. If you sign us on as resellers then I can promise you that all our clients will become instant buyers of your product during their next home project. If we don’t become dealers of your product, as long as they remain our clients, they won’t see your product.

“Our clients would rather have technology they know we can manage than use some other integrator who can sell your brand but isn’t structured to provide an excellent overall experience including outstanding ongoing support. Whether we have your brand or not, our experience-centered overall product is competitive with and often beats out the hardware-centered product you require that your dealers sell. Let’s work together and, as long as we’re both good at what we do, we’ll both sell a lot and have happy clients.”

Jason: “I don’t think this is a good fit.”

I was speechless after that call. This was an egotistical company that didn’t believe in its own product enough to let it succeed in a meritocracy, but rather simply demanded brand loyalty. This is exactly the opposite of how our highly flexible economy works. Brands have to be willing to live or die by the quality of their product and their real-time reputation with their customers, not with old-school monopolistic practices. Even the strongest brands in our industry are not so entrenched that the combination of bad word of mouth and a better and more accommodating competitor couldn’t drive massive market share shifts.

We’ve seen many cases where a client is unhappy with a brand in one home and opts for a different one for their second or next home and later asks to have the first home system switched out. And when their first integrator can’t give them the system they want, they have two other integrators bidding on the project telling all about the alternatives. A/V and smart home systems are not utilities; the customers are not trapped.

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3. The integrator who doesn’t know the first thing about service or integrity

Years ago, Crestron made a shift that signaled they too believed the user experience should be prioritized. It modified its reseller terms for new dealers to ensure that all ownership of system code is assigned to the client, which means the homeowner has the rights to their home’s programming even if they change integrators.

Not having your code would be like not having the blueprints to your own home. Making any changes or performing maintenance can be difficult or impossible without them. Crestron also set up a task force encouraging existing resellers to make code available to clients without any hassle.

In a 2009 CE Pro article, Crestron’s then-EVP of Marketing and now current CEO, Randy Klein, was quoted: “I would strongly suggest–sort of demand–that dealers take that code and allow end users to have it,” he says. “You have the professional responsibility to consumers, the industry, and the company.”

He went on further to explain that the commercial industry 10 years ago was just as bad as the residential space, but since then has stopped using the code as leverage to trap disgruntled customers. He appeared to indicate that the commercial space has “grown up” while the residential side has not.

Related: Check Out the CE Pro Job Board

While Crestron acknowledged this was a big deal and has since supported the end-user when they needed/wanted to get a copy of their system’s code, not all dealers obliged and some continue with their old ways by forcing the client to buy the code separately from the project (in other words, they hold the code for ransom).

This continues to happen today. We recently took on a new client who was left unsatisfied by the original integrator who finished the project in their home and had already been paid in full. The email transcript follows:

[Firm X (name changed) is one of the longest-standing integration firms in the U.S. with 30+ years behind them.]

Email 1, from client to Firm X: “Could you please forward to me the document set and program files for our home – [address removed]. I would much appreciate it.”

Email 2, from Firm X’s Senior Design Engineer: “All Crestron programs are considered intellectual property of [Firm X] and typically have an associated cost for release (if approved).”

Email 3, from Firm X’s Service Manager: “I have been asked by [senior design engineer] to reach out to you regarding your request for the Crestron program that is operational in your processor. I have been in touch with the owner of [Firm X] and he has agreed to release this file for $2500. All Crestron programs are considered intellectual property of [Firm X] and have an associated cost for release.”

These emails were privately forwarded to us with one word from the client: “Unbelievable.” And we agree. Not only is it unbelievable, it’s turning what was long ago a black mark in the industry into an indelible stain.

Last week we had an identical experience with another long-standing firm in the New England area, but this time it was about the schematics. In this situation they had actually lost the programming files from their servers due to a failure years ago, so those weren’t available to be sold. But they still had the schematics, and they insisted on selling those back to the client for $250. This client reacted with something much worse than “Unbelievable.”

The case was made back in 2009 when EJ Feulner, a commenter in the CE Pro article mentioned earlier, said that integrators who act like box pushers instead of client-oriented professionals are going to have neither the respect of their clients nor others in the design and building trades, despite being responsible for some of the most complex aspects of a construction project.

If we, as an industry, don’t all keep this in mind, change our ways, and prove that we “get it,” then someone else will eat our lunch.

Part 3: No Respect: Why Custom Electronics is Rodney Dangerfield of Design/Build Sector

About the Author

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Joseph Kolchinsky:

Joseph Kolchinsky is the founder and CEO of OneVision Resources, a service platform that partners with integrators to provide high-quality support with a small-company feel with the sustainability, scalability, and profitability of big-company scale. If you're interested in taking your company's service to the next level, reach out to Joey at joseph@onevisionresources.com.

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