CR Talks To: Michael Flink, President, ADI Americas : On the Up & Up
A reliance on strong category management is seeing this distributor and its clients successfully through 2011.July 2011 By CR Staff
CustomRetailer: We wanted to talk to you about the directions in which you are leading the brand among residential and commercial custom integrators. Can you give a general synopsis of what your goals and aspirations are?
Michael Flink: In the period between 2003 and 2009, ADI spent a lot of time improving its internal processes and delivery mechanisms in moving to a much higher level of execution, where we now deliver 96 percent on time. We've fine-tuned operations even further, and the company is back in growth mode. The mission I was asked to take on was to look at growing the business with a sales- and customer-focused set of eyes. We're looking to find ways to help our customers grow, which is how we grow.
CR: How is your business divided between serving residential and commercial dealers at this time and is one area growing more than the other?
Flink: So many of our products cross over into both areas; we have 65,000 active customers and handle 15,000 transactions a day. There are areas that we define as very commercial, such as IP video systems and commercial 70-volt type A/V products. We're doing very well in the small- and medium-sized commercial space because we are focused on it. We've added some product lines and are moving into commercial A/V in a big way. We're moving into IP-based video distribution and CCTV systems in a big way.
On the residential side, a lot of that business we had been used to in the past was due to big-bulk home construction, and the overall market was hugely impacted. Interestingly, our business was not impacted as much. What we are seeing with our stronger dealers is that they are adapting very quickly to a theme we have presented, which is selling more content to every customer.
CR: Can you speak about the brand, product and category mix you currently carry?
Flink: There are a couple of dimensions to my answer. One thing we are doing is moving to stronger category management implementation. Traditionally, we've provided a broad product selection; in 2010, we had 50,000 products sold consistently through the year, with about 130,000 parts in our system. Now, however, in each product category, we are becoming deeper in availability of products and narrowing, by just a hair, the selection, to provide consistency across all of our branches. As an example, take monitor mounts. We sell thousands each week. We have 10 brands, and 120 models in stock—but there are not 120 really differentiated products.
So what we are doing is looking at our key suppliers, identifying the most popular sellers and the most differentiated products, and stocking six to eight deep in each branch. This means we may now have 18 models in each branch, rather than 40. It adds up to increased local inventory, better depth of product, improved price-point selection with a good-better-best strategy, and it will also improve on-time delivery to 100 percent. The other thing it enables us to do is improve internal and external training efforts in presenting a consistent set of products that we can develop customer training around.
CR: Training in security, IP and A/V technologies seems to be an integral part of your way of doing business. I note that your ADI Expo schedule spans the U.S. and most of 2011. What are you doing to enhance training, going forward?
Flink: There are two aspects of primary customer trainings.
One is the classes we hold in our branch locations. In 2010, 1,400 training sessions were held for our customers. They were of a broad variety, from fiber-optic planning sessions to fire protection to CE credits for certain states that require it for security.
Then, we have our Expo series—the local trade shows we do in the Top 40 markets. We've totally revamped them this year to put a lot more emphasis on training at those events, and have gotten great reviews with the format blend of training with a local trade show. We help dealers learn IP-based product technologies and the newer products in the categories, with the focus on how these new things help them grow their businesses.
What you'll start seeing in our marketing and advertising materials is a new tagline that revolves all around this which is: "Today, your business deserves a lot more—extraordinary growth." People have gotten their heads hung down a bit, what with the market conditions, but we want to emphasize that there is plenty of opportunity out there. We've just got to help our customers up their game on being able to communicate product value.
CR: What sorts of opportunities exist today in the way of recurring revenues in the security category for integrators—and how much do you expect that sector of their business to grow in the near and far terms?
Flink: People have looked traditionally at recurring revenue as the monthly monitoring for a burglar alarm system. There are other revenue streams that we've been talking about the past year that we'll continue to focus on. One is managed video services—DVR-in-the-cloud-type services where the integrators provide recording and playback on a services model as well as an equipment model. The same thing exists with access control. There are a lot of opportunities there, where the end users are smaller companies who don't want to have an access control administrator; they want that done for them. So we have offerings in those services, with recurring monthly revenue.
Sometimes, it's just a matter of looking at products differently. An example: Some personal emergency response systems are monitored, and some aren't—there's product out there with local dialers for people who aren't buying into the service for $25 a month. But even on that, there are servicing agreements people haven't looked at as recurring monthly revenue. So we've got an approach on non-monitored systems to get dealers to understand that, for $79 a year, you go out twice and test the system and make sure batteries are up to speed. You get recurring yearly revenue basically for a service contract as opposed to a monitoring contract. It's a very basic service, but it also keeps you in front of the customer, keeps your trucks rolling, and gives you opportunity to increase contact with the customer because you're back with that customer and you have another opportunity to upsell or cross-sell them.
Where we're going to make a big push this year is on VoIP services—new telephone systems where the dealer can participate in the monthly phone bill and reap revenue from that. We have some interesting developments we'll introduce in late Q2 on that.
CR: What do you think are the best opportunities for the dealers you serve to increase their businesses and maximize their value in what continues to be a challenging economic climate for many?
Flink: A lot of dealers are challenged with cost and profitability on systems now. What we're working with our vendor community on is lower-cost ways to create the experience in a retrofit market of wireless audio/video transmission, where you're not having to pull wires to create a good system. There are a number of products we're focused on that enable wireless capability to build a system. It would make it an easier install for the integrator, and it makes it more cost-effective for the end user. Certainly, 3D TV presents an upgrade opportunity. And there is a big opportunity in retrofit with some of the nice, new whole-home touch panels really bringing all the content into one-stream systems. It has a lot of potential. The days of a burglar alarm keypad, wireless Internet, set-top box, iPod and streaming music all being separate are over—customers want integration. It's getting a little bit easier to manage, and a lot more affordable. CR