Transformation is defined as “a change in form, appearance, nature or character.” Today, the physical security industry is faced with the fact that digital transformation has redefined business risk. We face fundamental and rapid change as an industry, and the security industry’s ability to succeed in the future depends in large part on the capability of your firm’s leadership to embrace technology transformation and company culture. How can leadership address fundamental changes in everything from technology to company culture while managing to position for future opportunities and growth? We can learn from business history and the valuable lessons that former CEO leadership provides.
As I write this article, the recent death of Ross Perot, Sr. is breaking news. As an IBM employee, he saw the opportunity to change an industry direction and create a business in IT services, away from a preoccupation with hardware sales. It was a developing segment of the market that Big Blue was not interested in addressing. Perot saw the emerging opportunity and in 1962 he left IBM and started Electronic Data Systems (EDS) with $1,000.
The timing was good, as large organizations needed IT services (and staff) to successfully leverage computer hardware deployments. The rest is history. Perot sold EDS to General Motors for $2.5 billion in 1984 and later founded Perot Systems, again leveraging a services model, which was sold to Dell Computer for $3.9 billion a decade ago. Perot said, “Inventories can be managed but people must be led.” He clearly understood the difference between management, or changing course, and leadership — as in changing a fundamental industry direction and creating a company culture to execute that vision.
In many ways, IBM’s corporate history serves as a benchmark from both a positive and negative standpoint when examining transformative leadership. Lou Gerstner was the first CEO of IBM from outside of the company. When he started in 1993, IBM was almost broke and in the process of breaking the company up into multiple business units for sale. He had a unique vantage point of having been a large corporate customer (RJR Nabisco) and innately understood the value of IBM as providing a “total solution” that included not just hardware and software, but services.
In his great book, Who Says Elephants Can’t Dance, Gerstner mentions that putting the brakes on the breakup was the most important business decision he ever made. Not only did he see a new direction for IBM, but he changed the compensation plan to align with his vision. Rather than individual sales plans, he tied compensation to the goals of the company and directly to all employee salaries and bonuses to reward teamwork, rather than individual business unit success. This is an example of changing a company culture during an industry transformation. Gerstner also changed the mainframe mentality toward desktop computing, abolished the “no booze” policy, and eliminated the dress code. Gerstner explained that “understanding cultural behavior, values and rewards” was critically important to his leadership style.
Another IBMer who learned a valuable lesson in customer focus is former Cisco CEO John Chambers. Early in his career at IBM, he experienced a company that lost its contact with customers and felt its success mandated that “they had all the answers.” Chambers also worked for WANG Computer, an industry leader in minicomputers that missed the industry transformation to open systems, and like that entire industry segment, went out of business. Chambers’ book, Connecting the Dots, is recommended reading.
To quote Chambers, “Successful companies and countries catch the transition cycle before it is obvious to others.” In 2001, Cisco made a bet in their product cycles that IP would become the only true interoperability standard. It was a wager that paid off for the company and its investors alike. Chambers’ genius was not only in anticipating market transition, but also in educating and motivating Cisco employees to embrace those changes and build a culture around customer needs. He predicts that 40 percent of businesses today will not exist in 10 years because of technology transitions. His advice: “Change before you have to. The worst mistake is to do the right thing for too long.”
Therein lies the challenge for a security industry that has been both successful and is experiencing double-digit annual growth. Ignore it at your own risk. During his tenure with Cisco starting in 1991, Cisco’s annual revenues grew 65 percent over the next decade. His prediction for the future: “The Internet of Things will be bigger than the internet.”
Finally, any example of transformative leadership is not complete without highlighting Steve Jobs. I previously wrote about Steve Jobs in 2011 and cited the fact that while Apple stores generate upwards of 40 percent of all new sales, he deployed them en masse at a time when the entire industry was closing retail stores. Remember Gateway Computers? Again, an example of seeing a different future. Jobs also had Apple Computer drop the word Computer from its name to become Apple Corporation. He made one of his last public appearances in June 2011 when he announced the Apple iCloud, saying, “This is the cloud the way it should be: automatic and effortless. iCloud is seamlessly integrated into your apps, so you can access your content on all your devices.”
This is advice that physical security integrators can take to heart as our industry migrates from on-premise to hybrid and eventually complete cloud-based deliverables. This is where we are going; the question is when do you embrace the cloud and its recurring revenue model, and make it a part of your business?
The consistent theme of these famous transitional leaders is constant communication, cultural (behavior) change, and a focus on services.
At PSA the Managed Security Service Provider (MSSP) Program was created to leverage the opportunities that technology transformation provides. We have recruited key partners and designed a roadmap to cloud-based subscription services for access control, video surveillance and cyber security solutions. I credit Bill Bozeman, PSA’s CEO, for seeing where digital transformation is taking the physical security industry. It is up to us as industry leaders to see the future, adjust our course to provide managed services, and execute.
For more on the MSSP Program visit https://www.psasecurity.com/mssp.