Next Year’s Model

Thank you. Thank you, so very much. I’m so glad to be here once more at Blue Star Security’s annual sales conference. I hope you enjoyed the buffet lunch and that you’ve been making the most of the hotel’s facilities. Isn’t the pool great and hasn’t the weather just been wonderful?

I see a lot of familiar faces here today – and some new ones, too. The first thing I want to tell you is how tremendously proud I am of what’s been accomplished this year since the leveraged buy-out. You’ve all seen the numbers on last year’s results. We’ve improved our market share and we’re up relative to plan over 4% for the year.

On the downside, we didn’t fully capitalise on some of the growth prospects in the middle tier. Clearly this is going to need continued attention going forward.

However, we did stabilise our market share in the first half of the year. It’s true that it slipped in the second half, but that’s partly due to an escalation in competitive promotions.

Earnings are lower.

We always knew that. We had to take our earnings down to support the investment that would build our business. That investment clearly got delivered on because we’re up two share points versus a year ago.

It’s a tremendous achievement.

Only last year, our competitors were writing us off. They were saying ‘here’s a company that’s got seventy-nine million dollars of debt, here’s a company that’s going down, that’s tremendously demoralised, here’s a company that’s going to have to cut staff dramatically.’

Did we ever prove them wrong.

They didn’t respect us. They wrote us off.

And we ate their lunch.

Today, we have the edge on our competitors in almost every dimension of the business, both domestic and commercial; in CCTV surveillance, burglar alarms, parking security, access control, systems integration, concierge service, water flow fire alarms, armed patrol services, celebrity security, mobile and wireless surveillance.

Wherever and whenever a strategic partner devoted to individually tailored security is needed – be it in the office, business, school, hotel, casino or on the construction site – Blue Star has proved it will build and maintain relationships by delivering solutions; all backed up by substantial advances in accounts specific marketing, total category management and effective merchandising.

But times are hard for everyone.

There’s profit pressure across the board. If we look at the playing field coming into the next quarter, everyone’s feeling the pain.

So what are we going to do to out-execute our competitors? How are we going to beat our targets?

One thing we’re looking into is new ways of delivering enhanced product satisfaction while optimising profit opportunities in designated markets. We’ve already made adjustments to manning rates and we’ve concentrated turn around times for weapons training for new personnel. We’ve successfully outsourced our remote surveillance operations to territories with more flexible tax regimes and friendlier labour laws.

We’re working hard to cultivate that kind of consistency and focus in other areas of the business, too. Bill Standish in R&D has come up with some truly exciting ideas to add value to our mid range product lines that are currently being tested in the lab.

As most of you will already be aware, sales of our mid range burglar alarms have fallen sequentially year on year over the course of the last three cycles. I’m talking about the standard model for the mid-tier consumer on a budget who can’t afford armed surveillance or a premium rate law enforcement account.

When I first came to Blue Star Security over thirty years ago, this sector was one of the most robust in the group, generating an efficient, dependable revenue stream year on year. Maintenance and repair alone accounted for just over 2% of gross annual profits.

But the domestic market has shrunk across the board. It’s been saturated with second-rate product. The homeowner no longer connects with the concept.

How many of us have walked down a city street at night – or even during the day – and heard an alarm go off, in a house, in a business or in a car, and just ignored it? I know I have. You probably have too.

You heard it ringing loud enough but you told yourself it was more than likely a faulty setting, or a breakdown, or you imagined the owner’s dog set it off or something. So you walked straight past and never gave it another thought. That’s if you even noticed it in the first place.

No matter how loud or persistent the alarm was, we all thought it was someone else’s problem. And the forces of law and order feel just the same. They’re overworked, they’re underpaid, undermanned and undermotivated.

There isn’t a criminal in the country who isn’t aware of it. They know only too well that if they set off a domestic alarm in a middle to low-income residential area nothing much is going to happen.

Insurance companies won’t even give consumers a discount on their insurance premiums for installing one anymore. As a result, most consumers have stopped bothering with the product altogether.

So we took a good long look at the problem from all sides to see if we couldn’t come up with some fresh initiatives. The first thing was to reconceptualise what a domestic burglar alarm actually does. It will come as no surprise to those of you who’ve been in the business a while that it turns out it’s a box that makes a whole lot of noise when someone disturbs it. Apart from advances in technology, the basic paradigm hasn’t changed much since it was invented way back in the 1850s.

So we got to thinking about the things we could change, the things we could take forward relatively easily without incurring too many additional costs and jeopardising earnings performance. And we asked ourselves a crucial question.

Why does an alarm have to ring at all?

It was a question no one had ever asked before. So Jim and the boys dropped all the bells and the sirens and the flashing lights. They played around with some fresh new concepts. And they came up with some revolutionary new sound patterns that bear testimony to the passion they both have for mid-tier home security.

Here’s an audio sample of the first sound pattern they delivered. Are we networked into the audio system? Yes? Is it this button here? OK. Here’s the first one.


Thanks, that was great. Strong modulation coupled with perfect clarity and tonality, I think we’d all agree. But you can’t always expect a dynamic new concept to stimulate the marketplace straight off the bat. Results from focus groups were – to put it bluntly – below optimum target acquisition levels. Few potential consumers responded positively. If anything, they found the new sound patterns slightly easier to ignore than the traditional bell or siren.

We were disappointed. But, undeterred, we moved on to the next sound trial. And here it is.


This sound pattern got a much more favourable response from the focus groups. When asked if they’d respond to an alert of fire in their immediate neighbourhood, 76% of participants answered ‘Yes’ or ‘Probably’.

But then our legal department told us we were laying ourselves open to charges of reckless endangerment. If anyone died as a result of a panic caused by one of our new sound patterns we could have been liable.

But did we give up? Hell no. Rome wasn’t built – nor was its perimeter secured – in a day. In spite of the setbacks, we just knew we were on to something. So we experimented with a whole new range of sound patterns: gunshots, barking dogs, crying babies… But nothing seemed to connect with the public without getting us into more of that legal trouble.

Then we took the concept back to the lab and had another look at it. What if we brought the levels down on those sound patterns? What if we brought them right down till they could only be heard inside the home? What if we ignored the casual passer-by or the cop on his beat and, instead, what if we focused on the offender? What if we created a new type of sound pattern that could be tailored to the psychological profile of the criminal while he was operating in the home?

Lab tests on carefully selected volunteers have so far been extremely positive. These subjects – all young men with criminal records for robbery and house breaking, between the ages of 17 and 23 – were subjected to the latest sound patterns, in a laboratory mock-up of a middle income domestic environment.

They all presented immediate symptoms of stress, including increased heart rate and markedly higher sweat outputs. Many complained of headaches and fuzzy vision.

Mundane tasks, such as locating valuable objects became difficult, if not actually impossible, to accomplish. 73% of the test subjects left the lab’s simulated crime environment without removing any objects whatever – sometimes even those placed in plain view.

This was especially noticeable in situations where a safe or a strongbox was involved. Even hardened safe crackers with many year’s experience reported an irrational urge to want to leave the sound pattern’s area of audibility.

We consider these results to be quite astounding and a total vindication of Bill and his team’s hard work. And bear in mind the pressures on the subjects would be markedly increased in a non-laboratory environmental situation.

On the negative side there were a few instances of inadequate anger management resulting in some damage to the laboratory mock-up. Our technicians are looking into this and are adjusting the modulation on the sound pattern’s vocal output, lowering it to 140Hz, thus endowing it – we hope – with a less threatening suggestion of benign authority.

Anyway, the audio is loaded. I think we’re ready to roll. We’re going to let you listen to Bill’s latest sound pattern then you can all get back to the pool. But first let’s picture the scene for a moment.

You’re no longer middle management, sales executives and salesmen for one of the country’s largest private security companies. You’re a bunch of crack addicts looking for cash for your next fix. It’s early evening and you think you’ve found a likely home in a middle-income district. The lights are out. You’re pretty sure no one’s in. There’s nobody in the street and there’s no CCTV around, so you climb over the fence and slip into the garden. You’re hands are shaking a little. It’s been a while since your last fix and you could do with a taste. You force open the window and climb in. The alarm goes off. And this is what you hear:

‘…love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you… your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you… your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you… your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t love you…your mother doesn’t…’

Picture source: Pavel Ševela