Rob Martens: “ ‘Peak’ing around the corners” of the future of business

Thanks for having me.

I just try and stick with innovation and design officer now. Just a lot of different roles and responsibilities. Yes, it's one of the joys of the role. You never know what you're gonna get each day, so I enjoy having a little bit of that variety.

Sure. So Allegion is a pure-play global provider of security products and solutions. It's about a 2.8 billion dollar business. As you mentioned, our regional headquarters is in Carmel, Indiana. We're technically headquartered in Dublin, Ireland. We were spun from Ingersoll Rand back in 2013, but I'm sure we'll talk about that a little bit later. Allegion provides a platform for a lot of things associated with security products and solutions. So for example, we have a very large portfolio of brands and companies underneath the Allegion umbrella that are mechanical solutions, such as locks, hinges, door closers, door exits, things of that nature. But we also have a lot of electromechanical products and digital solutions that allow us to play in what's called the IoT, or the Internet of Things space. By way of my background, I was a CIO for 15 years, a chief information officer for 15 years, and have focused on the emergence of Internet of Things as a large trend within industry. I switched from being an enterprise software deployer, which many CIOs are these days, into someone much more focused on product design, product delivery, and working on futuring for our business, which is very much a strategy planning play for kind of peeking around corners, looking at adjacencies that might help us to prepare as a business.

Absolutely. I think Tom, upfront there they're surprised early, but once you start to look at the trends, the mega trends starting with something like urbanization, right? A trend below that, we do a lot of work in futuring. For a definition of futuring for us, it's pretty simple: futuring is identifying these trends and then creating a relevant narrative for our business around it that allows us to plan, scenario plan, or position ourselves so we don't get surprised by things. So for example, one of these trends is edge computing. I think a lot of people have heard the term edge computing. A simple definition of edge computing is we're doing more processing on location, so physically at the spot. We're still interacting with the cloud, but more of the activity is actually happening locally. So what's interesting is when you start talking about door hardware or security hardware, we have what we refer to as a very unique geography around the door. I helped to manage relationships and strategic partnerships with mega tech companies such as Apple, Amazon, Google, and the like. They have mobile devices that many of us carry in our pocket, but what they don't have is that unique geography within a building. So all of a sudden, our products being connected products sitting within that unique geography around the door can do more processing locally and then share that with the cloud, providing a better experience. When you start to explain those types of things, for example like the edge and our advantage with the edge, all of a sudden the light bulb goes off and people say, 'Okay, now I really understand why Allegion is treated by the exchange and other places as a growth company, even though our background which is over a hundred years actually even in Indy is of a mechanical nature.' Speaking of light bulbs going off, we'll come back to that later. One of the first products that we were able to see out of the Pin and Tumbler Studio involving light, but we'll get to that in a second.

Sure, happy to do it Tom. So Allegion Ventures is really focused on adjacencies to our core business. We're constantly looking to add to our core. We have been acquisitive, we have bought companies, but we're also interested in peeking around corners and gaining a view of what's going to happen in the future. So Allegion Ventures plays in this adjacent area. A couple of examples would be a company called PinDrop, which does voice recognition technology and can identify deep fakes. A company named HqO and Robin Powered, two different companies that focus on optimizing the experience for clients and people in commercial buildings and facilities. And then other companies like OpenPath, which I know we're going to talk about a little bit later as well, who are essentially data platforms tied directly to access control. What's a little bit unique about our fund, as many people have corporate venture funds, ours is slightly different than the norm in that it's meant to be an inclusive fund. The way that we do that is it's an engagement tool for our employees. We have a very limited staff. There's actually no permanent full-time employees on Allegion Ventures. We have myself, we have two principals, and we have a chief marketing officer. Then the rest of the work that's done is being done by subject matter experts inside of Allegion. You're pulling the people from within Allegion who are the experts on certain areas. Absolutely. That's been an incredible experience for them. We get a lot of wonderful feedback from startups that we talk to. You don't invest in everybody, as a matter of fact you invest in a small percentage, but we get a lot of wonderful feedback and it's been reputationally fantastic for the fund. Even if you didn't get an investment from us, chances are you had a great conversation with a tax expert or a mechanical expert or expert in any number of fields. So ventures has been a great engagement tool for us as we mentor and support these businesses over a much longer time horizon. We typically look at ventures as an 8 to 10 year commitment, as opposed to maybe a shorter timeframe where you're looking for that exit that a typical venture capital might be looking for. Absolutely. It all depends on the stage that you invest in. We tend to invest in a little bit earlier stage. For those people who are familiar with the terminology, we would be a Series A, Series B, but we do have more mature companies. For example, PinDrop would be a Series D round. But we typically invest earlier on in the process where we feel like we could have a more beneficial influence and quite frankly that we could learn the most from our interaction with those companies.

Well, I think it's imperative. I know you and I are going to talk about a little bit later in the conversation as well, but we tend to not do the best job all the time of bragging about what it is that we do well in Indiana. I think it's important and imperative for people to understand what we're good at so that they come here for that support rather than going somewhere else. So for example, one of the companies that we've recently invested in is a company called OpenPath. They're based out of Los Angeles but they have an office here in Fishers, Indiana.

They did have that office, but our level of engagement and where we plan to help, we plan to do a lot of work with them here locally. One of the things that we try to do as a fund and as an entity is engage really deeply. It's not about just a financial investment for us, it's about sharing subject matter expertise and helping them grow their capabilities. They have a nice office in Fishers. If we do our job well, we think they will grow and we think it will grow opportunity here in the local area for them as well. I will say OpenPath is a well-funded startup. It was very competitive to become an investor with them, so we're really proud of that investment. But it's also really important for people in Indiana to know that Fishers is OpenPath's only remote office. So the fact that you've got a really fantastic Los Angeles-based startup company and their one satellite office happens to be in Fishers, Indiana should tell you something.

Sure. So we have what we would refer to as four innovation engines at Allegion. Our first innovation engine is our core team. So Vince Wenos, our CTO, and Tracey Camp, our Chief Digital Officer, have wonderful teams. Vince has hundreds of engineers across the globe and we sometimes create our own organically. Our second innovation engine is through our mergers and acquisitions arm. Patrick Shannon's team with John Padula, we have been acquisitive. Our third innovation engine was Allegion Ventures, and we just talked about that. It's an opportunity to invest and partner and peek around corners. What we realized was we still had a gap, which was our typical development cycle can take anywhere from 18 to 24 months to get a security product to market. That has to do with a lot of testing and the fact that we can't have certain types of things happen with a life safety product. So we took a hard look at that and created Pin and Tumbler Studio, whose primary focus is to actually go from concept to delivery into the hands of a consumer within a hundred and twenty days. So we put together a small team of engineers and a small team of industrial designers and took a very aggressive stance. What's really unique about Pin and Tumbler Studio is we took some of the same models that we had with Allegion Ventures, which is we recognized that whenever you create a team and say 'this is a SWAT team of special people doing special things,' those don't tend to last. If you talk to most CEOs or executives, those might last two years or something. When you do a post-mortem on them and you ask what happened, they said 'I wasn't really sure what they were doing, it felt distant from the business, I wasn't sure I was getting the value.' So our goal with Pin and Tumbler Studio was to have a highly inclusive entity that could collaborate highly. In addition to having that core team of what we would call engineering player-coaches, we also create cohorts. In other words, if you're a high-performing member of the Allegion team and you've just come off of a big project, let's say it wasn't even product related, it was an ERP deployment or you did a great job on something in finance, you have the opportunity to be nominated to participate in one of these 120-day Pin and Tumbler Studio cohorts so that you can be side by side with a player-coach engineer and deliver product. The other beautiful thing about Pin and Tumbler Studio for us is when you're working with startups, one of the challenges that you typically have is when you say 'what can we do for you besides capital?' They typically say 'I'd like to do a proof-of-concept with you.' Typically you either get an ask for doing a proof-of-concept or they want to leverage your distribution. That's particularly difficult again in a security space where reputationally you don't necessarily want to do that, there's a lot of risk. Well, Pin and Tumbler Studio allows us to work directly with startups and do less than 120-day proof-of-concept launches with them by creating new brands, going to market in completely new ways than they were anticipating. So the feedback has been interesting from the standpoint that we're actually able to move faster in many cases than the startups themselves are able to move.

Absolutely. So it was, we were very proud. We didn't know what to expect, so we put 120 days and then we launched the first in 70 business days, so we're very pleased with that. It was a product that we call Illuminati, which actually is a doorknob that has a PIR sensor, an infrared sensor, built into the cap of the product. We refer to this as a techno-functional product. In other words, it's not connected to the Internet. From a privacy standpoint, there's no information being shared, but it is a smart product. So when you walk within the range of the product, it will light, provide some functional lighting on the door to let you know where the handle is, while at the same time it's also quite beautiful. We got a lot of feedback from a variety of groups. Some people saying 'my goodness, this is such a practical thing to have in my geriatric facility' or other practical applications, but also a huge response from a more artistic community saying 'oh my goodness, this is a beautiful wonderful thing.' What we learned from it, which is a big part of Pin and Tumbler Studio's mission, is that when we wanted to put this sensor in the cap, we were unable to do that initially without exposing a lens which is kind of ugly to look at and most consumers don't like that. So part of the mission of Pin and Tumbler Studio is to find new technologies. We actually found a Swiss company that provided a substrate that looks and feels very much like the material on the knob, and the signal can go directly through that. The sensor is set up so it actually gets a broad range. So from the side you could walk up to it from the side or directly on and it would light. That technology, that new substrate and that application of the PIR on it, is something that we're now looking at leveraging across the broader Allegion portfolio, which includes things like exit devices. So for example, if there was an emergency situation, the light could appear on an otherwise non-powered exit device, or in a number of other product instantiations.

Well, I think you nailed it Tom. It's all about prioritization and making a good choice. We have so many interesting products on the shelf. I think it's fair to say commercialization has a lot to do with our prioritization. We do have research projects with PNT and things like that, but we also have some other interesting work going on with local universities and other entities to get these products off the shelf and into the market. Allegion has a huge backlog of really fantastic solutions that have never seen the light of day just because again there's only so many hours in the day and you're focused on optimizing the things you need to for business. But as we see work that's going on at universities, other mechanisms that we're forming like Pin and Tumbler and other things, there's a lot of new opportunities to get these products out. What's really interesting about that is not all of them are going to come out with an Allegion brand. They can be spun off. There are very unique business opportunities. Some of these are independent businesses that will be formed and have their own distinct business plans where we may be just an investor. So lots and lots of opportunities. I would encourage many of the other businesses that are listening to this podcast, this is a huge opportunity for everyone. It is a very unique time within our region, and you're starting to see capability whether it's from universities or from private venture studios, the ability to take some of those ideas and content off the shelf and get it out there and see some unique growth.

Absolutely. It's one of the most important focus areas for us. One of our probably most important products that we make has been made in Indianapolis for over a hundred years. It's called the Von Duprin, and it's built off of Toby Drive in Indianapolis, and it ships to the entire world. By the way, if you get off an airplane in Dubai, you're going to hit an exit bar that was made in Indianapolis, Indiana. So great company. But they feed, and we feed a huge amount of that product into K through 12 schools. We work in a very broad ecosystem. So you have mechanical purely mechanical products, you have electromechanical products, you have digital platforms that connect in. We're very focused on ensuring that K through 12 schools have the best tools that will allow administrators and school resource officers to create the best possible outcomes for students when something does happen. Egress is something that is super important in case of a fire, in case of needing to exit the facility quickly. That's just as important as controlling who can come into the facility. So we've made a number of investments and participate in a number of safety boards and industry associations to ensure that people are focused on the best practices and how we can do things in a safe way. We've seen some suggestions where the intent is really good but people want to put in what we would term as barrier-type solutions which ultimately are patently in many cases unsafe. So we try to take our knowledge in codes and applicable codes and regional differences with school construction and share those as broadly as we can and act as experts in the space to try to ensure that our kids have a safe, secure, and quite frankly a simple environment to work in, so they don't feel like they're in a lockdown place.

Yeah, so voice recognition has gotten a lot of attention and it's a really useful tool for a lot of different demographics. I think that's what the big appeal is, Tom. It doesn't matter whether you're in your 70s or 80s or whether you're in your teens, voice recognition is something that people are interested in and they use. One of the challenges we witnessed with it early on, I was actually at a meeting at Amazon talking about Alexa, and we had an opportunity to be one of the first locks to lock or unlock based on interacting with Alexa. The challenge is that Alexa is not smart enough at this point to distinguish with certainty between Tom's voice and Rob's voice. So my feedback to them early on was 'what are you gonna do if you stand outside with a bullhorn and say Alexa unlock my door and you're a bad actor?' So that's where companies like Allegion play a strong role. We think about the security. To Amazon's credit, they came up with a scenario where you have to, if you're gonna unlock your door and you can do that with a Schlage product today, it would say 'Alexa, unlock Maya door' and she would say 'Okay Tom, what's your PIN code?' Well, to me from an experiential standpoint that's not ideal. So we began to look very closely at what other options are out there for voice identification that have a higher rate of accuracy. We need in that 99.9% category in order to feel comfortable on a residential application that you are who you say you are with your voice. Interestingly enough, we met a company through ventures called PinDrop, based out of Atlanta, Georgia. They were using their product primarily in financial call centers. So think big credit card companies or large financial institutions, and they were using it to identify known fraudsters who would call in to take advantage of things, trying to open bogus accounts, do things they shouldn't do. They are also experts at identifying deep fakes, if you're familiar with that term. We see that with both video and with audio. So they have unique technologies and algorithms that allow us to ensure you are who you say you are. So we've been taking a very deep dive into figuring out how can we apply that technology to locking platforms to make your experience when you walk in a building or unlock something more seamless. In this case, as you can imagine, a simple application that everybody could understand that I think we'd all be interested in is if we had an auto opener on a door that we have for Americans with Disabilities Act compliance. If we had an auto operator and we had a voice ability, wouldn't it be wonderful in today's world with coronavirus to be able to say 'please open the door' and have it recognize your voice and open the door for you, where you didn't have to touch anything?

Yes, yet. And to the degree that we need it, they can differentiate a little bit but not in all cases.

You know, when I go to conferences to talk, and I spend a lot of time doing media work more than I had ever planned to do, people ask me about Indiana and they say 'Can you describe Indiana in a word to me?' And my word is 'competence.' This is we have amongst the most competent workforces, whether it be mechanical, technology, we have an incredibly competent workforce that is incredibly dedicated and they take their jobs very seriously. I think that's born at a very early level even in our schools, in that we value our citizenry, we value being good citizens and what it means to be a good citizen. What we also have is a habit of being overly humble in my opinion. I think we really need to communicate what we're working on and what we're excellent at in order to have bigger and better opportunities to collaborate. My winning example would be the outcome that we saw with ExactTarget and Salesforce. Look at what happened there. Salesforce, a Silicon Valley powerhouse, sees what ExactTarget, sees what Scott Dorsey and the team there are doing, and makes a great decision and has absolutely run with it from there. If we don't get out and communicate to people what it is that we're doing, they're never going to have the appreciation for the level of gravity that we have here. I could give a number of examples. I'll give you one tangible example: we really know how to build here. Silicon Valley is very focused on connecting things, they're very focused on building software and things like that. Our special skill is we know how to build physical things. And there's a gap in the marketplace for taking those big complex physical things and connecting them with that application layer, with that software layer. This is a huge opportunity for us and I think it's someplace where you're gonna see us grow and you're gonna see us really have incredible opportunities going forward over the next three to five years.

There's a simple formula for it, Tom. I talk about it all the time, I call it the 3S model: if we can focus when you're going to connect something, if we can focus on three things, and it doesn't matter whether it's a physical mechanical device or a connected device or a digital device, you can focus on these three things and you're gonna be successful. One is that it's secure, two is that it's scalable, and three is that it's simple. If your product is secure, scalable, and simple, you have a great chance at success. Because I can tell you right now, in a more and more connected world, as we're starting to take things like door hardware that in the past had not been connected, as we start to take these really important things that are part of our core infrastructure and bring them online, or maybe we don't connect them per se but they have more smart intelligence in them, if you can focus on the security, the scalability, and the simplicity, you have a huge advantage.

I think simple is probably the most difficult to accomplish. I mean, we are all experts in our fields, we know how to build things. But if you can't relate to it or you can't intuitively understand how to use it, you're either not going to use it at all or you might not use it in the right way. So I think the magic that you can bring to people is making things simple.

Well, I think I'm really lucky in that my work ties off pretty favorably with my personal interest. So you could probably say I'm one of these people that work all the time. But my spare time is definitely dedicated to my family. I'm lucky to have been married for 25 years to Carolyn, who runs Housemartins and is the master of ceremonies for all things. So typically my big job is to show up. We have three teenagers in the house, so very busy with school activities, everything from cross-country all the way through to symphonies and all kinds of good stuff. So I'm very, very thankful for a wonderful partner at home who makes it easy for me.

For me, success is feeling happy and fulfilled with what you're doing every day. It's having a meaningful connection with those people that you work with, where you feel more of a connection than simply being in a place where you get a paycheck.

Thanks for having me Tom, it's always great to visit with you.