Two Part Conversation with Rob Martens of Allegion and Allegion Ventures

It's good to see you, Lee. Crazy times. It is definitely. So now it's the new normal, I believe. So well and hopefully conversations like this, whether they are a mental break for people or then also maybe they spark an idea or help get through, that's the desire and the hope we're doing this. So thanks for taking your time out of, you know, leading an organization to spend some time to talk about these things. So thank you. No, thanks for having me, Lee. I think these are great. I've been watching them and I think this is a good opportunity for those of us in the industry to get together and start some broader conversations. So appreciate you facilitating it.

You know, out of crisis is born necessity, right? So we see a lot of things where people for obvious reasons don't want to touch, whether it's a door handle, whether it's any type of contact point that may not be clean in their mind. First, I think the easiest way to describe what we're doing in this space is we're trying to act as an enablement platform for people that are working in specific markets. So for us, what that really means is we have a very large mechanical business, as many people know, we have a decent sized electromechanical business, then we have digital platforms. So if you take that all together, we would call that our enablement platform. And then in the case that you're describing, and specifically we're looking for more touchless stuff, we're working with some really ingenious companies like Openpath and other people who are saying, 'Hey listen, Allegion has an auto operator or has these other door controls and things, what can we do collectively to start to think about what the next generation of solutions are going to be where we can integrate those things together?' So we're going to have some interesting solutions that are going to solve for specific problems. I think the flavor of the month is touchless, but I think one of the benefits from an innovation standpoint of what we're seeing with this crisis again is companies are talking to each other that historically may not have gotten in the weeds on some of these things. It's a great opportunity for people to discover each other and to talk about what they uniquely have to offer in their spaces. So I think it's really important for incumbents like Allegion to get out there, make sure people understand what we're willing and able to enable for them, and to start building out some of these unique, whether they're frictionless platforms, seamless platforms, or touchless platforms, whether it be for healthcare, whether it be for higher education, K through 12 schools, commercial real estate, multi-family, you name it, it's a collaboration of partnerships, definitely.

Do you agree with that? And I think it's important to keep in mind we obviously have some advantages on the non-residential side of businesses, and that we have codes and we have some standards that everyone adheres to that you don't see on the residential side of security. That's caused a lot of the challenges. I think just an incredible number of standards and other pieces. So the way we approach it is kind of threefold, and we're improving, or at least I hope we're improving every day and trying to do it. And that is we believe that in order to be successful, you got to offer three things. One, you got to be secure. Okay, and I know I'm preaching to the choir here, but when I talk about secure, I mean both physical and digital. So a simple example of security physically is, hey, you know, if you have our lock maker like Allegion, you've got to perform against picking, you got to perform against kick-in attempts, all of those things like that. Digitally, what we're talking about from a security standpoint is protecting the information that may be in that device, but also preventing things like DoS attacks, denial of service attacks, or other elements like that, your cyber elements. So security is one. Scalability is number two. Scalability, giving examples again from a physical standpoint, scalability means things like cycle testing: how many times can I use that lever, use that lock before it's going to break down and not perform the way that it should? So that's scalability in the form of the physical lock. Scalability in terms of software, in terms of platforms and things like that, has more to do with how does it behave when you have 500 users versus 5,000 versus 50,000 versus 500,000? How well does it scale? And Lee, as you well know, depending on how you've architected your solution, how you built it, scale exposes small problems that then become big problems. So for example, if you have a small memory leak or something of that nature, that can be exacerbated in a massive way at that scale. And then last but not least, simplicity. We all get simplicity from the standpoint of interface. You know, when people walk up to a lever handle or something, they know intuitively to put their hand on it. What other types of solutions do we have? I would argue that people like Openpath and PinDrop and other Allegion Ventures portfolio companies are extremely intuitive. They understand that simplicity is terribly important for adoption. But simplicity also crosses over to your very point in terms of the digital UI/UX, the digital user experience and user interface that you're providing, and how simple is that. But if we take on those three S's — security, scalability, and simplicity — as an enablement platform, one of the things we want to do is when we're working with a partner like Openpath, is how simple can we make it for you to interface and integrate with us? That is our job. It's no longer about having proprietary exclusive platforms that make it so you're locked in. It's about how quickly can you do it and how quickly can you add value to not only the partner but more importantly the end user, the facility manager, the people that are managing those systems. So I think we're working our way out of this mindset of proprietary where I have more control over these pieces, and more to a value-added, value development mindset, which has everything to do with adhering to a little bit more open focus. We may not get to completely open standards, that's difficult to do, but I do think we can get to a mindset of 'I have to be the easiest partner and enablement platform for people to work with in order to be successful.'

Is, you know, I like, I know the PinDrop team, you know they do a really good voice authentication platform. They're not gonna be the best guys probably to build hardware for locks, right? So the ability to bring those two together, and you can start to put the parts and pieces to deliver what is probably the best solution, which would then drive adoption because experiences are better, which I think that's what the consumers want. Where historically it was always believed that the best way to deliver the best solution was to control everything, see the floor because you were the master of that domain and you can control it. Now though, it's flipping. The ability to drive the best product is actually one where it's made up of many parts. And that's a totally different mindset from everything from product management to the finance, how you do it, to how you build a product, all that stuff. So my hope is, coming out of this as a community if you would, that that will actually even grow faster, which I think will deliver even better solutions.

There are going to be more people that are taking the approach that we take. I think specialization in understanding your end market, if that's what you're serving, is going to be incredibly important. So when you look at a company like Kendra, they've historically focused in places like contact centers and in other high-security areas where maybe it's dealing with credit card fraud and financial services and things like that. When you see a need and you see a crossover where, for example, Alexa simply at this point isn't able to discern with enough certainty Lee's voice from Rob's voice, there's a clear opportunity for a PinDrop to come in and bring in their technology that gets us to that 99.99% level that we need to see in order to adhere to our requirements. Those are great opportunities. And this is a time for entrepreneurs to really deeply understand what they're offering and to scan across multiple industries in some cases to see where they can apply. I would suggest that access control, as we become more, using your word Lee, more interoperable, there are more and more players that we have historically not thought of as security or access control tools that are going to work their way in. Yeah, a hundred percent. It's another one of those phase changes where you've got products that have user experience that's in HR or other areas that now all of a sudden become the front end to a lot of these systems. And historically our industry didn't want to give up control, if you would, because of the security side of what we did, where if we let somebody do it, it was... but now it's actually flipping to where that's actually gonna be the necessary way of the market, 'cause that's what the consumer wants.

Sure, you can always check us out at AllegionVentures.com. There are really easy ways to submit your idea, your company. Simply ask for a callback. If you do submit through there, I personally guarantee you will hear from one of us. We do have an extended team of folks, so what we call everyone back, I think. Right now, venturing is an interesting place to be. I think in particular corporate venturing is a very interesting place to be. You know, capital up to this point has not been difficult to find, but I think what you want to really get after is finding people that are going to provide some tangible value to you outside of just the financial piece. Now that's not to say most of the VCs are going to provide you with some really savvy business advice, but in terms of understanding product roadmap, where to go, who to integrate with, how to get those things done, and most importantly understanding how these relatively complex markets really work, especially in times of a downturn, is super important. So finding those, I would say, corporate venturing resources that have innate knowledge of the markets that you're interested in, I think you'll find those are worthwhile calls to put in and to make those connections. I would say the other thing to consider is we really have four distinct what we call innovation engines at Allegion. Our core innovation engine, of course, we have hundreds and hundreds of engineers around the globe that do organic innovation for us, and industrial designers and all kinds of other great team members. In addition to that, if you know Allegion history, we've been somewhat acquisitive. We do add from an innovation standpoint to our portfolio on occasion when we think the cultural and product synergies and business synergies are good. Then we have ventures. What you should understand about Allegion Ventures is we focus on adjacencies to the core business that we have. And the purpose of focusing on adjacencies is, Lee, exactly what you're talking about. And so for y'all, for your audience, we focus on solutions that we don't necessarily see as being part of our core offering, but we believe are interesting, valuable, and can help us kind of see around the corner for our industry, to see what's going to happen. And then last but not least, I haven't mentioned it, but Pin & Tumbler Studio, which is our incubator slash accelerator in the company. Because when you work with a lot of startups, or quite frankly even with our partners, with startups in particular, typically what people want to do is they either want to leverage your distribution or they're interested in talking about a proof of concept. And Pin & Tumbler Studio conceives and launches products in 120 days or less. That's our model. And so we do rapid development and dispersal of what we would call experiments to validate theories and other things. You have of course advanced development, which is focused on propagating standards and things like that. And then you have things like Pin & Tumbler Studio, which is more focused on the innovation side, which is about theorizing and proving those theories out. So the purpose in mentioning these is if you're a startup, look for corporate venture arms that provide you access to these types of tools and these types of insights, because that's where you're going to see the best opportunity. One last thing, maybe Lee, is understand fundamentally as well: if you believe that you fit into the core platform of a corporate venture you're talking to, ask yourself as the founder whether you really want that entity on your cap table or not. This is still a time to protect yourself. So for example, I have people on a regular basis that sell smart locks or create smart locks that reach out, and I always like to ask them that question: depending on what your exit strategy is, do you really want a company that you may look to ultimately sell to to be on your cap table? So be smart. This isn't a time to panic or anything like that. It's time to be smart. So think broadly and deeply at the same time about who you partner with.

Well, thanks for having me, Lee. And just for your audience, you know, be safe and be healthy. We're going to get through this, and I guarantee you we're gonna come out the other side a lot stronger than we were before.