“In 1973, the value proposition was to keep bad people out. If no one has been shot in your building, it's working. That still remains, but the industry is evolving from that core principle."
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Episode 110 is a conversation with Lee Odess, physical security expert and access control system thought leader and author of the book The 6 Phase Changes Shaping Access Control.
This is a deep dive on access control, one of the main utilities in a building, the silos that are subindustries in and of themselves, just like HVAC or lighting or elevators. In many ways, the evolution of these siloed industries are colliding with the smart building industry and we explore those collisions in this insightful conversation with an absolute expert.
Mentions and Links
- The Six Phase Changes Shaping Access Control by Lee Odess (0:39)
- LATCH (1:13)
- Lutron (1:21)
- The E-Myth Revisited by Michael Gerber (44:40)
- Build by Tony Fadell (44:45)
- The Messy Middle by Scott Belsky (45:43)
You can find Lee on LinkedIn.
- The history of access control systems (3:26)
- Components to access control systems (7:42)
- The Six Phase Changes Shaping Access Control (24:23)
- The verticalization of occupant experience transforming the access control system (30:49)
- Business models in the access control of tomorrow (37:59)
- Carveouts (44:15)
Note: transcript was created using an imperfect machine learning tool and lightly edited by a human (so you can get the gist). Please forgive errors!
[00:00:03] James Dice: hello friends, welcome to the nexus podcast. I'm your host James dice each week. I fire questions that the leaders of the smart buildings industry to try to figure out where we're headed and how we can get there faster without all the marketing fluff. I'm pushing my learning to the limit. And I'm so glad to have you here following along.
[00:00:31] James Dice: The episode is a conversation with Lee odes, physical security expert and access control system thought leader and author of the book. The six phase changes shaping access control. This is a deep dive on access control, which is one of the main utilities in the building. One of the main silos that are sub industries in and of themselves, just like HVAC or lighting or elevator.
And in many ways, the evolution of these siloed industries are colliding with the smart building industry as a whole. And we explore those collisions in [00:01:00] this insightful conversation with an absolute expert. Enjoy. Hello, Lee, welcome to the nexus podcast. Can you introduce yourself for.
[00:01:07] Lee Odess: Absolutely. Thank you. I appreciate the opportunity. So, yeah, Leo currently now I'm the senior vice president ATLA. I've been within the security access control specifically space for quite a while. I'd say the connected space for 20 years started out with Lutron.
So letting controls had an integration firm worked for a handful of security firms, primarily run access control. Where then had my own consulting company, the space I worked with you name 'em, I've probably worked with majority of either the startups or the big companies in the access control, lock space.
And then sold that business to latch where I'm currently at now. Okay, cool. And that
[00:01:42] James Dice: business, I was doing some research on you. That business was like, you started it during the pandemic. It looked like, and then you sold it last fall,
[00:01:48] Lee Odess: something like that. Is that right? Yeah, it was actually, so we started in January of 2020 uh, I left before the Panda.
Okay. Yeah. yeah, it's funny. Cause it was call it serendipitous in some areas, but [00:02:00] I, you know, in our, in our industry, the security side, there wasn't a lot of video content there. Wasn't a lot of you know, we had a big trade show in March that was scheduled and I wanted to go and basically. You know, I had interest in creating YouTube the content in digital marketing on LinkedIn.
So I bought a camera, bought a microphone, had all these plans to go. I, and then the pandemic came leading up to it. I was working with a lot of The startup companies in the space that don't get, unless a lot of press in our, in our industry and aren't in on the show floor. So I was gonna do a combination of the show floor on that mm-hmm.
So I interviewed I about 40 interviews had, had going into it. So when it cancel instantly, I was doing like three podcast videos a day and it, and then building more and it, it sort of turned into this thing that, yeah, and I. Probably roughly about January the, the closing of the, of the, of the business being sold happened.
But yeah, so that's, it's uh, for the pandemic, it was horrible in a lot of ways, but from a business standpoint, for, for me personally, and, and the people on my [00:03:00] team and the family, it was good timing because of the dynamics of what happened. It was very topic. Nice. Nice. Very, very cool. But we haven't,
[00:03:08] James Dice: we were talking before we hit record, I, I haven't had a deep dive on access control on the podcast yet.
So I'm excited to just kind of nerd out with you. Uh, Have you teach me, and then by default, teach the audience about these systems and kind of the role they play in the bigger smart balloons picture. Let's just start with just maybe just a history of access control systems and what I mean by that. How, when did this first start becoming a digital thing?
Right. And then what are the different phases that you think about when you think about how that industry has evolved
[00:03:42] Lee Odess: over time? Yeah, absolutely. So yeah. So if you think about electronic access control, cause access control has been around since, you know, the cavemen of putting boulders in front of caves, if you want to, but jokingly, but like locks like back in Syria, like long, long time ago, mechanical locks, it's actually quite interesting.
I [00:04:00] was just in the, the BAS region in Spain and France, the area of, of the world and That's been run for a very long time. It used to be locks that were made for luggage when people were like horse and buggy, right. Like, oh, OK. So that business has gone to actually like the hotel I'm sitting in now the lock that's on the door here has its heritage back to the company that created those little locks for luggage.
That basically. Right. So, so, but if we were to probably more of what you're talking about, especially when it comes to smartphone, it's more about the electronic access control. Yeah. And there's a great debate around it, but we did some research in really around 1973. Is when electronic access control started.
There's an argument over which companies, and this is primarily United States. Now, as you go in different areas outside of it roughly around the same time though, frankly, it's just, you have an argument over who did it first, not necessarily did it happen. Um, But 1973, Southern California, handful of companies created electronic access control.
Which if you were to look at the different periods of time of when had happened there's a handful of events that happened [00:05:00] that I would say have continued to tweak what has started in 1973. And the good and the bad of our industry is, is that the fundamentals of keeping bad people out and the fundamentals of what happened in 1973, the value creation story hasn't changed.
OK. Like a lot of it. It really has, the fundamentals haven't necessarily changed. But the value creation has, and we sometimes mix the fundamentals of the value creation story too much. And so if I was looking at the different periods of time, that, that our industry has seen, that have been pivotal, that you can go back to and see it, how it's evolved.
Uh Lockerby is one of them when that moment happened. And if you think about it you had a lot of security around airports in the government, which that's, that drives down to the commercial space. You know, then you have nine, 11 is another event. That drove it. Cuz if you think about it, you used to be able to walk into any building with a business card frankly, and you would get access to a lot of different places, all of a sudden photo identity.
And a lot of the things you see at airports are driven into corporate apartment [00:06:00] buildings and the rest. Then the really interesting one is the introduction to the iPhone. Cause that's when you had the introduction of convenience with security. Where before all the other ones were about security.
And now I would say you're starting to see it because of the pandemic, like, so that has triggered some of changes in the phases, but those were really the big events. Now people would argue like the introduction of like the microchip or whatever, but like, fundamentally those are like the big events that have driven very north American focused.
But, but not even all because they it's it's. It's a very small community in a very global world for the access control. So a lot of what happens in China impacts here, what happens here impacts the UK. Like it's just how it works. Got it. Got it.
[00:06:45] James Dice: And you mentioned locker B. I don't know if I know that story.
Can you just briefly explain what,
[00:06:49] Lee Odess: what that was. Yeah. It it's well documented of sort of a, a hostage take with the an airplane crash and like around sort of security on that side, [00:07:00] but pretty well documented. It's the, it's a, it's a moment that triggered. I would say a change in policy and the expectation of how systems work or how you would implement, but more than anything else, too, what it changed was an influx of capital to accelerate technologies that were started within the government, kinda like DARPA and the internet that all of a sudden.
Makes this happen, right? Same type of thing has happened in our industry of adoption of like radar and of electronics and identity and a bunch of stuff that primarily came from government influences and money that then come down and trickle down. So an application of a technology that was protecting airports, me going into a coffee shop.
Yeah. Got it. OK. So let's, let's
[00:07:41] James Dice: do a little bit of. Nerd out on the, like, when I look at an access control system, what are the components? What are the, what's the architecture. And then how has that changed in, in these phases that you're talking about?
[00:07:52] Lee Odess: Over time. Yeah, I will. And, and I will apologize to my counterparts [00:08:00] cuz there's some parts that I won't talk about that, but are very important to them, but may not be important, like I'm not gonna get into biometrics here.
Right. So, okay. If we, if we look at the different components, you've got the person as one. So call it identity. With that typically historically. Cards keys and fobs on biometrics, but historically it's primarily, you know, people use a card. I've got one here to get in my hotel. You get in your office, it could be a fob, whatever.
It's right. So that's, that's one component you typically will have some sort of device like a reader or a lock. That you go up to that black box that's on the wall or it's built into the lock or whatever it might be, but that's usually a part, there is a controller behind that. Whether it's a computer, it's a box to a box, like it's where the brains are now, that is happening to also be in the cloud now with architecture or on site or a hybrid of the two on that.
There's typically an access control software solution that either sits on site or in the cloud or a combination too, that helps you manage who has access at what time, who does [00:09:00] 10, your alerts, all of that good stuff. Then there's a whole bunch of components and parts pieces, but theoretically, those are primarily the most notable parts within an access control system.
Now, a new introduction is. Which has now opened up a whole nother world where you're starting to see a lot happen in that world, but those are primarily your, your majority important parts. Got it. Got it.
[00:09:21] James Dice: And how is that? So you mentioned the controller could be on site in the cloud. It, you mentioned the software layer could be on site in the cloud mm-hmm
Has that fully distributed that sort of changed fully distributed throughout the industry? Or is it kind of like the building automation world where you have. Legacy systems that could be still installed from 20 years ago. And it's. Big hodgepodge in terms of what those architectures look like across, across
[00:09:48] Lee Odess: the board.
Yeah, no, it, it, it follows that we just may be lagging in some areas and leading in others if you would, but the architecture adoption and that, so again, I go back to 1973, those [00:10:00] systems were built to be in the wall 30, 40, 50 years from now. Right. So they built them that way. So in a lot of, and when their value proposition was to keep bad people out, if no one's been shot in your building, It's working.
So the budgets have never really opened up that much to change those systems. Cause the fundamental value of what they were doing is still there now though, as like, that's why the pandemic is so interesting. Cause the, the value proposition like overnight, when you couldn't go to your building to change the system and you didn't have it have cloud based, you had no visibility to what's going on, but you had to give access rights and the rest, unless you had a VPN built and the rest is.
You're pretty much, you know, Sol to go do that. So all of a sudden, the architecture of these buildings that we've been talking about, I worked for one of the, for the first access control system that cloud based while ago we were the weirdos in the back of the booth of the, at the shows. Right? All of a sudden we were like, now, You're getting to the application of the application.
So it's not really more about cloud or onsite. We're now [00:11:00] starting to talk about, although, you know, it's 20, 22, right? So you would, this stuff's been around since the early nineties. Yeah. Yeah. So
[00:11:10] James Dice: just to back up a little bit, the pandemic made it so immediately overnight, you're saying people weren't able to come on site.
So they had to administer their systems remotely. Is that what you're saying? That was the first kind of shift that the pandemic
[00:11:22] Lee Odess: had. That was, that was one of them. Yeah. But, and then even in that case, like, I'll give you a couple examples of how they've shifted. All of a sudden wellness in our industry changed from just keeping bad people out and making sure you don't get shot or stabbed.
Right. It was then now about health, like touching things and frictionless and seamless. You also had health attestation where. The core value proposition of mobile before was I was gonna take my cards and make them mobile. So I was, it's like early smart home where early smart home mobile was. I'm gonna do everything I did before.
Like flip a switch. I'm now gonna go do that inside of my phone right now, though, the [00:12:00] value proposition has shifted a bit more. So overnight the health access was part of the access control and you needed to have that seamless. You also had a case where everyone now is a visitor where before you had knowns and unknowns, you still have knowns and unknowns, but we went ahead and made everybody unknown because you need to know when they're coming in, when they're not the, the expectations of our system, like about booking desks and booking things.
And like all of that stuff didn't exist. And now all of a sudden. Overnight in the commercial world, your systems need to do that, or they need to integrate, which is also another interesting one. Is it, it added another layer of the need for APIs and SDKs and things like that. That, yeah, they've existed before, but they were kind a nice to have overnight.
They became a must have for your system. And that's, that's interesting to me because now you see companies putting budgets, real budgets behind doing that stuff where before is like, All right. There's some missed opportunities and some key accounts may be asking for, so that's what I'm gonna do. So now it's sort of like, if I don't have it, [00:13:00] my system's outdated.
Yeah. Yeah. And, and
[00:13:03] James Dice: just to kind of mirror what's happening in the building automation world, because we have that wide spectrum of systems that have been upgraded in systems that are legacy systems. What we're seeing on the building automation side is that some systems have APIs, right? You might go to a building and you might find an API, but you might go to a building and you might find a legacy protocol that you now need some sort of gateway to connect to that system.
Is it the same exact thing on the access control
[00:13:28] Lee Odess: side? Primarily. Yeah. I mean, once you get in the, I don't believe we've still got there in the whole building automation, like, you know, back to the back net days Tridium and the rest of it back way back machines of yeah. When we were doing this back.
For me, it was 1999, but for other people, I'm sure it was 1979. Right. But so we're still, we're still like on that same, maybe it's, there's a bit more adoption the rest of it, but like from an access control standpoint of being able to do that stuff. Yeah. Same model of like, you have old systems that are being asked to [00:14:00] do current value propositions of today, and they're wondering why it doesn't work.
And it's like, well, You know, having RPC XML, sort of like, you know, database of how you do integrations versus restful APIs and the rest of the stuff. It's not like you can spin that stuff up overnight. It takes time and the need for it is now. So you get to this weird case, which I would also say, which is nice.
Is. Now that the value proposition has changed too, where historically you would never do a rip and replace as an end user. You now have a more reason and more budgets because all of a sudden, overnight access control was primarily the, the weirdos in the basement doing security, or like who was associated a risk.
But now around our table in decision making, which it was there, but it was only at the high end mm-hmm now going deeper into decision making. You've got, you know, the HR people, you've got the legal people. I've got all these people that. An access control system, which is probably one. The things that people touch on a daily [00:15:00] basis.
So if you think about the impacts of, of making a touch point with somebody, you use your access control system, like almost every day when you go in a building, even when you're not using it, you're using it because the way the system's been set up is to let you go in that's that's access control. That just means I don't have a barrier set up to stop you.
And so, like, it's an interesting, important piece that is historically, I would say. Only being considered because you didn't want, again, a bad person to get in now, though, it's sort of like, all right, how do we play with engagement? How do we help with health and wellness? How do we data? Like how do we understand people flow?
And like, you know, like there's a lot that our systems were, have been able to do before that people are starting to put more money towards, to adopt in the rip and replacing. Got it. Got
[00:15:44] James Dice: it. So. You mentioned integration, you mentioned connecting to other systems. What are all the different systems that data might go to from the access control
[00:15:55] Lee Odess: system?
And then maybe
[00:15:57] James Dice: this is gonna be a long answer from you, but [00:16:00] I actually just want to hear what you have to, what you have to like, kind of like answer this really broad and vague question. And then what are the systems and use cases where. Commands might come from elsewhere besides the access control system.
Does that make sense?
[00:16:15] Lee Odess: Yeah, totally. I'll first start by saying access control is a utility in the building, in my opinion, just like H V a C. Yeah. Just like lighting just right. So it's it's a fundamental piece. So it, it, it takes some of the fundamentals. Building management. Like it can be as something as simple as a building automation system, as something as you know, left to the imagination that I don't even know about at that point where you can, you can make a rational decision.
So because it's utility and because it, it typically is managing not only risk, but like flow of people and things. Things being like cars for instance, into a garage, right. That that's an aspect of access control as well. That may have nothing to do with getting into the actual office, but it does now of [00:17:00] getting the cars into the parking lot.
That's part of the building, right? So like, mm-hmm, it, I I'll answer it. You know, I can get as specific as you want from examples, the other thing, or, or, and as, you know, brought us, me basically punting and saying, you know, anything cause it's utility, right? Cause it's utility and that's a hard in the good.
About that is, is that as an industry, we haven't necessarily done a really good enough job telling our value creation story because yeah, we've been so hardened in the security space where actually think about it. If I want convenience now from doing this, that actually typically runs in, in like complete contrast to security.
Like we want barriers. We want you to be inconvenience. Like that's a fundamental part. It's purposely. There's a lock in a door. And if you have to do eight things to get in, we're like, yeah, good. It means it's working. And they were like, well, now I've got this device being the phone that, you know, a computer, how do I bring levels of higher security, convenience?
That's the great, that's the area I spend a lot of time in thinking about, because I [00:18:00] will not, I'm not the one that dies in the hill. That's like, you know, mobile's not gonna be there. Convenience can never be part of this. Like, yeah. Like I just, that's not where I come from. So, I get sometimes. You know, flag is like not the security guy, but that's not true.
I think it is this part of the security story, but I would also say it depends on verticals too. What's interesting now within security. Before, like I said, most of our systems were set up for airports that were brought all the way down to a multi-family building that you live in and we, and you would use like 10% of what's needed in there, but it fundamentally did what it needed.
It stopped and added access for people and kept bad people out. So it's like, cool. It works, but it's not, it doesn't delight. Right. So now though, you have verticalization happening. You've had that, like for instance, in hotels where the access control now is specifically for hotels integrations with hotels, you know, we don't call you know, people that stay here.
You know, employees because like, I I'm a, I'm a guest, right? Mm-hmm so the systems themselves are very specific to [00:19:00] that. You're seeing that now. Multi-family where I spend most of my time now is. Those systems are verticalizing as well. So like the people that are winning in the access control space in those areas are getting very specific where the, the integrations are unique.
They, the value creation stories are unique. I you're gonna start to see it in and you're starting to see it in the enterprise side of it. There still will be the airports. There still will be industrial and the rest, but that's, what's happening to our industry right now, which. Primarily being driven by software.
And that's, what's interesting. If we take a step back, if you look at our industry, we went from mechanical locks to motorized, same ones now, motorized, like I want that happen to connected. To now smart. We're starting to enter the smart world. And that's really the progression that we've made. What we've historically have had happen though, is the same locks that were connected were the same ones that were motorized, which were the same ones that were analog and mechanical.
And we treated software [00:20:00] along the way as a feature of hardware what's happening now, though, is you're seeing a shift in our industry where the hardware is actually a a feature of the software. Totally different fundamentals. Now my, my industry, folks that I like to get into, so call it intellectually sparring over.
This would be, they'll say, no, that's not true. They're. I read about this in the book and that around you have a phase change happening and just like water, turning to ice, that weird period in the middle where it's like slush. That's what we have right now where you have both truths, the old truths and the new truths exist.
So we do have pockets where all the fundamentals of 1973 still exist. It doesn't mean that the 20, 22 ones of software that I'm talking about. Don't and so you've got it's, it's very confusing now for. End users in a lot of ways, because you could almost see the fundamentals of what they want and the old stuff, but then they get to a point it's like, well, why doesn't it just work?
It's like, well, it's hard to explain to 'em that [00:21:00] like, because back in 1973, there are systems that still work in buildings since 1973 that are still happening right now, especially in New York city and areas of density and early adoption that are being used. That is like, Ooh, like it's gonna take some time.
[00:21:18] James Dice: It's gonna take some time. Hey guys, just another quick note from our sponsor Nexus labs. And then we'll get back to the show. This episode is brought to you by nexus foundations, our introductory course on the smart buildings industry. If you're new to the industry, this course is for you. If you're an industry vet, but want to understand how technology is changing things.
This course is also for you. The alumni are raving about the content, which they say pulls it all together, and they also love getting to meet the other students on the weekly zoom calls and in the private chat room, you can find out more about the email@example.com lab. Start online. All right, back to the interview
so you mentioned kind of fundamentals of value creation with software. I, I don't know if that was your exact [00:22:00] wording, but something like that. What are those new fundamentals of, of, of the software driven side of things?
[00:22:06] Lee Odess: So I do think it's a definition of like APIs and SDKs are one, like having those, like the basic, like you would think that, that doesn't need to be like a, a, I don't have to say that, but you do cuz it's that doesn't exist.
Like it does exist. It's starting to, and what's new is the new people are a lot of times forcing the legacy that have to go do that on that end. There's also a, an interesting, fundamental of like getting very crisp on your core value proposition. Where historically we've been lot of closed architectures and we do everything.
Sometimes we don't do anything other than the one thing we'll protect it by doing some, some thing to like a protocol or a way we wire the system, whatever
so a core sort of fundamental also is the sort of cooperation side of where historically you competed with people, you didn't cooperate with them a lot where now the we're having to make real clear point of [00:23:00] views and where our value creation is.
And, and also like the expectation is, is that you're now gonna compete, but then also cooperate in some senses of, of a value. Complete system to a marketplace where you haven't before. Yeah. I think another one is that's fundamentally changed is the, the pure definitions of how our product goes to market through the channel, how we make money, how things are priced, all of that.
The old I like I, our industry was. In a lot of ways I joke, but not has been based off of Excel spreadsheets. And maybe even before that, you know, however long Excel's been around, even before 1973 versions of, you know, green bars and whatever it might have been back in the day, then mm-hmm of Formulas of how we make money are being challenged.
Now with these new things. Like if before, all I had was the hardware to make money off of, I did it one way now I have software also. So I, as a, as a company, I have different ways to make money. I, I believe in some senses, that's why you're gonna start to see things change a lot, like in safe schools, [00:24:00] because historically the only way I made money off the schools was selling.
Now though I have different ways of doing it, that I may open up where I historically have not been able to want go do because of, of that and pressures from society of, of doing things different to bring different levels of, of that. But those are some just examples. There's there's like I got a hundred list of things that have changed.
[00:24:21] James Dice: Yeah. So you mentioned your book. I wanted to get to that. Mm-hmm sounds like you, you published it. Around 20, 20 ish. And it's kind of about these changes that are happening. It sounds like. Can you talk about kind of, the book and kind of what you were intending to do with it?
[00:24:37] Lee Odess: Sure. Yeah.
It's it was called the it's called the six phase changes, shaping access control. And yeah, we wrote it like in 2020, I think we launched it then, or 2020. I can't remember exactly, but around that same type period. And it was, it was me trying to articulate what I believe were the changes that are happening.
And what I tried to show too, is that some of these are sort of like just fundamental stuff. It's not like some weird offing, like, cause if you look at the six [00:25:00] that we set are there it's market reach technology innovation engine. Marketing talent in what I called it factor. Right? Like those are, I'm not like AI and robotics.
Yeah. And you know, and like, like CRISPR, it's like, no, it's like, these are like core things, but it, those are the things that, in my opinion are changing. I mean, drastically that were frankly happening before, but then the pandemic is accelerated or in some cases there was like a longer list of things that were part of changes that are no longer.
That important mm-hmm because these things have taken over and it's, I'm now in, you know, 20, 22 starting to think. All right. One of those things are still true. What that we get wrong. Mm-hmm what are, in some cases, the, the sort of the, even more detailed around them, like marketing, for instance.
We've never had to really market we've marketed the channel. It didn't matter. All of a sudden mainstream marketing is here and we saw the markets happen where we had an influx of cash in companies going public and spa. [00:26:00] We had more companies go public in, in call it. 20 22, 20 21. Then we probably either over the past 10 to 15, 20 years, we had more cash flow, come in, cash, new cash, come in from external people that didn't care about our industry ever, all of a sudden, right?
So like those fundamentally changed things like how you talk, the stories you tell. It became very important if I do that. Yeah. So like, in fact, for instance, all of a sudden it mattered how you. It was a bunch of brands that no one really knew about before. It didn't matter. But now how you showed up in the room actually matter.
Hmm there's there's a, there's a belief, especially if you look at some of like some of the fundamentals of like, the software industry of what you see that stuff matters in that world. And it's starting to matter in our world where, before you didn't want that, you didn't want people to know about you because you were a security company.
More people knew about you, your, your attack surface was larger and stuff like that. Right. Like, right. So it's inter it's interest. So we, so yeah, so we got into. All of those parts. And then we took that [00:27:00] book though, and then applied it to, I think it was 40 companies in our space. Oh, okay. And, and applied it to a, a today and tomorrow access to basically say, who are the companies that are set up primarily to take care of today, tomorrow, both.
And we try to apply it. So it was a different lens because most of the companies in our space they'd be. Who are the most successful, like, oh, here's the biggest, and that's not always the case. Yeah. Because if you're looking at today and yesterday, maybe that's the case. But as I was looking at today and tomorrow, my, my lens was very different and it was the conversations I was having with not only people in our industry, but as I started talking people outside, it was just interesting to me to think, oh, they were asking me totally different questions.
They weren't asking me if I, you know, supported this protocol, they were asking. Like, how do you innovate, like, things like that, right. That no one cared about frankly before in our industry or didn't ask directly. Yeah. Yeah.
[00:27:56] James Dice: And is it, is it similar to other sort of, you call them utilities like [00:28:00] that?
It's a better framing. I used to say silos. Is it, is it similar to the other, the other utilities in the building, like HVAC where you have these. Hundred year old incumbents or maybe 30, 50 year old incumbents that are a little bit slower to change a little bit kind of grasping onto how things have always been.
Is it, is it the same thing in access control?
[00:28:20] Lee Odess: Hundred percent. Yeah. I mean, we're very similar to HC. We're very similar to lighting. You know, when I, when I look at my days back in the lighting world, there's a lot of the same type of stuff that is happening. Here's just at different parts of the sort of adoption.
And we happen to be, I would say be, you know, in some cases we're ahead in some areas and we're behind, but the fundamentals, a business are still fundamental as a business. And I always joke that like some of these cases are, you know, buildings are still primarily built a lot of the same ways. Like it's not all of a sudden that like the core fundamentals have changed in a lot of cases that some have, but they, I would say evolved more than changed.
So we, we pattern a lot like that. [00:29:00] Got it. Got it.
[00:29:01] James Dice: I wanna circle back. Are, are there any other of those six phases that you feel like are important to, to touch on in this conversation? I don't know that we have time to like go deep into each one
[00:29:10] Lee Odess: of them, but any, any big ones? I would say market reaches an interesting one, because again, we've used to historically go after the high security side of just like the top of the pyramid of security needs, airports mm-hmm and we would push down and there's a big middle ground that we never have really worried about that all of a sudden, too, you're even seeing from call it more consumer of the.
The bottom side going up, impacting our business. So, when we did research and we, we did the total addressable market of our industry, it's been a 10 billion market historically that has been built off that high security side. And it was primarily hardware when we looked at it. And we brought in software and we looked at it, it was, we actually saw a 70 billion market.
And a lot of that is because of the applications of the technology have changed. The customer set has changed. So we went from a 10 [00:30:00] billion market to a 70. And what's interesting is a lot of the big companies that are going after that. 10 billion are actually not the long term, big companies that are going after the 70.
It doesn't mean their business. Isn't good. Like, and this is not like, um, no, it just means that the market is very, very different. Once you start looking at the market reach of these companies that it just changes the way you view it, completely of how you build the markets you go and the rest of it.
And it also shows why you're starting to see the investments into our industry as you were before, because the, the public markets, if you would, or the, the more I call it more risk money, like venture back and stuff like that. Never saw the 10 billion market. Big enough. They do see the 70 billion market as big enough.
So that's why you started to see people come in the impact. Like I like to spend a lot of time secondary effects. The secondary effects are like 10 years from now. It's totally different market. Totally. D
[00:30:54] James Dice: circle back on. I wanna circle back on, on the software. And then specifically you said security versus [00:31:00] convenience. So. A lot of the software I track in this space is, is vertical specific kind of like you're talking about the verticalization of, of access control. There's also the verticalization of.
Occupant experience. Right? So there's apps there and, and the apps specialize on multi-family or they specialized on, on workplaces, right. That are occupant owner-occupied. And then there's apps that specialize on tenant landlord situations, right? For experience there's apps that specialize in higher ed and healthcare and all, all of that.
Right. The question I have is how. You have a startup that's software only, right. Coming into a space and, you know, making demands, like you talked about of, you know, you need to have this in your API, SDK, Mr. Access control company, right. How is that the, the impetus of these apps and as they gain scale and into these verticals, how is that sort of transforming what the access control system is becoming?
Does that make sense?
[00:31:58] Lee Odess: Yeah, totally. It's [00:32:00] it's, it's always interesting to me. Right? Cause in a lot of these companies they'll come in and like the tenant engagement side. They'll they'll basically come in and talk about how they're gonna disrupt the old legacy access control, ignore them like that.
They, what everyone wants is they want to be able to order a latte. Right. And what you quickly find out is it's very hard in my opinion, to get users, to change the habits of ordering lattes through the app, get adoption of the app. Yeah. So what they all end up doing is they all go back down the road and they call me the access control or keep my peers mm-hmm then they have to deal with us.
The sort of bare basics of what people do every single time is they use their card to get into the building. And now they wanna move that to mobile. The idea being is that once they move the mobile, I've now got them in the app. I now can then sell their lattes. Like it's like, you know, I just summarized the 60, you know, 60 page deck of a lot of companies that are, that are in our industry.
Yeah. And what you see is the adoption of that. [00:33:00] It's relatively slower than their PowerPoint. Presentations say it is, but they get traction on the access control. So then they start building out access control features, and there's this weird period that happens where they start to be competitors of the same companies they compete with.
Yeah. And they start to have to go build a bunch of things that they don't want to go to because it's, again, it's a, it's a, utility's been around for a long time. There's a whole bunch of. You need to go build to be an access control company that doesn't support the investment thesis that your venture, you know, backing told and it's are the features that you promised on the roadmap of like 17 different, you know, milk types for my latte.
And you're spending all your time doing this dirty access control work that needs to be done. And you get to this weird period that happens then that. What does happen? It is showing the value beyond locking and unlocking the value beyond keeping bad people out. And it's now allowed companies like ours to [00:34:00] have conversations that are very, very different than before where the expectation was.
Just talk to me about the locks. Like, yeah, don't talk to me about the other. I'll give you a good example is like the whole delivery side of things. Now that you're seeing going on about getting packages into people's houses or into the fridge or into the units or into the buildings. That happened to the access control industry.
We've been able to do that for a very, very long time that's access and letting people get into it. It's very hard to do it when it's the old school way of where we've done it, where it's sort of knowns and unknowns. And actually we don't know who the people are. We just know the card that we gave it to somebody where now I need to know who the person is, cuz it's very dynamic.
Mm-hmm . That that's now allowed us to really look at it and say, you know, in a lot of cases, some of these companies are logistics companies now that are formally access control companies, or they're working with them and they can, they have a new revenue stream because now you want my APIs. I'm not just gonna give them to you so you can go create value on top of my stuff.
No, like I'm allowed to participate in that [00:35:00] conversation. So like that's a lot that's happening. So it's value. It's permission in the marketplace to go do it. It's allowed investment in areas that historically, maybe we didn't have the opportunity cuz we couldn't tell the story at, at the old it's also I'd say, put in check some of the venture back companies who, you know, were gonna dominate the world, selling lattes and engagement.
I joke about that, but like, yeah. That's like the extreme mm-hmm but it it's, it's true. Like the, the conversations that have changed a lot. The other thing I'll tell you is that we've been having a lot of. Me personally, since 2001, we've been having a lot of these conversations. They just weren't at the extreme that they are now where you have so many companies doing very, like, very specific things that I, you know, sometimes feel like a feature of a larger company where the vision is to be a larger company, but they're gonna go, they're gonna crush this one feature.
There's a ton of them. Fantastic. And it's hard to know where to prioritize and where not where, cause you know, no one has [00:36:00] infinite resources. Yeah. So you have to, you know, the, the way that you product manage has fundamentally changed in our industry.
[00:36:06] James Dice: Interesting. Yeah. I, I think there's a lot of parallels there, there with energy management and how there's so many different companies and it's very, very, very fragmented.
Everybody does like one step of the journey really well. How do you see that playing out with all these startups? And then all of these incumbents, how do you, where is, where is this going in access control?
[00:36:27] Lee Odess: I, I believe, you'll see. I, I, so I think maybe the the frantic pace maybe slows down a bit.
Right. And it normalizes a bit. But I believe that there will continue to be evolution in development and innovation. So it's not gonna go away. Mm-hmm I think some of the truths of old will continue. Some will die. Some new ones will be introduced. Right? Cause I think some of the startup companies will adopt some of the old truths of the old industry and it'll, you know, continue some of the new ones like on that end, I believe.
I believe you will start [00:37:00] to see a great amount. Weird partnerships that seem weird on paper today, but look, make a lot of sense long term. On that end, right. I, I really believe that this is a half full story where new value creation you know, some of the, some of the bad fundamentals will continue.
Like, you know, there'll be coming that pop and then go away for a lot of reasons. You know, there's, there's, there's great. There's great stories that you can use outside of our industry. That'll look a lot like us, whether it's the stories of Kodak or it's the story of magic leap, you know, that you can, you can, you'll see those in our industry as well.
So, I mean, I think in the end um, I do believe you will see More vertical, like you're saying happen more. So there'll be actually a larger market for people to win. Where in access control. It's usually been just one market and there's only been a few winners. Mm-hmm I think there'll be a lot more winners because there's a lot more opportunity.
[00:37:59] James Dice: My last [00:38:00] question is around business models. So you mentioned this started as a hardware business model. I'm gonna sell. You know, readers and controllers and some sort of server or computer that sits on site. Right. Very, again, very similar to HVAC very similar to lighting. What are the, what are the business models and access control of tomorrow and, and how do those, you mentioned software, right?
But how, how are they charging their customers and how is that gonna work? Moving forward?
[00:38:28] Lee Odess: Yeah. So there's an interesting model that's been introduced in access control new actually stakeholder that we've historically not had an opportunity to interact with and that's the end user. Yeah. So. As I look at different ways of interaction, which open up different opportunities as we now start to have a better relationship with the end user because of this.
I then start to think what I can do on that. So it's the value that I can create outside of my interactions with them or access you know, the delivery side, like before, if you think about it, [00:39:00] the shippers. Never cared about the access control companies to create that. But now if I can reduce the number of times, they have to make deliveries to bring a box, that $200 cost of doing that.
Now I can share that. Hmm. Right. So like it, all of a sudden there's, there's operational efficiencies. And revenue generation opportunities that didn't exist before, because my core value proposition was keeping bad people out and I cared only about landing and then expanding because you didn't rip my stuff out.
Yeah. And so I always joked that my value. My, the way I made money was like, I prayed for lightning strikes because if you, if a reader got shocked and died, I can sell you a new one. Right. Or, you know, I'm waiting for expansion of the existing hospital that existed there. Right. Where now I look, my, what I view every existing opportunity is now a whole new game.
That's the other part, our industry has primarily been built off of new construction. Rip and replacing, which is never gonna happen. Got it. [00:40:00] Mm-hmm right. So now all of a sudden I can go back to systems and I have a new way of monetizing, cuz I have new interactions and new value. That's phenomenally interesting.
And that's why the bill, the industry, it is probably even bigger than 70 billion, but I, I didn't have necessarily the math chops to be able to understand that marketplace mm-hmm , but I mean, what's the, I don't know, like what's the spend that goes on in certain areas where people make decisions, where they need access to where I have a new monetization where it's not like the hardware's the enabler of the software.
Yeah. Which is then the enabler of the interactions of a new stakeholder. I dunno. Yeah. And is it the case or also I'll give you another one, like, okay. Like I find it interesting to think about how our industry impacts engagement with employees at a building, like when everyone's hybrid now. Right.
Mm-hmm so like the expectations you have on my system are different. When I'm doing health at the station, I'm welcoming people, they're booking it at desk, you know, a package comes and pinging. 'em like, like there's a whole lot of things where like, [00:41:00] theoretically you would never see a company like zoom get into the access control business.
But if now, My physical spaces are no different than this space. That's why I talk about, like, I get into the metaverse now conversations with people and I'm not even arguing whether it's real or not, or it matters, but like I get into it on the idea that the, that sort of the permission it gives for you to explore basically thinking like, like, like I always think that there's a, there's a branding opportunity in our industry, like Mr.
Beew and burgers to security. Like if I'm securing. Buildings in the metaverse for my son now in Roblox, for instance, mm-hmm, when he's older down the road, he's got a trust relationship that there's a company on Roblox. That's been securing his, you know, virtual places forever that he, now, if he sees it as like the actual person guarding a, I don't know, a stadium.
He's got a relationship there, right? Like that. I'm like, wow. That's like, okay. So where what's the monetization there where like, I actually can monetize in the metaverse [00:42:00] and it directly impacts where I don't have to monetize in the physical word. That's I don't know. Like, is it gonna happen? Yeah, I hope so.
Will it happen? That's a whole nother podcast, but like, yeah. That's interesting, right? Like 1973, me access control. Nah, I wasn't worried about. No. No,
[00:42:16] James Dice: absolutely not. Absolutely not. So, so if I'm a building owner and I'm buying it and where I used to buy hardware, I used to buy probably a project that included hardware.
Right. You know, installed I'm I'm renovating around building a new building. What's my access control bid. How, how am I buying it today? Is it a bunch of. SAS agreements based on these different value propositions or how does that work?
[00:42:38] Lee Odess: Depends. Okay. Some of it's still the 1973 model where it's hardware and no software costs, some of it has software yearly and then some of it is SAS based.
Right. So it depends on what legacy building versus new depends on, you know, You as a, a building owner versus like how, like the type of building owner that you are. Right. [00:43:00] Mm-hmm like, there's a whole lot that goes into it. And that's why my opinion. The, the curiosity of that owner now has to change to where the way you interact and think of your access control system has to change so that your, your RFP and RFQ and your expectations and what you wanna do and what you're willing to it's changed.
So like asking different questions as well as saying like, cause this is what's in, like, as we look to go forward, I do believe the companies that still focus on safety and security are the ones that will win. Not a latte ordering company that doesn't worry about safety and security mm-hmm cause it's a fundamental piece.
Like you look at safety and security, it sparks innovation. Cuz if I can go into a building and I don't have to worry about being shot, I'm not, you know, I can, I don't have to worry about like that's a core societal, like lot of books have documented the psychological health of being safe in a building to your ability to, you know, perform You're gonna still need that.
So you still wanna have those [00:44:00] basics. It's just now what you, what you can do of it and your, your thought around your expectations of how that system should perform completely different. Hmm. Fascinating.
[00:44:10] James Dice: All right. Let's let's close. I feel I could ask you questions about this all day because it's a new domain in my brain is just being fed.
I love it. Thank you so much. Let's let's close this down though, and go into my last question, which is carve outs. So could be personal professional besides your book, which will put a link to in the show. Thank you. What podcast show, movie book, et cetera. Would you recommend people check out?
[00:44:35] Lee Odess: Yeah. So on a book, this is for me personally.
And the one I tell people all the time, the one that made the biggest impact for me is ETH mastery. I read it years ago. Mm-hmm fundamentally, still works today. Like I read the new book build, right. The one that just came out. Yeah. Like it it's, it feels like that book just the more modern in software, but like the fundamentals are there and I, okay.
We're always looking written by
[00:44:56] James Dice: Michael Gerber also, or who's bill
[00:44:59] Lee Odess: written by no [00:45:00] builds by Tony Fidel. Got oh yeah, yeah, yeah. Mm-hmm. It's funny. I look at those books and there's a Venn diagram of like overlap of a lot of that end it, but it's also a part that, you know, Michael Gerber's book totally missing, but it, like, I look at that it profoundly a huge impact on me.
That me still, one of those that's still relevant and it was construction in some ways, too. Right. So it's like, it meant more to me in that case than like regress of it. So that, that would be the one that I, I still. Any new employees that I get or people I mentor and work with. I tell, 'em go read that.
And you're like that whole book you're like, yeah, yeah. That's
[00:45:35] James Dice: book. Absolutely. So funny story about mine. So I'll share mine as well. I was gonna buy bill by Tony Fidel and I bought this instead. It's called the messy middle. Yeah. And it's like, kind of like where I'm at on my entrepreneurial journey is like nexus.
Been created. It's a thing it's, you know, it's here, but like how do I get from here to, to there? And it's really interesting. I just read, there's like two page [00:46:00] chapters and I just read a chapter every morning before I start my start my day. And it's been great. Yeah. The messy middle by Scott Beski,
[00:46:07] Lee Odess: which is good.
One highly recommend that too. I read it too. And it's, it's one of those that. Obviously not obvious all at the same time, which is always, I, I, I love things like that, so yeah. Love it. Love it. Well, thanks
[00:46:19] James Dice: Lee, for coming on the show. I really appreciate it. And uh, we'll let you get off to
[00:46:22] Lee Odess: the airport. No, thank you very much.
Appreciate the opportunity. Appreciate what you do too. I know how hard it is for my past life. I'm doing this and the constant grind of what you do and the produce this in the professional way that you do it. Yeah, I'm I not only envious of it, but respect it a lot, so. Oh, thank you.
[00:46:37] James Dice: Congratulations.
Well, I find it very, very. And uh, hopefully everyone
[00:46:41] Lee Odess: else feels that as well. Thanks. Wonderful.
[00:46:48] James Dice: All right friends, thanks for listening to this episode of the Nexus Podcast. For more episodes like this and to get the weekly Nexus Newsletter, which by the way, readers have said is the best way to stay up to date on the future of the smart [00:47:00] building industry, please subscribe at nexuslabs.online. You can find the show notes for this conversation there as well. Have a great day.