Recent events have made us realise that if we don’t actually make anything, we don’t own anything… Myke Ireland explores what this means for the AV and integration space.

If you take a hard look at the state of the world right now, it’s not a stretch to say we learned absolutely nothing from COVID. We’re seeing once again that in any time of global uncertainty, the first thing to snap is the supply chain. You only have to glance at the price of petrol to see which countries have bet their entire stability on resources they don’t control, leaving themselves dangerously exposed.

And here in Australia, we are prime examples of that vulnerability. As an island nation, we are always one of the first to feel the shockwaves of any global disruption. The pattern is predictable as night follows day, and the uncomfortable truth is that it plays out just as clearly inside our own industry as it does on the national stage.

Because the reality is, even within our industry, the same rules apply. In times of uncertainty, the businesses that carry the most risk, the ones with the most at stake, are the ones that don’t actually make anything.

They just do things.

They fix things. They install things. They program things. They move things from one place to another. These are the service providers, the integrators, the distributors, the facilitators. And in a shaky economy, they are the most fragile players on the board.

This is by no means intended to detract from the value that some of these providers offer, but it is intended to get you thinking about what it is that our industry is actually built on. Under all the marketing gloss, stories of company culture and customer service, what is it that makes any one business unique or with value long after the supply chains are snapped.

If you want a perfect, real-world example of this entire concept in action, you don’t have to look any further than the good old-fashioned Aussie icon, Holden.

For decades, Holden was synonymous with everything it is to be Australian; it was a cultural institution. Up until the GFC, one in every three Australian families had a Holden of some description sitting in the driveway. Everyone had a Holden story. You bought one because it supported Aussie jobs, it was built for Aussie roads and it made you feel like you were doing the right thing. It was a car that could genuinely compete on the world stage and it was proudly owned and built here.

The Commodore, their most iconic and longstanding model, is a testament to that. Even now, classic models fetch insane prices; an original VK Commodore ‘Blue Meanie’ will set you back close to half a million dollars, if you can even find one. That’s the kind of legacy you build when you actually make something great.

But then, the GFC happened. The world shifted, Holden was forced to close down local manufacturing and start building cars overseas just to be competitive, and with this move, Holden began relying on an offshore supply chain far more than they should have.

I remember being at a Holden staff meeting around 2018 or 2019, back then I was working for a business supporting them as a client. It was around this time that whoever was responsible for putting the proverbial writing on the wall had just purchased a new box of big, fat, permanent markers. During this meeting, the chief executive got up in front of all his staff, around two or three hundred people, and delivered a line that was clearly intended to be some kind of inspiring, forward-thinking mission statement. It wasn’t, but it forever remained etched in my brain: “Holden is no longer a manufacturing company. We are now a sales and marketing company.”

Now let me tell you, the look on the faces in that room that day would have been enough to get me to hand in my papers if I were the chief executive. You could feel the air being sucked out of the room. That’s it. We don’t make cars anymore. But we’re a car manufacturing company; if we don’t make cars, what do we do?

And that was the key. If Holden isn’t making cars, if it’s just importing other people’s vehicles and sticking a Holden badge on them, then what even is Holden? The brand had leverage based on its product, it had equity and it had a place in the market because it made things. The moment they decided to stop manufacturing, they lost everything that made them who they were. They made nothing, and therefore, they had nothing.

They were forced to risk their entire reputation on the quality of other people’s products. And look what happened. That wasn’t even a decade ago. Now, where are they? It’s over. Done. That’s how fast you disappear when you have nothing left to call your own.

It’s at this point that all the warm and fuzzy corporate jargon blankets start getting handed out:

• “We’ll continue to offer amazing service.”
• “We have a culture that is incomparable to the opposition.”
• “Our staff are the reason people keep coming back.”
• “It’s the relationship we have with the client that matters.”
• “Our brand is still the same brand.”

Nope. The point is, Holden was once unique because of what they built, and they had a level of control over their own destiny, over their quality and, for the most part, over their supply chain. Once all these aspects were surrendered, all they had left was the staff and the outwardly dependent supply chain. And what do we call a business that no longer imports or sells its own product…

Which brings me to my next example, distribution.

Think about the last two decades in our industry and how many shifts we’ve seen in the distribution network. Companies have been purchased, sold, they’ve folded, rebranded or, in some cases, just quietly vanished from our industry. The list is long. And the reason feels similar to me: Distributors don’t make anything. Their business is warehousing and logistics. Sometimes they bolt on a bit of marketing, but the fundamental model is to import things and sell them on. And even then, their model demands they keep the absolute minimum amount of whatever they distribute on the shelves. No one’s balance sheet looks good with six months of stock sitting on the books, much better if you can hold one month’s worth and turn it over every month. Same reason why there are only 30 days of fuel reserves in our country at the moment.

When your entire operation is built on that premise, and you happen to live on an island at the mercy of global shipping lanes, it’s painfully obvious who’s going to feel the crunch first in a crisis.

The industry has already seen it happen, time and time again. When global supply chains head up the brown, smelly river, and you aren’t the one making the product, there is nothing for you to double down on. You’re left with empty shelves and broken promises. COVID verified that immutably. The industry was telling clients they’ll be waiting upwards of 12 months to get stock. 12 months? We’re in technology, 12 months is two product cycles in our game.

Some of you will now be saying: “But even manufacturers had the same issues, and they make things?”

Well, some manufacturers make things; others just assemble things that are made elsewhere. So those dependencies stay the same.

But let’s take it down one more level. Integration and service.

As a service provider, what is it that defines the quality of service you provide? The service, right? No brainer. But unless you’re a one-man band, it’s not actually you providing the service, is it? It’s your staff. Sure, that’s all underpinned by some warm fuzzy blankets and a risk-averse HR team, but you’re not making anything, and you don’t own your staff. Staff leave, they go elsewhere, to better jobs, higher-paying jobs or different careers altogether. Staff are inherently the same vulnerable supply chain you rely on as you do the physical ones, and so you have twice the problem.

How many staff do you think it takes to leave a business before the service that once was, no longer is? Let’s say you have four staff. Three left, and they were the best three, the ones that all the clients loved and the ones that did the highest quality work. Are the clients staying with you, or are they following those staff?

What if you have 100 staff? The reality in that case is kind of the same; even in a business that large, 20 people hold 80% of the business’s value, and if enough of those people leave, what keeps the clients around?

It’s easy to think we can just hire new staff and train them, but if your best people have moved on, then it’s not your best people training the new ones. Now we’re juggling an interrupted supply chain and a staffing issue. If all you do is install things you can’t get, using people you can’t keep, your value offering is predictable as the current cost of diesel.

But what if you made something?

What if, for instance, as part of your service offering, you had a dedicated software toolset that you owned? And I mean one that you built, not something third-party your business uses as an on-sell. Not Microsoft Teams Room Pro, or Control Cockpit, to simply manage devices of the same brand, and not something made by someone else that is white labelled as your own. Something that no matter how many people leave, or how many supply chains are broken, it is the one thing that cannot be offered by anyone else. That’s when it’s batter-up time.

I’ll try to be specific, because “build something” sounds like consultant-speak. A genuinely owned monitoring platform that clients rely on daily makes you infrastructure, not just another contractor. A proprietary deployment methodology that captures your best engineers’ knowledge and survives staff turnover becomes IP you own, and not a service you sell. And then there’s the data, you’re sitting on years of performance insights that, turned into predictions rather than reactions, make you genuinely difficult to replace. But if you don’t own that platform, stop kidding yourself. You’re at the same mercy of a supplier putting the price up on you, or cutting you out entirely.

Because look at it from the flipside, if there’s nothing you can give a client that is unique to your offer, then you are quite literally spending all your time putting hardware and software inside a client’s facility that actually makes it easier for them to go elsewhere.

So, when you look at your business, what is it you actually own? Not the vans, not the products, not the people and certainly not the “service”. How much of the value in any transaction are you truly responsible for? If your top three engineers walk tomorrow and your main supplier gets acquired or wiped out, what’s left? You’re left with a brand name that refers to a company that doesn’t exist anymore.

Here’s a test you can run in your next leadership meeting that will either reassure you or keep you awake: List everything you deliver on a typical project. Put a tick next to anything you genuinely own, not that you configure, program, install or resell. Then circle anything that would still be deliverable in exactly the same format, using the exact same costs, if your three best people left tomorrow and your main supplier got acquired.

Whatever’s left circled on that page is your actual business. For most companies, that piece of paper comes back disturbingly empty.

Without control over your product and without ownership of your people, the only thing you really control is the margin you add. And one thing we all know for sure, the market dictates that. That’s why you see everyone selling gear at single-digit margins just to stay in the game. It’s a race to the bottom, and the floor is zero.

Now, I’m not making the argument that everyone needs to go out and build a manufacturing plant tomorrow and start churning out TVs and amplifiers. My point is that it’s time to get serious about what you can create. It’s time to build something that fosters a unique and dependent relationship with your clients, something based on what you do have control of. Something that is uniquely yours. Something you can work on hand-in-glove with your clients to consistently improve and increase its value to them.

Because if you’re not doing that, then you have no right to complain about the price of fuel, or how far you have to drive to the next servo for a tank of diesel. Holden had a century of goodwill, a nationally beloved brand and hundreds of millions of dollars behind it. Once they stopped making something that was genuinely theirs, it took less than a decade to disappear completely. If it can happen to them, it can absolutely happen to any business that’s been coasting on relationships, reputation and the hope that nothing goes wrong all at once.

If you rely on others for everything, you will eventually learn that no one relies on you for anything.