Unit 9: Leadership, Policy, and Culture

Case 9: Defender Direct, Inc.: A Business of Growing Leaders

Gosia Glinska

Edward D. Hess

1 Defender Direct, Inc. (Defender), headquartered in Indianapolis, Indiana, was a privately held company that sold and installed ADT security systems and Dish Network Satellite TV to homeowners in the United States. President and CEO Dave Lindsey started the business out of his home in 1998, making the transition to entrepreneur from new-product development at Medeco Security Locks, Inc. He used $30,000 of his and his wife’s personal savings to fund the start-up, which he called Defender Security Co.

2 From its humble beginnings in the Lindseys’ spare bedroom, Defender became one of the largest security and satellite dealers in the Midwest, experiencing an average annual growth rate of 60% over 10 years. In 2008, Defender generated $150 million in revenues and ranked 387th on the Inc. 500 list of America’s Fastest-Growing Companies. With 1,500 employees, the company had a national footprint of 120 offices in 40 states.

3 Defender’s stellar growth was fueled by an aggressive direct-marketing focus and national expansion, but Lindsey, who was fond of saying that “businesses don’t grow—people do,” credited the Defender culture, which fostered continuous employee development. He elaborated:

Defender has grown faster than its peers not because we are better at selling and installing security systems but because our people have grown. Our sales have doubled because the capacity and talents of our leaders have doubled. A few years ago, we stopped trying to double our business and realized the way to grow was to double our team members’ enthusiasm, optimism, and skills. Send people to seminars, leadership conferences, and self-help programs. Build a culture on purpose, not by accident.1

THE FOUNDER

4 Lindsey was born in 1969 and grew up in the Midwest. He graduated with honors from Indiana University with a BS degree in Business Finance and an MBA in Marketing and Finance. After graduation, he worked for various companies in the lock and door hardware industry and became interested in security systems. A turning point for Lindsey came when he was passed over for a promotion while working for Medeco Security Locks, Inc., in Salem, Virginia. “We’re going to start a business,” he said to his wife, “because I don’t want to ever be in this spot again, where it’s office politics controlling my career.”

5 At Medeco, Lindsey had been involved in a program called Medeco Business Advantage—a 2X Strategy to Grow Your Business, a set of business processes inspired by Michael Gerber’s best-selling book The E-Myth: Why Most Businesses Don’t Work and What to Do About It. According to Lindsey, “It was a way for a mostly traditional type of locksmith to double their business, using the 2X process and then up-selling. We would teach it to our locksmith dealers, and I saw it work and decided, ‘I’ve always wanted to own my own business, why not buy a locksmith shop, double it, and create value?’ “

Source: This case was prepared by Senior Researcher Gosia Glinska and Edward D. Hess, Professor and Batten Executive-in-Residence. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright © 2009 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Rev. 7/09.

OPPORTUNITY KNOCKS

6 Lindsey and his wife started looking for a locksmith business to buy, but after finding none at a price they were willing to pay, they moved to Indianapolis. “That’s where my family was and my support structure, and where I really wanted to be permanently,” said Lindsey. He reflected on his days as a freelance locksmith:

I began changing locks and installing deadbolts, which was pretty horrible because every psychological test I’ve ever taken says that me and a power drill should stay as far apart as possible. I have some great stories about taking out my friends’ locks and not being able to put them back on …. So that’s how I began, pretty ugly, and my intention was to never do installation, because I’m not technical. But I had to get out and learn.

7 While his wife took over the role of a family breadwinner, Lindsey researched the security industry. “I was, like, if someone needs a lock, maybe they want an alarm system? And in the mid-’90s the alarm industry really exploded.” Lindsey jumped at the opportunity when ADT Security Systems and other brands began offering $99 start-up packages for homeowners, making home-security systems more affordable to a wide group of consumers. “We wrote a business plan, got ADT to take a chance on us, and began as an ADT Authorized Dealer. We never looked back. I never did another lock job once we signed our ADT contract.”

LEARNING THE ROPES

8 For his first three months as an ADT Authorized Dealer, Lindsey focused on meeting the sales quota. Failure to sell 15 systems per month not only could lead to problems for the business but also could result in a financial penalty, which would have swallowed much of the Lindseys’ start-up capital. A devotee of the principles Gerber laid out in The E-Myth, Lindsey said he “was looking for that Gerber-type of repeatable system, something that could be ‘McDonaldized.’ “

9 Lindsey took advantage of a sales-training program offered by ADT. “The Dealer Program I came into was 90% door-to-door sales,” he said. “ADT was teaching us to knock on doors. They threw me in a van with a bunch of other guys and put me on the street, and I’d sell ADT systems door-to-door.”

10 The day that Lindsey, who had never sold an ADT system before, made his first sale within a couple of hours, he “saw it work.” He immediately called his wife to tell her he was going to buy a 15-passenger van. He recalled:

I had seen a repeatable process, which involved a van; when you go door-to-door you have to have that team environment—when you drive together in one car, you’ve got to pick the people up so they can’t leave, until they get a sale. When everybody drives individually, they end up getting back in their cars and leaving.

11 During the first month of knocking on doors, Lindsey sold six security systems and fifteen during the second month, with the help of a friend. It was cause for celebration because they had met ADT’s monthly quota. The third month was even better; with first hires onboard, Lindsey and his team sold 30 systems.

THE ADT SALES CONTEST

12 By September 1998, Lindsey had assembled a team of 10 salespeople. “I really wanted to start the team out with a bang,” he said. “I needed a catalyst, a point of focus.” ADT’s sales contest with its $15,000 prize was exactly what Lindsey needed to fire up his team. “Each dealer’s quota was based on the previous three months’ sales,” he said. “I believed we had a great opportunity to win since our previous three months’ quota would be only 17 units.” The team launched a sales blitzkrieg. As Lindsey recalled:

My living room was converted into our Sales Meeting War Room. My artwork was covered up with a makeshift sales board, and my entertainment center became an employee mailbox system. Administrative paperwork was handled from my back bedroom, complete with a board stretched out on the bed to form a desk, a computer, and a borrowed fax machine. Side meetings and training sessions were held on the front lawn. We were entrepreneurs, making the rules up as we went. We had no fear and knew we had a great product and wanted to meet as many people as possible. We went out together each day, feeding off each other’s energy.2

13 One day in mid-September, while his sales team was gathered in his living room, Lindsey went to the back bedroom to call ADT’s headquarters to find out how his team ranked among other ADT Authorized Dealers. His surprise turned to shock when he learned that, as a new ADT Authorized Dealer, Defender had its sales quota increased from 17 to 45. Shaken, Lindsey weighed his options.

14 What happened next was what Lindsey referred to as “an inflection point in the company” and “the moment of truth” for him as a leader. He took a few minutes to compose himself and went back to the living room to face his sales team. He candidly related the news about the quota and then spent a few minutes rallying his troops. “We’re going to blow through this,” he said.

15 With 45 sales already under its belt and two more weeks to go, Defender still had a shot at winning the contest. “We took it up a notch or two during those last two weeks and worked long hard days,” Lindsey said. Defender’s installation crew tripled its capacity to make sure every system Defender sold got installed the next day. By the end of September, with 142 systems sold and installed, Lindsey’s sales team was 316% above its quota and 835% above its three-month historical average.3

16 In snatching the top prize in the sales contest, the upstart company had defeated hundreds of other ADT Authorized Dealers from across the United States. “September was crazy,” Lindsey said. “After four months of knocking on doors, we had a system, and we knew what we were doing. Soon after, we sold 200, 300 systems, and we ran pretty quickly to the 600-range a month. And it kind of skyrocketed from there.”

THE ENTREPRENEURIAL MINDSET

17 During its first few months of operation, Defender subcontracted all systems’ installations. “You know the old adage, nothing happens until a sale happens,” Lindsey said. “So we focused on creating demand.” In September, when sales numbered 142 systems, however, Lindsey hired his first installation technician. At the beginning, Defender hired technicians with minimal industry experience, who were able to handle a wireless alarm system that was relatively easy to install.

(Pearce 9-1-9-4)

Pearce, John, Richard Robinson. Strategic Management, 13th Edition. McGraw-Hill Learning Solutions, 2016-01-02. VitalBook file.

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