Wednesday, October 4, 2006

The Swedish Crime Stoppers, Inc.

Currents' Fall issue 2006.

To many Americans, Sweden is more known for social security, than for stopping crime. But then we have Securitas, Inc., which around year 2000 became America’s largest private security company through a series of acquisitions orchestrated by Don Walker. He ran the U.S. security giant Pinkerton before it was picked up by the Swedes. Currents' editor Hans Sandberg interviewed him about Securitas in the U.S.

Don Walker started out working for the Federal Bureau of Investigations back in the 1960’s, but later left the FBI to set-up his own security programs, first at a bank in New York, then at a company in Cleveland, Ohio, and six years later he started a similar program for a company in Nashville, TN, which eventually was spun-off as a wholly-owned security company. With the help of investors, he bought out the company and sold it to Pinkerton in 1991, where he became executive vice president and chief operating officer (COO.) Today, Don Walker is chairman of Securitas in the U.S., and of it's daughter company, Pinkerton. Securitas’ American branch has about 100,000 employees and about 2.6 billion dollars in revenues.

How do you explain Securitas presence in the American market?
“When I was COO for Pinkerton, we analyzed the competition in the U.S. and the world, because we were expanding Pinkerton internationally. Securitas was a company we watched very closely – this was before 1999 – as it had made some significant acquisitions in Spain, Germany, France, and the Scandinavian countries.”
“It was obvious that the Securitas leadership had the ambition to be number one in Europe, and that it didn’t take much of a stretch of the imagination to think that they wanted to get into the American market, since it was the biggest security market in the world.”

What followed next was a set of meetings with key players in the industry to gage market facts and trends, and obtain general information about how to raise standards and develop the industry. It was during this process that the leadership of Pinkerton came to know the leadership of Securitas. “In 1998 we started to have serious discussions with them which culminated in the acquisition in early 1999,” he says.

One would think that the Americans would have the upper hand in the security business. How come it wasn’t Pinkerton that bought Securitas? And what did the Swedes bring to the table?
“When we saw what Securitas had accomplished, how they did it, and the stock market’s appreciation of what they had done, we realized that we could learn something from them. They had a model and a plan. It was fairly simple, easy to understand and easy to communicate. Even though we all like to think that we know more about our positions than anybody else, we understood that Securitas had taken a fresh look at security,” Don Walker explains.
“It was not an issue of pride, but of professionalism. This is a tedious business with lots of details, and Securitas simplified it with their model. That’s why they were able to do certain things in Europe, and we brought that model to the U.S.”

Could you say that they benefited from coming in with an outsider’s perspective?
“Yes, definitively. Most people tend to get buried in the details, no matter what the job is. Or sometimes people focus on doing the same things differently, but there was no need to do more of the same. Securitas and in particular Thomas Berglund, was a dreamer who could visualize what should be. He had a very broad and deep imagination, which incorporated the idea of taking a risk. As Thomas and Håkan Winberg developed the strategy, and presented it to the Securitas board, it became very clear to the board, and the U.S. market, that they were on the right track.”

Don Walker says that Thomas Berglund early on in the talks made clear that he didn’t want to create just another U.S. security company. He wanted to lead and change the industry, and knew that it took market size to do that.
“He asked if we could create the largest security company in the United States, and I said, absolutely. Then he asked to see our plans for how to do that, so I put forth a strategy of acquisitions that was consistent with Securitas’ plans. Securitas then acquired Pinkerton.”

Within a year, Securitas has bought up a large part of the private American security industry, including American Protective Services (APS,) First Security Services, Smith’s Security, Doyle’s Security, and Burns International Security, which was the second largest security company in the U.S.
“Before buying Burns, we had grown Securitas from a company with roughly 600 million dollars in U.S. sales, to a company doing about a 1.3 billion dollars. Burns added another 1.1 billion,” he says.

What is Securitas in the U.S. today? You fused a number of regional and local security companies with Pinkerton at the core?

What’s the difference between Securitas in the U.S. and in Europe?
“Well, it’s really a totally new company. When you take ten acquisitions with ten different cultures and mold those together, then you have to create a new culture.”
“It took a lot of hard work, but the Securitas model was a roadmap that made it easier.”

We had three objectives in mind and we accomplished them:

  1. Establish a clear market leadership in each region of the country, as well as in the U.S. as a whole.
  2. Create a large platform for organic growth.
  3. Achieve density and cost efficiency.
“We’ve achieved all three, so now we are in the process of refinement and transitioning from selling services to selling security solutions.”

When you had just packaged these changes, 9/11 happened? How did 9/11 change things? Has it affected growth and strategy?
“It changed things in certain regions in the U.S., obviously in Boston, New York, Washington, D.C., Chicago and other mayor cities east of the Mississippi River. It was a change in attitude and perspective, but I would not say that there has been much of a change in other parts of the country.”

It must have been hard to merge ten different corporate cultures, but how about the merging with a corporate culture that came from Sweden, with its labor laws and so on? Swedish companies entering the U.S. can have a hard time dealing with America itself, its size, complications and lawsuits. People sometimes think that the world is more globalized than it really is. How was it for Securitas in the U.S. to work with the Swedes and the original model?
“The Securitas management probably underestimated the legal system in the U.S. They believed that there were differences in every country, but I don’t think that they fully appreciated the legal system, and how litigious the U.S. environment can be. Neither did they always understand the extent to which the industry is the controlled by individual states. It was an educational process,” he says

One would think that security is a very local business where you need to get down to the nitty-gritty of things? How come then that we are getting global companies with models that you can transfer from China to the U.S. and so on?
“This has changed dramatically over the past few years. Smaller accounts and contracts are local, but major U.S. corporations – not so much European and Asian corporations with the exception of Toyota – are looking for global commonalities. We have been talking about this major shift as far back as 1999, and even before that. Globalization is real and security is part of that.”

Could one say that the Swedish background affects the relationship to labor?
“Training is definitively a benefit that we have received from the Swedish experience. Thomas Berglund has been so committed to the Securitas executive training program that he personally attended every session. That’s been a major time commitment. Through his example, everybody understood that we are not just talking about training, but that it is real. Securitas has been very supportive in encouraging new training programs, some of them from Sweden, some from Norway and other countries. This has been a benefit of this new corporate structure within Securitas. We have all benefited from each other’s experiences.

So training is not only for executives?
“No, it goes all the way down.”

Does that affect your ability to retain staff?
“There are several things, of which retention is one. It’s also that we are telling people that we care, and that there is a career path. People may start as a security officer, and work themselves up to a supervisor and security manager. We have several vice presidents that started as security officers.”

Securitas has a national footprint in the U.S. and is spreading out into consulting. Is that the wave of the future?
“Yes, consulting, investigations, and risk analysis. We are working with the energy industry, and the government, especially the federal government.”

Isn’t hard to work with the federal government when you are a foreign-owned company?
“We’ve addressed these issues by creating Pinkerton Government Services, which has an independent board of directors in the U.S., and is well received to handle top secret or cleared government contracts. But Securitas can handle many other contracts that don’t need to be cleared.”

Will Securitas U.S. experience help in your global expansion?
“We’ve already announced that we are expanding into new markets. We’ve just opened our first office in India, Pinkerton Investigation Services, and we’ve just opened our first office in China. We have a company in Argentina that is relatively new, and we are working on a company in Brazil. It’s a global expansion.”

What is your impression of working with Swedes?
“We’ve all been impressed by how hardworking and dedicated the Swedish management is, and how loyal they are to the company. Sometimes we’ve had concerns that our particular issues here were not as well understood as they should be, but then we had to step back, and say that maybe we didn’t do such a good job in explaining it. It’s an educational process, because people from different cultures have differences. It doesn’t matter who you are, or what country you are from. What is important is to have an open mind and work together. It’s been fine, a good relationship.”

Hans Sandberg

Tuesday, February 21, 2006

We're all neighbors now

I can't help but feeling that there is something rotten … no not in the Kingdom of Denmark … but in the entire world. As much as I want to, I cannot put all the blame for the ugly state of the world on George W. Bush, or Dick Cheney, or for that matter Osama bin-Laden. Contrast our current malaise with the world at the end of the Cold War. Do you remember how good we felt when the wall came down? There was hope in the air, where today, there seems to be mostly smoke after bombs and disasters. It as if the only bright spot in the world is China, which is very sad, as it is a repressive authoritarian regime.

What happened to hope? The current outrage among fundamentalist Muslims is a sign of what is wrong with our time, but it also points to the underlying causes that makes people on one side of the world explode in fury over a set of cartoons published on the other side. Technology has brought the world together and released the economic forces of globalization. Hence we are now much closer to each other than anybody thought was possible, rendering us not only benefits of trade, but the whole shebang. Mankind has rather unwittingly entered into a global wedding, for better or worse. The honeymoon was quick and sweet, and then came the fight over the dishes, and fear of our new neighbors, who are watching those strange movies on their satellite-TV system.

We are so close now, so close that we care for each other the way people care for each other across ethnic and micro-geographic borders. It used to be that neighbors hated each other, like the Germans and the French, the British and the Irish, the Khmers and the Vietnamese, the Indians and the Pakistanis, the Hutus and the Tutsis, the Iranians and the Iraqis, and once also the Danes and the Swedes – Remember the Bloodbath in Stockholm 1520? (I guess, there were not enough good fences to go around.)

You don't hate people who you don't see. It's when you see them you realize how different they are, and how scary the thought is that your kids may want to play with their kids, and that your daughter may one day fall in love with one of them, one of THEM!

Greed and progress brings us all together, but coming back from the market with the short end of the stick, you are upset. Fear and suspicion undermines the marketplace and breeds resentment, which is why the scale is not just a symbol for justice, but a peacemaker. Some people are not ready for the marketplace, while others seems to have grown up there… It is easy to throw blame around, but deep down you know that it was your own weakness that made you into a victim. What are you going to do? Sharpen your knives or your skills?

It is always easier to blame someone else. Who wants to go tell the chief or the elder council that our age-old traditions and accumulated collective wisdom doesn't work anymore? For all of its poetic beauty, it doesn't do the trick. The priest, the rabbi, the mufti or the medicine man may be great comforters, telling us what we want to hear so badly, but they don't heal bleeding wounds, nor do they fill empty stomachs.

Adam Smith was right. You don't expect the baker to give you a loaf of bread out of charity, or the baker will go out of business. You have to bring something to the market in order to bring something back.

It was probably easier when roads were short and markets small. You knew whom you were dealing with, and you would meet him or her during the week. But who knows where that pair of sneakers are made (except that they were assembled in China, by a subsidiary of a company whose shares are traded in New York.) Marx called that feeling alienation. You don't know your producer anymore, and feel estranged from the product and the world behind it. You have lost control; you depend on others. That is why trade breeds fear. There is a lack of trust.

During the Cold War, there were at least two rivals caring for us out of fear that we would turn to the other. When the wall came down, and the Kremlin crumbled, they stopped caring. The new U.S. president, George W. Bush, looked at the Middle East back in the beginning of 2001 and told the world that he didn't care. It took the terror attacks of September 11 to make him change his mind. No, I'm not saying that 9/11 was his fault, but his initial pullback from the world – remember his dizzing of the Kyoto Protocol and the International Court? – gave the world the impression that America doesn't care, which played into the hands of the reactionary mullahs of Iran, the Talibans of Afghanistan and the bitter Osama bin-Laden. America's walkout was their big chance.

Globalization pulls the world together economically, while at the same time pulling it apart emotionally. It's time to focus more on what our neighbors say and think, rather than to focus on what they look like.

Hans Sandberg
21 feb 2006

Thursday, February 16, 2006

How St. Paul Got Energy

(This article was first published in Currents Magazine, Spring 2006).

Back in 1979 -- during the second oil crisis – the state of Minnesota sent a delegation to Europe in search of a way to break its oil dependency. They found it in Uppsala, just northwest of Stockholm. “What made us unique was that we could use many different types of fuel,” says Anders Rydåker, president of District Energy in St. Paul, which runs a huge state-of-the-art system for remote heating/cooling.

District heating means that you warm up buildings by circulating hot water or steam through underground pipes, instead of relying on heaters in each individual factory, office or apartment building. The basic idea goes back to the aqueducts of the Roman Empire, but one of the oldest written reports is a complaint in France about two citizens, who didn’t pay their heating bills. The year was 1332.
“The modern technology for district heating was invented in the U.S. about 120 years ago, but Sweden has developed the technology to a point where we can help other countries. Our system knowledge is quite unique,” says Sven Werner, professor at Chalmers University of Technology, and a leading expert on district heating systems.

When the Minnesota delegation arrived in Uppsala, Anders Rydåker worked for Hans Nyman at Uppsala Industriverk (the local energy authority,) who had pioneered an advanced district heating system. It produced and distributed heat generated by a wide variety of methods, from burning household garbage, waste products from forestry, to tapping energy from fields of solar panels, and extracting heat from sewage water with heat pumps. “Today, half of all heating in Sweden is district heat,” Sven Werner says.

The energy department of Minnesota was so convinced by the Uppsala demonstration that they called Hans Nyman and asked him to come over and evaluate the prospects for introducing the technology there. It took four years to investigate and prepare for a new system, but eventually they could start converting the old obsolete district heating system in St. Paul to the new Swedish model. However, Hans Nyman called Anders Rydåker in 1983. “You have to come over. I need you here,” he said. Nyman felt that it was hard to get the Americans to understand the new model, which used hot water in contrast to older steam-based systems.

“The project in St. Paul was seen as a pilot project for the entire state. It took two years to build it, but just as we had finished it, the oil and natural gas prices dropped, which made it economically hard for us to compete,” Anders Rydåker says. He was offered the job as head of St. Paul’s energy company after Hans Nyman died from cancer in 1993. District Energy Inc. today serves close to 475 commercial, industrial and residential buildings in and around St. Paul. President George W. Bush toured the company before he gave his first major speech on his energy policy in May of 2001. In it he described the company as a model of energy efficiency, diversity and affordability.

The system in St. Paul relies on biomass in the form of wood chips, but can also use oil, natural gas, or coal. Over time it eliminated 75 percent of the oil and coal usage, delivering heat at stable prices for two decades while providing this city of 400,000 with an environmentally friendly energy system.

However successful the district heating system was in St. Paul, it lost much of its steam when oil and gas prices dropped drastically, forcing Anders Rydåker and his colleges to rethink their mission. They now started to design systems that circulate cold water instead of hot.
”Property owners realized in the 1960’s that a more centralized system could save money by reducing the size of the maintenance staff for heaters and air-conditioning units. We investigated the technology and by 1993 we had figured out how to do it,” says Anders Rydåker, who had moved back to Sweden in 1989 and convinced Stockholm’s public energy utility to build a seawater-based system that keeps all of downtown Stockholm cool during the summer. “It is one of the world’s largest district cooling system,” Sven Werner says.

One reason for why Sweden became so strong in district energy and other alternative energy technologies was the country’s energy taxes, especially on oil and gas.
”They forced its engineers to be more inventive when it came to diminish the dependence on oil and natural gas. This helped Sweden to move ahead in this field,” says Anders Rydåker.

The hardest part when it comes to promoting district energy is that it takes large investments, which may seen from a strictly economical point of view only yield marginal benefits. The interest in district energy has been much stronger in Europe, Russia and the former Eastern Europe, and Canada, but the interest is growing in the U.S. as well.

The rising oil- and natural gas prices, and the growing awareness of the global warming has opened up new opportunities for District Energy, both when it comes to heating and cooling. Honolulu Seawater Air Conditioning, a subsidiary of District Energy’s affiliate Market Street Energy, is currently developing a 120 million dollar system for cooling downtown Honolulu with deep-seawater. One of Anders Rydåker’s colleges, Ingvar Larsson, is chief engineer for the project.

“I am very optimistic and believe that we are in the beginning of an expansion phase. Our customers are very happy, and we will expand our systems. We are right now evaluating different expansion scenarios dependent on various price levels for oil and gas. We don’t need to search for new customers. They are knocking on our doors,” he says.

Hans Sandberg