Lockmaker seeks key to future in the cloud
Stockholm, September 22, 2013
By Alistair Scrutton
Despite the rapid pace of technology that has overhauled many consumer goods, the front door lock and key is little changed since the 1800s. That is about to change - to virtual keys in data clouds, if the world's biggest lockmaker gets its way.
Assa Abloy, which makes one in ten locks worldwide, is the muscle behind brands such as Yale. But the lock technology it is now developing means consumers will be able to open doors with a tap of their mobile phones, visitors will be able to download a key online and business owners will be able to lock and unlock their premises remotely.
"I think most people will go digital. People will rely more on a secure identity than a physical key, provided over the net into your mobile phone," says Johan Molin, Assa Abloy's lean 54-year-old chief executive.
Electro-mechanical locks like key cards in hotels now account for almost half of Assa Abloy's sales compared with 13 percent a decade ago, and the company believes this is just the start of growing demand from consumers for more flexible, high-tech locking mechanisms.
At its Stockholm headquarters, some of Assa Abloy's staff are trialling different versions of virtual keys downloaded to mobile phones that open a lock simply with a swipe of the phone. The company is also working up versions where phones with bluetooth or wireless links could automatically open doors when within a certain distance. Other keys can be set to switch on at a certain date and expire on another date, meaning someone renting a flat, for example, need no longer hand over physical keys at the end of their stay.
The digital keys can be embedded in SIM cards, within software or inside the phone itself, thanks to Near Field Communication (NFC) technology, or short range wireless that within a few years may be standard in most mobile devices. US research firm ABI Research has estimated that the number of NFC enabled devices will exceed 500 million in 2014.
The new key technology could also unlock higher recurring revenues. While traditional locks last on average four decades, electro-mechanical locks have lifespans of 10-15 years and software coupled with more fickle consumer electronics means these locks will need to be routinely replaced or updated.
It is a model Assa is confident that consumers used to frequently upgrading their phones and tablets will accept.
"People will have the same kind of relationship to their lock that they have to their computer. They will want to have the latest features, designs," Molin said.
Just this week Apple launched its new iPhone 5S, with a fingerprint scanner, replacing the need for passwords and PIN numbers with biometric security.
But selling locks is a delicate business and the market traditionally conservative. Some consumers, especially in Europe, are reluctant to move from the security of physical keys to a more opaque system, particularly amid worries about cybersecurity. Additionally the cost involved - a digital Yale lock is about 30 percent more expensive than a traditional one - currently limits the technology to high-end households.
So Assa Abloy's strategy is to make the technology a good fit with businesses and institutions like hotels, hospitals and schools, which account for three quarters of its sales, in order to 'normalise' the new product, lower costs and ultimately drive broader consumer acceptance.
With this in mind the company has boosted research and development spending 129 percent since 2005 and in 2012 spent about $210 million, or 2.9 percent of sales, on R&D.
That 2.9 percent is around the industry average for R&D spending, analysts say, as Assa's U.S. rivals in particular, Ingersoll-Rand and Stanley Black & Decker chase the same new markets.
"The challenge for Assa Abloy is to move fast enough," said Carlo Pompili, CEO of Swedish startup firm Telcred which is working on new locking technology. "It's a huge market with many nuances. They cannot think of everything. That opens up space for other companies."
Alongside its own technological research Assa Abloy says it will continue to do deals that advance its products.
"We of course try and focus on our own innovation," says Daniel Berg, vice-president of Assa Abloy mobile keys. "But complementary acquisitions could happen if there is a start-up with a great idea."
There are newer and smaller competitors pushing forward in this area, like US-based Lockitron, which makes devices to lock and unlock deadbolts via remote control, or Spain's Salto, making lock software tailored to businesses. But in a still-developing market few can compete with Assa Abloy's reach.
"High-tech locks, using phones, etc, are the future, but the question is how fast it will grow?" said Oscar Stjerngren, an analyst at Danske Bank. "Assa Abloy are so dominant globally they can drive this transition in the high-tech lock market." - Reuters