For thirty years, the world's leading manufacturer of alarms, Jablotron, has been shattering established notions - despite doubts, it has proven that quality electronics can also be produced in the Czech Republic. "When we asked for money, the banks wondered if we were crazy," Jablotron co-founder, majority shareholder and former long-time boss Dalibor Dědek described the difficult beginnings of his business. In the next part of the interview, which was already published on the Export.cz website , Dalibor Dědek explained his investments in hydrogen technologies.
At the time when you started your business, no one would have thought that a Czech company could make a name for itself in the production and sale of alarms. Already at the beginning of the nineties , you started offering a wireless alarm. Was this the turning point that made you also aim at foreign markets?
From the beginning, we tried to be different from other manufacturers. At that time, Czechoslovakia had no great tradition in the use of security technology. The demand for it increased after a small privatization, suddenly people's relationship with property changed. So we went to the segment of existing objects. When you already have a house that is standing and you are building a security system into it, the biggest complication is the installation of cables. All quality systems on the market at the time were wired. We thought we could make it with a wireless version, even though it would be more expensive .
So was this really the pivotal moment? There were more turning points, this was the first. We started out supplying simple wired alarms, but soon realized we weren't coming up with anything new. We didn't want to be the seventy-fifth in a row. We decided to make a quality wireless system. Everyone looked at us like we were crazy because all the components were extremely expensive. Few of the other manufacturers realized that not only the price of the material, but also the assembly plays a key role for the end customer.
As far as I know, you were the first in the world to be certified for a wireless alarm… That's right, it was at the turn of the century when the first European standard was published. We have greatly mixed up the cards in the market, because until then the legislation everywhere in the world was built only on wired systems. No one expected wireless at all. We were thrilled that the boom in mobile phones had arrived. This made the technology significantly cheaper and new components appeared on the market. It was an absolutely wonderful time. When we were developing our first quality wireless system, the European Commission invited us to create new technical legislation. We were thus at the origin of new standards and were the first to secure certification according to them. At the same time, our biggest competitors from Canada or Israel are subject to legislative changes in Europe that did not attach importance. That was another key moment for us. To tell the truth, we also got slapped pretty hard.
As? What do you mean? For a long time we were not very interesting to the big western counters of central protection - our potential customers. When we came out with our new product, these companies bought ten or twenty samples from us and we didn't hear from them for six months. But then all of a sudden orders started coming in that if we went crazy and produced 24 hours a day, we wouldn't make even a fraction of what we could sell. I thought to myself what idiots we were. We have built up the market and now we are far from being able to deliver everything.
That's a pretty nice worry, isn't it? You know, even pleasant worries give you a headache. Looking back, the entire first twenty years of running Jablotron was really nothing more than crisis management. When we asked for money at the very beginning, the banks wondered if we were crazy. Produce electronics in the Czech Republic? In the nineties, Tesla was one of the first to fail here . They told us we were lunatics from the Jizera Mountains. Paradoxically, the first person to lend us money was Česká pojišťovna . When we were dealing with the lack of production capacity, we found an Israel company that was - to put it mildly - inspired by our product. And they came to the market with their alternative to our product.
Did you actively try to prevent them from doing so? They tried, but it was slow for us. They occupied the European market, they killed us. A lot of our excited distributors started buying from them. But God's mills grind and the Israeli company made one fundamental mistake. She started pushing hard on the final price, advertised bargain prices for her packages and didn't count on a sufficient margin for installers. We, on the other hand, got back on our feet, learned a lesson and based our strategy on the knowledge of how important the role of the fitter is. In reality, the end customer does not choose the alarm, the person who comes to install it chooses it. He explains to the customer what its advantages and disadvantages are. And we calculated the margin for fitters. Thanks to this strategy of ours, we dominated the market after all.
How did you end up solving the lack of production capacity? Outsourcing. That hurt so bad. In-house production makes everything terribly easy for you. I called it the backstairs effect. Making everything yourself doesn't force you to make perfect production documentation. Production is constantly connected with design engineers. When the slightest problem occurs, it can be quickly resolved. But a large external manufacturer must have everything foolproof documented. It took us maybe two or three years to prepare the documentation for the production of our key products.
Have you started outsourcing production in China ?
First of all, we entered it here in the Czech Republic . We found several companies that even then specialized only in production. And we also found a company in China that was able to produce quality products for us. We have already been taught by not very good experiences from the time when we wanted to have our own company in China . Many of our partners there convinced us that they could arrange everything promptly, but then it often turned out that this was not the case. We found that we had to find one really reliable partner.
Does production in China still continue? Yes. I say that we have a subsidiary company in China that still manufactures for us. We make about fifty percent of our products there.
Lessons from Gott
You said that there were more turning points in your business…
The second turning point came sometime around 2005. We realized that although we had a wireless product, we were connecting it to a landline. Communication with the central protection desks was via a switched protocol – i.e. via a memory modem. This was reflected in the quality and speed of the connection. The central protection desks received information once every 24 hours that the telephone connection was or was not working. When someone wanted to rob, for example, Karel Gott's villa and knew that there was an alarm, all he had to do was cut the telephone line at the right moment and he had 24 hours to take the furniture out of there as well.
So was the next milestone the connection of alarms via mobile phones? More precisely, the second turning point was communication via the IP protocol. First, we actually produced a GSM communicator connected to a mobile network. It was the same song again - we were using a component that was ten times more expensive than all of our competitors' components. Nevertheless, we prevailed. Our device was suddenly able to communicate with the central protection desks practically continuously - the connection check could be set with a period from one minute. Subsequently, we were the first in the world to start using the IP protocol for this communication. We stumbled again because the big players weren't ready for it. It forced us to start manufacturing receivers for central protection desks ourselves. There were many turning points, but I will mention the third. More than ten years ago, we actually came up with a solution that was close to what is now called cloud technology . Even then, we had remote access to our products, which meant a big competitive advantage. Then when everyone started talking about the Internet of Things, for example, we laughed and said that this has been a common standard for us for years.
Some time ago, CNN made a funny report about another of your products – a mobile phone, which at first glance resembled a classic desk phone... We are going back to the time when mobile operators attacked fixed telephone lines, which still had the upper hand. Our systems were already connected to the mobile network, and we also equipped their security control panels with a classic telephone plug. It was therefore possible to disconnect from the fixed telephone line and connect to our switchboard, which then functioned as a telephone gateway. And we realized that we were actually making something like a large desktop mobile, but it couldn't send text messages and didn't have other functions that we expect from mobiles. Some of us thought that we would add a handset, a comfortable keyboard, a large display to our switchboard, and really launch a large desk phone on the market.
Did it sell well? Well, hey. We made four prototypes of a large mobile and went to Hong Kong to exhibit them together with our other goods. Some people laughed at us, asked - don't you in the Czech Republic know that mobile phones are supposed to be small? Others, on the other hand, were enthusiastic, they considered the large desktop mobile to be a great solution for retirees and for offices. Then the gentleman who later filmed a report for CNN came in and laughed a lot…
In that report, he was walking around town showing people your phone, which at first glance had nothing to do with a cell phone. Of course, such a device looked very impractical on the street. At that time, CNN filmed several such funny reports, then aired the spot about our desktop mobile every hour for a whole week. You wouldn't believe it.
Apparently it was a product for some transitional period… Oh yes. However, within the first ten days, we received an order for 250,000 of these phones. At that time we had three prototypes made on the knee. Don't wish to see the nerves when we negotiated the subcontracting of components. We had three months to do it, but we managed it even in such a tight deadline. A little over 1.5 million of these phones were produced in total. They didn't sell much in the Czech Republic, but they did elsewhere in the world. Gradually, we discovered that our phones also suit mobile operators. Do you know what is the biggest scare for mobile operators? Paradoxically, their phone is mobile. They have to build expensive infrastructure to handle capacity peaks because people travel. But when the phone is stable, like ours was, and no one moved it anywhere, the operators didn't really incur any additional costs. The operators thus offered special tariffs for our desk mobile and its operation was cheaper than a landline.
EUROPEAN BREAKTHROUGH How did you get into foreign markets? You revealed earlier that you initially set up a branch in Taiwan , which was a powerhouse in electronics manufacturing and therefore it was more advantageous to reach customers from there. Mainly it was the place where traders were looking for goods of this type. First we went to exhibit in Hannover. It was a big expense for us and brought us total disappointment. Back then, everything had a Made in Taiwan label on it, nobody took us seriously. I understood that we have to go to Taiwan . There I met an American who could speak Chinese. Together we founded Jablotron Taiwan and started offering our products from there. Suddenly the Czech origin didn't matter at all. Our local branch was also approached by the Prague dealer GM electronic. When we answered them from Jablonec, they told us that they wanted the goods directly from Taiwan and not through some domestic dealers. We invited their owner to come and see us to see that we really produce here.
How was it in later years? The breakthrough moment was that the Czech Republic became part of the European Union. Few people realize how joining the EU opened up foreign markets for Czech companies. Only the unification of technical legislation had a major positive impact.
You have a website in more than twenty language variants and all of them are languages spoken in Europe . This tells you where you export the most… We sell more than 80 percent of our production outside the Czech Republic . A substantial part of it goes to the European Union . We had a period when we sold quite a lot to Asia, especially to China, where we encountered counterfeit products. A smaller part of our exports went to America. But for us, the fact that the closest to us is the European mentality plays an important role. This is important in terms of building distribution networks, training installers. In recent years, the most conservative markets such as Germany, Switzerland and Austria have grown the most. We are traditionally strong in Scandinavia.
Who are your biggest competitors in Europe ? Paradoxically, one of them is a Canadian company called Paradox. But we don't have many competitors in Europe anymore. The security technology here has been bought up by large corporations. It almost happened to us too, one of our failed products almost cost us our lives. As our competitors took over the big juggernauts, the competition fell terribly. Instead of developing new products, they are more concerned with internal processes, internal ethics, how a unified logo should look like... I used to enjoy the competition terribly. We all went to world fairs, competed in innovation, outdid each other to see who could crack who's protocol and beat the remote control.
Do you export other products besides alarms? We operate in the segment of homes, mainly family, and small businesses, which is why, for example, we also launched the air conditioning division. We manufacture recovery units. In addition, we focus a lot on service. The pain of consumer electronics lately is the senseless pressure on the speed of innovation. This destroys the quality of the products. A number of products, including tablets or mobile phones, come to the market de facto unfinished, one upgrade catching up with the other. If something doesn't work for you, you can download a new firmware version, or buy a new model and voila. This is not possible in security technology. We still service systems that we produced fifteen or twenty years ago. When you install them in the barracks, the customer expects that they will work for him basically forever. You can't tell - flash the firmware and try something else.
You are a harsh critic of what you call the digital rococo… Many of our competitors thought that their product would be sexier if it was more complex, had more displays, all kinds of icons, buttons, and so on. The exact opposite paid off for us, we always followed the path of the simplest possible solution. In the case of a well-made alarm, if you make any mistake, it will be shouted to the surrounding area, the siren will be turned on, and the emergency service will also come to you . Alternatively, you will still receive an invoice for the departure. People are stressed by overly complex products, and this stress contributes to them making more mistakes. I'm saying one thing - the product is supposed to be intelligent, but it's not supposed to make you stupid. I learned that a good development engineer will make a perfect product in an infinite amount of time and only he will understand it. He must have a client against him, who sometimes destroys his little things.
How big is the supply chain for your alarms? How many subcontractors do you have, different components? There are hundreds of subcontractors and thousands of components. Recently, a lot of them are missing, including chips. So far, however, we do not feel any major impact on our sales , which in the case of our entire group are above the level of three billion crowns. Covid has also taught us many things. We had no idea that some processes could be done better with the home office system than without it.
Do you stock up on individual components? You know you do. We don't have such distribution chains that someone would plan exactly in advance. Over the years we have learned how to ensure a sufficient supply of everything needed in our warehouses. It was a great alchemy. But we have the advantage that Jablotron has no key customers. At one time, we dreamed of supplying car companies , and then we succeeded. We tried it, fine, but never again. The worst is the dependence on a strategic customer. It is good to have several hundred, ideally thousands of subscribers. If you drop one, nothing happens.
But you still deliver safety systems to cars … However, the customers in this case are not car companies . Our products are part of so-called after sales. We supply to specialized companies, which is something else entirely. The automotive industry is a tough business. The car companies know very well what your costs are and will give you very little to earn. In addition, they will impose such conditions on you that they are capable of destroying you for the slightest slip.
In the beginning there was a crash You are one of the successful entrepreneurs who started in the nineties. Some went into business because people expected it from them and they actually saved a plant or part of it. Others were attracted by the business, they couldn't wait any longer and seized the first opportunity. How was it in your case? We started from scratch. I laugh at those who saved existing factories and succeeded. We had the great advantage that we did not carry with us a lot of bad experiences. I remember well how it looked in those state factories. I witnessed the demolition of the Liaz in which I used to work. It was similar in 90 percent of cases.
So in your case, it cannot be said that you were saving certain know-how? If anything worked here in the previous regime, it was education . When I came from CTU and then I saw what the engineers in some companies were capable of - there was enormous potential. When we started in the nineties, finding a qualified technician was no problem. Back then, people lacked languages and penetration, but they didn't lack knowledge. Today, penetration and languages are not lacking, knowledge is a little worse. Finding a technician who knows which end to hold the solder is sometimes a problem.
In the beginning you had three companions. Did they gradually leave? We were all technicians and none of us rushed into the management of the company . Foolishly, we hired a former Tofa director as executive boss and thought we would each do our own thing. We understood very quickly that it would not work like that. It was left to me.
After all, you probably had the most prerequisites for driving... That was different. Our first company, which was called Jape, went bankrupt. At the same time, we had to repay the loan , for which both my parents and my mother-in-law guaranteed the house. And when you wake up at night with the idea of how you're going to tell your mother-in-law that the bank took her house, you have a sacramental motivation to come up with something. This is how we came up with security technology. Then it became clear that if we were to move forward, the company could not be run by four people at the same time. Four-headed creatures only exist in fairy tales and usually end badly.
Did all the property share gradually pass to you? At that time, I agreed with the guys that they would sell their share to me and keep their floor in the Jablotron. One of them, for example, later became a shareholder in one of the subsidiaries. We introduced option programs after we made Jablotron a holding company. Our managers thus had the opportunity to acquire a share in the company. Little valid - when the manager who owns a part of the company runs the company, he has a completely different relationship with it.
A few years ago , you sold a 40 percent stake to your successor as CEO. So you still have a majority stake. Are you thinking about who will take over from you? I have my share in the trust fund. It is treated so that everything will continue to work. My children didn't sweat, so I don't think about succession in that sense. You know, I've never built a property as such. I was building something that should work - to make the mill grind, to make happy those who work in it and whom it serves.
Is it important that Jablotron remains in Czech hands? I think the important thing is. As I said, once it was hanging in the balance that we would sell it. I'm glad it didn't turn out that way in the end. It is much better to have an interesting business than a pile of money.
Source: kurzy
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