Richard Culberson, Executive Director, Smart Home and IoT Strategy & Operations, talks with Sarah about lessons learned in working to diversify revenue streams with service.
Sarah Nicastro: Welcome to the Future of Field Service podcast. I'm your host, Sarah Nicastro. Today, we are going to be taking an inside look at Cox Communications' service-based revenue diversification strategy. Say that three times fast. I am joined today by Richard Culberson, who is the executive director for Smart Home and IoT strategy and operations at Cox Communications. Richard, welcome to the podcast.
Richard Culberson: Thanks for having me, Sarah.
Sarah Nicastro: Thank you for being here. All right. So to get us started, why don't you just spend a few minutes telling us a little bit about yourself, your background, and your current role at Cox?
Richard Culberson: Sure. So I've been at Cox now for about nine years. I'm trying to be a reformed consultant, coming from Accenture, where I toured two tours of duty, one on the technology and process side of the house, and then another on a corporate strategy growth, strategy group within Accenture. Joined Cox about nine years ago. As I mentioned, was in the corporate strategy team during typical strategy work, but more often than not partnering with our new growth team. So that's where we investigated gaming and health. And the one business that really stuck was home security, which we rebranded eventually for Homelife to extend its reach into some of the IoT areas we'll talk about. So I've now been working with Homelife for about six years. I'm responsible of both the strategy of the business, as well as the day-to-day operations. So one foot in both, and that's kind of what's kept me interested in the business as we change a little bit every day.
Sarah Nicastro: Cool. Okay. So this division was created about six years ago. Tell our listeners a little bit about how you and the team at Cox identified the opportunity for this line of business, and then the process around kind of creating it. And two reasons for that question. One is just to share your experience. And two is many of our listeners are regularly looking for those opportunities to sort of add adjacent or complimentary services to diversify or even pivot a bit to diversify. So I want to keep that in mind as we walk through your story so that folks can kind of learn maybe some tips or tricks for what to look for.
Richard Culberson: Sure. So if you don't know much about Cox enterprises and the larger Cox company, a long history of innovation. It was started by Governor Cox as initially with newspapers, and then expanded into seeing opportunities in radio as that came as a new medium, and then broadcast television, which led to cable, which is now one of the largest of the two divisions that we have, Cox Communications and Cox Auto.
Richard Culberson: While Cox Communications, we started obviously through your traditional cable company and long history of finding new opportunities to join in with subscription businesses. So for example, we were the first cable company to launch phone, and people don't know about that. And as we look at constantly, what's next and what else can we go in and enter to help out consumers with some of the other opportunities and needs they have around the home? So what you'll find is it all centers around the home and how can we help out our customers?
Richard Culberson: Specifically with home security, if you look at that traditional home security marketplace, it's about 20% of households passed, traditionally are entered in, and it's growing a little bit, but obviously what we'll talk about a little bit later down the path. Now, with smart home is where the big boom is. But we saw there was a huge opportunity, even in the legacy home security business. Traditionally, someone comes at the door, they sign you up, you never see them again. You're paying for something every month, but you've got Ving Rhames at the front door, protecting your house. We saw that consumers really want more of a peace of mind. So whether it was from burglaries, whereas even with cameras and some of the forward-looking technologies that we have right now, we knew that consumers weren't being served to the need. But also we know with our video, our data and obviously our internet products, we have relationships with depending on the market, 60, 70% of households.
Richard Culberson: So this is an opportunity kind of giving customers that one throat to choke. Whether it's from billing or internet connectivity, how do you tie all these together to make a better service for customers? So we knew this is an opportunity for us to enter and explore. And as I said, about six years ago, we really started dabbling and testing in that, but immediately it started resonating with customers as a different business model and a different operating model. So we've been growing off that ever since.
Sarah Nicastro: Okay. All right. So based on your experience six years ago, kind of creating this new division within Cox, but also your history in evaluating some of these other revenue options or opportunities, what advice would you give folks that are listening on the different evaluation criteria? How do you determine what's a worthwhile pursuit and what might be a good fit to kind of branch off into?
Richard Culberson: Sure. We kind of look at it in three lenses and we always start with the customer. So if you look at it from the customer perspective, from our front lines, so whether we're talking about technicians, or sales reps, or customer call reps, or if you're talking about the business model and the financials behind it. So we try to look through all three lenses. What we found is we've had the most success when we always start with our customers, of finding what a customer need is, and is it being met right now or not. And even if it is, so for example, in the home security marketplace, is it being met in a way that they want, or is there a way that we can improve on that, which was definitely the case for the home security marketplace.
Richard Culberson: Then we talked to our front lines, and that addressed... They have a different lens on the customer because sometimes if we do just market research and if you follow what customers say, how they act, isn't always directly in alignment. It's well intended, but when it comes down to the pocketbook, or push comes to shove, how they act it might be a little bit different. So what we found is it's really beneficial to talk to those front lines. And that's where as a cable business, as an MSO, it's really beneficial because we already have an existing billing relationship, our technicians are in the house. I mean, more than not, we have customers baking brownies for technicians when they're in their house, feeding them pizza. So there's no better frontline of really understand what's going on in the home.
Richard Culberson: If then you combine that and start looking at our operating model, that really sets us like, "Well, how do we set ourselves apart, and how do we differentiate?" More often than not, we found that that decides how we'll be successful or not. To be blunt, when we first started this home security model, we kind of replicated what was already happening in the industry; so very consultative, dedicated sales, someone comes in, spends a long amount of time setting this up, and then kind of removing ourselves from that and just letting the product run ourselves.
Richard Culberson: We, to be honest, didn't get the traction we wanted to get. So we knew we had to pivot a bit and said, "Wait a minute, if we want to sell more, we know that we have to go where the existing customer transactions are. Where are we already talking to them? And what are customers expect when they're interacting with us?" So that taught us two things. We changed our sales channel strategy to move distribution more to where they're interacting with us, but we also changed our model. So we started saying, "Well, it's less about expensive device sales. No one calls into their cable company and says, 'I'm expecting to fork out $200, $300, $500 upfront.'" So we pivot our model and good to our strength of subscription model. We'll say, "Let's put a little bit more on a monthly payment, but that removes that barrier to entry for the customer, and at that unexpected, 'We need this much money upfront.'"
Richard Culberson: That spreads it out, which again, we already know their credit, we know their credit worthiness. We have lots of insights as an MSO, that we can use on that relationship. So we changed both our sales strategy on that front, as well as basically how we serve, and being more engaged. That allows us to put more focus on retaining the customer and reaching out to them more proactively, because that's one of the biggest pain points they always say is, "I can't get a hold of people. I just wish they would check-in." So we invest more on that relationship as it goes.
Sarah Nicastro: Good. There's a couple points you made there that I just want to revisit briefly. One is, we have a lot of conversations around this idea of developing advanced services and looking for different opportunities to deliver outcomes, experiences, et cetera. I think that what you said about sort of the interactions with customers, but also the market research just made me think of a conversation I've had recently around the idea that you certainly want to lead with what your customers are telling you, but you also want to look for the opportunity around the things that they might not know to say. Right? And so to kind of temper those conversations and that firsthand perspective with a little bit of research and brainstorming around what needs might be there that they aren't articulating is one point. And then the idea too, of a lot of this, you're sort of figuring out as you go, right?
Sarah Nicastro: As you said, you identified the need, you launched the solution, but then realized, "Boy, we could get much better results if we just reshaped the financial model of this a bit and offered it as a service, instead of expecting an upfront investment from customers." So it wasn't starting over, it was pivoting and keeping the offering, but doing something different in terms of how you're financing it and packaging it. And I think that that's another important point is you don't have to have it all figured out before you start down the path. I mean, you obviously want to have a strategy and you want to do your due diligence, but you're going to be learning as you go, and you can incorporate those learnings to improve your outcomes. Right?
Richard Culberson: Sure. It's very helpful. What we tried to do a bit is established kind of a strategic framework and then say, "Well, how does this fit in as the next change, the new marketplace comes out, a new device? How should we think about it?" The most common framework that we use is we actually go broader than, I know industry terms are all over the place these days and we confuse ourselves as well as our customers, but we consider Smart Home to be one component of the broader connected home strategy. And what I mean by that is you can think of it as three concentric circles, almost like Russian nesting dolls, if you will.
Richard Culberson: At the heart of everything and this is why we think we can be very successful, it starts with connectivity. So broadband connectivity, obviously we are a leading provider of internet and we're a mass market provider. We've got great penetration in the homes already. If you don't have good solid connectivity, you really can't build out from that. So obviously that's the bread and butter of our business. We've got one of the best networks out there, but we know we need to piggyback off of that.
Richard Culberson: So if you go from that inner circle to the next circle out, that's where we get into this smart homes, smart homes as a service model by saying, "Well, wait a minute. If you take that connectivity, right now, consumers can add all sorts of devices on it. But the barriers to entry that we've seen is these devices, they don't work together. They have a hard time getting them installed. What happens if it breaks? There's an affordability issue." So we really set our smart home as a service, or as we call Homelife automation up, we said, "Let's establish this to remove the mass market barriers to entry, so with the affordability and just giving peace of mind, whether that's setting things up, getting them to work together, or if something breaks, we can fix it.
Richard Culberson: So that smart home is that second concentric circle, and that's largely how we're taking to market today and the way that that's really taught us so many things is we're very careful not to use device-centric thinking or device-centric language. This space, as you know, there's so many shiny objects. You can do connected to anything. If you can think of it, it can be connected, it can be made smart these days. But what we found, it's a long tail. There's so many devices down there, but if you can really knock out the top three to five devices that enable use cases. That's the language we always refer to is what are the use cases in the home that we're trying to enable? And then, what are the devices needed in the home to do that?
Richard Culberson: So therefore, that helps us be able to say, not this long tail of all these... We always make the joke of the connected toilet. Sure, we can build it, but what's the marketplace for that? What consumer need are you meeting? Just be careful about how far you go down that long tail? So in this middle ring, we started with use cases, and the three use cases that we prioritize based on what customers are buying and what they've been telling us, it really starts with cameras and being able to see them in their home, and being able to protect what they have in their home, both inside and out.
Richard Culberson: And the second really comes with lighting. So whether it's a switch, a plug, a light bulb, anything to do with lighting. We'll start with just those two. But the good news, I'm going to tie these two rings together before I go to the third ring. But at the end of that, when you call in to buy broadband, the first question you'll always hear us ask is, "Well, how do you need to use that?" Because we're already asking the questions of how much speed do you need? What bandwidth do you need? Is low latency an issue for you for a gamer? We already know these questions, but in that learning process, we said, "Well, do you have children that are in there? How often are they interacting to drive more devices in the home?"
Richard Culberson: Well, that same question we can then pivot and say, "Well, do you want to be able to see when your kids come home from school? Do you want to know when the dog is playing in the backyard?" More often, they want to check on their dog more than their kids. It's amazing. So we think from that use case of what they can see, or do they want a light to come on at night? We need all those use cases to fill out the second ring of smart home. But then that's interesting because that is what's really turned on the open spigot for adjacencies, if you will, for other areas we can go into. And we say, "Well, if they're using us for that, we can use the same platform, the same devices, the same analytics to help starting into energy management." So if I know how much power you're using, I can help you control that and work with your utility of a lower your power bill. So energy management is that new buzzword that's coming out.
Richard Culberson: Or whether it's home health. We ran a trial for a PERS solution, personal emergency response system, the "I've fallen and I can't get up," service. We found that almost using the same services, we can help out seniors who in the pandemic, as you know, they're more removed and the caregivers can't reach them now. So more now than ever, that's been a critical service that we've been able to turn on using the same platform. Or even a in apartments and condos for MDUs, property management. So there's a certain level of control of the same devices for the tenant or the resident that's living in the unit, but also the property manager, when it's vacant, they can control.
Richard Culberson: So we use all those same devices and that same platform to enable that third ring of what we call connected services. So it's that connectivity to smart home, to connected services, that make up the connected home that we are proudly pursuing on a few different fronts.
Sarah Nicastro: Right. Okay. So we touched on this a bit, but I want to go into specifics on some of the different areas that you are leveraging economies of scale. Right? So first you talked about you're expanding the in-home value proposition. Right? But talk a little bit about how branching out into these different areas creates sort of customer stickiness or more intimate customer relationships.
Richard Culberson: Sure. And that's kind of what we built this off of. There's as we were talking about, when we look at devices and the options that consumers have in this marketplace, you can go to Home Depot and there's probably 10 different camera manufacturers. So some of the most capitalized largest companies in the world, the Amazons, the Googles, the Apples of the world are really product leaders in this space. So we knew that we want best of breed products, and we even want to work with many of those large competitors because the consumers want those all to work together. We want to try to enable that as much as possible. But at the end of the day, we know that we're not going to sustainably differentiate by having the best camera.
Richard Culberson: So instead, is we focused on service and we knew that that's something that we've already established, a relationship with the customer, we have call center assets. We have technicians in the home. That's where we said, "Wait a minute. As we were talking about the barriers to entry, we knew that they want us to set it up for them. We wanted our platform to have all of these work together. And we know if something breaks, "Who's going to come and fix it? I don't want to worry about that." That's that piece of mind on the service mentality. So we've taken a lot of the same assets that the company already has. We've got thousands of in-house technicians and third-party technicians. They're doing a great job in home, already doing technical work? And they know the customer. Why don't we leverage those same assets and say, "Wait a minute, stay a little bit longer in the home and help them get these devices up and going."
Richard Culberson: So it's cost efficient and actually, we were rather surprised, all of our technicians love it. Because it's a new skill set, it's new capability. Customers were already asking them to help out with the cameras that they had anyway. And now they're able to meet the needs, that they weren't previously able to. So as a service provider, we're getting some of the highest employee NPS, as well as customer NPS off of that. And because it's all coming together and from one provider, we've seen now using some aggressive analytics and new things we've been learning that having our Homelife, whether automation where security is one of the number one differentiators, and basically churn reduction drivers for broadband.
Richard Culberson: There's a stickiness naturally that comes with it, because now they're seeing, "Well, wait a minute, I've got a camera that works off of this. This is how all of my home is working." We're basically the operating system of the home now, so there's a lot more stickiness and we have a deeper relationship that we might not have had with the customer otherwise.
Sarah Nicastro: Now, IoT is the other aspect of your title. So from a technology perspective, how does this build off of the IoT and technology that's already in use in other areas of Cox?
Richard Culberson: So we've been working with both residential and commercial IoT for quite a while. We do have a strong point, one of the first things we want to make sure we enter in, because we've got a fantastic footprint within the home and residential. But we also have very large and growing commercial business, whether it's small business, mid-business or enterprise customers in our footprint.
Richard Culberson: The first example of launching on the commercial side was Cox Business Security Solutions. What we call CBSS, in-house. That's somewhat traditional-minded security, but also has an automation flare to it. You can add cameras and other devices as well for that service. But what we also stood up was a group that we called Cox2M, and they're really focused on commercial IoT and all of its different flavors, whether we're talking about smart communities, as almost as an expansion on the smart home, smart communities and smart cities.
Richard Culberson: So now we're working with builders on seeing what we can do to enable the property, the homes, before they're bought, because we know that increasingly residents in MDU or buyers of single-family homes are expecting this to be there. If it's there, that's even better. But we're also starting to look out of home and we're seeing more press on our smart cities, whether that's really, we're seeing some intelligent parking solutions, lighting solutions across cities. Other examples are smart agriculture. What we found is farming has a massive need for this.
Richard Culberson: But the first trial we executed was actually in partnership with our Cox automotive business. We have several Cox owned properties, whether you're talking Autotrader, Kelly Blue Book, but also Manheim Auctions is one of the largest auctions in which to turn used cars. So there's quite a marketplace there, but people know there's thousands of cars moving in and out of the lanes, constantly being sold. But right now, that the requires a driver, and constant checking of where those cars are. And literally, they're going with key fobs around a thousand-car parking lot, trying to find cars. If you've ever struggled with that in an airport, try doing that with thousands of cars.
Richard Culberson: Now, they're able to be so much more efficient and it reduces our costs because they can find that car quicker, and they can have additional information that's present, using a new technology that we're able to lean in through or activate in through Cox2M.
Richard Culberson: So we're trying to do as much as possible as we go to market, is trying to like, "What's kind of that bringing all of those assets together?" And recognizing because quite often, for example, if someone has a small business and they're using the CBSS product, they also have Cox Homelife in their home. And quite often they might also need some of these other assets that we have from Cox2M. So we're trying to be as intelligent as we can about common platforms, common use sources. So for example, both on residential and commercial, we're leveraging some of the same technicians because it's a lot of the same skill sets.
Sarah Nicastro: Right. Okay. So you talked a little bit about the response from customers and employees. Tell us a little bit more about the feedback you've gotten on... I know it's not a new division anymore. You said you were six years into it, but on this area of the business.
Richard Culberson: It's funny because we're so close to it. This is one of the reasons why we constantly do customer research and go talk to our front lines. It's easy to forget that while we feel that we're pretty mature being about six years in market, our brand awareness is significantly lower still than overall Cox. That's why we make sure we never say on the marketplace, "Homelife." We always say Cox Homelife, because we still, even though we've got great spots out, great commercials, and some of the highest scoring that we have for the company, people are still learning about things because there's either just entering the smart home marketplace. It's easy to become probably for you and for I, this focus group of one of, "Well, of course, everyone has 10, 15 devices in the home." We're really trying to open up smart home for the masses.
Richard Culberson: We commonly use the phrase, it's like a speakeasy. There's this cool thing that people have heard of, but they don't know what it is or how to get in. We're trying to make sure that the mass market has a way to get into this. So because of that, a lot of our potential customers aren't aware because they haven't been in the market before, but we want to make sure that when they come into the marketplace, that we're in consideration. So we are running more in commercials, you'll see us more out in presence. And all of our sales interactions are driving that a little bit more. So it's still definitely a new or brand newer brand. But specifically what we found on a marketing return on investment, when we run a Homelife commercial, there's a halo to the rest of the business. There's a positive halo because consumers see this and see us as being so much more for them. So we've seen as much as a 1% to 2% increase on our return investment just by running Homeland spots against our broadband business. So again, seeing tremendous halo benefits for some of these capabilities.
Sarah Nicastro: Yeah. I mean, it makes sense that people are looking to simplify as much as possible, right? So the more you can do in one place, that is I think increasingly important for folks, so that makes sense. Okay. Let me ask you this question. In your experience, if a company is looking to determine best ways to differentiate revenue, what's the biggest mistake that gets made?
Richard Culberson: I think this is pretty common across the board and especially in the space that we're in. If you look at marketplaces and valuations of companies that are out there, there's so much of fear of missing out these days. Of, "Wow, there must be money there. People are making money. I must be able to make money too." What we've always found is that whether you're talking about consumers or businesses, they really do care about their pocketbook. You have to know how deep you're reaching into their wallet and what the wallet share you're trying to extract. So I think it's easy to get excited about so much press that's going on. It's clearly a growth market.
Richard Culberson: People either do one of two things. They jump in, feelings that, "Oh, wow, everyone has a right to win," rather than focus on what their right to win is and looking at what assets they have as to, "Why me?" I think that's one and one we've made mistakes as we've gone, but I think we've continued to tighten up a bit in saying, "Well, why us as a cable provider, as an MSO?" Well, wait a minute. They know they have the connectivity. We have this relationship, but that's an honor and a privilege. So it's easy for us to go too far down that path of, "Look what else we can do." We have to be very cognizant of how much they pay on a monthly basis because we're a big portion of discretionary income for a lot of consumers.
Richard Culberson: So I think as other people are looking at this, looking at revenue adjacencies, you have to know what your right to win is and what a customer thinks of you, which is why we're trying to do a lot of things to make sure we're supporting the community. We're out there increasing brand awareness as a cable company, but also for this specific business, because on a month to month basis, they're paying us a lot of money and that's ours and we have to live up to it every month.
Sarah Nicastro: Right. That makes sense.
Richard Culberson: So for that, we're were doing a lot of work. We started obviously, with just acquisition, but we have a big focus on customer engagement now. So segmenting out each one of these customers, are they online? And if they're not, what do we do to proactively bring them back online? What are they using the product for? How can we drive that up to show that there's more value for them? Because every month, when they sit down at their kitchen table and say, "Well, what can we cut to bring down our budget?" We need to be above that red line and make sure we're a value to that point.
Sarah Nicastro: Right. Right. That makes sense. What do you see as future potential for diversification for Cox?
Richard Culberson: When we look at going back to that connected home space, adjacencies, they're so numerous because it's really a platform strategy at the end of the day. We have a platform which has the analytics and it's collecting data from the home, which can be used to help enable customers live a richer life in one way or another. So we look at that. And while, as I said earlier, we try to keep a tight portfolio of devices. We do that by saying, "What use cases are we enabling?" But there's so many more new things that are opening up, and coming out of the pandemic hopefully, we've learned a lot of things.
Richard Culberson: People are spending so much more time at home, they look at their homes differently. All you have to do is look at telehealth and the numbers are staggering of how many people now are comfortable talking to a doctor or being given clinical advice from the home. I mean, to be honest, that's not being run well. There's so much more opportunity to connect those dots, remove that fear, but it's all rooted in that same peace of mind that we talked about.
Richard Culberson: Another good example is education. Teachers is doing the best they can, but what you found is that they just don't have the tools and the platforms to do this. I have three young daughters, so very, very happy to have them in school whenever we can because of the environment. But we know that there's a good chance that more often than not, that this will be one of the dimensions that has to be available in the future. So as a company, we're doing as much as possible to expand affordable access to broadband, as a company. And many programs in partnership with the FCC and internally, we're driving. But the same piece is here, but that's education. If they have broadband and if there's needs at home, there's so many pieces that are being underserved right now. And again, it all goes back to where are the customer needs? We think that there's a lot of areas that we can serve that are readily available.
Sarah Nicastro: Yeah. Yeah. It seems like there would be a lot of opportunity. And to your point, it's a matter of, like you said earlier, sorting out not what the opportunities are, but what you specifically can provide when it comes to those opportunities.
Richard Culberson: And we are particularly looking at partnerships too. Not all of the funding... I've listened to a couple of your podcasts and it's a good point in talking about what's revenue versus a business model. And if we're talking about all this revenue, the cost can't be fully burdened all the time by consumers. So perhaps if there's a win-win where a utility bill can come down, utilities, they're all building out capacity to that prime hour. Well, if we can shift consumption of that energy, the utility wins and the consumer wins, so perhaps some of that burden of the consumer can be born by the utility now. So if we look more and more at some of these different value propositions, it doesn't all have to be born on the back of the consumer. There's lots of people that can win.
Sarah Nicastro: Right. And what will that inner connectedness of that ecosystem look like as we go forward? I think that that's going to be a big part of the next phase of service and looking at the customer journey from the perspective of connecting some of those dots. Right? That makes sense. Okay. All right, Richard, any other comments, thoughts or words of wisdom for our listeners?
Richard Culberson: No. Probably the most important, you learn something new every day. Probably flexibility. I think the things that we've really learned are making sure you focus on what are your core, sustainable differentiators and build off of that. And what can you use as a pivot foot? It is March Madness, so we can talk about using the pivot foot. From what you do well today, to what's that next step you can take, rather than making a leap. It's kind of when you leap from one cycle to the other, when you go a little too far astray, and we've obviously made a couple of those mistakes and learn as we we've gone. But I think coming back to the first question we talked about, as long as you're coming back to consumers and their needs, and customers in the business side, you tend to be a lot better off.
Sarah Nicastro: Yeah. Yeah. I agree. It definitely needs to be led from that direction. But I think that going back to a couple of the points I made earlier, you're learning as you go and you guys are doing a good job of having a vision and a strategy, but being fluid in how you get there. Right? So you try something and then you recognize an opportunity to do it a little bit differently and a little bit better. And then you adjust. Right? So I think that's one of the important points is, you need to know where you're going, but you don't have to have every step mapped out. In fact, it might be smart to not try to map every step out because the path is going to wind a bit as you work toward that vision. So yeah, that makes sense.
Sarah Nicastro: Well, thank you so much for coming along today and sharing the journey with us. Certainly appreciate it. And we'd love to have you back in the future and talk about where things have led to.
Richard Culberson: No, this is great. Thank you so much, Sarah and I appreciate you having me on.
Sarah Nicastro: Absolutely. You can check out more of our content by visiting us at futureoffieldservice.com. You can also find us on LinkedIn, as well as Twitter @TheFutureOfFS. The Future of Field Service podcast is published in partnership with IFS. You can learn more about IFS solutions by visiting ifs.com. As always, thank you for listening.